Digital Locations Inc (DLOC)

[NevoTX]

Interesting tidbits from the 10K

In last quarter's 10Q, CABN states, "Our research and development efforts are based on developing a commercial form of this catalyst for use in existing natural gas reforming processes." However, in today's 10K, we have, "At this time, we are not undertaking any research and development projects" and "In our miniGTL plant, we intend to use a combination of existing and well known reforming processes - steam, partial oxidation, and/or autothermal. Dry reforming, which is what our proprietary catalyst does, will not be used in our first miniGTL plant."

So we have a company that's not doing any R&D competing against big names (with big budgets) using well-known technologies. "For example, companies that offer fuel production technologies include UOP LLC (a Honeywell Company), Chevron Corp, Royal Dutch Shell plc, BP plc, and ExxonMobil Corp. Royal Dutch Shell and Sasol have profitably commercialized large scale, multi-billion dollar GTL plants."

CABN is apparently staking their competitive advantage on small-scale plants. Yet "we see this as a lucrative market opportunity and we expect new entrants into the market. Many of these competitors may be more capitalized and may have more human resources than we do to develop a GTL project."

Those of you hoping for a quick payday might be interested to learn that "our losses are expected to continue to increase for at least the next 48 months as we commence full-scale development of our technology. We believe we will require significant funding to make this transition.... Our inability to secure additional resources, as and when needed, or manage our growth effectively, if and when it occurs, would significantly hinder our transition to an operating company, as well as diminish our prospects of generating revenues and, ultimately, achieving profitability." CABN isn't going to hit a penny a share any time soon, much less the nickel a share that some of you were talking about a few weeks ago.

Even through all this, I can continue to hold out hope for CABN. But this statement is a biggie: "The cost of developing a miniGTL plant may require in excess of $100,000,000."

A hundred million dollars. For a technology that CABN has yet to prove will work.

Here's another biggie: "The ability of our catalyst technology to be utilized on a commercially sustainable basis is unproven, and until we can develop and prove our technology, we likely will not be able to generate or sustain sufficient revenues to continue operating our business." Also, "To date, we have incurred approximately $1,246,000 in research and development costs separate from our license payments, and we will incur additional research and development costs to commercialize the catalyst and optimize the process."

So let's get this straight. They're not doing any research and development, yet until they can prove their catalyst works (remember, this is the catalyst they're not spending any money on developing), they won't be able to make enough money to continue operating. They will be doing R&D later, I guess, but not now. In the meantime, they'll continue to lose (our) money.

Here's another good one: "Our success is highly dependent on our ability to attract and retain qualified scientific, engineering and management personnel" but "As of March 24, 2014, we had one full-time employee."

Those who have commented that CABN doesn't own any patents appear to be right: CABN's "patented catalyst" is actually patented by another party, and CABN is licensing it: "In addition to our license to the patented UOS catalyst..." This license is costing CABN $20k a year and if they fail to pay they'll lose exclusivity. (Which might not be a bad thing, since there's no evidence that this 'patented catalyst' actually works.)

So we have a company with no money and no product, lots of debt, and increasing doubt about acquiring additional funding. This company is going to require another $100M in funding to build their product, and they're competing against bigger, more experienced, and better funded companies doing the same thing.

I don't see how CABN is going to survive.