Base Ten Chairman and CEO Mike Kranzler Makes Announcement to Shareholders.TRENTON, N.J.--(BUSINESS WIRE)--Sept. 16, 1997-- Dear Shareholder: We are happy to report that significant progress has been made in recent months to help maintain our position as a leader in the computerized Manufacturing Execution Systems – Manufacturing execution system (MES) describes a set of integrated functions within a packaged software system or it can also describe the accumulated functionality within the production management infrastructure of a manufacturing or production company. (MES (Manufacturing Execution Software) Software that provides real time access to plant activities that include equipment, labor, orders and inventory. An MES integrates the data with enterprise resource planning (ERP) systems so that management has complete control of ) market for pharmaceutical and medical device manufacturing; regulated by the FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. and similar agencies both here and abroad. We believe the industry will provide us with a near term opportunity to increase our growth and potential for positive and sustainable earnings in an expanding market. We have an important head start and we have demonstrated the advantages of PHARM PHARM Pharmacy 2(TM), our flagship MES product, through sales to the world's largest pharmaceutical companies including Pfizer, Abbott, SmithKline Beecham, Roche, Novo Nordisk Wikipedia is not the place for advertisement or self-advertising. Novo Nordisk (, NYSE: NVO) manufactures and markets pharmaceutical products and services. Founded in Denmark in 1923, the company has since become a world leader in diabetes care with the broadest , Astra, and Pharmacia & Upjohn.(a) We believe that PHARM2 is significantly ahead of the competition. We believe that our important investment in overseas markets opens the opportunity for financial rewards.(a) We have begun deliveries of PHARM2 software to a large pharmaceutical packaging plant in Japan using robotic equipment as part of an automated manufacturing system. A successful PHARM2 system accepted by a European customer has resulted in a second order from that customer for the same software to be used in a U.S. operation. We believe the world MES market is growing in importance, as evidenced by the increase in the number of inquiries for our products, including opportunities for global contracts. The broadening of this market enables us to offer PHARM2 more as a standard product and less as a customized activity as we increase the functionality of the basic system through the addition of features required by our wider customer base. To satisfy our delivery requirements The stipulation that requires that an item of materiel must be delivered in the total quantity required by the date required. and include the additional functions desired by our clients, we have increased organizational strength and allocated resources on a priority basis. We believe that the next few months will have a significant influence on our future and we are dedicated to maximizing our forward momentum and exploiting our present position. The success we achieve over this period will act as a primary showcase for PHARM2 and its capabilities. Although this effort will cause the Company to incur substantial expense beyond scheduled income, we believe it will serve as a basis for meaningful future growth(a). To accommodate this growth we have increased our development team by 40% since April and, consequently, our third quarter costs included both training and familiarization fa·mil·iar·ize tr.v. fa·mil·iar·ized, fa·mil·iar·iz·ing, fa·mil·iar·iz·es 1. To make known, recognized, or familiar. 2. To make acquainted with. costs necessary for growth as well as the cost of finding and hiring new personnel. The necessary product development achievements include the addition of Danish, French, Spanish, Flemish and Japanese language Japanese language Language spoken by about 125 million people on the islands of Japan, including the Ryukyus. The only other language of the Japanese archipelago is Ainu (see Ainu), now spoken by only a handful of people on Hokkaido, though once much more widespread. capability for PHARM2, making it more salable sal·a·ble also sale·a·ble adj. Offered or suitable for sale; marketable. sal  a·bil internationally. To handle Japanese we had to redesign
PHARM2 using an advanced computer language and absorb the associated
costs. Our investment is intended to give us a more favorable position Noun 1. favorable position - the quality of being at a competitive advantagefavourable position, superiority advantage, vantage - the quality of having a superior or more favorable position; "the experience gave him the advantage over me" in developing the Pacific Rim Pacific Rim, term used to describe the nations bordering the Pacific Ocean and the island countries situated in it. In the post–World War II era, the Pacific Rim has become an increasingly important and interconnected economic region. market(a). Third quarter financial performance was forecast to be negative and resulted in a loss of $2.8 million on revenues of $3.6 million. PHARM2 revenues, however, almost tripled to $0.9 million compared with $0.3 million in the second quarter and $0.2 million in the first quarter. Our Government Technology Division suffered an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $0.5 million primarily because of continued delays in order bookings and we are currently reviewing alternatives designed to eliminate losses in the Government Technology Division and favorably affect our future. Now that PHARM2 is being delivered to customers, PHARM2 functional enhancements are no longer capitalized. Second quarter capitalization of $1.4 million, resulting in an equivalent reduction in expense for that quarter, shrunk by $0.8 million in the third quarter adversely affecting results. In addition, interest of $0.4 million (of which $0.1 million is a non-cash expense Noun 1. non-cash expense - an expense (such as depreciation) that is not paid for in cash disbursal, disbursement, expense - amounts paid for goods and services that may be currently tax deductible (as opposed to capital expenditures) ) and amortization of $0.4 million (a non-cash expense) will continue to influence earnings until the revenue volume grows accordingly. Of the $2.8 million loss, $1.6 million is attributable to these causes. As previously announced, we have retained Cowen & Company as our financial advisor to help insure our future. The market for pharmaceutical MES is uneven and we expect further orders to come in groups rather than in a smooth progression. Our current sales forecasts Sales forecast A key input to a firm's financial planning process. External sales forecasts are based on historical experience, statistical analysis, and consideration of various macroeconomic factors. are higher than earlier in the year since opportunities in Europe which were slowed down by the summer holidays are again under consideration and our quotation activity has increased(a). We have already been selected by one of our major customers as the standard for paperless manufacturing and we have proven that we can win against the competition. Our plans are to keep on aggressively selling to increase our market share. If we continue to upgrade our product line and future deliveries meet with the type of success we have already achieved, we would be able to reach our goals and prove our investment in this industry was the wisest course(a). Cordially, Mike Kranzler Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. September 1997 -0- (a) FORWARD LOOKING INFORMATION The foregoing contains forward-looking information within the meaning of The Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements appear in a number of places and can be identified by an "asterisk" reference to a particular section of the foregoing or by the use of such forward looking terminology such as "believe", "expect", "may", "will", "should" or the negative thereof or variations thereof. Such forward looking statements involve certain risks and uncertainties, including the particular factors described above throughout this Letter. In each case actual results may differ materially from such forward looking statements. The Company does not undertake to publicly update or revise its forward looking statements even if experience or future changes make it clear than any projected results (expressed or implied) will not be realized. -0- Reference is made to the S-3 filed with the Securities and Exchange Commission on August 22, 1997 for a summary of the risks applicable to our business. CONTACT: Base Ten Systems, Inc. Edward J. Klinsport 609/586-7010 or Strategic Growth International, Inc. Richard E. Cooper/Robert Schatz 516/829-7111 |
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