Call with Ron...
First of all, I must say that I was not at all impressed with Ron. I spoke with Darryl Ray while he was still with the company and he was pretty helpful and actually returned my call. The first thing that Ron told me was that he believes everything that I need to know is the filings and as a public company, he didn't feel it was necessary to take investor calls because of that reason. (Huge No-No in my book!) After almost having a cow at this comment, I decided to continue the call anyway, despite my gut feeling of just hanging up the phone and immediately selling my shares (which I really couldn't do because it was 5:30 on Friday).
1) GE relationship - The GE business remains a very signficant portion of their business and things are going very well.
2) Sales growth in US slower than International sales - International sales (especially Asia) has been very strong as this is a growing market for microarray technologies. Asia will remain a very strong market for the forseeable future. In the US, sales have slowed as they transition from a distributor infrastructure to a direct sales method. Once this transition is completed, sales should accellerate. Using direct sales will have a little higher costs, but the increased revenues will more than make up for it (by a long shot).
3) Does APNO have recurring revenues? - Not a lot of recurring revenues; some consumables, but not a major part of their business.
4) Why do people buy from APNO when they could buy from Perkin-Elmer ($3 billion market cap) or Molecular Devices (~$1 billion)? - APNO has better capabilities in their microarrays and better support, along with an overall better product. A good example of better support from APNO is that PKI and MDC won't demo a product before they sell it. APNO does and the customers like that.
5) Does hiring Mark Allen open up windows to sales in Asia? - Mark has a lot of experience in Asia from Molecular Devices and should help us accellerate sales to Asia and increase our opportunities there.
6) R&D expenditures have declined as a % of sales versus last year...are you sacrificing future growth for short-term profitability? - The long period of investment in their newest microarray reached the end of its development cycle. APNO is currently running at a normal R&D run rate. The company is also lowering its R&D expense by partnering with other companies to do development of new products and allows them to take advantage of a greater talent and resource pool.
7) Any plans to bring on a new CFO? - No near term plans to bring on a CFO, APNO would rather put money back into the direct sales team and R&D.
8) What is going to happen with the $1.5 million in short-term debt that is due? - First of all, the the ST debt rolls over each year. APNO is very reluctant to do a stock offering (no dillution) and is currently looking to put the cash that it makes back into the business.
9) Why no public PRs about the AlphaImager and AlphaView? - The Business Wire service didn't post it (it was there fault) because they "sometimes leave out smaller company's PRs because they won't have as big of an impact on the market as putting out a PR on a $10 billion company." (Beigledog's note: That's insane!) However, these products are just product extensions of current products and aren't really game changers for APNO.
10) How much of the business is seasonal and why? - It always seems like 4th quarter is the best quarter, but there is no reason for it to be this way.
11) When will the expenses due to Haseeb and Darryl Ray go away (G&A increased 24% in 2Q)? - They will be done by the end of the year.
12) Speaking of Darryl, do you know what his intentions are with his 1.1 million shares? - There is no bad blood between Darryl and the company, it's just a business decision to sell shares. Darryl wouldn't sell stock intentionally to hurt the company.
13) Long-term goals - Want to be a major player in the market, more focused on gel than PKI and MDS, leverage the GE Healthcare relationship to grow their sales.
14) Ron's background - Life sciences consultant previously. They (Darryl and Haseeb) wanted Ron to help with the transformation to becoming a public company. Ron previously brough Ultradata and Lexar Media public.
15) Anything else? - The company has been cash flow positive for the past 4 quarters and will remain that way from now on. While they have reported a loss in the last couple quarters, APNO will continue to lower costs and grow their business and should return to profitability soon.
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