LaserCard Corporation Terminates Master License and Manufacturing Equipment Agreements with Prevent Global
Termination will yield one-time income of approximately $20.7 million in the Company’s fiscal quarter ending December 31, 2010
Mountain View, Calif., Nov. 23, 2010–On November 17, 2010 LaserCard Corporation (NASDAQ:LCRD) terminated its Master License and Manufacturing Agreement, dated April 3, 2004, as amended (the “Master License Agreement”), and its Equipment Sale Agreement, dated March 18, 2006, as amended, each originally entered into with Global Investments Group (“GIG”) (together, the “Subject Agreements”). The Subject Agreements were part of a series of agreements that LaserCard entered into in 2004 with GIG (the “Agreements”). In 2007, GIG assigned all of its rights, title and interest in the Agreements to Prevent Global dru ba za upravljanje, investicije in razvoj d.d. (“Prevent Global”) and Prevent Global agreed to assume all of the obligations under the Agreements. However, a dispute arose regarding whether Prevent Global or GIG (i) was obliged to make payments owed to LaserCard under the Agreements; (ii) had rights to certain equipment under the Agreements; and (iii) was subject to and bound by the arbitration provisions contained in the Agreements. On July 12, 2010, the English High Court of Justice, Commercial Court declared Prevent Global the rightful counterparty to the Agreements, entitled to all rights and bound by all obligations.
The Subject Agreements provided for non-refundable payments to LaserCard of about $31 million to date, including wait fees and interest, and provided for a seven-year mandatory training and support package, the required manufacturing equipment and installation support for the licensee’s new facility to achieve a targeted initial manufacturing capacity of 10 million optical cards annually. There were also 13 optional one-year support packages that would have been provided upon the receipt of payments of $1 million annually to begin April 1, 2011.
Prevent Global ceased making payments under the Subject Agreements after a December 1, 2008 payment. On July 21, 2010, LaserCard notified Prevent Global that its failure to pay the amounts owed under the Subject Agreements constituted a breach of the Subject Agreements. On August 3, 2010, Prevent Global filed a petition in bankruptcy in Slovenia also a breach of the Subject Agreements. Given the repeated and uncured breaches of the Subject Agreements, LaserCard notified Prevent Global by correspondence dated November 17, 2010 that LaserCard had terminated the Subject Agreements and intended to commence arbitration for recovery of the sums owed under the Agreements. The Company intends to account for the termination of the Subject Agreements by recording income in the current period of approximately $20.7 million consisting of payments to date net of costs deferred.
About LaserCard Corporation
LaserCard Corporation, together with its subsidiaries, is a leading provider of secure ID solutions to governments and commercial clients worldwide. It develops, manufactures, and integrates LaserCard® optical security media cards, encoders, peripherals, smart and specialty cards, biometrics, and modular software. The company’s cards and systems are used in various applications, including citizen identification, border security, government service delivery and facility access.
For further information, please visit http://www.lasercard.com
Forward-Looking Statements: All statements contained in this press release that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are not historical facts or guarantees of future performance or events. Rather, they are based on current expectations, estimates, beliefs, assumptions, and goals and objectives and are subject to uncertainties that are difficult to predict. As a result, our actual results may differ materially from the statements made. Often such statements can be identified by their use of words such as may, will, intends, plans, believes, anticipates, visualizes, expects, and estimates. Examples of forward-looking statements in this release include the intention to account for the termination by recording income of $20.7 million in the current period. This and other forward-looking statements in this press release are based upon our assumptions about and assessment of the future, which may or may not prove true, and involve a number of risks and uncertainties including, but not limited to whether the customer’s scheduled delivery dates are rescheduled or canceled in whole or in part, whether the customer continues to purchase products from the Company and whether the Company encounters card production difficulties as well as the risk factors detailed in the Company’s Form 10-K, and 10-Q filings with the Securities and Exchange Commission under the caption “Risk Factors” and elsewhere in such reports. Due to these and other risks, future actual results could differ materially from the Company’s expectations. These forward-looking statements speak only as to the date of this release, and, except as required by law, the Company undertakes no obligation to publicly release updates or revisions to these statements whether as a result of new information, future events, or otherwise.
Steven G. Larson, VP-Finance