Location Based Technologies®, Inc. (OTCBB:LBAS) CEO
Dave Morse has released a letter to shareholders.
Dear Shareholders,
I have recently received many calls and emails from shareholders
expressing disappointment and concern about LBT’s financial performance.
Without exception, we all share your same sentiment. While knowing that
success is a journey filled with ups and downs, it is nevertheless not
as important to know the reasons why we didn't achieve our
performance targets as much as is the fact that we didn’t achieve
them. As difficult as that is, it has given us all, here at LBT, a
stronger resolve to become even more focused on those things that we can
do to create momentum and achieve positive results. Thankfully, in our
case, as long as we continue to increase our customer base, persistence
is the most sure predictor of success.
Like many other companies both large and small, LBT was hampered by
tremendous economic challenges through 2013. However, we are certainly
not out of the game, and based on lessons learned, we have a plan to
play differently. I want to share with you some insight into a few
initiatives that will have an impact on our approach this year – both in
the commercial and consumer markets.
Commercial
After a year of discussion, planning, and negotiating with UT Battelle,
the managing company of the Oak Ridge National Laboratory (ORNL) for the
Department of Energy (DOE), LBT was awarded a 15-month exclusive
contract to integrate DOE’s VERDE (Visualizing Energy Resources
Dynamically on the Earth) platform with LBT’s proprietary geo-location
platform to be offered commercially through LBT to utility companies in
both the public and private sectors. This VERDE system is what the
Federal Emergency Management Agency (FEMA) and other agencies rely upon
during emergency events to display the damage to the energy sector
within each state, when restoration is expected to occur, what response
measures are being taken, and what is needed in terms of restoring
electric power. Bill Irwin, disaster program manager for the U.S. Army
Corps of Engineers, said, “It was difficult to get a clear picture of
what was going on. Now we rely on the DOE as the authoritative source.”
Those responsible for implementation of the DOE VERDE system have
been named as “Service to America” 2014 Finalists for the Homeland
Security and Law Enforcement Medal. The VERDE solution provides:
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a)
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a set of unique/powerful tools to enhance situational awareness for
utilities’ operation centers;
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b)
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new capability for field supervisors to more effectively manage
power restoration;
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c)
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visibility to power outages along with up-to-the minute severe
weather info from VERDE data feeds;
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d)
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and real-time tracking of response crews and equipment with LBT’s
GPS data – all on a single map.
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Initial commercial prospects wanting VERDE shared what they see are the
immediate benefits:
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1)
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more effective emergency preparation planning,
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2)
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better assessment of critical needs for mobilized equipment,
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3)
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faster response time in the field for communities with urgent needs,
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4)
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enhanced evaluative tools to assess real-time dangers for work crews,
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5)
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reduced operations costs by knowing what equipment is needed and
where/when to send it.
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Based on early feedback, we think this could be a major game changer for
LBT, and for the market.
The LBT and ORNL VERDE platform integration is underway. This is a
collaborative development effort that will complete within 30-days
followed by controlled demonstrations to key accounts happening as early
as in June. This timeline is critical due to the fact that the sales
cycle is longer, but we are not waiting for finished product to get
things rolling with sales. The second reason it is critical is due to
the fact that weather predictions for 2014 indicate it may be one of the
worse severe weather seasons we’ve experienced in a long time in North
America. We’d like to have this in place for Utilities to take advantage
of its benefits for reasons of both safety and security.
Our go-to-market approach will include working with channel partners who
currently service major accounts in the Utility market – the first of
which is a strategic partner who has participated in the discussions
with ORNL from inception. Our excitement for successful execution of
this commercial business initiative is rooted in the opportunity to
balance out our reliance on AT&T by signing up other national as well as
large regional clients. In parallel with our Utility market approach we
will be seeking GPS technology partners that may want to provide the
VERDE integration into solutions for the Telematics market servicing
large trucking and equipment fleets. Our pursuit of software only
business opportunities may include development of weather and
power-outage mobile app overlay that is marketed to consumers.
Consumer
There are three primary shifts in our consumer market strategy launching
in 2014:
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1)
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shift away from focusing only on small online resellers;
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2)
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partner with large distributors that have a strong channel presence
with medium to large retail chains;
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3)
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selling pre-paid Service Plans like we do for our commercial
accounts.
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The approach to offer prepaid plans provides our customers with more
convenience, no service interruptions because of lapse in billing, and
helps with LBT internal operations by receiving payment up-front.
Additionally, this may also create a way for retailers to be able to
resell our Service Plans bundled with PocketFinder in the near future.
In the US and Canada we are working with Synnex to develop key account
plans to offer PocketFinder consumer products online and then transition
into retail brick-and-mortar. This approach is necessary in preparation
for launch of our 3G based PocketFinder products later this year. We
have engaged with Ingram Micro, the world’s largest IT and consumer
electronics products distributor, and hope to bring them on board soon.
Ingram Micro would serve as a strategic partner in further development
of our retail business in parallel with development of our commercial
business as they have over 20,000 value-added resellers who sell into
every commercial industry in North America.
We are also in pursuit of specialty channels; namely Auto Dealer
channel, Pet channel, Sporting Goods channel, as well as Senior
Independent and Assisted Living channel. LBT has previously sold
products for use in these ‘markets’ but we have not yet pursued business
through a dedicated channel. Each of these channels represents
significant pockets of consumers who have varying needs for locating and
monitoring loved ones – both two-legged and 4-legged – as well as
valuables worth recovering. The first two channels will be Auto Dealers
and Senior Living markets in US, with programs expected to launch as
early as this summer.
Though this past 2013 year-end holiday sales season was brutal for all
retailers worldwide, we managed to have a 150% sales increase over our
previous year. Currently, the average street price for our PocketFinder
product has come up by about 25% since February with the adoption of a
Minimum Advertised Price policy to discourage a handful of resellers
from selling our products at single-digit margins, which has now
resulted in larger resellers like Amazon, Best Buy, and Walmart
increasing orders because they can maintain better margins. We expect to
see a positive impact to consumer sales this quarter.
We support our earlier projection based on our current order pipeline
along with conservative estimates of what we may be able to achieve with
our market expansion to generate $4,000,000 to $5,000,000 of revenue in
calendar year 2014. This estimate does not include sales to the US
military, which would only add to those figures.
Our singular focus in 2014 – profitability. Now that baseball
season is in swing, let me say we will continue to work hard for ‘base
hits’, because we know base hits are how ball games are won. Home runs
are just an added bonus. Each hit gets us closer to building the
momentum needed to reaching and sustaining profitability. We appreciate
your patience and your feedback. We wouldn’t be able to make this a
successful endeavor without your support. Thank you!
Sincerely,
David M. Morse, PhD
CEO
Copyright Business Wire 2014