Q1 2005 Duraswitch Industries Inc. Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good afternoon. My name is Lashauna, and I will be your conference facilitator today. At this time I would like to welcome everyone to the Duraswitch first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer period. [Operator Instructions] Miss Beshears, you may begin your conference.

HEATHER BESHEARS, VP CORPORATE COMMUNICATIONS, DURASWITCH INDUSTRIES INC.: Thank you. Good afternoon and thanks for joining us today. A copy of our press release was issued this afternoon announcing our first quarter results. That copy is available on our website as well. As a reminder, today's call contains forward-looking statements that are expectations for the future including statements regarding expectations for minimum royalty payments from Delphi, our licensees ability to successfully market and manufacturer products using our technology, the potential benefits of marketing efforts supporting licensees, possible sales of ART LPR software and our ability to execute on our strategy of leveraging our licensing model. Risks and uncertainties that could cause results of operations to differ materially from those projected include Delphi's none performance under their exclusive license agreement, lack of market acceptance of our technology, under-estimating the length of time required to develop sufficient licensing revenue to create a net profit, unanticipated expenses related to protecting our intellectual property, increased sales and marketing expenses and other uncertainties described from time to time in our documents filed with the Securities and Exchange Commission, including our annual report on form 10KFB for the period ended December 31st, 2004.

We can't guarantee the accuracy of any forecaster estimate and we do not plan to update forward-looking statements during the quarter. The audio replay of this call will be available through tomorrow April 27th. The call is also being webcast and that archive will be available on our website through June 30. Now, I would like to turn the call over to Bob Brilon, Duraswitch CEO. After his comments we will open up for any questions.

BOB BRILON, PRESIDENT, CEO, CFO, DURASWITCH INDUSTRIES INC.: Good afternoon, everyone. We're going to start with an overview of the first quarter, 2005. We reported a net loss of $412,000 which was $0.04 cents per share compared to a net loss of $420,000 the same net loss per share first quarter last year. Licensee revenue was up slightly year over year. For the first quarter 2005 we reported $207,000 in licensing revenue compared to $180,000 in the first quarter of 2004. Licensing revenue is also up slightly quarter over quarter. The revenue from fourth quarter 2004 was 198,000.

Recognition of the deferred revenue from our exclusive license agreement with Delphi made up 50% of the licensing revenue for the first quarter 2005 compared to 57% of Q1, 2004. The majority of non-exclusive licensing revenue, which includes Duraswitch royalties and revenue from the sale of license components and certain control panel materials has been related to our PushGate push button technology.

Gross profit for the quarter was $161,000 with a gross margin of 78%, up slightly from fourth quarter and about even with the first quarter last year. We expect to continue to see some fluctuations in our margins depending on the percentage of sales based on royalties from our patented technologies and licensed component sales.

Operating expenses for the quarter 2005 were $587,000 compared to $569,000 first quarter last year. This slight increase was primarily due to the increase in director's fees for our …