Superconductor Technologies Inc.
Q3 2018 Earnings Call Transcript

Published: 13 Nov 2018

[Operator:]

Good day, and welcome to the Superconductor Technologies Third Quarter 2018 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Moriah Shilton of LHA. Please go ahead.

[Moriah Shilton:]

Thank you, Derrick [ph]. Good morning and thank you for joining us for STI's 2018 Third Quarter Conference Call. If anyone has not yet received the earnings press release, it is now available at the company's website. If you would like to be added to our distribution list or if you would like additional information about STI, you may call LHA at 415-433-3777. With us from management today are Jeff Quiram, President and Chief Executive Officer; and Bill Buchanan, Chief Financial Officer. I will review the Safe Harbor provisions of this conference call and then I will turn the call over to Jeff. Various comments regarding management's beliefs, expectations and plans for the future are forward-looking statements and are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance and are subject to various risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ from those expressed in the forward-looking statements and those differences could be material. Forward-looking statements can be affected by many other factors, including those described in the Risk Factors and the MD&A sections of STI's 2017 Annual Report and Form 10-K. These documents are available online at STI's website, www.suptech.com or through the SEC's website, www.sec.gov. Forward-looking statements are based on information presently available to senior management and STI has not assumed any duty to update any forward-looking statements. Jeff will begin with an update on STI's Conductus wire program. I'll then turn the call over to Bill for a review of the financials, after which he will open up the call for Q&A. And now I would like to turn the call over to Jeff.

[Jeff Quiram:]

Thank you, Moriah and good morning, everyone. In the third quarter, we generated $517,000 in revenue, related to our next-generation electric machine, or NGEM, project with the US Department of Energy. STI is prime for the program with our partners with our partners, TECO Westinghouse Motor Company, Massachusetts Institute of Technology and the University of North Texas. Since our work began in June, 2017 we've recorded approximately $2 million in government contract revenues. In the third quarter we also successfully completed our planned optimization of our Conductus wire for high performance magnet applications. We've demonstrated 2S performance improvement since the beginning of this focused R&D effort in June, 2017. This significant improvement in Conductus wire allows our customers to design and build new devices that deliver higher performance and improve efficiency while also reducing the size and weight of the device. As later in the development of 2G HTS wire, our materials are uniquely positioned for magnet applications. Our Conductus wire utilizes three element of metals for the superconducting layer a rare compound along with barium and copper. HTS compounds are the only materials [indiscernible] demand that construct low energy consumption magnet while delivering the very high fields required by these next generation magnet applications. For strong forecast demand from commercial customers we continue to believe magnet applications will be the largest addressable market for our technology going forward. With our Conductus magnet wire now meeting critical performance requirements our customer orders have transitioned from sample lengths 2,000 of meters. [Indiscernible] clear message received from our meetings with customers at the Applied Superconductivity Conference last week, is that the industry needs NGEM wire for multiple applications now. Companies are forecasting significant demand in the near term. This demand is aligned with several accelerating energy megatrends. These centralized renewable energy, high energy efficiency and sustainable transportation has [indiscernible] in [indiscernible] 2018. One example of the example growth according to Navigant Consulting on a five-year basis from 2015 to 2019 distributed energy resources in the United States are growing almost three times faster than traditional centralized generation. In order to accelerate the time to market of our Conductus wire with these new enhancements we conducted our R&D efforts utilizing our production systems. The specifications for these high performance magnet wire have been integrated into our design and have been adopted in our manufacturing process. We completed the transition from R&D to production in Q3, 2018. In Q4 we plan to further integrate production enhancement design to provide improved process control to maximize yield. It is anticipated that the production machine upgrade will be completed in December 2018. We're currently in discussions with our customers to secure significant initial orders and supply agreements as we refine our build plan for 2019. Our initial ramp plan takes us into production delivering thousands of meters in Q1, 2019 with a plan for meaningful commercial revenues in the second half of the year. In addition to our commercial work, the second budget period for our DOE project is expected to begin shortly. Where we will be focused on producing components for our 5,000 horsepower motor in utilizing our Conductus wire. As we're focused on moving to production of our commercial magnet wire, we anticipate starting Phase II of our project in late in Q1 or early Q2, 2019 so that initial focus on methods to improve yield. The goal of the three-year project is to improve performance of Conductus wire to 1,440 amps operating at operating at 65 kelvin in 1.5 tesla field and reducing cost by improving yield. Our enhanced Conductus wire is also well positioned to meet the needs of new high field low temperature applications including NMR, proton accelerators, particle accelerators and fusion devices. These applications operate at magnetic fields above 20 tesla and temperatures between 4 kelvin and 50 kelvin. These new devices are expected to use significant amounts of 2G HTS wire to construct magnets utilize to trap or guide high levels energy. Fusion devices are particular interest of late with exciting new advancements in project plans for fabrication of fusion machines. These efforts in the next few years are anticipated to require hundreds of kilometers of 2G HTS wire beginning in 2019. Moving to thousands of kilometers of wire in 2021 and beyond. [Indiscernible] fusion devices the development of revolutionary way to produce energy in a clean environmentally and friendly way that is highly efficient and extremely low cost. Companies focused on developing these fusion machines have a strategic investments from such visionaries as Bill Gates and Jeff Bezos along with innovative electrical grid operators. We look forward to working with fusion developers around the world as they begun selecting HTS wire suppliers that can deliver the desired volumes of high performance wire. Before I turn the call over to Bill, I wanted to reinforce that our team is focused on transitioning from being a leader in the development of high performance magnet wire to a large scale manufacturer of 2G HTS wire that meets industry needs. Our goals are aligned with DOE targets as they focus on improving US competitiveness in superconducting technologies manufactured in the United States. Now Bill will provide a review of the financials. Bill?

[Bill Buchanan:]

Thank you Jeff. In our third quarter revenue was $517,000 which consisted entirely of government contract revenues compared to $130,000 in commercial product revenues in the year ago quarter. Total R&D expenses amounted to $665,000 and were $766,000 in the prior year quarter. SG&A expenses were $1 million compared to $1.1 million in the year ago quarter. After adjusting for our per share data for the one for ten reverse stock split we completed on July 24, 2018. Net loss for the third quarter $2.2 million or a loss of $0.88 per share compared to a net loss of $2.5 million or a loss of $2.34 per share in the prior year quarter. Onto the balance sheet, on July 30 we completed a public offering with net proceeds of $7.98 million. As of September 29, we have $7.6 million in cash and cash equivalent. In the first nine months of 2018, $5.1 million was used to fund our operations and $100,000 was provided by net changes in our working capital. Based in our current forecast we expect our existing cash resources will be sufficient to fund our planned operations well into the third quarter of 2018. In the next few weeks, we will be renewing our S3 shelf registration statement. Our last S3 registration statement expired in March 2018. We have no current plans to raise additional funds. And now operator, please open the calls for questions.

[Operator:]

[Operator Instructions] and we'll take our first question from Sameer Joshi with H. C. Wainwright. Please go ahead.

[Sameer Joshi:]

Just a clarification, you mentioned two projects in 1Q, 2019 and 2Q, 2019 to improve yields, is this related to the fusion devices or is this related to something else?

[Jeff Quiram:]

Well the move to improve yields Sameer is not really focused on any one particular application. It's more of an of overall focus on improving the - well the profitability of wire. So I mean I think as we've talked about in the past. The actual bond content in the superconducting wire is relatively low as a percentage and so it's all a function of how much yield you can get every run and the higher yield, the higher the profitability. So yield is kind of an across the board sort of focus that will provide benefits to all applications not really focused on any one, but one of the key elements of the DOE project was the government really looking for attempts to try to make that our yield numbers better, so that again profitability is better and ultimately that will then translate in the ability to solve the wire at a more competitive price which then enables more applications to utilize the wire. So it's just kind of a cycle that will continue. So I would say efforts to improve yields will never really stop. There will be an ongoing focus for as long as I can foresee.

[Sameer Joshi:]

Right. And thanks for that clarification. So is this same as DOE second stage or rather does it coincide with the DOE second stage for the funding?

[Jeff Quiram:]

Well it's certainly an aspect. It's an aspect of year two, so when we the DOE program really was three things it was in three periods. The first year was really focused on improving the performance of the wire and looking and doing experiments where you were trying to change the structure of the superconducting materials so that it would carry more current in the presence of a magnetic field so that was the primary focus of year one. Year two, the focus is - it shifts to trying to improve yield of the wire that you, the recipe that you've now developed to increase performance while also providing wire to our partners that are then using the wire to build, to begin to build the devices that will go into the motors and then, year three is to then go forward and actually produce a kind of pilot device that will demonstrate the ability of that wire to meet the requirements. So yes, working on yield is part of what the DOE project was put in place for and I guess the good news is [indiscernible] that it's very synergistic with what we were going to be doing or that we would need to do it, in any of [indiscernible] it just allows us to accelerate the work in those areas.

[Sameer Joshi:]

Understood. Okay got it. In terms of your ramping up or rather building up inventory. What level of inventory are you targeting for these orders that you expect next year?

[Jeff Quiram:]

Well I think what will probably end up happening Sameer. I mean we have pretty significant number of orders in-house now and I think that, I don't know that we'll ever really be building much inventory I guess, this is the way I want to respond. I think the view on it right now is that, we'll probably be shipping probably be shipping wire as quickly as we can build it, is really the focus. So our focus at the moment is not to necessarily build inventory is to get the wire coming off of the machine in a more regular manner at higher yields and at consistent performance. So that's the focus and as soon as you get wire that meets the need of any customer that we have existing order for, we're shipping it.

[Sameer Joshi:]

Understood, okay. So in terms of discussions that you're currently having with multiple potential customers. Can you give us qualitative as well as quantitative requirements from that customer - what kind of applications and what level of, what kilometers or meters required to expense?

[Jeff Quiram:]

Well most of the requirements are for, are for the magnet wire that we've been working on. So the wire that is suitable for use with magnet applications. And so in general that's the type of wire that we're talking, the majority of the customers that are looking to make significant and purchases going forward in the next year or so. So today we're receiving orders in kilometer lengths and I would say the view right now is that, many of orders that are being talked about are in the high double-digit to mid triple-digit kilometer sort of orders. So very significant orders from our perspective, certainly when you start getting into the hundreds of kilometers of wire that needs to be produce that will certainly then transition our while our focus and our progress we need to make into really running those production machines regularly and getting lot of wire of them. So but that's the sort of size that many of customers are talking about.

[Sameer Joshi:]

Okay, so in relation to that. Do you expect any additional products and assets to be invested in or any additional personnel being hired over the next few quarters?

[Jeff Quiram:]

I missed that little bit Sameer. Any additional personnel, is that what you said?

[Sameer Joshi:]

Yes, any OpEx and CapEx requirements basically over the next few quarters.

[Jeff Quiram:]

Well as we ramp production, we'll certainly be hiring more production workers and that of course - tends to show up in cost of goods sold category. So the goal is not - sort of expenses that will flow in that way. There are a few capital relatively small capital purchases that need to be made, but I would say that we're not really focused on making large capital purchases until you start moving into the next set of production equipment and we're not really ready to do that yet. So there may be a small increase in capital spending, but it won't be significant at least not in the short-term. Our goal would be to have so many orders in place that we definitely need to begin to ramp capacity beyond what we have in our existing capital and at that point, we'll be happy to go out and start investing more capital, but we haven't made those decisions yet. So I just want to make sure I'm clear on that.

[Sameer Joshi:]

No, no that is clear. Thanks for that. Just one last clarification. Most of your third quarter revenues were from the DOE project and next stage is not expected until next year, so would your fourth quarter revenues or are there any fourth revenue quarters from BOE.

[Jeff Quiram:]

As I - well Bill you might be able to know if there's any revenues that actually flowed into the fourth quarter. I would say they're not significant revenues, but Bill would you respond to that?

[Bill Buchanan:]

Yes, it won't be as high as the third quarter but there are some government revenues would come in the fourth quarter, yes.

[Sameer Joshi:]

Understood.

[Jeff Quiram:]

But we haven't really launched the year two budget period. So there will be, until that happens you'll see the revenues go down a little bit.

[Sameer Joshi:]

Yes, no that is understood. Okay, thanks a lot and good luck.

[Operator:]

Thank you. Our next question comes from William Labb [ph] a Private Investor. Please go ahead.

[Unidentified Analyst:]

I think Bill you want to clarify. I think you said the revenues. The cash or last year third quarter 2018, you meant 2019. Didn't you?

[Bill Buchanan:]

2019, yes.

[Unidentified Analyst:]

Okay, just wanted to clarify that. So you're burning it about $1.7 million a quarter it looks like based on your 5.1. Jeff, you talked about these productions and these orders, but I'm trying to understand when are you going to start selling stuff and producing revenue. I mean you see you got these orders for thousands or so, when do you expect at quarter one, quarter two. Do you expect to be producing revenue from the sales rather than? What kind of sales are you talking about, all these orders they want? What's going to come out in the revenues in quarter one, quarter two?

[Jeff Quiram:]

We are expecting to ship wire in, well hopefully late this quarter and in quarter one. When you're talking in many instances you're talking single-digit kilometers Bill, so single-digit kilometers are relatively modest levels of volume, but if we're shipping multiple kilometers we should be able to get into tens and thousands and little bit more than that in revenue from those levels of shipments. As we said, when you get into the hundreds of kilometers that you start to ship, that's when you really start to see meaningful revenues and that's still several quarters away.

[Unidentified Analyst:]

So I mean do you think, in the first quarter and the second quarter. You think you'll produce revenues $100,000 to $200,000 from outside shipments. I mean, we're trying to get a flavor I mean this has been going on for a while, now you're at the point where they'll accept the wire. So we want to know when you think, are you seeing till the third quarter until you get any revenue or substantial revenue? What are you talking about for the first and second quarter rather than the government revenue? Can you give us kind of an idea what you're talking about?

[Jeff Quiram:]

It will be in most instances and the way I'm looking at right now Bill it will be modest revenues. So and I'm not going to give a firm forecast, is it $25,000? Or is it $100,000? It's not $1 million in wire shipments let's just say that. [Indiscernible].

[Unidentified Analyst:]

[Indiscernible] but I mean is it going to be over $100,000 or do you think it will be - $100,000.

[Jeff Quiram:]

I would say that we can get to the point where we're approaching $100,000 to late first quarter to beginning of second quarter, but probably not. It won't be in the fourth quarter.

[Unidentified Analyst:]

Okay, so is the wire ready to ship now. I mean we got, are they going to be testing these new greater lengths. Have they indicated once these test come in, are we talking three, four, five customers. How many customers are we talking about that would be buying the wire in the third quarter and fourth quarter? If things work out.

[Jeff Quiram:]

We have orders in hand from I think it's six customers that are really looking for wire that what I would call the magnet wire that we're discussing so, well that's the number of customers.

[Unidentified Analyst:]

Okay, so I mean in other words. You're talking about renewing the S3 and one of the things we don't need is more dilution. So the question is, if you get to the third quarter are you going to have the ability to self-finance and move on unless you get a big order and maybe get a lease machine. In order words, do you see in your future here that the third and fourth quarter you'll shipping enough wire that you'll be making money and be able to self-fund it, without going to the well again.

[Jeff Quiram:]

Well that's everybody's preference would be to get to the point where we're self-sufficient and needing no additional capital. I understand your concern what I'm not going to be able to tell you that yes in the third quarter we're going to be cash flow positive. I don't think we'll be there yet because as we've talked in the past we need between $5.5 million and $6 million in quarterly revenues to be cash flow positive. And that's probably not where we're at in the third quarter, so the goal really is to hopefully we start to show the ramp, is the sort of orders that are being discussed with various customers begin to show themselves that will then set us up to have a pretty significant backlog that will have a path to being able to deliver a significant amount of revenue and then the question will be, how do we execute on the plan to be able to do that and do it in a most, the most capitally efficient manner we can and do it to try to minimize things like dilution that you've talked about. So our goal is perfectly aligned with yours on that. I can't look at my crystal ball right now and tell you exactly how that will play out two to three quarters from now.

[Unidentified Analyst:]

Okay, but based on the wire you're producing and what you've delivered to these people in samples, you're pretty optimistic that you've got a lot of the problems for production out of the way and now just a matter of them giving them a wire and testing in their own design. In order words, we're not going to run into another problem where the wire isn't working. Is what I'm trying to say.

[Jeff Quiram:]

Well we don't believe, we believe that we've dealt with all the problems associated with mechanical strength. So we think that we've got the mechanical strength issues behind us. So we're not going to be in a situation where we have wire that's not meeting the specifications for that. I think [indiscernible] is hesitant to say that everything's - until you ramp up from doing tens of meters, to doing thousands of meters. It's very difficult for me to tell you with 100% certainty that there's not going to be any issues that present themselves. It's one of the things that we've been working on and it continues to be a process that you work through and you get better and better and you're ramping up the various processes that go into building the wire and you try to do it in an orderly manner so that, if you find any challenges you solve those challenges and as you hit them and then move on. I expect that we will have challenges as the ramp process continues and all I can say is, that we were expecting there to be challenges and we expecting to get on rapidly and try to fix them. I don't see any big show stoppers stirring us in the face right now. But it's not all smooth sailing either so I'm not looking at it saying yes we've had - everything is exactly how I would like it and I don't anticipate any problems whatsoever I can't say that. But am I confident that we're building wire that will meet the customers need and that we can build the answer is yes and so now we just need to do it.

[Unidentified Analyst:]

So but the good news is, that the wire you're building now it's not different ones. I mean it's a generic type of wire for everybody. Right I mean in other words it's the same wire for customer one, two, three, four and five. Am I wrong on that? So that you don't have to adjust for this and that. We had the other one with the FCL where you had to have a different. In other words, it's a same wire they all want the same wire, correct or incorrect?

[Jeff Quiram:]

I would say that the basic requirements for the wire are similar. There are people that have differing performance requirements that they would like to see. Now what's going to happen in my mind what will happen is, that the people who step forward and place the large orders I mean that's the wire that will then be being produced and if there are other people that want that flavor of wire exactly they can certainly utilize it, but I guess I don't want to lead you to believe that, that every customer that worshipping make it magnet wire to right now is happy with an identical piece of wire. But they are in the same sort of ballpark on the requirements for thickness of various layers and things of that nature. But there's always somebody that wants 500 amps and somebody who also wants 700 amps and somebody who also - may need 300 amps. I mean that's all is going to be the case. And I guess what's going to come about is, is once there is a leader or two in the clubhouse that have large orders in place for a specific version of wire, well that's what we'll be focused on building. And if we can meet the needs of others with it, we will.

[Unidentified Analyst:]

Okay, do you think right now the six customers [indiscernible] be identified kind of, the two key leaders that will probably the most likely to build the most wire for, two big customers.

[Jeff Quiram:]

Well we have our own view on from discussions with the customers and others on who'll move and who'll move faster and who has ultimately the more robust business case and ultimately more advance. So we have our opinions on that, but I guess it will all it does all come down to who actually does step forward and execute on their business plan sooner, rather than later and that is, that's not something that we don't look at any certainty, but we have our views on it. So yes have we handicapped the rank of those customers and who we think is going to do what, yes we have and but I guess the only way - the only people that will determine whether that is true or not are the customers themselves. So we'll see where that goes.

[Unidentified Analyst:]

And I presume you're telling the customers you better get in line and move fast because somebody may beat you to the production line.

[Jeff Quiram:]

Those conversations I had pretty regulatory and I think that I can safely say that, we're not the only people that have those challenges and so yes, I mean we have those conversations. I mean - the amount of wire that we can build is, we're don't have a limitless capacity at the moment and so I think I've said this before. One or two customers can probably consume pretty much everything we can build in the next year or two, so the first one or two that step up they'll be the ones that get the wire and then, we'll just have to be ramping production, try to meet the needs of other investment as we can and I guess that's [indiscernible].

[Unidentified Analyst:]

Okay, but the question is, do they really have alternatives to go. I mean isn't your wire the best producing or what they need in the magnetic field. Where are they going to? Is there other people they can get this wire from?

[Jeff Quiram:]

Well it depends, it depends what the requirements are of the individual customer. So I said there are people that want really, really high performance and there are people that are okay with the lower performance and of course the lower the performance requirements are, the customers, the more candidates they have to help them.

[Unidentified Analyst:]

Okay, all right.

[Jeff Quiram:]

I guess I won't say that customers have no options. They certainly always have options and of course our goal is to make sure that we're not only we don't want them to have to do us business with us. Certainly want to do invest with us because we've got the solution that meets [indiscernible].

[Unidentified Analyst:]

Okay, all right well thank you for the clarity.

[Operator:]

Thank you. Our next question comes from Steve Kruger with Foresight Investing.

[Steve Kruger:]

So I've got a bunch of questions. Jeff. How do you measure yield? Jeff. In other words, is there a minimum defect-free length that defines in acceptable yields. If you produce three meters and then as a defect, is that all flowing always, do you have to get to a certain length before you say that might - acceptable. How do you measure that?

[Jeff Quiram:]

Yes that's a really, that's an interesting question, Steve and a complex one because it's a function of - when you really look at it, it's a function of what do the customers want and are there pieces that you can get off of, let's say you have a run that is sub-optimal. So you want it to be 500 amps for instance, but it's only 200 amps. Well if there are customers' that you can ship 200 amps wire to well then you get some yield off of that run, but it's not the full yield that you're looking for right. So it is a - it's probably more complicated than I want to go into on this call. I will say that you're correct that the way you measure it, it is really a function of what lengths are you looking for and what's the minimum performance that you're looking for on the lengths and then it's, okay how much wire did it put in the machine? And how much wire did I get off the machine that meet those requirements? Ultimately that is, how you calculate yield and then the goal of course is to just get better and better as you move forward?

[Steve Kruger:]

Can you share well at this point give us any insight as to, however you're measuring yield. What the yield is right now? Is it 10%, is it 40%, is it 60%? Where are you right now and once you complete if you complete the second phase of DOE project successfully where would the yield be at that point?

[Jeff Quiram:]

Yes I think the yield number now is very hard to give you primarily because the machine is in the hands of our production people, but it hasn't been in their hands for very long and so and it's very hard to any yield numbers that we would use that came from, when we were doing experiments for the DOE are really kind of useless because you know the yield isn't good because you're always changing the knobs. Well now the knobs are in the hands of people that are going to try to keep them consistent and the focus on taking it yield and getting it better and better. So I would say, we don't really have a good yield number right now to start with, but we should over the course of the next few weeks and months. I mean right now if I had to say what the yield was, I would say it's quite low.

[Steve Kruger:]

Okay. And is there a bogey in the DOE contract?

[Jeff Quiram:]

No, the DOE contract was focused more on putting some monitoring items in place to be able to better control the process and thereby enhance the yield, but the DOE is program is more about showing an improvement in yield versus an actual number. If you don't meet 65% yield for instance it's a fail, no that's not what it is, it's a shell [ph] improvement.

[Steve Kruger:]

Okay, to the DOE fund anyone else with a similar kind of grant? Are you the only people that the DOE is supporting with this high temperature super conducting wire?

[Jeff Quiram:]

The DOE has done grants for several participants in the space. But I will say everyone's project is a little bit different so they're not all exactly the same but question was, are they funding other projects in the HTS space. The answer is yes. Is the project? Does it exactly have the sort of focus on yield and manufacturability and things of that number? That I don't know, I mean I'm not privy to what everybody else is doing, with their DOE programs. But we do - and have funded several programs. We received some of that family of programs that they funded back year and half ago. We got one of the largest grants. Many of the others were smaller. So I don't think that anyone product, any two projects are exactly the same.

[Steve Kruger:]

Okay. Last quarter you said that you expected to make sample shipments in the third quarter and then in the press release today. You said customer orders have transitioned from sample lengths to thousands of meters. Got a couple of questions of there, did you in fact make sample shipments in the third quarter to these six customers and did - how many of the six actually approved the sample, the sample is qualified and meet their requirements. And secondly, the wording is a little bit murky here. You said the customer orders have transitioned to thousands of meters, but in the next sentence you say you're in discussions to secure orders. So what does it mean that customer orders have transitioned to thousands of meters? Does that mean they've given you indication that's what they will place once they actually place the order?

[Jeff Quiram:]

No what that means is, that we've actually received orders that instead of being for 50 meters or 100 meters we're receiving orders for kilometers.

[Steve Kruger:]

So you actually have orders in hand, firm orders for multiple kilometer lengths of HTS, your Conductus wire.

[Jeff Quiram:]

Yes.

[Steve Kruger:]

And the delivery dates associated with those orders.

[Jeff Quiram:]

No, I mean there are not firm delivery dates on the orders and that's really, I guess what I'm trying to say is, we're trying to ramp production on the machine. We're trying to get - we're trying to fulfil the orders as quickly as we can. We are - in many instances a lot of these sample orders today are still kind of it's a best efforts sort of date. So there are not firm dates because well the reality is, as soon as we get - it's a multi-step process so we have to get the wire off of our machine, we have to send it out and get it finish. We have to bring it back and test it. And the reality is, as soon as we have a good piece of wire that fulfil the need of an order, we ship it. And we know that's not the optimal place to be, we know that's not where we going to want to be when you get into production, but we'll be firm shipped, schedules and all of that. But until we have the process really nailed down as far as the entire process with us and our suppliers and the wire type, its if we're not there yet. So anyway it's a best efforts activity right now and I think we're making progress on it and are successful. If we're able to do that successfully on ramping and doing that with the customers, that's when we'll see the larger orders that will hopefully secure in the next quarter or so.

[Steve Kruger:]

Okay, did you actually ship samples that were accepted and met customer requirements in the third quarter?

[Jeff Quiram:]

I would say we have not received a firm acceptance from any customer that's gone beyond. Is that okay? We've accepted your wire and now we're going to place the large commercial order. I'd say we have not crossed that chasm yet.

[Steve Kruger:]

What's your goal in terms of timeframe for reaching that milestone?

[Jeff Quiram:]

Well that are definitely people that are talking about supply that they need in the 2019 timeframe and they're planning on placing orders to make that happen. So if we're going to be one of the participants in those 2019 supply agreements we need to get some approvals soon. So I would like to get some approvals in the next - probably I could get approvals today. But I think it's more likely that we'll do it over the course of the next two to three months and that's what we're focused on.

[Steve Kruger:]

Okay, is it reasonable to assume that if you reach that stage with a customer, you've actually gotten a firm order with approved prior you would make an announcement to that effect.

[Jeff Quiram:]

That is absolutely our intent and so yes, in many - I think and it all comes down to - those are - and again what the announcement will say and how much detail will provide will many instances be a function of the agreement that you have with the customer, but yes we will consider. I consider that material information and we will disclose as much as we can as soon as we can, when that happens.

[Steve Kruger:]

Okay and it's - is it possible that you'd make - we see an announcement like that before the end of the year. Is that within the realm of possibility?

[Jeff Quiram:]

I'd say it's possible, but probably not likely.

[Steve Kruger:]

Okay, that's all from me. Right now. Thanks Jeff.

[Operator:]

Thank you. And it does appear we have no further questions. I'd like to turn the conference back over to Jeff Quiram for any additional or closing remarks.

[Jeff Quiram:]

Thank you. I would like to thank you all of you very much for joining us today and we look forward to speaking with you again on our next call. Good day.

[Operator:]

Thank you and again ladies and gentlemen. This does conclude today's call. We do thank you for your participation. You may now disconnect.