We are pleased to report the final test run of 400 lamps is going well. We expect to have all assembly completed this weekend and remain on schedule to test and qualify beginning next week.
We’ve had a few follow up questions related to why we have experienced some recent delays and I’d like to address these. As anyone in business knows, no project will ever run seamlessly. Although we made every effort to account for unexpected delays, we experienced more than our fair share of “seams,” each one unpredictable.
Let me provide a recent example. When we moved from our former manufacturer, the inventory from the last purchase order was transferred. Upon arrival at our new facility, and after doing an extensive inventory analysis, we realized that many of the electronic components had been swapped for “similar” components that were less expensive. So, although our directive was to buy #9 Blue Diode, the manufacturer purchased #8.9 Light Blue Diode, assuming it was comparable. But “close” is not good enough, even at half the cost. We also found, during the same inspection, that the potting compound they planned to use was unauthorized. So, in order to meet our specs, we were forced to reorder components and the proper potting compound. Even if components are “off the shelf,” it takes time for them to come in and this resulted in one of our delays. We have learned from these delays and have put processes in place that will result in less opportunity for delays to occur in the future. For example, in this instance we have mandated a Vu1 employee work in concert with our new partner to ensure proper components are ordered and at the proper prices.
So much for the past; I’d like to share our thoughts for the future. Assuming our tests are successful next week, we are hoping to fill two separate purchase orders and complete them by year end. Investors should consider these to be to be in the “tens of thousands” of units. In December 2014, for manufacture in January 2015, we hope to initiate a third purchase order with our new electronics package that I referenced in a blog a few months ago. Assuming everything is running smoothly, this purchase order will be in the 100,000-unit range. There is a premeditated reason for the jump in volume and the introduction of the second-generation electronics package. With this strategy, we will be radically reducing component costs. So we will crawl, then walk, then run. We expect to continue ramping from that point. Of course all dates are projections that are not guaranteed, but we wanted to share our goals.
Our engineers are working with great ease with our new partners and the collective team is excited about our future. We hope to post an update next week.
William B Smith
Chairman and CEO