Iq Power AG (fka IQPOF)

[Aduke]

New strategic focusing of iQ Power AG
16MAR2012

Increased cooperation with Korean battery manufacturer to enhance supply chain management and delivery reliability

Search for a strategic partner for a majority stake in European facility

Focus on the licensing business

New focusing will require adjustment to the convertible bond issued


The iQ Power AG announced today the base for the strategic and structural reorganization and development of the Group.

The management and the board of directors of iQ Power AG have agreed on various measures for a strategic reorientation and strengthening of the iQ Power business model. The cooperation between the European battery production facility and the facility of the Korean joint venture partner will be intensified in the future. This enables an optimization of the supply chain management and will lead to faster and more flexible deliveries due to scale and cost advantages. Another essential part of the action taken is a significant streamlining of the Group structure, which provides for a reduced role of iQ Power AG at the production units and distribution company in Europe. The research and development department will be reduced to key positions in order to maintain the company's intellectual property and the development of future technologies. This means that the overhead costs of the company will be significantly reduced. Although the European business is developing satisfactorily, the iQ Power AG has decided to focus almost exclusively on the promotion of the licensing business. iQ Power will seek to maintain a minority share in the European operations. The minority stake is similar to holdings with the other licensees and helps to influence customer service, delivery reliability and quality,

The drivers behind the new measures are, 1-the significant expansion of European production capacities can not be realized in the short to medium term and 2-the inability to take-over the lead battery manufacturing and recycling plant in Bosnia Herzegovina.

As a battery manufacturer, it is mandatory to achieve a critical sales volume with an integrated lead recycling to be able to operate profitably. Accordingly, a strategic partner for a majority stake in the European business is being looked for, through whom the targeted business growth and the financial terms are optimally supported. Various partner models are currently under investigation, such as the participation by a licensee, a large battery supplier or a management buy-out.

Until a suitable partner is found for a majority stake, the iQ Power AG will support the European operations fully. A continuous maintenance of the supply chain for customers and suppliers is ensured.

The restructuring of the iQ Power Group as well as the associated concentration on the license model paves the way to profitability with a lower sales volume in a short to medium term. Also, the financing of the iQ Power AG is put on a solid basis by continuous royalties. The forecasts of the royalties of the Korean licensee amount to over 50,000 € per month from the middle of 2012 with a significantly increasing trend up to € 200,000 per month by the end of the year. Due to delays, the first license revenue from North America is expected for mid 2012. The operation in Europe will continue to be a further source of royalty income. Other licensee agreements are currently in negotiation.

Influencing the decision is the fact that the European business is now on a stronger basis and requires less support from the iQ Power AG, because the joint venture plant in Gwangju, Korea has the possibility to deliver large quantities of DIN European sized batteries to European customers in collaboration with the European plant.

Even more important for the financial future of the AG, is the fact that the success of the licensees abroad is now largely independent of the commercial success in Europe.

By opting for a strategic realignment of the company, the iQ Power AG keeps the possibility of a merger or participation by interested parties open. In this regard, the basis for such negotiations will mainly be the licensing business.

Finally, the iQ Power AG announces changes in the still ongoing convertible bond. Due to the lack of acquisition of the battery manufacturing and recycling plant in Bosnia Herzegovina, the equity amount of the factory as well as the shares in Asia will no longer be available. As a compensation for the loss of this security, the conversion price of EUR 0.048 is reduced to EUR 0.036, whereby the total volume of the convertible bond is reduced to a maximum of EUR 4.2 million (previously: EUR 5.6 million). Signatories of the convertible bonds that have been drawn at a conversion price of EUR 0.048 will receive an adjusted offer. Further details on the convertible bond will be published shortly. The funds are used to fund working capital and to improve the balance sheet position.


The Board

http://www.iqpower.com/index.php?pid=1,1&id_news=1021&ID=06d71d9454cc195d5bacf6d630d1a5d4