One of the first projects the company did after getting public is to buy 4 other Haptics companies, and you know, unlike many other technologies Haptics is not really a very popular technology. In fact, advanced Haptics courses are only available in two or three universities around the world. So what the company did is it bought 4 other Haptics companies, and with these companies came people, processes, and most importantly patents. So very early on the company accumulated a lot of Haptics patents and throughout the history of the company, it has continued innovating and continued developing patents, and innovation and patent development is very, very much a culture in the company.In the initial years, the company focused on a number of segments, it won a lot of contracts from gaming companies like Logitech. It was successful in entering into the automotive market with BMW, and then in the middle of 2002 the company found that a number of other gaming companies like Microsoft and Sony were infringing on its patents, and as a result of this the company sued these companies, and over time settled and won those litigations. So fast forward now to 2007, the company has won the litigation. In 2008, Vic retired as CEO, but continued to stay on the board, and a new CEO was appointed, who decided to focus the company’s efforts on the medical business. Now the timing was unfortunate because if you recall that was also the time when the recession started, and a lot of hospitals and medical companies weren’t really interested in spending a lot of investment dollars for medical products. And so over 2008 and 2009, the company went through significant losses, a lot of the cash that it had obtained from Sony, from the $150 million it got down to the $80 million level during this time. But another very interesting thing happened during this time, which is in 2006, 2007 the iPhone was introduced, and with that smart phones really took off. And that was an area where the company had a lot of strength, because as we have seen there are a lot of advantages to the touch technology. The only disadvantage that people don’t like is the fact that it doesn’t give feedback, and Haptics provides that feedback.
So the combination of touch technology with Haptics is very, very compelling. So that is level setting the place, Vic came back to the company in late 2009, and decided to redirect the strategy of the company. Up until now, the company has been selling both products and licenses, and products accounted for about 50% of total revenues, licenses accounting for the other.So Vic’s new strategy was basically to transfer the product to other companies, and he transferred three of the four main medical product lines to a company called CAE, retained the licensing rights, but then reconvert the company from one, which was half products, half licensing to one which was almost completely licensing. So today as a company about 90% of our revenues come from licensing. We have one product line left, which is in the medical simulation business, but our focus is actually on licensing. And as we go through the model, you will see why this is very important, and why this has proven to be very successful for us. Now moving on what is Haptics. So, Haptics is a science of touch just like acoustics is the science of sound, and Haptics is the science of sight, Haptics is a science of touch, and what Haptics does it essentially brings life to objects like touch screens, it brings them to life. Without Haptics, you know, touch screens are very limited, small controls, visual impediments, small devices, but your fingers are very large. So it doesn’t give you the feel and you never know when you press the touch screen whether your touch is being registered or not, and it is a very, very uncomfortable feeling. Read the rest of this transcript for free on seekingalpha.com