iQ Power Licensing AG | Status report of the management
Dear Shareholders and Stakeholders.
In the first six months of 2016 iQ Power Licensing AG (IQPLAG) was dominated by the strategic decision to continue the active engagement in the revitalization of the JV factory in South Korea. The recent upturn in sales and production in the last half of 2016 has proven the Management decision correct and shows that the potential of the factory and its meaning for the future of IQPLAG justified the sacrifice.
Activities in South Korea
In the 1st quarter the aggressive tooling program was completed to assure a full product line for car batteries. This allowed the plant to become a serious supplier to larger customers in North America and Europe.
As noted in earlier reports, the strategic partner of IQPLAG, Discover Energy Corporation (DEC), Canada, has provided working capital and investment capital for the tooling and equipment. More importantly, DEC began to actively market the batteries to its worldwide customer base.
It should be noted that it requires some time for major distributors to switch to new suppliers due to contractual commitments to existing suppliers. Many orders are small test orders to check if the factory can deliver quality products on time.
As orders increased at the end of the 2nd Quarter of 2016, it became apparent that the earlier estimates of production capacity were over-estimated. Production equipment and machinery was purchased to allow for an increase in capacity and output. The equipment was installed in September and October and was fully integrated during the 4th quarter of 2016.
In Brazil, the Licensee finished the testing and tooling to for the start of production of batteries for the first idle-start-stop engine (ISS), which will be equipped with iQ Power technology and iQ Power Licensing has now been qualified for OEM use.
Discussions with potential European and Asian licensees been resumed in mid-year on a limited time basis due to time and logistical constraints resulting from the engagement in Korea. The success of the Korean factory aids in discussions greatly. Increased activities are foreseen for 2017.
Sales in the North America from the Licensee, Smart Battery are now included in the sales numbers of the Korean factory because Smart Battery purchases their batteries from customers of Discover Energy in the USA. The amount of batteries sold by Smart Battery, however, remained small.
The progress made in 2016 is very encouraging and the plant will contribute significantly to revenue in the 2nd half of the 2016. Following the full implementation of the projected new assembly line in 2017, the sales volume is set to increase significantly during 2017 and provide stable cash flow to IQPLAG. In addition to sales from Korea, sales from Brazil and Bangladesh are expected to contribute to revenue growth.
Charles Rober Sullivan
CEO — iQ Power Licensing AG