Letter To The Shareholders
A Periodic Report from R. D. (Dan) Burck July 2006
The opportunity to lead a company with such solid achievements and boundless potential as Nano-Proprietary Inc. is tremendously exciting for me. I have been on board just over a month, but already I have a great deal to report to the shareholders about where we stand as a company and where we are going.
Our great strength, for today and for the future, lies in our intellectual property and in the highly talented people whose creativity and innovative spirit underlie everything we do. I am honored to lead this wonderful group of employees, and I have been mightily impressed these past few weeks with what I have learned of their abilities and their dedication. Developments just in the past six months make it clear that 2006 is going to be one of the most important years in the history of Nano-Proprietary Inc., as the company has put in place an impressive foundation upon which to build enduring value.
As CEO, my role is to provide the leadership and direction that will, above all, produce increased value for you, our shareholders. I can assure you that our management team, our staff in research and development, and all our other employees are focused wholeheartedly on this preeminent objective. I embrace the responsibility for keeping that focus always sharp and clear.
I understand why there can be impatience with the time it takes to turn potential into reality. An important part of my job is to make sure that we keep moving in the right direction and that we continue to accelerate as we go, and if we do that I am confident that we will arrive at the place all of us want to be.
You may be interested in knowing a little more about how I am approaching my new job. Throughout my career, both in business and in the business side of higher education, I have operated on the principle of accountability. Nowhere is this principle of greater importance than in the relationships between a CEO and his Board of Directors, and between the CEO and the owners of the enterprise, the shareholders.
A number of business organizations have had trouble in recent years with being accountable, but there is no great secret to accountability. It means formulating a vision and a plan, making sound and forthright decisions, and being answerable for the results. This is the sense of trust and personal responsibility with which I do business, and I look forward in the coming months and years to making this philosophy pay off for everybody concerned. And that means making it pay off for, more than anyone, the people who have invested in the stock of Nano-Proprietary Inc.
Our Priorities
I have been devoting most of my time since joining the company to a comprehensive evaluation of all our projects and initiatives. This, of course, is work that never ends; we must continually assess the value and effectiveness of the company's operations, and we must remain flexible and adaptable as circumstances warrant. However, I have reached several conclusions about company priorities based on my analysis thus far, and I want to share my thinking with you with regard to a series of important subjects. It will be clear that each of these relates directly to ways that we can increase revenues and other income generated by our intellectual property. As we move forward, more detailed information on these and other projects will be available on our Web site.
Novus. Our agreement with Novus Partners LLC for licensing of patents formerly held by EBT has potential as a major, long-term source of income for our company. We are particularly enthusiastic regarding the pivotal role that the patents can play in the projected growth of the market for networked digital advertising signs. Analysts have projected a potential for digital advertising to become a multi-billion dollar industry, and because of our patents we are uniquely positioned to gain from this growth.
Electron field emission technology. Our patent portfolio in this area is one of the strongest assets of the company. The portfolio includes basic patents in technologies such as carbon nanotube emissions, as well as numerous manufacturing patents. One of the most exciting opportunities is our work with Shimane Masuda Electronics Co. Ltd. to develop lighting devices using carbon nanotube electron emission technology. As with other projects using this technology, we are confident that the current pilot project will lead to volume production that will generate revenue through a licensing agreement. We are also continuing discussions with Da Ling concerning a pilot line for carbon nanotube televisions. CNT televisions have the potential to capture a significant part of the market for large flat-screen displays, a market that has been estimated to be $100 billion annually in the United States by 2010.
Sensor technology. Another area with extensive potential for the company is the commercial development of sensors, for which we have four different platforms. One is the GMOS technology, a discovery originating within our company with vast commercial potential. Development is under way to expand the GMOS platform to detect or monitor numerous gases and other chemicals. In addition, we received in June a $750,000 grant under the federal Small Business Innovation Research program for R&D on a carbon monoxide sensor. We also continue to work with Kelman on the testing of a reengineered hydrogen sensor, and we anticipate seeing results from this work by the end of the summer.
Nano-materials. We will remain at the cutting edge of the development of new nano-materials, through initiatives such as our current contract with a major sporting goods company to develop composite materials that will improve the performance of sports equipment. We are also pursuing other contract opportunities involving nano-materials.
Photoscrub technology. Our technology is being used to enhance the Photoscrub air purification system. The great promise of our technology is evident from our current R&D grant of almost $1 million from the Army. We have begun preparing a $5 million grant proposal for Phase II, which would begin in 2007. The grant and funding process is always uncertain, but I look forward to getting involved. I believe the members of the Board of Directors will tell you that one of the reasons they hired me was my experience in Washington and in working with the Texas political leadership, and I am eager to put these strengths to work on behalf of this and other important R&D initiatives.
Defending Our Intellectual Property
We are currently pursuing two lawsuits in defense of our patent rights, one against Canon Inc. of Japan and its U.S. subsidiary, and an unrelated suit against Mr. Till Keesmann, a German citizen. No one enjoys litigation (except, perhaps, some of our friends in the legal profession), but an essential aspect of our fiduciary responsibility is the protection of the company's intellectual property. We have engaged an outstanding law firm to pursue these cases, and we feel very confident about the eventual outcome.
Since we are, above all, an intellectual property company and own more than 200 patents, being willing to pursue litigation in defense of that property is always going to be one of the realities of doing business. We will continue to take a very aggressive stance with regard to our legal rights. Anything less would be to accept a short-term and merely temporary gain while foregoing long-term value.
Shareholder Communications
I understand the desire by shareholders to have solid, up-to-date information about the companies in which they invest. That is one of the reasons I have begun this series of newsletters - to provide you, the shareholders, with information about what is happening at Nano-Proprietary Inc. and how company affairs affect you. I want to expand communications with shareholders in other ways. To that end, I have hired a company to redesign our Web site, to make it more user-friendly and interactive, and to make sure it is always an accessible and reliable information source. We expect to have the new site up in September.
My thanks to each of you for your continued interest in Nano-Proprietary Inc. - Dan Burck
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.