Letter To The Shareholders
A Periodic Report - June 2007
My last written communication was six weeks ago, which of course, was followed by the investor conference call of May 9th. My intent today is to provide a quick update on the business to give you a method to gauge the management team's progress toward turning NPI into a robust growing business.
Our focus on attracting additional development projects that will lead to license revenue has continued and we have now signed our first integrated sensor agreement that covers all aspects of the business relationship from development to technology transfer to recurring license fees. This model of doing business may appear intuitively obvious, but it has not been the company's standard in the past. It will be now.
This arrangement will contribute some revenue during the current quarter, although our conservative methods of revenue accounting make it difficult to forecast exact results. However, as of May 15, the last date we had completed the full billing cycle, we were achieving our revenue plan.
To further focus on sensor opportunities, we have also expanded our sales effort to address the pharmaceutical market. If you follow the trail of provisional patents we have filed, you can see we have been giving considerable thought to how sensors can be applied over the long term to health monitoring. A greater sales effort in this area will help us to find a development partner to fund additional work.
Another important progress step in your company has been a major change in the method we use to compensate our outside Directors. Previously, they were compensated with an annual grant of stock options as the sole method of compensation. This meant they were essentially working for free unless they sold shares periodically, which the market can take as an unfavorable event. Our new plan combines cash compensation along with restricted stock grants bringing our compensation practices in line with contemporary standards. Integrated into this plan, the full details of which will be in a future regulatory filing, are mandatory holdings of stock for all Directors. This concept will ultimately be expanded to include senior managers.
I believe building a Board of significant depth and competence is essential to the company's future. To the extent I am successful attracting additional Directors of the skill and experience of Howard Westerman, our most recent Director addition, we will all benefit. As a management team, I can assure you we do not have all the answers; having a knowledgeable, experienced and accessible Board will provide guidance as we grow.
Before leaving this subject, I want to stress that my focus in this area should not be taken as a criticism of the Board for past actions. Its members have served the company loyally and well. Some of the members will remain, others recognize they cannot commit the time I will demand or they have skills that are better suited to earlier stage companies, but in either case, their efforts are appreciated.
It has been six full months since I started at NPI. During this time, I have been trying to set realistic expectations for our future and move the company towards a firm financial footing. Now that we have made significant progress along that path, we have a story to tell and my near term task is to start telling it to prospective investors. A lot of the materials I am developing for these presentations will be included in the presentation I am planning for shareholders at our annual meeting, which will be held in the Dallas area on September 11. We are working on the details of the meeting now and we will know about the specifics of time and place over the next several weeks. You can expect a thorough update on the business, an opportunity to ask questions of me and the management team, along with the opportunity to express your opinions as shareholders.
In conclusion, as I have said in the past, I have not purposely tried to hide anything in this letter. If I didn't address something, it doesn't mean we are not working on it. Be assured, if I was in possession of "bad news" I would not withhold it.
Sincerely,
Thomas F. Bijou
SAFE HARBOR STATEMENT
This press release contains forward-looking statements that involve risks and uncertainties concerning Nano-Proprietary’s business, products, and financial results. Actual results may differ materially from the results predicted. More information about potential risk factors that could affect our business, products, and financial results are included in Nano-Proprietary’s annual report on Form 10-K for the fiscal year ended December 31, 2005, and in reports subsequently filed by Nano-Proprietary with the Securities and Exchange Commission ("SEC"). All documents are available through the SEC's Electronic Data Gathering Analysis and Retrieval System (EDGAR). Nano-Proprietary hereby disclaims any obligation to publicly update the information provided above, including forward-looking statements, to reflect subsequent events or circumstances.