Three years later, ZENN finally negotiates to get disclosure from EEStor… does it matter?
After major delays, missed deadlines, and pretty much three years of silence, EEStor will soon have to disclose where it’s at in terms of development of its much-anticipated (and for some, much written off) super, duper ultracapacitor-based energy storage technology.
It’s been a long time coming, and many have already declared the company dead — or at least close to it. Back in December 2010 Greentech Media posed the question: Is the EEStor saga finished? Since then, those who aren’t EEStor diehards have come to the conclusion that, yes, it’s pretty much over. Of course, EEStor was the major focus of a chapter in my book Mad Like Tesla (to buy on Amazon click here), so I have a personal interest in seeing things through to their true end. Based on comments made yesterday by EEStor-investor ZENN Motor Co. at its annual general meeting, the dream still appears to be very much alive.
Here’s what ZENN said on March 26 in a press release to report is first quarter 2012 numbers: “The Company recently participated as a minority investor in an equity financing completed by EEStor Inc. While the Company’s investment was small, the investment was part of a financing that provided EEStor with additional working capital to further the development of its power storage technology. Importantly, as part of the investment the Company was able to review certain aspects of the technology and obtain a covenant from EEStor regarding a timeline for near term public disclosure of the status of its technological development certified by an independent third party.”
A day later, at ZENN’s AGM in Toronto, company chairman and chief executive James Kofman gave EEStor investors and groupies a clearer picture of what to expect in the months ahead, and spoke about the state of ZENN’s relationship with EEStor, which hasn’t disclosed anything publicly since 2009.
“The relationship between ZENN and EEStor is as strong as it’s ever been, and certainly stronger than it’s been in many, many years,” Kofman said. “There is a very good dialogue between the companies, and regular rapport on many fronts… The recent announcement has demonstrated we really are in a good position with them, much better than we were a year ago. What everyone is looking for is real transparency and real disclosure. The announcement we made puts us finally on a path where we have a clear methodology for getting better public disclosure.”
So what does that means? It means that going forward, as part of ZENN’s latest minority investment in EEStor, the company will have greater access to EEStor and insight into its progress. As well, EEStor will have to do a better job of disclosing that progress publicly. “I met (EEStor founder and CEO) Dick Weir before I joined the board and went down to Austin. We have kept a very regular dialogue. A number of directors have kept a regular dialogue with him, and also have visited with EEStor in Texas,” said Kofman, in an effort to give investors more confidence that ZENN isn’t oblivious to what’s going down in Austin. “We now have a very clear agreement with EEStor which provides for a mechanism for them to publicly reveal where their technology is, and to do so certified by a third-party expert in the near term.”
Kofman continued: “Dick is a very secretive person, he’s very careful about his patents, and we respect that. We’ve worked incredibly hard over the last year to earn his trust. There were some issues that happened a number of years ago that made him very cautious about making any statements for fear they would end up in the public domain. I think we’ve demonstrated consistently to him we can be trusted. Through that he’s opened up more to us than he has in a very long time.”
So when can the world expect Weir and Co. to reveal what’s going on inside the walls of EEStor? “We’re expecting this before the summer, if not well before that time,” said Kofman. “It’s coming, and it’s very specific on what needs to be disclosed. So we’re excited.”
He said EEStor continues to file patents and work on its patent portfolio. “That’s critical because there’s a lot of competition out there.” But Kofman made clear that whatever developments there are at EEStor the technology, for all its potential, isn’t going to change the world tomorrow. “I think we’ve recognized that technology doesn’t just happen overnight. So even if there is in the near term some public disclosure that says where you are, it doesn’t mean you can just plug it into your Chevy Volt… It’s likely the EEStor technology will be used in some of the simpler applications well before automotive.”
Asked by one shareholder about EEStor’s competitive advantage against other up-and-coming technologies and startups, Kofman replied: “I don’t want to put words in Dick’s mouth. I will say Dick remains incredibly bullish that there is no technology like his technology… I’m paid to be a little more of a skeptic… We recognize eventually there will be competitive technologies one way or another, but in fairness to date we haven’t seen anything with the potential of this technology – not yet. But it will come.” He left open the possibility of major joint ventures, or even the scenario that ZENN would get bought out. “We’re going to do whatever it takes to get the most value for shareholders.”
As far as cash flow goes, he said he wasn’t comfortable with where ZENN was at — about $750,000 in the bank. For this reason, the company is going to look at doing a new round of financing to make sure the company can move quickly to leverage its investment in EEStor when the time is right.
One shareholder asked why EEStor has been selling off manufacturing equipment, and whether this was a sign it was running out of money and desperate. Kofman dismissed the idea. “I sold an old pair of skis the other day. It doesn’t mean I’m running out of money. I just don’t use those skis anymore. For EEStor, this is equipment they’re not currently using and don’t see a use for. And definitely capital is more interesting than equipment that’s going to get less valuable over time. They’re getting rid of equipment, as I understand it, that they’re not using and don’t expect to use.”
The reason why this update should not be dismissed as just another EEStor striptease is that it’s coming from Kofman, who is highly respected in the Toronto financial community and has his own reputation to protect. (See this little backgrounder prepared by TheEEStory.com). A veteran investment banker who worked at UBS Canada until 2009, Kofman joined Cormark Securities last fall as its vice-chairman. He holds that role in parallel to his dual chairman/CEO role at EEStor, which he first joined as a director in March 2011. As one Cormark colleague of Kofman’s told me recently: “He’s far too busy here, and it’s far too lucrative, for him to waste time at ZENN unless he felt it was ultimately worth it.”
Kofman, it should be pointed out, isn’t getting paid. He’s taking stock options only in the hopes that his contributions to ZENN will pay off. If nothing happens, he gets zero back — pretty much the same position ZENN shareholders are in. Shareholders seem to like the message. The stock is up 28 per cent as of noon today and could soon shed its penny-stock status.
So, perhaps EEStor will still surprise and survive… In the meantime, ZENN is sitting tight, slowing down cash burn, raising extra money, and waiting for the day that Dick Weir will make good on a very delayed and very important promise.