Lifecore Biomedical Inc (LFCR) 2008 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Landec Corporation first quarter fiscal 2008 earnings conference call.

At this time all participate participants are in a listen-only mode.

Later we'll conduct a question and answer session, and instructions will be given at that time.

(OPERATOR INSTRUCTIONS).

As a reminder this conference call is being recorded.

I would like to introduce your host for today's conference, Mr.

Gary Steele, Chairman and Chief Executive Officer for Landec Corporation.

Mr.

Steele, you may begin.

Good morning, and welcome to Landec's first quarter of fiscal year 2008 earnings call.

I have with me today Greg Skinner, Landec's Chief Financial Officer.

This call is being webcast by Thomson CCBN, and can be accessed at Landec's website at www.landec.com on the Investor Relations page.

The webcast will be available for 30 days through October 26, 2007.

A replay of the teleconference will be available for one week by calling 888-266-2081 or 703-925-2533.

The access code for the replay is 1138012.

During today's call we may make forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially.

These risks are outlined in our filings with the Securities & Exchange Commission including the company's form 10-K for fiscal 2007.

As reported in yesterday's press release, for the first quarter of fiscal year 2008 revenues increased 23% to $62.7 million and net income increased $3.1 million compared to the first quarter last year.

Notably during our first quarter sales of our value-added specialty packaging vegetable products grew 12% to $39.4 million and value-added gross profits increased 35% to $6.1 million.

In addition, license fee revenues increased by $1.3 million license fee gross profits increased by $1.5 million.

Overall Landec generated $4.2 million in operating cash flow during the first quarter of fiscal year 2008.

Based on the results for the first quarter, we are on track so far for achieving our revenue and net income goals for fiscal year 2008.

Accordingly, we are not changing our original guidance for the fiscal year 2008 which is to increase revenues by 10-15% and after excluding $18.8 million of non-recurring events from fiscal year 2007, increased pre-tax net income 45-55% and net income after tax 30-40% compared to fiscal year 2007 results.

Our progress in the second quarter is going well.

Our Chiquita collaboration is proceeding well not only with the rollout of selling bananas to new alternative retail sites but also with retail grocery store market tests which are expected to continue in early calendar year 2008.

In addition, we just expanded our joint technology license and supply agreement with Chiquita.

The expanded agreement includes additional exclusive fields for bananas.

Further, as part of this agreement Landec and Chiquita have entered into a new exclusive license using Landec's BreatheWay packaging technology for avocados.

This agreement with Chiquita covers additional exclusive fields for bananas which are strategically important to Chiquita and new applications for packaging and selling avocados resulting in expanded market opportunities for both Chiquita and Landec's BreatheWay packaging technology.

Under this agreement in exchange for expanding the exclusive license fields for bananas and adding an exclusive license for avocados, the minimum gross profit amount says from the purchase of BreatheWay packaging by Chiquita will increase a total of $2.1 million over Landec's next two fiscal years to $2.9 million in fiscal year 2008 and to $2.2 million in fiscal year 2009.

As part of the expanded banana license agreement with Chiquita, in fiscal year 2008 Landec will receive initial incremental minimums for the additional exclusive fields for bananas.

All in all we are tracking well, and our progress is in line with our internal plan for meeting our goals for fiscal year 2008.

Let me turn to Gregory Skinner for details of our results.

Thank you, Gary.

Good morning, everyone.

As outlined in yesterday's news release Landec reported total revenues for the first quarter of fiscal year 2008 of $62.7 million versus revenues of $51.1 million for the same period a year ago.

The increase in total revenues during the first quarter was due to first a 12% or $4.4 million increase in revenues from Apio's value-added vegetable produce business, second a 36% or $5.7 million in revenues from Apio's commission trading business and third, a $1.3 million increase in license fee revenues primarily due to revenues from the Intellicoat license agreement with Monsanto.

Both the Apio value-added vegetable business and the commission trading business benefited from the favorable produce sourcing conditions in the first quarter of fiscal year 2008 compared to very unfavorable weather-related produce sourcing conditions during the first quarter of last fiscal year.

For the first quarter of fiscal year 2008 the Company reported net income of $3.1 million or $0.11 per share compared to net income of $14,000 or break even per share for the same period last year.

This increase in net income during the first quarter of fiscal year 2008 compared to the same period last year was primarily due to first, a 1.6 million dollars increase in gross profits and Apio's value-added vegetable business primarily due to favorable produce sourcing conditions during the first quarter of fiscal year 2008, second, a $1.5 million increase in licensing gross profit as a result of the Intellicoat license agreement with Monsanto, and, third, the elimination of $2.5 million of operating losses incurred by Landec Ag in the first quarter of fiscal year 2007 as a result of the sale of Fielder's Choice Direct to Monsanto in December 2006 and the fact that under the Intellicoat license agreed Montana was currently paying for all of Intellicoat operating costs.

These increases in net income were partially offset by a one one-time net proceeds of $1.3 million from an insurance settlement received during the first quarter last year which was recorded as a reduction of general and administrative expenses in the prior year, and from the increase in the book income tax expense of $1.2 million during the first quarter of fiscal year 2008 compared to the same period last year.

It should be noted that only &50,000 of the $1.2 million book income tax expense will be paid because of the repurchase of Apio's options resulted in a tax deduction of $19.7 million which reduced Landec's cash tax liability to the minimum owed under federal ANT.

However, for book purposes the $19.7 million is not considered a deduction when calculated in the income tax expense because the options that were repurchased had never been included in a prior period as an expense for book.

Turning to the balance sheet, during the first quarter of fiscal year 2007 our cash balance decreased by $16.3 million to $46.3 million.

Cash decreased because of the repurchase of all of the outstanding common stock and options of Apio not owned by Landec for $20.6 million.

This decrease in cash was partially offset by $4.2 million of cash generated from operations.

That concludes my formal presentation.

Let me turn it back to Gary.

Thanks, Greg.

Our first quarter results begin to demonstrate the benefit of Landec's increased focus on its two core businesses.

The Apio food technology business, and the technology licensing business.

In the food business the focus is on selling value-added specialty packaged vegetable products and selling BreatheWay packaging to key partners for produce products.

In the technology licensing business outside of food, the focus is on licensing and commercializing Landec's patented polymer material to say key partners that are outside of the food application area.

During the first quarter we benefited from good weather, increased demand for our food products, new licensing arrangement with Monsanto, increased interest income from the cash received from the sale of Fielder's Choice Direct direct to Monsanto last December 1st, and the absence of losses from Fielder's Choice Direct which has historically occurred in our first fiscal quarter.

As we look forward, a key driver of future revenue growth in our Apio business is the continued growth of our value-added specialty packaged fresh cut produce products to retail grocery stores, club stores, and food service outlets.

This business is growing at rates above category growth, and we are taking market share using our proprietary BreatheWay packaging technology that extends shelf life of perishable produce.

As consumers make better choices about their health and eating habits and continue to look for healthy fresh prepared food products, we see our category continuing to grow.

We are also benefiting from our focus on growing markets in the converging trends to healthy and convenient fresh foods and snacks.

Turning to our non-food technology licensing business, we are busy with our partnerships with Monsanto and Air products as well as our internally funded corporate R&D efforts focused on new break through polymer chemistry.

We're expanding our R&D staff and filing more patents.

In implementing our strategy we are subject to the rate of implementation and determination of our partners such as Chiquita, Monsanto and Air products, to develop, launch and market new products using Landec's technology.

And in our food business our business plan does account for some weather-variability issues but not for extreme conditions such as prolonged freezing or heat waves.

We are working to stay ahead in our markets and applications through innovation, uniqueness and new products.

We are please to do expand our relationship with Chiquita to include a wide expanse of license applications for bananas using our BreatheWay technology.

We are impressed with Chiquita's brand, logical support, customer relationships, international presence and strength and technology development.

Chiquita conservatively estimates that they are in over 11,000 North American sites and three European countries with its Chiquita to Go program.

Chiquita's focus is to aggressively expand the Chiquita to Grow convenience store program in North America and Europe, identify quick serve restaurant chains that can benefit from having bananas on their menu and continue to develop an array of products that will allow a broad and successful rollout of retail products to grocery store chains sometime next year.

We will keep you posted on our progress.

We stated earlier in the year that we would be seeking new partners or expanding current partnership agreements for selling our BreatheWay packaging technology for new produce targets.

Our expanded agreement with Chiquita to collaborate on avocados is our first move outside of bananas.

We like the profile of the avocado market, the size, the growth, the current difficulty that suppliers delivery a ready to eat product that has adequate shelf life for the consumers.

Americans consume 2.4 ponds of avocados per person per year, and the demand for avocados is increasing.

Our focus with Chiquita is to package avocado to say extend the shelf life and ripe and ready to eat avocados.

We will have more to say about this program after it gets launched in the next year.

Monsanto is in early stages of accessing how -- of assessing how Landec's polymer technology can be used for seed coatings in broad areas including corn, soybean, cotton and canola.

This is going to take time, but we certainly have the benefit of being with a partner that has the technical expertise, research capabilities and field expertise to determine the best uses of our coating technology.

Thank you.

We're now ready for questions.

Thank you sir.

(OPERATOR INSTRUCTIONS).

Our first question is from Steve [Benalt] of Northland Securities.

Your question please.

Good morning, Steve.

Good morning, everyone.

Good morning.

Can you--the Chiquita agreement and the expansion which includes exclusive fields of bananas, can you help me better understand specifically what that means?

Think of all applications now in which we can use our BreatheWay technology, are now included in this exclusive license, includes small package sizes, large boxes.

It would not include packaging sold on the packaging aisle of a grocery store.

It would not include shipping container, it would not include pallet shrouds, that kind of thing, but everything you can imagine that you would want to use for packaging bananas either in the tropics or up here in North America is now included in this broad expanse of exclusive license.

Is there anything in particular that wasn't included prior?

Yeah.

There were portions of what I just said that weren't in the initial license agreement, and Chiquita saw that it would be in their best strategic interest to fold those into their exclusive license, and as we've been working with Chiquita for a couple years, we realize that we're working -- we think we're betting on the right horse, they've got strength and expertise.

They're obviously investing heavily in this technology.

They've gotten to know our technology, and so we saw it as a mutually beneficial arrangement to expand it to include these other categories.

Okay.

If I pick, the 11,000 points of distribution within alternative channels, how many points of distribution are there within the three European countries if you have any idea?

That I don't know.

I know that Chiquita has identified 200,000 potential sites in North America, but I don't know what those potential sites are in Europe, and I will try to find out for you.

I am not sure.

Does Chiquita do any business currently within the QSR channel?

They are selling some -- yes, they do.

They have some -- they're selling some of these apple slices, and I believe that they may have through their fresh express subsidiary they may have some lettuce business with some of these quick-serve restaurants, so yes they already are serving some of them with these products but not bananas yet.

Perfect.

Thank you.

Thank you, Steve.

(OPERATOR INSTRUCTIONS).

Our next question comes from Jeff Osher of JMP.

Your question, please.

Hi guys, another good quarter.

Congrats.

Help us through -- I know there was some questions and analysts note about the sequential negative gross margin contribution.

Just walk through what given the better sourcing environment what led to $500,000 less of gross profit on that incremental $11 million sequentially of sales?

Are you talking about in total for Apio or --

Yeah in total for Apio.

I think you guys mentioned you did have a favorable sourcing environment.

Yes, we did.

The one thing you've got note is the largest increase in our revenues, 36%, came from our commission trading business.

That's right.

That is a 4 -5% margin business, so as it becomes a higher percentage of our total, it is going to drive down our overall gross margins, but it increases our gross profit which is more important.

Well, I guess the question, though, is on that incremental in the Apio trade you guys did $13 million of incremental revenue sequentially and about $500,000, so you had like a 2.5 or 3% gross profit on that incremental revenue.

Was there something -- was there an anomaly in there?

No.

No.

Typically in that business if revenues are down, that means you have sourcing issues which typically means that your commission you're going to receive is higher.

When you have ample produce which increases your revenues, you tend to have lower commissions.

That's just the typical economics of supply and demand.

Okay, so we should think about a very minimal contribution margin there on that incremental revenue?

We understand, but in the end of day year in and year out they come in on an annual basis about 5 or 6%.

Okay.

Okay.

That's helpful.

It kind of works its way out during the course of the seasonal variations.

Well, was there -- refresh my memory.

Q4 '07, was the environment for value-added as favorable as Q1?

I am just trying to understand, it was a very good quarter.

I want to get my arms around the gross profit drop by a full point and the value-add as well sequentially?

Fourth quarter does tend to be a better quarter historically if you look back than the first quarter.

I think in the first quarter this year there was some mix changes that resulted in the variation in our gross margins, but overall, and you can look back the last year when we had sourcing issues and changes in our mix, at the end of the day our gross margin for the year even though it varied quite a bit quarter to quarter ended up being 15% which is what we're projecting for this year.

Okay.

Great.

One other one with the incremental Chiquita minimums, I noticed you held your guidance.

Is that an act of conservatism or did you actually include some of these licensees that you obviously announced Chiquita in Q1 and that you'll announce throughout the course of the year in your guidance?

In other words, should we think of the change in the minimum where you picked up a million plus of operating income, is that additive to the guidance you gave three months ago.

No, Jeff, we anticipated this deal happening.

Sometimes these things get strung out a little bit in time, so we put it into our plan.

We knew it was going to happen.

We had the specifics of it, so it is already in our guidance.

So does your guidance include other licensing deal that is haven't yet been announced?

In other words, I am trying to get some flavor for --

No, no.

This one is in.

Okay.

Any future arrangements that involve material dollars would be additive, but this one was already in.

Okay.

Thanks a lot, guys.

Next question is from Bill Gibson of Nollenberger Capital.

Your question, please.

Good morning, Bill.

Good morning.

I just wanted to follow up on Steve's question, and you talked about the expansion of the banana agreement, so when you say large boxes, is that the 40-pound shipping boxes?

Yes.

Yeah.

Those are now included.

Thank you.

Thanks, Bill.

Our next question is from Sal Kamalodine of B.

Riley & Co.

Your question, please.

Your question, please.

Good morning, Sal.

Good morning, guys.

I really just had one question.

I noticed some change in the language thats used in the press release to describe Chiquita's view of the market opportunity for packaged bananas at grocery stores, and maybe I am trying to read too much into this, but in the last press release you described them as being very excited.

This time around you're using remains enthusiastic.

Are you -- is there any change at all or is this just meaningless change of language?

I think it if it is any change it is minor, Sal, and let me explain.

As you know, a number of months ago, a couple quarters ago we started the retail trials.

They're in 80 sites, the produce managers loved the program.

Consumers liked the product.

We did it with one type of product format, a three-finger, individual-finger tray with a film on top of it, the membranes on the tray.

Price pointed was tested at $1.50 or $0.50 a banana, so you go into this thinking we'll learn what we can.

So what have we learned?

What we've learned the consumer likes the concept.

What they're buying is a ready to eat banana they can take home, it is not green and hard.

You can take it home and eat it, open it upright away, or if you want to wait, you can open it up 3,4,5,6 days later, and it is still ready to eat that.

So that concept is playing well.

But consumers are telling Chiquita that they want more choices.

They want more than just a three-finger choice.

They would like to have more variability in terms of the size of the banana.

These were three large fingers, and some kids really love the mini sized bananas, so they want more choices, more sizes.

We're looking at different packaging configurations besides just a plastic tray, and we're also -- Chiquita is also doing what you would normally expect them to do which is price elasticity tests to see how demand will vary with different prices.

We're even toying with the idea of could we reseal the package, probably not, but could we.

We'll look at it.

These are the types of things that are going on, and so what we've learned is let's not just kind of dribble this stuff out.

Let's get these pieces right, and then let's roll it out.

Remember, we're selling the product now.

We're charging $1.50.

So its not a freebie, but everybody believes Landec and Chiquita believes that we want to make sure this is not a niche market, that this is a broad-based paradigm shift, and we to want exploit that and in the retail business you want to get it right the first time.

Chiquita, we think, is making the right moves here to be me to methodical, do the testing, do the product development, get in a position for a broader, more encompassing launch sometime next year, so that's what's going on.

Got it.

And just another semantics question, similarly in the press release in describing the areas of focus for the licensing business, you talk about pharmaceutical drug delivery application which I don't believe was ever mentioned before in your press releases.

Is that indicative of potentially one of the other licensing deals that you expect to announce pretty soon?

You certainly get kudos for paying very close attention to the new words.

We haven't mentioned that before.

As I said in the last twelve months we're stepping up and expanding R&D.

Frankly we had curtailed R&D a little bit too much in the past few years.

We're stepping that up again.

We believe our technology has the potential for delivering a small molecule or maybe a large molecule, and the small molecule could be a drug, the large molecule, the standard chemical drug.

The large molecule could be a peptide or hormone.

We believe it also could be a pesticide or insecticide, so it could be a surfactant that is in a wash cycle, so we're looking at this temperature-control, temperature-release dispensing type of technology that has broad applications of which drug delivery is one.

And it R.

View this as R not D.

Got it.

And final question is in relation to the avocado licensing deal, it is my understanding that Chiquita has a pretty small market share in grocery stores for avocados, so I would assume the contribution from that in the near term is going to be pretty small but is is their intention also to potentially use the packaging technology to distribute avocados into the food service vertical at Subway, for example?

I would like to let them comment on that, but let me just comment on the fact that the implication of saying Chiquita is a small -- they are a relatively small player today.

I can tell you that the leadership team there has looked very hard and wide at what products fit extremely well with the Chiquita brand internationally, and avocados and the Chiquita brand is a perfect fit, and something that they believe that they have the logistics support, the sourcing, et cetera, et cetera, to really make a serious run at this, but I would imagine that they're looking at this very broadly.

I don't think that they're looking at doing this in just little niche avenues, so I think that should speak volume to say your question.

Got you..

Thanks a lot.

Thank you.

Our next question is from Jonathan Lichter from Sidoti & Company.

Your question, please.

Good morning.

Good morning.

Can you break down how much of the increase in license fees was related to the banana deal and how much to avocados.

No, we haven't disclosed that, Jonathan.

Okay.

The majority of it was from bananas.

Can you talk about what progress you've made on resealable bags.

Very little.

It is a new thought.

It is early stage, and it is a tough one technically.

You cannot have any leaks.

If there is any leak in the reseal or Ziploc or whatever, we're not creating and controlling the modified atmosphere that we want, so I would say view it as a long shot.

Long shot.

Okay and in terms of acquisitions is that on the back burner at this point or do you have any candidates currently?

It is on the front burner, but we've got such strict criteria Jonathan, that maybe we're just being too fussy, but there is just not a lot of desirable targets out there for us at this point.

It is not on the back burner.

It is just, we're not succeeding in meshing our desirable needs and targets with what we're seeing.

Thank you.

Thank you.

Our next question is from Cheryl Cortez from SIG.

Your question, please.

Hi.

Hi, Cheryl.

I just wanted to know if there is any updates on the military licensing trials you were doing?

That's a good question.

I need to get more up to date on that.

I think it is in full swing -- I think we're testing--

We've been testing for five months now.

Testing in five months.

Let us get a little bit more up to date so we can answer your question more intelligently, but it is in full swing, but I don't have any more details to tell you at this point.

Okay.

Thank you.

Thank you.

Our next question is from Bill Gibson of Nollenberger.

Your question, please.

Just one book keeping follow-up, Greg.

I think you handed out the operating cash flow number which I missed.

What was that number?

$4.2 million.

$4.2 million.

Thank you.

(OPERATOR INSTRUCTIONS).

Our next question is from Shawn Boyd of Westcliff Capital.

Your question.

Good morning, Shawn.

Hey, Shawn.

Good morning.

Just a couple, guys.

On the trading, what drove the big boost in trading revenues this quarter?

Having produce available.

The trading business is a good business for us even though it has low percentage margins.

It is a good business for us for three reasons.

One is it provides predictable and steady income for us without risk.

Second, is as down the road when and if we're able to launch global types of applications for our membrane technology to help move produce from Chile to the U.S.

and vice versa, it would be a good launching pad for us to do that because it is dealing with shipping and containers every day, and, third, not stated very often, but the export business when we go into tight supplies on the domestic front, there is a little bit of robbing from Peter to pay Paul.

The export tends to get -- we basically try to supply our domestic suppliers if we can, and often the export guys get short changed, so over the last year, especially last year, there were produce shortages, really affected them, and in our first quarter this year we had full supplies, and the quality was good.

Got it.

So going forward, I was thinking about this as sort of a single-digit growth business.

I guess maybe that's incorrect.

Are we to think about a higher growth rate on this?

I don't think so.

I think you should continue to think of this as a 5-10% single-digit business.

I think that's the way we're thinking about it.

You need to know that we manage this business so that we start with saying we're not willing to take any accounts receivable risk, none, zip, zero, so if we were willing to change that philosophy, we could make this double-digit growth, but we're unwilling to do that.

Got it.

That's helpful, Gary.

The value-added.

Revenues up 12% year-over-year, kind of right between the goal posts.

I think you guys talked about 10-15% in the past.

The business has grown at a higher rate in the past, more toward that 14, 15% rate.

Right.

I am just wondering here we had a pretty favorable environment, and I am curious, can we go through some of the things that take you to the high-end or the low end of that guidance?

In other words, what takes this down to a 10% growth business?

What takes it up to a 15% growth business?

What are the conditions that you need to do that?

New product launches--.

Landing new customers is number one.

We've got to add new sites, new customers, and that's why we pay five field sales guys and brokers pretty good money to do that.

That's the biggest swing, landing new customers.

I would start there.

Second is launching new products, and with such as our veg line, our snack line, snack line is now being introduced in Safeway, our first toe in the door.

The salad line is down in Vaughnes now, the first toe in the door, so those are the drivers for growth and exceeding category growth.

Those are the biggest factors.

Losing a customer is the contrary.

That would take us down to the lower end of growth, and there are other people out there trying to do things similar to what we're trying to do, they just don't have the technology, but there is good folks out there, and there are regional processors that can process next-day delivery where as with us you have to wait five days if you're on the East Coast for it to get across the Rockies and to your plant, so we got to work real hard and smart here.

This is not easy stuff.

Do you see any potential increase here in customer attrition as we're -- anything out of the ordinary?

Well, you always worry about that, but it is not that I know of.

We've got a loyal customer base.

It has been steady for a number of years.

I don't want to sound complacent or over confident here, but no is the answer.

Got it.

Okay.

And, Greg, if I could just shift over to the expenses for just a second, with the changes in the company last year, it is real -- you have to be real careful about doing anything looking at last year's quarters, and so here we are at $4.5 million in SG&A and $800,000 in R&D.

Going forward, would the business as it is now, should we think about a fairly linear ramp or do we still have some kind of big November quarter boost in SG&A?

What can you tell us on just the directional aspect of those operating expenses?

I would say on a quarter to quarter basis this is fairly representative quarter.

Obviously in quarters where you have large increases in revenues you're going to have some commissions and bonuses and other things that are tied to revenue growth, but by in large I would say that this quarter is pretty representative of future quarters.

Okay.

Great.

That's helpful.

Congrats on the quarter and thanks a lot, guys.

Thank you.

Our next question is from Will Lauber of Sterling Capital management.

Your question, please.

Good morning, Will.

Yes.

I had noticed that Amazon.com in their food delivery services started trials in the produce area, and I was just wondering if there is any fit there, whether it is in the shipping part of their business or where Landec could play a part?

I think so.

This is new stuff for us, and we've got to be aggressive and look at some of the emerging -- they're still very nichey as you know, but some of the emerging direct delivery market opportunities, and I think we could modify some of our packages to accommodate this type of opportunity, but for us it is all new, Will.

Okay.

And my other question was what are the future applications of the technology for flowers, flower delivery?

Don't know.

We're not doing anything there, and it is a bandwidth issue, number one.

Number two, is the respiratory profile of flowers is much more complicated than standard produce.

The stem respires at a different rate from the petal, et cetera, et cetera.

Roses are very different from carnations, so there is a complexity there that looks challenging on the surface, but don't rule it out for us.

It is just a matter and I will tell you quite frankly we got a little bit too overwhelmed and consumed for a few years focusing on the banana and Chiquita relationship and getting that right, and now we're freeing up resources to begin to look at new targets, but we don't really know how well the fit will be with flowers.

I don't need to tell what you people are spending for flowers these days and how challenging it can be to ship these things up from Columbia and South America and get them in a state that people will pay good money, so it is on the list.

Okay.

And the last question, you had said that you were expanding the R&D staff.

I am just trying to get as you allocate the capital there, obviously you think you're going to be getting more bang for the buck there, but how does that compare to hiring sales people to go out and try to find new licensing partners and just want to know how you think about the capital allocation there?

That's fabulous, fabulous question.

By the way, you just, guess what our next board a agenda is, and this is the case to where to properly invest, and the two greatest needs that I see are -- I wouldn't call them typical sales guys.

It is corporate development, business development types of people.

We need to strengthen that in our company, and we need to put more R&D feet on the ground, so those are two priorities for us as we look to move beyond the deals and the collaborations we're working on today and move beyond the applications we've been focused on today.

We're going to need a few more really good people.

Thanks a lot.

Thank you.

Sir, at this time I will showing no further questions.

We want to thank everyone for being with us today, appreciate your continued interest and loyalty, and we'll keep you posted our progress and plans.

Many thanks.

Ladies and gentlemen, thank you for participating in today's conference.

This concludes the program.

You may now disconnect.

Good day.