Legend Power October Update

We are pleased to provide a corporate update for our various supporters and shareholders. With our fiscal year ending on September 30, 2012, we experienced much success over the last twelve months and we are a stronger and more focused team.  In October 2011, we launched our new sales program and team and since the launch, we secured over $2.5 million of product commitments with dozens of major Canadian corporations.  Our brand became “known” in our target markets and orders during the year were “buy and try” orders meaning follow on orders are expected based on good product performance.

Although we had success growing our order book this past fiscal, our biggest challenge was moving bookings to installations and cash collection. During October and expected during fiscal Q1 2013, many of last fiscal’s orders are being installed and cash will be collected.
At the start of our last fiscal, we started several initiatives to improve the company:

  1. Launch a new sales program, process and sales team in Ontario
  2. Reduce our operating costs and increase effectiveness
  3. Reduce our product costs while improving product capability
  4. Improve our customer ROI

By successfully completing the above critically important initiatives we have achieved high team morale and focus, we are cost effective and we have unique reliable products and a sales program that is developing nicely. We are excited about our new fiscal year and the opportunities for success in front of us.

We have been very busy at Legend and we are pleased to update you on positive corporate progress.

Highlights

  • Significant progress has been made securing orders and installation dates which have really improved team morale and belief that the dream is possible.
  • With expected installs booked, in fiscal Q1 2013 we should be cash positive for the first time in our history.
  •  A $500,000 loan was closed on October 31, 2012 (on very favorable terms) and will provide working capital to support our Q1 cash flow.
  • Monthly burn has been reduced to $125,000 per month. (Two years ago the monthly burn exceeded $380,000)
  • As you will see in the product update, great progress has been made to “commercialize” our products and achieve unequalled performance levels. The improvements will continue with our new product release in fiscal Q1 2013.
  • We have successfully completed product installations with a major Canadian retailer and a global product manafacturing and distribution company.

Sales

  • We have been in closing/installing/invoicing mode (focusing on installing product and cash)
  • Very busy fiscal Q1 – fully booked at 1 install per week (near max. current internal capabilities)
  • Trend – 6-12 month old commitments now being installed
    • Customers now have budget and final order/install approval
    • Sales is focused on “securing 2013 budget” with prospects now
  • The sales funnel is growing and our installed products are meeting or exceeding customer expectations. Virtually all of our current customers have the potential to utilize over 100 Legend products within their network.

Product

We have finally reached the point where our product claims are now reality. With major product improvements and cost reductions we have a very compelling and unique offering to build our business on. We are for real. The engineering team is fully engaged on fulfilling orders and install commitments.
Transformer

  • The new transformer is complete and in testing – all looks good. Regulatory testing is required and is expected to be completed by the end of November 2012.
  • The cost of the new transformer is down by 50% when compared to our current transformer. The new transformer will also incorporate an 8% tap (up from 6%) which creates the opportunity to increase a customer’s value proposition by 37 %.  This will significantly improve our value proposition, improve our substitute product competitive position and increase our share of potential market. This is a huge milestone for the company and we now officially have a real proprietary product that we control as a manufacturer should.

Latest Automatic Voltage Regulator (AVR)

  • Costs have been reduced on the latest AVR by 50% and it is now comprised of only 3 main assemblies, down from 12. It is simpler in design,has fewer parts with improved reliability, and is our “secret sauce” that creates our competitive uniqueness. The product is now ready for full commercialization in targeted geographical areas, and with minor work applicable for other geographical regions.

Overall our product cost is down by 35%.

Installations

  • This has been a problem area as discussed in past reports. The good news is that we are improving our installation processes, management, and abilities. Our goal is to be able to perform installations 100% on our own (in any situation) by February 1, 2013.
  • We have reduced our install costs (in most situations) by 30% with a target of 40% by February 2013. We now have margin with our installs instead of just covering our costs. Installations have become a profit center and we will grow this group reflective of our order flow.
  • Our new Toronto based Project Manager is contributing greatly and already has 3 installs completed in only his second month with Legend.
  • We have established working relationships with several new electrical contracting firms to help with our installations and provide additional manpower at peak times. We have already seen better pricing due to competition.

We are excited about fiscal 2013 and expect to see significant progress as our fiscal 2012 initiatives and efforts provide a strong foundation for growth. We have finally left the research and development stage and look forward to commercialization of our solution in our target markets.

With continued success in Ontario, fiscal 2013 will see Legend commence discussions with distributors to market Legend solutions in the United States. The US has high energy costs and good government incentives so the Legend solution is a strong fit for customer energy saving objectives.

We appreciate that the last year has been a tough financial market and like 90% of TSX venture companies, our value decreased. We believe that the financial markets will take notice of Legend’s accomplishments and value Legend as a going concern with good upside. We need to execute to plan and properly communicate our results to the appropriate financial audiences. We will do so.

We thank each of you for your on-going support of Legend Power. I know that many of you invested in Legend several years ago and the Company has not delivered as promised. We are now two years into Legend’s corporate turnaround and today’s Legend is nothing like the Legend of years ago.

Quite frankly the turnaround was a bigger challenge then we first thought and virtually all aspects of the Company needed to be reviewed and improved. The good news is that we are nearly through the turnaround stage .We have a committed team with clear focus, an effective and reliable product, worldwide market, limited competition, a frugal cost structure and we exceeded $2.5 million in commitments last year.  The turnaround will now become a successful growth story.