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Edited Transcript of SCON earnings conference call or presentation 12-Nov-19 4:00pm GMT

Q3 2019 Superconductor Technologies Inc Earnings Call

SANTA BARBARA Dec 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Superconductor Technologies Inc earnings conference call or presentation Tuesday, November 12, 2019 at 4:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jeffrey A. Quiram

Superconductor Technologies Inc. - President, CEO & Director

* William J. Buchanan

Superconductor Technologies Inc. - VP, CFO & Principal Accounting Officer

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Conference Call Participants

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* Moriah Shilton

LHA Investor Relations - SVP

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Presentation

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Operator [1]

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Good day, and welcome to the Superconductor Technologies Third Quarter 2019 Conference Call. Today's conference is being recorded.

At this time, I would like to turn the call over to Moriah Shilton of LHA. Please go ahead, Madam.

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Moriah Shilton, LHA Investor Relations - SVP [2]

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Thank you, Christian. Good morning, and thank you for joining us for STI's Third Quarter 2019 Conference Call.

If anyone has not yet received the earnings press release, it is now available at the company's website. If you would like to be added to our distribution list or if you would like additional information about STI, you may call LHA at (415) 433-3777.

With us from management today are Jeff Quiram, President and Chief Executive Officer; and Bill Buchanan, Chief Financial Officer. I will review the safe harbor provisions of this conference call, and then I will turn the call over to Jeff.

Various comments regarding management's beliefs, expectations and plans for the future are forward-looking statements and are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance and are subject to various risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ from those expressed in the forward-looking statements, and those differences could be material.

Forward-looking statements can be affected by many other factors, including those described in the risk factors and the MD&A sections of STI's 2018 annual report on Form 10-K. The document is available online at STI's website, www.suptech.com, or through the SEC's website, www.sec.gov. Forward-looking statements are based on information presently available to senior management, and STI has not assumed any duty to update any forward-looking statements.

Jeff will begin with an update on STI's served markets and the company's Conductus wire program. He'll then turn the call over to Bill for a review of the financials. And now I would like to turn the call over to Jeff.

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Jeffrey A. Quiram, Superconductor Technologies Inc. - President, CEO & Director [3]

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Thank you, and good morning, everyone. In our target market, customer interest for high-performance superconducting magnet wire like ours has never been stronger. We are excited to see multiple wealth-funded companies that are developing new novel next-generation fusion devices that disrupt the energy market by providing clean, efficient power available 24/7. This, of course, is in addition to the countries that are working on the ITER project in Europe, the first fusion system expected to produce more power than it uses, which would be a watershed event for the technology.

Our focus remains on the transition from R&D to production of our Conductus superconducting wire that matches the requirements of many fusion customers. There's still work to be done. And in the face of this, the Board and management are now in the process of exploring initiatives that may include, but are not limited to, a strategic investment financing that would enable us to pursue our current business plan to commercialize the Conductus wire platform; or business combinations such as a merger with another party or a sale of STI.

We are engaged with discussions with multiple parties on various alternatives, but have no further updates at this time. There is no assurance as to when or if any such discussions will lead to a transaction. As discussed earlier, we do not intend to provide updates on this process unless or until we determine that further disclosure is appropriate or necessary. The company's timetable for the conclusion of this review and its decisions relating to any potential strategic alternatives are subject to the company's cash limitations that Bill will discuss.

Turning to a review of the third quarter. On the commercial front, we started delivering initial quantities of our Conductus high-performance magnet wire to several customers, but we remain challenged to meet current customer commitments. We're focused on completing our current customer demand before we can begin to transition to full production.

We made further progress towards high-volume manufacturing readiness. The new temperature control system that provides the environment necessary for high uniformity across the deposition area is operational, and we are running increasing lengths of wire through the machine. With regards to copper processing at long length, we believe our third-party industry experts have made the necessary progress and run already for electroplating the scale and volume.

Our efforts to commercialize Conductus wire for high-end field magnetic performance applications are important to both government and industry who seek more efficient alternatives to existing conductors that are available to meet the demands of next-generation power solutions. Late in the third quarter, we reengaged our efforts on our DOE project. In conjunction with project partners, TECO Westinghouse Motor Company, Massachusetts Institute of Technology and the University of North Texas, we are focused on the development of components for next-generation electrical machines. The objectives have significant synergies with our commercial goal of ramping capacity of best-in-class 2G HTS wire for superconducting magnet applications.

Finally, earlier in the fourth quarter, we strengthened our intellectual property portfolio as the U.S. Patent and Trade Office (sic) [U. S. Patent and Trademark Office] in October granted STI a patent that further protects its unique techniques to maximize current carrying performance in the superconducting magnet applications. This patented process is important for the industry as high-performance magnet wire is a key component to the successful future commercialization of fusion.

Now Bill will provide a review of the financials. Bill?

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William J. Buchanan, Superconductor Technologies Inc. - VP, CFO & Principal Accounting Officer [4]

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Thank you, Jeff. We had $157,000 in net revenue in the third quarter compared to $517,000 in the third quarter of 2018. For both periods, revenue was from work done in the company's ongoing Department of Energy NGEM project. Total R&D expenses amounted to $622,000, and we were $665,000 in the prior year quarter. These efforts remain exclusively focused on our Conductus wire.

SG&A expenses were $966,000 in the third quarter of 2019 compared to $1,041,000 in the year ago quarter. Net loss for the third quarter of 2019 was $2.4 million or a loss of $0.43 per share compared to a net loss of $2.2 million or a loss of $0.88 per share in the third quarter of 2018.

On to the balance sheet. As of September 28, we had $275,000 in cash and cash equivalents. Subsequent to the quarter end, on October 10, we generated gross proceeds of approximately $3 million from a public offering. In the third quarter of 2019, $2.1 million was used to fund our operations and $100,000 was used to fund increases in working capital. Based on our current forecast, our existing cash and cash equivalent resources will be sufficient to fund our business operations only into the first quarter of 2020.

And now I'd like to turn the call back to Jeff.

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Jeffrey A. Quiram, Superconductor Technologies Inc. - President, CEO & Director [5]

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Thank you, Bill. Before I close, I would like to note, as many of you have seen, we have a special meeting of stockholders later this week on Thursday to approve the authorization of a reverse stock split of our common stock as determined by our Board of Directors within a specific range.

Our Board recommends that stockholders vote for the authorization of this reverse stock split to provide the company the necessary flexibility, given current market conditions in order to address the minimum bid price requirement of NASDAQ. Please see our publicly filed definitive proxy statement available on our website and the SEC's website before voting.

In light of the multiple discussions currently underway through our strategic initiatives review, we will only have prepared remarks on today's call and will provide material updates on the process and other business developments as they occur. Thank you very much for joining us today, and good day.

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Operator [6]

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Ladies and gentlemen, this will conclude today's call. Thank you all for your participation.