lithium werks
TRANSCRIPT
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Tapping into the global lithium opportunity
Company Presentation
June, 2017
Lithium Werks
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Safe Harbor_______________________________________________________________________________
This presentation may contain “forward-looking statements” within the meaning of the “safe-harbor” provisions of the Private Litigation Reform Act of 1995, including statements regarding the Company’s expected production and sales. Such statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of Lithium Werks (“LW” or the “Company”) to differ materially from the results expressed or implied by such statements. These risks and uncertainties include, without limitation, economic downturn adversely affecting demand for the Company’s products, fluctuations in the cost of raw materials, the Company’s dependence on, or inability to attract additional, major customers for a new significant portion of its net sales, the Company’s ability to increase manufacturing capabilities to satisfy orders from new customers, changes in the laws of the PRC that affect the Company’s operations, the devaluation of the U.S. Dollar relative to the Renminbi, the Company’s dependence on the growth in demand for industrial and specialty applications and the success of manufacturers of the end applications that use its battery products, the Company’s ability to expand sales in the ESS, UPS and Telecom markets, responsiveness to competitive market conditions, the Company’s ability to successfully manufacture Li-Ion batteries in the time frame and amounts expected, the market acceptance of the Company’s Li-Ion products, and changes in foreign, political, social, business, and economic conditions that affect the Company’s production capabilities or demand of its products. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The Company has no obligation to update the forward-looking information contained in this presentation.
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EXECUTIVESUMMARY1
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EXECUTIVE SUMMARY: OVERVIEW
Who we are
The opportunity
• Lithium Werks, Inc. is a new Delaware C Corp entity, that has been formed in March ’17 to participate in the fast growing
lithium rechargeable markets
• We are focused on the production of top-class Industrial and Specialty based products that directly address the needs of
global companies for a longer lasting and lower cost battery solutions for today’s power hungry electronic devices and Energy
Storage applications
• The company was co-founded by T. Joseph Fisher, a proven global battery leader with 30+ years of international leadership
experience, and Christian Ringvold, a seasoned business executive with a solid track record and extensive experience in
corporate strategy, business development and finance
• Together, they have the vision of growing Lithium Werks into a leading low cost producer of specialty Lithium batteries, as
well as being a leading Value Added Reseller, producing game-changing products, and generating above industry growth and
profitability.
• Energy storage systems is the key segment of the lithium battery market – offering largest growth potential, particularly for
Value Added Resellers that are able to supply high-tech cost efficient solutions
• The market is consolidating quickly but solid opportunity is present to create a new market leader by partnering or acquiring
smaller Tier II players that possess strong technology and client base yet lack the scale to effectively compete globally –
essentially growing into the major global Value Added Reseller
Lithium Werks has now been presented with a unique opportunity to acquire the Industrial & Specialty business of
A123 Systems, LLC, a leading global Lithium battery company, with a strong reputation in the marketplace, solid
customer base and unparalleled engineering capabilities
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EXECUTIVE SUMMARY:
THE DEAL
The Deal
• The transaction is a “Management Buy Out” of the existing A123 Systems Industrial business. It includes the
manufacturing base and all the global customers of this strong global #2 business in the world of cylindrical power cells for
Industrial and Specialty applications – basically all non-transportation applications, and includes Golf Carts and Fork Lifts.
• The acquisition includes the Global Sales of the division along with the stock purchase of the A123 Systems (China)
Materials, Co., Ltd, which includes two plants located in an EPZ (Export Processing Zone) in Changzhou, China and about
300 employees.
• LW also acquires a royalty free license for A123’s proprietary, patented and world renowned Nanophosphate TM
technology (valid until 2025), along with the trademarks of Nanophosphate TM and “Power, Safety and Life” TM
• The acquisition also includes a contract manufacturer agreement for A123’s world leading Motorsports business, as well
as a medium term supply agreement with A123 for one of their largest Transportation customers for a specialized battery
moduleLithium Werks has the expertise and capabilities to grow into the industry leader in a large, high-potential market.
We are looking to raise up to $10m in new Equity, Asset based lending and/or other financing instruments, to
provide adequate growth capital to rapidly grow sales and profits via a consolidation of production facilities into a
smaller building, and more efficient layout, yielding significant cost reductions, as well as the introduction of a
new lower cost, higher energy cylindrical cell.
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EXECUTIVE SUMMARY:
VALUE PROPOSITION & DEAL SYNERGIES
Tapping into new market and growth
opportunities
• Through the acquisition of target’s strong
engineering & pack capabilities, LW would
be perfectly positioned to act on the
opportunity to enter the fast-growing
verticals of Energy Storage Systems, UPS
Data Centers and Telecom where
incumbents are quickly moving away from
lead acid battery solutions
• LW would be producing products ideally fit
for customers’ emerging needs - supplying
longer lasting, more powerful and lower cost
of total ownership Lithium rechargeable
solutions
Unlocking instant market access &
building credibility credibility
• The deal would provide LW with immediate
validation in the market through A123’s
reputation and client network
• With the deal the company would purchase
a diversified base of global customers in the
personal mobility, medical, industrial and
specialty markets
• Acquisition would also bring in the
necessary scale as well as substantial
annual sales and solid profit potential,
securing solid profit potential within the first
years of operations
Developing value-added partnerships
and amplifying revenue potential
• LW will develop sales and distribution
agreements with other leading lithium
battery producers, who are looking for VARs
of their cells in the fast growing verticals
• LW has already reached the sales and
distribution agreement with a fast growing
Lithium Polymer battery company for North
America & Europe regions and is eyeing
more similar arrangements in the future
The acquisition will instantly position Lithium Werks as one of the key “non –transportation” leading players in
the market, with global annual revenues of $50M and a solid base of global customers
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THE COMPANY:LITHIUM WERKS1
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THE COMPANY
Leading global Specialty Lithium Ion battery producer and
Value Added Reseller, providing lithium-ion energy storage
solutions that offer world-class performance tailored to
applications in the industrial and energy markets
CORPORATE HEADQUARTERS: Orlando, Florida
EMPLOYEES: 326 people
SALES OFFICES: Livonia (Michigan), Manchester (UK), Shenzhen (China)
PRODUCTION FACILITIES: 2 plants in an EPZ (Export Processing Zone) in
Changzhou, China with 200,000,000 Wh of manufacturing capacity
KEY PRODUCT FOCUS: World-class Industrial, Specialty and Consumer based
lithium battery products
INTELLECTUAL PROPERTY: multiple patents & patent applications, including
world renowned Nanophosphate TM technology and "Power, Safety and Life" TM
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KEY AREAS OF FOCUS
Key market Other markets
Other areas of focus
• VAR operations in the energy sector (ESS /
UPS/Telecom markets) with the focus on Industrial
and Specialty based products
• E-Bikes
• IoT
• Robotics
• Aerospace & Defense
• Drones
• Medical Equipment and Mobile Medical
cart batteries
• Airport handling equipment
• Industrial cleaning equipment
• Mining Equipment
• Alternative Power Units
• High end remote controlled toys
• Emergency Lighting
• Golf cart market battery applications through BMS /
Controller partner, with a future goal of making a
dedicated Plug-n-Play golf car solution
• Partnering with other Battery Management System
companies for the Fork Lift Market
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OUR CUSTOMERS
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THE TEAM
T. Joseph Fisher, IIICEO & President
Seasoned business executive with 30+ years of experience in batteries,
personal care products and clean-tech markets
Most recently, a VP of A123 Systems, as the global head of Industrial
battery activities
Previously served as CEO & President of Valence Technology, VP at
Energizer Holdings Group; CEO & President of Contour Energy
System, and founder of the successful consulting battery company JCF
International, LLC
BS in Industrial Management (University of Cincinnati) and an MBA
from the West Virginia College of Graduate Studies
Christian RingvoldEVP, Corporate Strategy, Business Development
Solid track record and extensive experience in business development
Worked with multiple global brands helping them to successfully
achieve growth and execute market strategies
Expansive network and knowledge in being a “door opener” in North
America and the Nordic Countries
In the past managing director for NorMedical AS, being key to
company’s development and success in the North American
marketplace
MBA from LeMoyne College, Syracuse N.Y
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Robert K. HolshouserChief Financial Officer
John AittamaChief Operations Officer
THE TEAM
Finance leader with diverse experiences in manufacturing and sales operations
and 20+ years of track record in finance
Previously worked as a Director of Financial Planning & Analysis at A123
Systems, leading global management reporting, business planning, cash flow
and financial analysis for global regions
Transitioned A123 Systems from Oracle to QAD and established project cost
tracking system to support growth
Led financial planning and implementation of turnaround plan that brought
underperforming Glass business to profitability, enabling sale of ~$500M Glass
Division to independent investor
MBA from the University of California (Berkeley), BS in Mechanical Engineering
from GMI Engineering & Management Institute and completed Senior
Management Program at IESE University of Navarra (Spain)
More than 20 years of successful experience in Operations and Product Design,
overseeing operations in Europe, Asia and USA
Most recently Vice President of Product Quality at Orchid Orthopedic Solutions,
overseeing 14 medical device design and manufacturing sites
Worked 6+ years at A123 Systems as; Director of Quality for Asia Pacific, Global
Director for Product Design and Sustaining Engineering, and Director of Michigan
Operations
As the leader for Michigan operations ran $8mm+ under budget and increased
capacity to 150%, producing record number of cells (4 million pieces).
MS in Mechanical Engineering from Michigan Technological University and BS in
Mechanical Engineering from Western Michigan University, 6-sigma Black belt
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OPERATIONS &FINANCIAL SNAPSHOT2
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OUR PRODUCTS
CELLS
• Cylindrical
• Prismatic pouch
POUCH CELL MODULES
• Cell selection
• Cell balancing and monitoring electronics
• Packaging / testing / manufacturing
LEAD-ACID REPLACEMENT
• Standard module form factor
• 2-3X the run-time and half the weight of similar sized lead acid
battery modules
• Product family current in re-development
• Lower cost of ownership
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BEST-IN-CLASS NANOPHOSPHATE TM
TECHNOLOGY
Proprietary, patented and world renowned Nanophosphate TM technology
with a significant advantage over other iron phosphates
Significantly higher rate capability Higher power Better life Increased safety
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PROVEN MANUFACTURING CAPABILITIES
Two plants located in an EPZ (Export
Processing Zone) in Changzhou, China
with 200,000,000 W Hrs of manufacturing
capacity
• Changzhou plant has been producing globally
recognized quality products for more than a decade,
in the past having produced 32113 cylindrical cells
for BMW ActiveHybrid series
• Regular quality audits to ensure consistently high
and improving standards of the production
processes
• Changzhou is TS-16949 certified
• UL, UNDOT and IEC approved products
• Original Gross Fixed Investment of $54m
Powder made in CZ
by Johnson-MattheyCoating Cell Assembly
Module
Assembly
Local control over product quality
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SOLID FINANCIAL PERFORMANCE
Net sales 40,288,707
Cost of goods sold (36,173,591)
Gross profit 4,116,116
Operating expenses (2,168,227)
Research and development (240,632)
Selling expenses (52,926)
General & administrative expenses (1,874,669)
EBITDA 1,947,889
Operations loss (1,177,434)
Loss before income taxes (1,540,539)
Net loss (2,882,196)
Cash & Cash Equivalents 843,344
Accounts receivable 12,913,563
Inventory 11,974,135
Total current assets 34,045,586
Property, Plant & Equipment 13,624,227
Other assets 2,937,840
Investment in subsidiaries (5,350)
Total Assets 50,602,303
Accounts payable 1,427,687
Other current liabilities 1,987,276
Other long-term liabilities 11,000,000
Total Stockholder’s Equity 36,187,340
Total Liabilities & Stockholder's Equity 50,602,303
P&L (DEC ’16, $) BALANCE SHEET (APR ’17, $)
Note: Per 12.31.16 Audited Statements and A123 Systems
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ATTRACTIVE BUSINESS FORECAST
Revenue growth
expected through 2019
$27M
13%
137%
Revenue in 2017,
> $60M in 2019
2018 EBITDA margin
Forecasted P&L
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
$-
$10
$20
$30
$40
$50
$60
$70
2017 2018 2019
Revenue Gross profit EBITDA, %
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THEMARKET3
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LI-ION BATTERY MARKET IS TRANSITIONING INTO THE
STAGE OF EXPLOSIVE GROWTH...
This is the dawn of the Lithium-ion
Age. The rapid development of
more powerful, rechargeable
batteries will revolutionize power
generation and distribution.
“5x
535kt
Global battery consumption is set to increase
5x over the next 10 years, reaching US$77.42
bn in 2024
Global lithium demand will increase from
181kt Lithium Carbonate Equivalent (LCE) in
2015 to 535kt LCE by 2025
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...TRIGGERED BY THE EMERGENCE OF A NUMBER OF
NEW APPLICATIONS MARKETS
NICHE BREAKTHROUGH NORMALIZED MATURE
Energy
Storage
Transportation
Consumer
electronics
Non-battery
applications
Selected industrial &
commercial applications
Emerging product applications
in a number of diverse
industries, still relatively small
compared to other sectors
Promising emerging market
but still 5 years away, with
50%+ expected CAGR to
2025
Key industry behind the
lithium demand growth (28%
CAGR)
One of the key li-ion
application markets;
currently stabilizing with
10% CAGR
Industrial non-battery
applications representing
the largest share of lithium
consumption (3% CAGR)
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LI-ION MARKET HAS YET TO REACH MATURITY AND
CONTINUES TO FIND NEW APPLICATIONS
TRANSPORTATION ENERGY STORAGE
CONSUMER ELECTRONICS INDUSTRIAL
growing market growing market
growing marketexpanding market
Buses
Hybrids
PHEV’s
EV’s
Portable Solar Energy
Storage
Energy storage system
Stationary energy
storage
Tablets
WearablesSmartphones
Drone
Robots
Portable
Medical
Equipment
Golf
carts
Forklift
Medical mobility
vehicles
E-bikes
Residential energy
storage
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ENERGY STORAGE MARKET OFFERS THE LARGEST
GROWTH POTENTIAL
Industry estimates put ESS lithium demand growth
estimates at >40% CAGR…
…expecting the market to grow to be a 50GWh per annum
market by 2025
• Energy Storage market is reaching an inflexion point
• Driven by the declining costs of lithium-ion batteries, battery
storage is now economically feasible for a number of Energy
Storage applications
• The impact on installed capacity has been immediate, with
installed battery capacity in Energy Storage products doubling
in two years, albeit off a low base
• Lithium-ion batteries should be the leading technology, with
superior performance and rapidly falling costs helping ensure it
will be the battery of choice in Energy Storage
• Lithium battery consumption is expected to reach 48GWh
(54% CAGR), accounting for 97% of battery use in Energy
Storage
• As a result, lithium demand should increase from virtually
nothing in 2015 to 34kt LCE in 2025
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EXECUTIVE SUMMARY:
THE DEAL
The Deal
• The transaction is a “Management Buy Out” of the existing A123 Systems Industrial business. It includes the
manufacturing base and all the global customers of this strong global #2 business in the world of cylindrical power cells for
Industrial and Specialty applications – basically all non-transportation applications, and includes Golf Carts and Fork Lifts.
• The acquisition includes the Global Sales of the division along with the stock purchase of the A123 Systems (China)
Materials, Co., Ltd, which includes two plants located in an EPZ (Export Processing Zone) in Changzhou, China and about
300 employees.
• LW also acquires a royalty free license for A123’s proprietary, patented and world renowned Nanophosphate TM
technology (valid until 2025), along with the trademarks of Nanophosphate TM and “Power, Safety and Life” TM
• The acquisition also includes a contract manufacturer agreement for A123’s world leading Motorsports business, as well
as a medium term supply agreement with A123 for one of their largest Transportation customers for a specialized battery
moduleLithium Werks has the expertise and capabilities to grow into the industry leader in a large, high-potential market.
We are looking to raise up to $10m in new Equity, Asset based lending and/or other financing instruments, to
provide adequate growth capital to rapidly grow sales and profits via a consolidation of production facilities into a
smaller building, and more efficient layout, yielding significant cost reductions, as well as the introduction of a
new lower cost, higher energy cylindrical cell.
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SUMMARY – REASONS TO CONSIDER INVESTMENT
• Large, broad and fast growing market place
• Patented and world class technology
• Nanophosphate™ under patents through 2025
• Use of the Battery World known “Power, Safety and Life™”
• Experienced and knowledgeable management team
• Existing diversified global customer base
• Significant cost reduction opportunity via move to new building with more efficient layout, lower variable and fixed costs
• Upside potential to bring in new Pack business through improved engineering focus and lower cell costs
• A123 Systems will retain a 20% equity stake
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For further questions please contact:
Truls Oma Erichsrud
+1 (305) 988-9333
Joe Fisher
+1 (314) 800-4695
Christian Ringvold, MBA
+1 (775) 409-7777
EVP, Corporate Strategy & Business
DevelopmentCEO & President Investor Relations & Business
Development