Medis Technologies Ltd. Q1 2008 Earnings Call Transcript

| About: Medis Technologies (MDTL)

Medis Technologies Ltd (OTC:MDTL) Q1 2008 Earnings Call May 13, 2008 10:00 AM ET

Executives

Robert Lifton - Chairman and Chief Executive Officer

Howard Weingrow - Deputy Chairman and Chief Operating Officer

Michelle Rush - Vice President of Marketing

Jacob Weiss - President, Israel Fisher, Senior Vice President and Chief Financial Officer

Michael Resnick - Senior Vice President and Chief Accounting Officer

Analysts

Gary Giblen - Goldsmith & Harris

Jerry Masano - Dawson James Security

Arthur Gray - Carret & Company

Tom Leach - Preakness Hills Capital

Jim Stevens - Arbor Research & Trading

Mike Saxon - Saxon Investment Group

Stephen Bartholow - Carret Asset Management

John Fichthorn - Dialectic Capital

Kevin Boylan - Bluefin

Henry Melbourne - MSC Global

Zack Conan - Capital Standard

Bart Blout - Sawtooth Capital

Willis Taylor - Gagnon Securities

Michael Fenton - Gilford

Operator

Good day, everyone and welcome to the Medis Technologies' First Quarter 2008 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participants are currently in a listen-only mode.

I’ll now turn the conference over to Mr. [Eaton Goodanclan]. Please go ahead, sir.

Eaton Goodanclan

Thank you. Good morning, everyone and thanks for joining us. Before we begin, I would like to remind everyone that this conference call may contain forward-looking statements, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify those forward-looking statements by words such as “may,” “will,” “should,” “expect,” “plan,” “target,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of those words and other comparable words.

These forward-looking statements are subject to risks and uncertainties, product test, commercialization risk, availability of financing, and results of financing efforts that could cause actual results to differ materially from historical results or those anticipated. Further information regarding these and other risks are detailed from time-to-time in the company’s filings with the SEC.

Medis assumes no obligations to update or alter its forward-looking statements made in this conference call or in any periodic reports filed by Medis under the Securities and Exchange Act of 1934, whether as a result of new information, future events, or otherwise, except as otherwise required by applicable Federal Security laws.

I now like to turn the call over to Mr. Robert Lifton, Chairman and CEO of Medis Technologies. Go ahead, Bob.

Robert Lifton - Chairman and Chief Executive Officer

Thank you, and good morning everyone. With me today on the phone from the United States is Howard Weingrow, Deputy Chairman and COO, and by popular demand Michelle Rush, Vice President of Marketing, from Israel are Jacob Weiss, President, Israel Fisher, Senior Vice President and Chief Financial Officer; and Michael Resnick, Senior Vice President and Chief Accounting Officer.

Let me start by expressing my excitement about our strategic program with the world’s leading electronics retailer Best Buy, which has just agreed to acquire a major position in Carphone Warehouse, Europe’s leading seller of cell phones. Adding Best Buy’s 1314 stores in the United States, Canada and China with Carphone Warehouse’s 2,411 stores in nine European countries provides a total of over 3,700 stores. In addition, it is reported that Best Buy is planning stores in Mexico and Turkey and that the joint venture plans to add stores in Europe. We expect that our strategic program with them will enable us to move forward on a number of fronts. As a start, it offers the opportunity to work with a highly placed and knowledgeable electronic retailer to develop the appropriate marketing message for our 24/7 Power Packs, including the different SKUs, the packaging and connector strategies, as well as the appropriate product placements in the stores. After that, we look forward to the opportunity to expand our offering of Power Packs in their broadly based stores.

We are also planning to work together with them on development of other products based on our fuel cell technology platform, including our second generation Power Pack and power sources for laptops and stationary power products. And we look forward to their taking advantage of the opportunity to place their representative on our advisory board.

Based on our conversations with mobile operators and other potential customers we believe that once the Power Packs are carried in the stores of a major retailer that event will accelerate the ordering programs from these customers. We are also discussing with other well-known OEMs the possibility of making power sources specifically for their products. And as noted in the press release, through our distributors and representatives, we are reaching out to markets in large parts of the world where billions of cell phones and other devices are in use.

In addition, Medis Technologies and Hewlett Packard, HP, are in confidential discussions regarding a number of potential programs. In my view, these expanding relationships with major companies reflect the growing recognition of the credibility and importance of our Power Pack product and our fuel cell platform technology. After all, no other micro fuel cell product is in mass production, and no other has received underwriter laboratory listing, CE mark and a permit from the United States Department of Transportation to be brought aboard aircraft.

As noted in the press release, one of the new products that we have high hopes for is the use of our very same Power Pack together with various LED and bulbs to provide illumination that is long lasting and inexpensive relative to what is available on the market today. We see significant market opportunities for such a product in the emerging markets where electrical power is not readily available and for other users like campers and for survival kits.

In addition, our product development strategy is to maximize our successful fuel cell platform to move forward with completing development of our second generation Power Pack, and have new power sources for laptops, stationary power for home and office, as well as for servers and other power users. In these and other programs, we believe that our invention of a stable, solid fuel based on our patented fuel that can be delivered in cartridges will help obviate the problems of storage, transportation and delivery associated with the wider use of hydrogen. Finally, let me note that we are pleased with the results to-date of our financing programs.

We are now open for questions. Because of the large number of questions we request that you limit yourself to one question at a time. Operator? We are open to questions now.

Question-and–Answer Session

Operator

(Operator Instructions) Your first question will come from the line of Gary Giblen with Goldsmith & Harris.

Gary Giblen

Good morning, Bob and everybody.

Robert Lifton

Hi.

Gary Giblen

My question pertains to the change in casing and the question really is has it been an impediment to sales and marketing or is it just increasing the market opportunity and also on the casing, is it a different cost of goods, and is it harder to produce which I am thinking might be the case because you are indicating the release 350,000 units per month, but the fully developed line had always been thought of as 1.5 million per month, so I guess if you could those questions on the case, that would be helpful?.

Robert Lifton

Okay, let me – I am glad you asked that question. When we put out the product as many of you have seen it had a black casing on it, and what we found in talking to our customer base, always the customers we have been talking about and many others that they preferred a casing which we gave them choices, they preferred a casing which was a tinted see through casing which had the following implications. One is it made the product actually look smaller, two is you could see through the casing and therefore, for people who are interested in technology as such, you could actually see a fuel cell for the first time in history, and that related also to people who were interested in green technology, the very fact that they could see through it and see a fuel cell was important.

Now, for all of those reasons, the customers all indicated that, that is the product that they want to carry in the stores, and wanted to offer and our distributors wanted to offer and so, we made a switch in terms of the decision as to what the product should look like and decided that, that would be the way the final product should look. We had made a few products, thousands of products the other way which we have sent out for distributors and others to use to show the product to their customer base, but also to explain to them that we are going to come out with a different product with the tinted transparent casing.

Now, to answer your specific questions, the casing doesn’t cost us anymore, it’s just another form of plastic. What it does do is require us to order that casing and interject it into the system and that’s what took the time to get to the point in when we are going to be ready to start making the products with that casing. Now we did not want to make – we made as I said we made products for inventory and otherwise with the original casing, but we did not want to make enormous numbers of products without casing. That’s the first point.

The second thing as to the 350,000 units, we have always pointed out that in order to do more units, we had to add more shifts, train more people. Each shift is approximately 350,000 units to get to the point where when you have all the shifts in place you get a million and half units per month. So we are now working on that first shift level, and once we start to get the orders in, and start to get the demand, we are already starting to train the people for the second shift now based on the relationships we have now established and get them ready to increase the amount of production. Thank you.

Operator

Our next question will come from the line of Jerry Masano with Dawson James Security.

Jerry Masano

Hey, Robert and team, you guys did an excellent job here, and even though it’s been a little long and coming I think you guys have really created a solid foundation to take this company a lot higher, my hats off to the entire team.

Robert Lifton

Thank you.

Jerry Masano

And Bob, I have no question.

Robert Lifton

Well thanks, Jerry for that comment. I will take advantage of this moment to just reiterate our own excitement at the levels of the companies that we are dealing with, and the implications of having those companies to work with, and if you all be patient with me, I will just repeat a story my father told me many years ago about Lord Rothschild who had done a favor for somebody -- who had a favor done to him by somebody and asked that person, well, what can I pay you? And the guy said, don’t pay me anything, just walk through the Paris bus with your arm around me. And to have those relationships with their arms around us in a world that is not familiar with fuel cells, in a world where other companies have all stumbled in making fuel cells, and the ability for our future customers, and other companies that we are dealing with to realize the relationships that we have established is enormously valuable to us, so thank you, Jerry.

Operator

Our next question will come from the line of Arthur Gray with Carret & Company.

Arthur Gray

Good morning Bob.

Robert Lifton

Hi, Arthur.

Arthur Gray

You just very casually mentioned the additional idea of having light come from the battery pack, it seems to me that’s an enormous potential, are we talking about possibly replacing a flashlight or are we talking about -- what are we talking about here? Sounds fascinating?

Robert Lifton

Thank you for asking that question. We are very excited about it, and particularly let me emphasize that it’s the same Power Pack so we don’t have to change the Power Pack at all. We don’t have to change the production facilities at all. All we have to do is just add a different form of connector with either an LED or a bulb or depending on what the customer wants, and now we see this is having implications in a number of markets. One of the first markets which struck me was I was talking to a major company in India that we have been working with who indicated that a product like that would -- might be an enormous product for the Indian government itself to buy to deliver to villages that don’t have electricity. And so one of the uses that we really are focused on is with government uses in India, China, Africa and many parts of the world that don’t have electrical power where they can buy a light and service with a number of lights, service an entire village of people. Secondly, for campers who are looking for a way to make sure that they always have light available to them and as to your reference to a flash light concept, we think this is an exciting product because the light can last for a lot more -- lot longer.

And finally, as I say for people who want to make kids for disaster, my god after what we’ve just seen go through the world in tycoons in Burma and earthquakes in China and the light, I think everybody is recognizing that something is going on in the world. I might add parotically that even our printer last night had a storm that a tree fell on and destroyed all of their power which is why it took us so long to get out the 10-Q till this morning. I mean we worked, our people worked right through the night to get that out in time to have it out before this conference call. But the printer went out. So, we never know what’s going to happen any more in our world and I think a product like that can have huge value for all of us to make sure that we always have power available and light available.

Operator

Our next question will come from the line of Tom Leach with Preakness Hills Capital.

Tom Leach

Yes, good morning gentlemen. Just some accounting questions this morning.

Robert Lifton

One, yeah.

Tom Leach

The outstanding share account?

Robert Lifton

Michael, what’s the share account that we are using now?

Tom Leach

You’ve referenced….

Michael Resnick

That is 39 million, 39 million share outstanding.

Tom Leach

That’s on 331?

Michael Resnick

That’s the current count, that’s May the 9th.

Operator

Our next question will come from the line of Jim Stevens with Arbor Research & Trading.

Jim Stevens

Hi, Bob. This is Jim Stevens. I have a small math question. So they are looking to 3700 stores on this Best Buy deal and assuming even 10 units of day per stores, six days a week that’s like 220,000 pieces a week. It's about 1 million a month. And if you are doing something with Hewlett, I can't imagine them doing less than 5 million a year that’s 400,000 a month. It seems to me that your whole production line even if you can get up to 1.5 million is on the verge of being sold out here. And it seems like this shift is going from selling product to you guys figure out, how fast you can build product and get it out the door. Can you elaborate on that or that…?

Robert Lifton

Well we are very hopeful based on the numbers that we have been discussing along the lines you talked about and including the number that we have been getting from ASE and the response from our distributors in different parts of the world. I think that your question is very appropriate that the focus right now has got to be on or what to do about the second line and how to plan for a second line. And frankly, whether the second line should be the same as the first line or whether we should take the time to and we’ll have to see how much time it takes, because we are going to be working with some of the names you mentioned in developing the second generation Power Pack. Frankly that’s one of the things that everybody is interested in, because it's much smaller, its much less expensive and it delivers more power and it uses the solid fuel in a cartridge form. So, it maybe that the decision would be to shoot for that to be a second and third line. These are the questions that are nice questions to have, and is certainly question we are focused on.

Operator

Our next question will come from the line of Mike Saxon with Saxon Investment Group.

Mike Saxon

Hi Bob.

Robert Lifton

Hi, how you are doing?

Mike Saxon

Good. Bob, am I glad that you finally closed this thing. The question is will BestBuy have any kind of proprietary interest in the technology?

Robert Lifton

We have retained in all cases. We have retained all of the intellectual property that on our technology. Now, if we work with the company whether it's the companies we've mentioned or some other company, it depends on what the new product we develop with them is. For example, we are working now with a major OEM on the possibility of a new power source for their particular product. If that new power source is different from what we have and from what we have invented and if it's something that they contribute, then in that case, with respect to that particular power source, we would share the intellectual property and share the appropriate revenues, but typically, we're using our own intellectual property for all of the products that we've mentioned to date.

Operator

(Operator Instruction). Our next question is a follow-up question from Gary Giblen with Goldsmith & Harris.

Gary Giblen

Yeah, hi. The Power Pack, the Power Management System, the current Power Management System is for the, is that still going to be used going forward for today's Power Pack and then the lithium polymers for the heavier?

Robert Lifton

Yeah, what we found, Gary, I'm glad you asked that question. It gave me an opportunity to explain it. You know, when we started this whole concept of providing a charger for Handheld devises, there was some who questioned the need for such a product and our foresight, if I might add was to realize that there were increasing amount of applications being put on these products. And of course, we've watched the technological revolution take place as more and more applications are being added to these products, in fact changing the fortunes of other industries like the music business, like the newspaper business and the like. And so, as they've been adding these applications, all of them dependent on the ability of the lithium ion battery.

The lithium ion battery as you know has not been expanded at all. So you have all of these applications of video and banking and GPS and internet, the broadband connections and social networking and all of it being added to the devises and the lithium ion battery not being able to sustain it. In that process what we found is that the initial simpler phones were able to be handled by the, what we call the one watt or the initial power management system and that will continue to be sold. That will be offered with the product throughout the world to the extent that they are working with the basic phones and that’s the product that we have been putting out already in the hands of our distributors. However, we also found that there was an increasing amount of power needed for the ever more sophisticated devices, if you look at the devices like the iPhone and the BlackBerrrys and the HDCs and alike and they require more and more, more power.

And so, we decided early on to develop another power source for those people who need extra power and that power source eventually will probably be able to deliver either 500 milliamps or as much as a 1000 milliamps, so i.e. of 1 ampere through that polymer battery. And that is able to give very quick charge to some of those devices which otherwise will take a long, long time to charge. And also puts us ahead and shoulders above what is out there in the marketplace in the competitive marketplace in terms of power available, twice length of time, et cetera, a green and the light.

And so, we think that that is a product that will be wanted by a lot of people in the enterprise market. It’s a more expensive product. But it’ll be wanted by people in the enterprise markets who are using much more sophisticated and much more power demanding phones. Michelle, do you want to comment on that?

Michelle Rush

I’m just going to say I would like to add that we are in the process of finalizing the various SKUs with Best Buy and the product that we expect to start the launch at the various stores according to our program with them is with the one watt. We will also book the one watt and the two watt that we will start with the one watt product. It’s a great product.

Robert Lifton

Thank you, Michelle.

Operator

Our next question will come from the line of Stephen Bartholow with Carret Asset Management.

Stephen Bartholow

Good morning.

Robert Lifton

Hi, Steve.

Stephen Bartholow

I’ll try to limit it to one question, but there are several components that are all linked together, again it sort of stings around the financing, which you’ve briefly touched on. If you could tell what is the current cash on the balance sheet and that along with the $60 million equity line, how far does that meet your current needs given the -- given your current cash burn, and help -- and if you can anticipate the orders coming on through Best Buy and ASE and the other relationships, when do you project -- at what quarter do you approximately project being cash flow positive?

Robert Lifton

Let me break up the question into parts as you said. First of all with respect to the cash position, Michael, what was the cash position at the end of the quarter, and then what did we add during this period?

Michael Resnick

The cash position at the end of the quarter including the short-term investments was about $13.3 million. We added -- under the UBS facility, we added about 4.8 million and under the new facility we added about another 7.35 million net.

Robert Lifton

Now that’s -- and your initial money doesn’t include the $6 million that’s set aside for….

Michael Resnick

Yes, that is correct

Robert Lifton

Yeah. It was about 19 million when including that 6 million and now we’ve added that money.

Michael Resnick

Correct.

Robert Lifton

We have -- Stephen to go back to your question, we have been sharply reducing our CapEx expenditures now, now that the line has up and running for example our CapEx expenditures in the March of ‘07 was 10.9 million and our CapEx expenditure in March of this past -- as of March 31st was 3.467 million. So, we are finished with the major CapEx expenditures. We are adding more and more inventory. As I said, we’ve been holding inventory available for our distributors to use, but that inventory is also the inventory with the current cover on it. We think that the funding available now is sufficient to carry us through our needs. It depends on how fast we get the products out into the marketplace and since how fast they pay us for the products and what the terms are on the final payment. I think Michelle have -- the 210, 30 or something like that.

Stephen Bartholow

Yeah, I like to……

Robert Lifton

I forgot what it is. And we also have availability, I might add, in a couple of other directions that we are looking at, one of that is the – there has been interest in investment bankers in talking to us about a single large placement, and that’s one area we are looking at. We are also in the position where we are exploring the possibility of selling the Cell Kinetics working with investment bankers on that. And that would – might bring in to significant amount of cash. So we are looking at different alternative ways to continue to fill our coffers. But what I do want to make clear is that we are comfortable now with the funding we have in hand through the equity line which we’ve already picked up across this 7.3 million last week alone that we have sufficient funds to carry out our business requirements and then will – it will tie in with what we do with how fast we get the products out the door and how fast they pay us and how much inventory we have to carry.

Operator

Our next question will come from the line of John Fichthorn with Dialectic Capital.

John Fichthorn

Yes, hi guys, great quarter. I was just wondering could you maybe help us understand kind of what firm purchase orders you have today, once again in an effort to understand kind of housekeep the ramps going to be here, from any of the buyers has anybody given you a firm purchase order, and once again, you mentioned kind of payment terms, have you said something 210, net 30, I am not really sure I understood what that meant. So kind of how are you going to get cash for this product? Does it sell in, sell through, (multiple speakers)?

Robert Lifton

First of all with respect to firm purchase orders we have on our – we still have firm purchase orders from ASE which have not changed at all and from Quasar which have not changed at all, from Northwest Power which have not changed at all.

John Fichthorn

Why haven’t they bought product, I mean you’ve made it?

Robert Lifton

Wait, well, can I answer your question?

John Fichthorn

Sure.

Robert Lifton

Instead of one question to a person. What we have decide to do with ASE and with the other people is to deliver a product with a new casing first of all. So we didn’t want to stuff them with a product which is outmoded and not give them the benefit of the new product. Secondly with respect to ASE we are in negotiations to deliver with that product a brand name that they feel and we feel will enhance the salability of the product and expand their sales even greater than their initial anticipation. There – have 60,000 doors that they service and their anticipation has been that with the appropriate support from us in terms of brand name and marketing that they could sell somewhere between 1 and 2 products per day per door so that would be a significant amount of product that they can handle. Their order is much less than that. But they feel they can handle and we would like to put them in a position to do that of course. So, yes, we have firm orders on the books that haven’t changed at all. And we want to deliver on those orders; we want to deliver the new product to them.

Operator

Our next question will come from the line Kevin Boylan with Bluefin.

Kevin Boylan

I was just wondering if you could comment on the new casing and how changes pricing or cost. And then also building on kind of how we get the profitability from here, so you’ll still be thinking, or should I be thinking about kind of 1 million a month unit number for break-even and everything after that subside? Thanks.

Robert Lifton

Well, first of all the new casing of course is not going to change in any significant way. It’s just a question of taking a plastic which we are using anyhow and taking a transparent plastic rather than the heavy dark plastic that we have been – that have been using, number one. Number two, those numbers that we’ve thought in terms of break-even on a product – on a line basis is somewhere around 800,000 units per month. And so we think at about a million units per month we would be breaking even on a corporate basis.

Operator

Our next question will comes from the line of Henry Melbourne with MSC Global.

Henry Melbourne

Hi Bob. Could Michelle explain a little bit on best buys plans for rolling out the product from the initial to rolling it out throughout their system?

Robert Lifton

Michelle?

Michelle Rush

Hi, Henry.

Henry Melbourne

Hi there.

Michelle Rush

You know, it’s a great program actually. And we are working actually with them now, finalizing the various SKUs for the product, except to receive a purchase order shortly and then start shipping in lots at the various stores according to the program with them. I would like to mention that in order to get it in as quickly as possible we are starting with the current black casing. The current 1 Watt product, we are finalizing the various packaging, and we’ll expect to roll out in a limited number of stores and then refine the marketing message, it’s going to be a very interactive marketing program. So during this period, we will define the marketing message as we expand to additional stores. And then we will have the tinted transparent casing and we’ll do a larger rollout we believe with that product.

Operator

Our next question will comes from the line of Zack Conan with Capital Standard.

Zack Conan

Hay bob great quarter.

Robert Lifton

Thank you.

Zack Conan

A question for you, if you are delaying the ASE, -- why are you delaying I guess the ASE deal, wait for the clear product, if we are going to roll out the black product in Best Buy. I was wondering kind on the program, when am I going to be able to buy a Power Pack?

Robert Lifton

Well, you are going to be able to buy a Power Pack with black product in the very near future and I would expect – Michelle at Best Buy, and you can buy at other places also, right.

Michelle Rush

We have started shipping some product to ASE, to Quasar, Northwest, in black casing. But they are – that interns doing their marketing program with the various customers that they are working with. The goal is to get to that transparent casing as quickly as possible and not to stuff the channels with the black casing when we are moving to the transparent and that’s what everybody would like. So that’s where we are starting. So we are shipping with the black casing now.

Operator

Our next question will comes from the line of Bart Blout with Sawtooth Capital.

Bart Blout

Yes, can you go into – Hewlett Packard is involved with you, they must have done a lot of due diligence in checking the pack than your production facilities, I wonder if you could give us a picture of that?

Michelle Rush

Bob, I think it’s based on…

Robert Lifton

I am going to answer the question. We have, with our relationship with various customers they all have different ways of handling the issues of public relations. The statement that we have in there about Hewlett Packard is the statement that we have agreed upon with them is the public statement for most about our relationship with them. And we’ve agreed not to say anything more about that particular statement.

Operator

Our next question will come from the line of Willis Taylor with Gagnon Securities.

Willis Taylor

Hi I was wondering if Michelle could expand upon her comments on the Best Buy deal, how many stores will you be shipping to initially, what will the stocking fees be, and what will the marketing cost fees?

Michelle Rush

We are starting with a limited numbers of stores they have requested that we don’t publicly state their marketing strategy. I mean it is -- it is their strategy that we’re fallowing along with. It is a limited number of stores and then we will expand we believe in a very short timeframe to additional stores and then go worldwide with the program. You can expect to see the products in the store shortly, and then we can expand on that program. Sorry, I cant give more details.

Operator

We have a follow up question, from Mike Saxon with Saxon Investment Group.

Mike Saxon

Hi. I guess I’m not – maybe not understanding what you said. I got the impression that the branding of the product logo would be Best Buy. I don’t know if that’s correct or not, but I guess the question is, are there any restrictions by Best Buy for us selling to other people?

Robert Lifton

I’m not going to answer the question about branding because that flows under the heading of what Michelle which is it’s their strategy and we are limited in what we are going to say about that. We have said publicly in our statements announcing the strategic program with Best Buy, we have said publicly that there were agreements with them as part of that program were would not directly sell to certain other names – companies.

Operator

We have a followup question from Tom Leach with Preakness Hills Capital.

Tom Leach

Yes, thanks for taking the second question. I had a question on share count; you mentioned on my previous question were up to 39 million shares and I think there is 43.5 million authorized. What’s your plans going forward on that?

Robert Lifton

Well, we have a meeting on the 15th of May, a special shareholders meeting to expand the number of shares outstanding by 6 million shares – 6 million authorized shares, Howard is correcting that. And we -- the proxies were sent out on that, and all the proxies that we have already are sufficient to authorize that. So we have enough proxies in hand. So I can tell you that on May 15th we’ll be authorizing another 6 million shares.

Operator

And we have a followup question from Zack Conan with Capital Standard.

Zack Conan

Hello. I was wondering if you could expand on -- I know you can't give specifics but is there a range of stores that is going to be invest by, are we talking sub 250s, sub 50? And then kind of in a tandem to that, you mentioned a national distribution or an international distribution with them rollout, is that guaranteed or how does that work?

Robert Lifton

Michelle, you want to answer?

Michelle Rush

This industry is the retail CE on -- in the mobile industry they are very competitive industry, they have outlined with us their programs, we are very pleased with the program and we -- it’s not a trial program, I want to make that clear. A trial program is -- they give you a purchase order for few hundred units and they try it out in the store, see how it does, this is a strategic program with them. We are very excited about it, we expect to starting stores on the West Coast and expand that program as we define the marketing message with them, this is a new product, how do you communicate to the consumer not only what it does but the actual technology it’s -- there are green acres or this young green market that is looking to support Green technologies, company’s that are supporting Green technologies they also are the early adaptors and there also the once that have the most, the revival marketers. So, we are working with them on that message, we expect to expand the rollout as we define the message and really until the product is out there in the store we are not going to be able going to anymore detail.

Operator

We have a question from Michael Fenton with Gilford.

Michael Fenton

Hi. Good morning. Question regarding the equity line. Have you started drawing on that and any color as to -- any more color you can share on the equity line?

Robert Lifton

Yeah, we said -- as we said earlier Michael, we drew down $7.3 million on that last week and we are very pleased with the relationship with Azimuth Opportunity. They have been very cooperative. They have met every commitment so far that they have made and we are very happy with the relationship.

Operator

We have a followup question from Bart Blout with Sawtooth Capital.

Bart Blout

Yeah. What label is the ASE that's being shipped going out as?

Michelle Rush

The product currently has been the Medis side. We have been keeping everything currently under the Medis brand except for Quasar as of Savannah brand.

Operator

And we have a followup from Zack Conan with Capital Standard.

Zack Conan

Hey Bob thanks for taking the question. In trying to understand the equity line it appears that there is price that which you couldn’t drove down on it any further could you spend on that and what the implications are?

Robert Lifton

Well, the equity line I mean its explained fully in our filings but essentially what it does and I must say it’s a very, very attractive program, because it allow us to set the price at which we are willing to sell and allows us to set the timing at which we are willing to do it, and then so a long as the stock value is above that price, then the deal goes through and it falls below that price, the deal doesn’t go through. So it’s up to us to set the price that we want to sell at and that we think is it appropriate price which relates to the market price obviously but its up to us to sell to make that choice. So if we make a price of X and the market is above X then the deal closes. If the market is below X, the average weighted -- I am talking about average weighted sales of that amount is below X then we don’t sell it at that price. So, its really very flexible program and that’s why I said we’ve been very pleased with it on how it works.

Operator

And we have no further questions. I will now turn the conference back to management.

Robert Lifton

Well, thank you all very much for your participation and we look forward to a very successful future going forward.

Operator: Ladies and gentlemen, this concludes our conference for today. Thank you all for participating and have a nice day. All parties may now disconnect.

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