Source - LSE Regulatory
RNS Number : 2659E
CAP-XX Limited
17 October 2018
 

 

 

 

Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR).

 

 

17 October 2018

 

CAP-XX Limited

("CAP-XX" the "Company")

 

Audited results for the year ended 30 June 2018

 

CAP-XX Limited, a world leader in the design and manufacture of supercapacitors and energy management systems, is pleased to announce its audited results for the year ended 30 June 2018.

 

 

Key highlights

 

·      Sales revenue of A$4.9 million (2017: A$4.1 million), EBITDA loss of A$1.6 million* (2017: A$1.2 million)

·      Operational expenditure includes non-cash share-based payment provision expense of A$920K (2017: A$283K) due to the granting of Employee Share Options

·      Royalty revenue of A$0.85 million (2016: A$0.66 million) up 29%

·      Company announced the development of the industry's first 3 Volt prismatic supercapacitor, with commercial production on track for mid calendar year 2019

·      Prismatic sales volumes up 31% on a year-on-year basis. Cylindrical cell supercapacitor revenue is increasing, with first quarter sales in FY19 exceeding the result for the FY18 full year

·      Strong sales pipeline consistent with trading update announced in June 2018

·      Cash reserves at year-end of A$1.9 million (2017: A$3.9 million)

·      New non-exclusive license agreement with TDK Corporation of Japan for a family of CAP-XX patents signed post period end. The royalty paid by TDK will be in line with royalty rates paid by Murata and AVX

·      Additional licensing deals remain under discussion and the Board anticipates some of these to successfully close before the end of the current financial year

* Excludes amortisation of employee share options

 

Anthony Kongats, CEO of CAP-XX said:

"We are delighted to have successfully concluded our negotiations with TDK and anticipate closing further license opportunities during the current financial year.  With market interest in supercapacitors for a wide range of applications increasing, we are very encouraged by the widening of our licence portfolio and the increase in direct sales opportunities."

 

Electronic copies of CAP-XX's audited annual report and accounts for the year ended 30 June 2018 will shortly be available from the Company's website: www.cap-xx.com.

  

For further information contact:

 

CAP-XX Limited

Anthony Kongats (Chief Executive Officer)                                    +61 (0) 2 9428 0139

 

Kreab (Financial PR)

Robert Speed                                                                               +44 (0) 20 7074 1800

 

Allenby Capital (Nominated Adviser and Broker)

David Hart / Alex Brearley                                                            +44 (0) 20 3328 5656

 

 

More information is available at www.cap-xx.com

 

Notes to Editors:

 

CAP-XX (LSE: CPX) is a world leader in the design and manufacture of thin, flat supercapacitors and energy management systems used in portable and small-scale electronic devices, and to an increasing extent, in larger applications such as automotive and renewable energy. The unique feature of CAP-XX supercapacitors is their very high power density and high energy storage capacity in a space-efficient prismatic package. These attributes are essential in power-hungry consumer and industrial electronics, and deliver similar benefits in automotive and other transportation applications. For more information about CAP-XX, visit www.cap-xx.com

 

 

 

 

Chairman's statement

CAP-XX is seeing a sharp increase in the uptake of its intellectual property in the market.  This has been driven by a combination of our own direct sales, the activities of our established licensees and growing market awareness of the advantages of supercapacitor enabled devices. Over the past twelve months, we have made good progress towards achieving this objective and we have entered the current financial year with a record pipeline of enquiries and a strengthened portfolio of licensing agreements.

 

The results for FY18 contain a provision for share based payments associated with the grant of employee options in December 2017. Rather than a straight-line provision over the term of the option life, the applicable Accounting Standards dictate that the provision should follow when the options are granted rather than vested. The impact of the provision is an expense incurred of A$920,000 (FY17: A$283,000). The effect of this provision, which does not impact cash, needs to be considered when analysing year-on-year financial performance. 

 

Total sales revenue for the year to 30 June 2018 was A$4.9 million (2017: A$4.1 million), which represents a 18% year-on-year increase. The EBITDA result for the year to 30 June 2018 was a loss of A$1.6 million (2017: loss of A$1.2 million).  This result for the year to 30 June 2018 excludes the employee share-based payment provision of A$920K (2017: A$283K). 

 

Royalties from licensees continue to grow with the Murata and AVX contribution increasing by a combined 29% over the previous year. The total licence revenue reported includes the final tranche of the "up-front" licensing payment from AVX. In addition, the Company recently signed a new non-exclusive licence agreement with the TDK Corporation of Japan. TDK is a highly respected global manufacturer of electronic components, with sales in excess of US$11 billion and over 100,000 employees. The new licensing agreement with TDK will further increase the Company's royalty revenue and increase the adoption of CAP-XX's intellectual property globally and across new markets.

 

The Company is having numerous other discussions regarding further licensing opportunities which are at varying stages of progress.  The complex legal nature of these arrangements results in it being very difficult to be precise as to the timing when these discussions will be concluded.  However, the Company is working extremely hard to conclude some of these new licensing arrangements before the end of the current financial year.

 

Prismatic product sales volumes were up 31% on the previous financial year, due to announced design wins and the penetration of new markets, especially for IoT applications. It is very pleasing to note that the Company has developed numerous new large sales opportunities for both prismatic and cylindrical supercapacitors, and these opportunities continue to grow. Several of the Company's new design wins are for automotive IoT applications.

 

The recent announcement of our new 3 Volt prismatic supercapacitor product opens up new large volume target markets primarily for IoT products. As anticipated, sales revenue from cylindrical cans for the year ended 30 June 2018 was modest.  However, sales opportunities continue to grow and revenues from this product for the first quarter of 2019 have already exceeded that achieved in the whole of the 2018 financial year.

 

Progress with sales of large cells for automotive applications has been slow. While the overall sales pipeline for large supercapacitors in automotive and related markets continues to be large in quantum, the frustration is the time lag between products being evaluated and the time to mass production.

 

The increase in expenditure is attributable to an increase in R&D targeted at product development to secure immediate design wins, production and engineering support necessary to assist with the product development initiatives, an increase in production capacity and commissioning and the streamlining of production processes.

 

The Board looks forward to a strong year ahead.

  

Patrick Elliott

Chairman

 

17th October 2018

 

 

Business Review

Review of Operations and Activities

 

The EBITDA result for the year to 30 June 2018 was a loss of A$1.6 million (2017: loss of A$1.2 million).  This result for the year to 30 June 2018 excludes the employee share based payments provision  of A$920K (2017: A$282K).  Cash reserves as at the end of June 2018, were A$1.9 million which was down from A$3.9 million as at 30 June 2017.  Not included in the cash reserves is the Federal Government R&D tax rebate which is expected to be approximately A$1.60m (February 2018: A$1.52m) with these funds expected to be received during December 2018. 

 

The Company has incurred a taxable profit for FY18 with the years income of A$403K (FY17:$97K). The taxable income is derived after deducting non-taxable deductive expenditure and also the eligible R&D expenditure which is reimbursed by the Government via a cash rebate after the tax return is lodged. For the financial period ended 30 June 2018, the Company will still have significant tax losses which can be utilised against future taxable income.

 

Total sales revenue for the year to 30 June 2018 was A$4.9 million (2017: A$4.1 million) which represents a 18% year-on-year increase. Products sales were up 19% on the previous year, due to announced design wins and the penetration of new markets especially for IoT applications. The revenue contribution from licencing, including royalties from Murata and AVX, was up a combined 29% over the previous year. The total revenue reported includes the final tranche of the "up-front" licensing payment with AVX (£750,000).

 

Operational expenditure, excluding the share-based payments provision as outlined above, has increased by 8% from A$5.0m to A$5.4m. The increase in expenditure is attributable to an increase in R&D targeted at product development to secure immediate design wins, production and engineering support necessary to assist with the product development initiatives, an increase in production capacity and the commissioning and streamlining of production processes. Production reject rates have steadily improved throughout the year.  This was assisted by the opportunity to do longer production runs of just one product for Spire's Health Tags. There has also been an increase in overseas legal expenditure associated with pursuing patent infringement cases predominately in North America, with the potential benefit to be realised via additional licensing and royalty revenue over the coming years. 

 

The Company signed a new non-exclusive licence agreement with the TDK Corporation of Japan, which has a royalty rate in line with those agreed with Murata and AVX. TDK is a highly respected global manufacturer of electronic components with sales in excess of US$11 billion and over 100,000 employees. The Board believes that the addition of TDK will not only further increase the Company's royalty revenue and increase the adoption of CAP-XX's intellectual property globally and across new markets, but also provides further evidence to customers, competitors and investors of the importance of CAP-XX's intellectual property.

 

During the financial year, the major R&D and new product effort was on the 3V technology which the Company announced in April 2018. The 3V project is progressing well and the Board is optimistic that commercial launch will meet our mid calendar 2019 target. The Company also continued to invest significant resources in redesigning products and processes to reduce manufacturing costs and to improve product performance.

 

Business Environment

 

The Board believes that CAP-XX's technology provides a competitive advantage over existing supercapacitor manufacturers, such as Maxwell Technologies, Ioxus, Nippon Chemicon Corporation and other Chinese and Korean competitors. While the Board has identified other possible competitors, the Board believes that these other companies are unable to match the CAP-XX technology for thinness, power density, energy density and reliability. Most of the Company's competitors only manufacture higher-capacity cylindrical cells used in large package modules and focus on applications where the combination of thinness, energy density and power density are not issues. These products are often not suitable for the IoT markets which the Company is targeting.

 

As reported previously, Internet of Things (IoT) applications, one of the fastest growing segments of the electronics market, provide one of the greatest opportunities for CAP-XX's products.  Driven by customer requests, manufacturers are constantly adding to the functions and applications available on IoT enabled devices. This means that power management continues to be an increasingly important consideration. The other important factor is size, as devices have become smaller whilst their electrical power demands have increased. The Company has been successful in winning new business from a range of these markets, such as the Spire Health Tag and several IoT automotive projects.

 

In the past, CAP-XX has faced competition in various markets from cheaper cylindrical supercapacitors where our thin form factor, high power and long life are not valued as highly as lower initial cost. To counter-act this, the Company released a range of cylindrical cells. Modest sales revenue for these products was recorded during FY18. Pleasingly, revenues for these products in the first quarter of FY19 have already exceeded those in the whole of FY18. Several large volume opportunities are still being evaluated by existing customers that are currently utilising cheaper cylindrical cells.

 

Automotive applications such as truckStart, Stop-Start systems, regenerative energy capture or KERS (Kinetic Energy Recovery Systems), distributed power, hybrid electric vehicles and electric vehicles still present very attractive opportunities for large supercapacitors. A number of CAP-XX's competitors are active in these markets, but the Board believes that the Company has significant advantages over the competition in certain applications upon which CAP-XX has focused its efforts. During the year, numerous automotive projects using large CAP-XX supercapacitors showed progress. However, because of the significant resources that each project requires, and the long time lag between product evaluation and mass production, the Board has taken the decision to focus the Company's resources on just a small number of key automotive projects and take a lower risk, longer term, more patient approach to these opportunities for large supercapacitors.

 

 

Opportunities

 

We expect royalty income from Murata, AVX and TDK to grow in the coming years, as more consumer applications adopt supercapacitor technology.

 

A significant additional benefit of the Murata, AVX and TDK licencing agreements is that they validate CAP-XX's technology leadership in the field of supercapacitors and energy storage, and the potential for supercapacitors as a mainstream consumer electronics technology. Their product lines and their sales activities are also increasing our exposure to markets and customers that were previously beyond the Company's reach.  Association with companies such as Murata, AVX and TDK is also helping CAP-XX gain recognition, win acceptance for its supercapacitors, and reduce misconceptions about the price and performance of supercapacitors.  It is also important that the strategy of these companies is to offer product ranges targeted at certain end markets. As such, they will not meet the product type or size requirements of all markets and all applications, leaving room for CAP-XX to supply these other markets directly using products made by its contract manufacturers.

 

As a result of the agreements with Murata, AVX and TDK, there are several additional opportunities for the Company to pursue additional licencing arrangements. Some of these have and may require the Company to enforce its patent rights through court action.

 

Separately, the overall direct sales pipeline for CAP-XX supercapacitors continues to be large in quantum and varied in terms of the targeted markets. The key target markets remain similar to the previous year, with IoT wearables, health, automotive, security, metering and energy harvesting having the most appeal and presenting the largest volume opportunities

 

Our customers' markets are constantly evolving as new products and technologies threaten the incumbents. In this environment, CAP-XX needs to always remain alert and flexible to changing business conditions and market needs. This creates opportunities to offer products that address what the market wants.

 

CAP-XX is continuing to refine the products that it offers for the IoT, portable electronics and other markets. The Company has already introduced its Thinline supercapacitors to address the space-constrained needs of many IoT products. In April 2018, the Company announced that it was developing what will be the industry's first 3 Volt thin prismatic supercapacitor. The development of the 3 Volt product has been accelerated to meet demand for small, inexpensive, energy efficient power solutions for thin wearables, key FOBs and other IoT devices, especially those using 3 Volt coin cell lithium ion batteries such as the CR2032 battery. The Company remains on track for commercial production to start in mid calendar year 2019.

 

In the future, there is an opportunity to migrate this same 3 Volt technology into larger prismatic supercapacitors, automotive modules and other products for high-energy, high-power applications.

 

As already noted, CAP-XX is concentrating on a small number of automotive opportunities. To further increase the Company's likelihood of success, CAP-XX is looking for opportunities to partner with automotive and military Tier-1/Tier-2 suppliers through either a new licence agreement or a joint venture to supply the automotive markets. The Board believes that such partnerships will be beneficial for all parties involved.

 

 

Strategies for Growth

 

The Company's immediate goal is to increase licencing income (including royalty income) and product sales from IoT applications.

 

The agreement with TDK and the increase in revenue from Murata and AVX is further endorsement of the Company's strategy to develop substantial and recurring income from its intellectual property. Several other licence agreements are at differing stages of negotiation with some forecast to be finalised before the end of FY19.

 

It is important that the Company is able to benefit from the large investment made over many years in building its patent portfolio. Where third parties are found to be infringing these patent rights, the Company has and will vigorously defend its rights even if this means pursuing legal action. 

 

Given the increasing levels of market interest in CAP-XX's technology and its high-performance supercapacitors, the Company believes that the IoT markets in particular offer significant opportunities for growth and to reach the immediate business strategic objective of an operating cash break-even position.

 

The Company continues to engage in discussions aimed at securing business with a number of global OEMs. CAP-XX is strengthening its relationships with these organisations and has regular engineering meetings with design teams, manufacturing groups and contract manufacturers. The Company is unable to comment on specific clients, but the Board is pleased with overall progress and is confident that the available market for supercapacitors is increasing as manufacturers become familiar with the technology.

 

The Company will continue to monitor new opportunities to increase the product offering, both through the current distributors and direct sales to customers. These offerings may take the form of complementary energy storage devices and modules. The Company is also adding new distributors to ensure that global coverage and penetration is maximised.

 

 

Research and Development

 

The markets in which the Company operates are competitive and are characterised by rapid technological change. CAP-XX has a strong competitive position in prismatic supercapacitors for all of its target markets, with its capability to produce supercapacitors with a high energy density and power density in a small conveniently sized flat package. CAP-XX's devices are also lightweight, work over a broad temperature range and have an operating lifetime measured in years.

 

To stay ahead of the competition, the Company is developing a strong pipeline of new products to follow the 3 Volt products already discussed. CAP-XX's R&D efforts are focused on a mix of short, medium and long-term opportunities, covering new products, cost reductions and improved product performance. CAP-XX has a research facility in Sydney, Australia, where a team of 18 engineers and scientists work to maintain CAP-XX's leading technology position in electrodes, separators and electrolyte materials and their assembly into supercapacitor devices. During the 2018 year, significant progress was made in a number of key areas including: 3 Volt technology; reducing the resistance of cells; improving the life of cells; reducing the cost per cell and developing new electronics to optimise the performance of the Company's modules. CAP-XX has also signed numerous collaboration agreements with leading research institutions, whilst the Company's Scientific Advisory Board provides CAP-XX with clear direction on commercially relevant technologies for the ongoing R&D programme.

 

The Company's success depends on its ability to protect and prevent any infringements of its intellectual property. To protect this important asset, the Company has considerable intellectual property embodied in its patents covering the design, manufacture and use of its high performance supercapacitors. The CAP-XX patent portfolio currently consists of 15 patent families with 37 granted national patents with an additional nine applications pending in various jurisdictions. The Company's intellectual property strategy has been to build value by focusing on opportunities to capture market share and exclude competition with an IP portfolio capable of generating licensing revenue. The Directors believe that comprehensive embodiments and interlocking patent groups, combined with a 'quick to file, quick to abandon' policy, have given the Company a strong and focused IP portfolio.

 

Outlook

 

The major short-term focus for CAP-XX is to drive the adoption of the Company's intellectual property and products, both large and small, into key target markets through future licence deals; joint ventures and direct product sales with the aim of generating an operating cash break-even position as soon as possible. Although much has been achieved in the past, the Company expects to see additional progress over the next twelve months and beyond.

 

     

 

   

CAP-XX Limited

Statement of profit or loss

For the year ended 30 June 2018

 

 

Consolidated

 

 

 

 

 

 

2018

2017

Currency: Australian Dollars

Notes

$

$

 

 

 

 

Revenue from continuing operations

1

4,905,687

4,142,119

Cost of sales

2

(2,704,077)

(2,233,555)

Gross Profit

 

2,201,610

1,908,564

 

 

 

 

Other revenue

1

47,260

30,009

Other income

3

1,525,419

1,682,364

 

 

 

 

General and administrative expenses

 

(1,915,080)

(1,785,709)

Process and engineering expenses

 

(1,213,190)

(863,307)

Selling and marketing expenses

 

(736,663)

(713,429)

Research and development expenses

 

(1,482,894)

(1,511,271)

Share based payments expense

 

(920,228)

(282,848)

Other expenses

4

(128,165)

(128,622)

Loss before income tax

 

(2,621,931)

(1,664,249)

 

 

 

 

Income tax benefit

 

-

-

 

 

 

 

Net loss for the year

 

(2,621,931)

(1,664,249)

 

 

 

 

Loss attributable to owners of CAP-XX Limited

 

(2,621,931)

(1,664,249)

 

 

 

 

Earnings per share for loss attributable to the ordinary equity holders of the Company

 

Cents

Cents

 

Basic loss per share

5

(0.9)

(0.6)

 

Diluted loss per share

5

(0.9)

(0.6)

 

           

 

 

 

 

CAP-XX Limited

Statement of comprehensive income

For the year ended 30 June 2018

 

 

Consolidated

 

 

 

 

 

 

 

2017

 

Currency: Australian Dollars

Notes

$

 

Loss for the year

 

(1,664,249)

 

Other comprehensive income

 

 

 

 

Items that may be reclassified subsequently to profit or loss

 

 

 

 

 

 

Exchange differences on translation of foreign operations

 

(33,031)

6,551

 

Other comprehensive loss for the year, net of tax

 

         (33,031)

            6,551

 

Total comprehensive loss for the year attributable to owners of CAP-XX Limited

 

    (2,654,962)

    (1,657,698)

 

 

 

  

CAP-XX Limited

Statement of financial position

As at 30 June 2018

 

 

Consolidated

 

 

 

 

 

 

June 30, 2018

June 30, 2017

Currency: Australian Dollars

Notes

       $

$

 

 

 

 

ASSETS

 

 

 

Current assets

 

 

 

Cash and cash equivalents

 

1,911,346

3,881,792

Receivables

 

823,090

   419,146

Inventories

 

1,220,906

1,321,327

Other

 

1,784,384

1,676,618

Total current assets

 

5,739,726

7,298,883

 

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

 

572,949

  369,779

Other

 

236,507

236,507

Total non-current assets

 

809,456

606,286

 

 

 

 

Total assets

 

6,549,182

7,905,169

 

 

 

 

LIABILITIES

 

 

 

Current liabilities

 

 

 

Payables

 

1,144,289

1,013,954

Provisions

 

760,491

682,962

Total current liabilities

 

1,904,780

1,696,916

 

 

 

 

Non-current liabilities

 

 

 

Provisions

 

41,296

91,756

Total non-current liabilities

 

41,296

91,756

 

 

 

 

Total liabilities

 

1,946,076

1,788,672

 

 

 

 

Net assets

 

4,603,106

6,116,497

 

 

 

 

 

 

 

 

EQUITY

 

 

 

Contributed equity

 

98,565,062

98,343,719

Reserves

 

5,212,170

4,324,973

Accumulated losses

 

(99,174,126)

(96,552,195)

TOTAL EQUITY

 

4,603,106

6,116,497

 

 

 

 

Statement of cash flows

For the year ended 30 June 2018

 

 

 

Consolidated

 

 

 

 

 

 

   2018

2017

Currency: Australian Dollars

 

  $

$

 

 

 

 

Cash flows from operating activities

 

 

 

Receipts from customers (inclusive of goods and services tax)

 

4,546,491

6,574,124

Payments to suppliers and employees (inclusive of goods and services tax)

 

(7,919,787)

(7,221,745)

 

 

(3,373,296)

(647,621)

Tax credit received

 

1,551,483

  1,546,175

Interest received

 

47,260

30,009

Net cash (outflow) from operating activities

 

(1,773,553)

928,563

 

 

 

 

Cash flows from investing activities

 

 

 

Payments for property, plant and equipment

 

(385,205)

(169,946)

Net cash (outflow) from investing activities

 

(385,205)

(169,946)

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from issue of shares (net of costs)

 

221,343

3,784,993

Proceeds from Loan

 

-

(1,000,000)

Net cash inflow from financing activities

 

221,343

2,784,993

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

(1,937,415)

3,543,610

Cash and cash equivalents at the beginning of the financial year

 

3,881,792

331,631

Effects of exchange rate changes on cash and cash equivalents

 

(33,031)

 6,551

Cash and cash equivalents at the end of the financial year

 

 

1,911,346

3,881,792

 

 

Notes to the financial statements

 

Basis of preparation

The financial information included in this announcement does not constitute statutory accounts within the meaning of the Australian Corporations Act 2001.  Whilst the financial information has been computed in accordance with Australian equivalents to International Financial Reporting standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001, this announcement does not itself contain sufficient information to comply with those requirements.

 

 

Note 1       Revenue

 

Consolidated

 

 

2018

2017

 

 

$

$

Sales revenue

 

 

 

Sale of goods & services

 

4,905,687

4,142,119

 

 

4,905,687

4,142,119

 

 

 

 

Other revenue

 

 

 

Interest

 

47,260

30,009

 

 

47,260

30,009

         

 

 

Note 2         Cost of Sale of Goods

 

Consolidated

 

 

2018

2017

 

 

$

$

 

 

 

 

Direct materials and labour

 

2,163,484

1,732,747

Indirect manufacturing expenses

 

540,593

500,808

 

 

2,704,077

2,233,555

 

 

Note 3         Other income

 

Consolidated

 

 

2018

2017

 

 

$

$

Foreign Exchange Gains - (net)

R&D Tax Incentive

 

                         

-

1,525,419

130,482

1,551,483

Miscellaneous Income

 

-

399

 

 

1,525,419

1,682,364

 

Note 4         Other Expenses

 

Consolidated

 

 

 

2018

2017

 

 

 

$

$

 

 

 

 

 

 

Provision for Withholding Tax Diminution

 

110,755

  91,277 

Provision for credit notes / doubtful debts

 

                   -

 (16,762)  

Provision for make good on premises

 

5,665

  5,527 

   Foreign Exchange Loss

 

11,745

-   

   Interest Expense - Loan Facility

 

-

48,580  

 

 

128,165

128,622

 

      

Note 5        Loss per share

 

 

 

Consolidated

 

 

 

2018

2017

 

 

 

$

$

 

 

 

 

 

 

Net loss

 

(2,621,931)

(1,664,249)

 

 

 

 

 

 

Loss per share - undiluted

 

($0.009)

($0.006)

 

 

 

 

 

 

Weighted Average Shares on Issue during the year

 

298,191,206

282,084,311

 

                 

 

 

-Ends-

 


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