bureaucracy

AS RECORDED BY: RICK NOVY

PRESENT:

CHAIRMAN:

Kermit Sayman

PRESIDENT/CEO:

Louis Gormant

VICE PRESIDENTS:

Derek Fong

Khin-Khin Tanaka

Michel LaFond

DIRECTORS:

Jose Herrera

QUORUM: Met

AGENDA: (1) Action Regarding Delinquent Payments on Majority-Owned implant customers.

1.1  The board considered and unanimously approved the Draft Minutes of the meeting of 7 May, 2036 (DOC:CII-BM-20360507).

2.1  Mr. Sayman opened discussion of the first and only agenda item by displaying a graphic depicting the P&L figures for the current quarter. Cybimplant is bleeding capital and projections indicate a loss for the seventh consecutive quarter.  Mr. Sayman also reminded the board that Cybimplant has not issued a quarterly dividend for over a year, and B shares are at a historic low on the NASDAQ.

2.2  Mr. Sayman presented figures showing majority-owned customers as a percentage of all customers to be 7.2%, numbering 381,600 individuals. The percentage of delinquent accounts is 17%, numbering nearly 65,000 individuals at a total cost of over $90M in bad debt per month.

2.3  Mr. Sayman proposed Cybimplant implement a repossession program to recover the bad debt and bring the quarter into the black. He also suggested Cybimplant could initiate a secondary market program to monetize the repossessed implants.

2.4  Mr. Sayman requested open discussion on the agenda topic.

2.5  Mr. LaFond moved that the discussion of a secondary market program be tabled.

2.6  The board recorded its approval to table a discussion of a secondary market program.

2.7  Mr. Herrera asked Mr. LaFond for an approximate ROI on the cost of implementing and maintaining a repossession team. Mr. LaFond estimated ROI to be 41% during the first year, gradually dropping to a baseline of 15% over five years under a logistic function model.

2.8  Mr. Tanaka asked Mr. LaFond whether a 41% ROI would be sufficient to overcome the negative cash flow for Q2. Mr. LaFond said initial calculations indicate that as very likely.

2.9  Mr. Fong suggested shareholders will demand a dividend in Q3 if Cybimplant shows a profit in Q2. Mr. Gormant took the action item to write a shareholder letter to be mailed with Q2 results.

2.10 Mr. Herrera inquired whether a repossession program would include purchase plan delinquencies or be restricted to lease delinquencies.

2.11 Mr. Sayman reminded the board that purchase plan customers agreed to different language and expressed concern that the legal department would need beyond the end of Q2 to complete analysis and create language to justify repossession defensible in a court of law.

2.12 The board unanimously approved tabling a discussion of purchase plan delinquency repossession until the legal team completes its analysis.

2.13 Mr. LaFond requested clarification on whether life-critical implants would be included in the repossession program, as not including them might impact the ability of Cybimplant to eliminate the Q2 negative cash flow. Mr. Gormant reminded the board that lease customers must agree to all contract terms before an implant is installed, regardless of the implant purpose, and repossession of delinquent leased equipment is always a possibility in any industry.

2.14 Mr. Tanaka expressed concern that repossession of life-critical implants might result in a drain on revenues in the form of wrongful death lawsuit defense. Mr. Sayman stated that lawsuits are a recognized and budgeted cost of doing business and wrongful death lawsuits were expected to be well within acceptable numbers for the industry.

2.15 Mr. Gormant moved that the proposal be brought to a vote. The motion was seconded by Mr. Fong. The board recorded its unanimous approval of the creation of a repossession program for delinquencies under lease for majority-owned customers. Mr. Tanaka was given the action item to implement the decision immediately.

3.1 Mr. Gormant moved to adjourn. The motion was seconded by Mr. Herrera. The board adjourned at 10:38 AM.

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Bio:

Rick Novy is an engineer by day and writer by night. He lives in Arizona. Learn more at ricknovy.com.