Cap-xx Regulatory News (CPX)

Chairman's statement

The first half of the current financial year has been characterised by continued strong sales demand. Product sales at A$2.4 million are up 40% on the corresponding period last year (A$1.7 million) and the order book at the end of December 2021 was more than 40% higher than at the same time last year. Pleasingly, the growth in the order book continues to be well spread, coming from all geographic regions and from different Internet of things ("IoT") related market segments.

During this period, there were no royalty payments recognised from Kyocera AVX Components Corporation (formerly AVX Corporation) ("AVX") and Murata. Total revenue was up 14% at A$2.4 million compared to A$2.1 million. The reported Net Loss for the period was A$(1.7 million). This compared to a Net Loss of A$(1.2 million) for the corresponding period last year.

The adjusted EBITDA result for the six months ended December 2021, which excludes the impact from the Murata project expenditure and patent infringement legal expenses, was a loss of A$0.3 million (2020: Profit A$0.3 million). The principal reasons for the year-on-year variance was the absence of both royalty and licensing revenue in 2021 (2020: A$0.4 million), no government assistance payments associated with COVID in the half year (2020: A$0.3 million) and the A$0.3 million increase in operational expenses at Seven Hills as part of the ramp up of production at Seven Hills.

Sales for automotive accessories, electronic locks and battery-less energy harvesting products have been particularly strong. Around 30 customers moved into production from the design win stage, and several other customers have designed CAP-XX products into a second or third product, broadening our sales base. At the same time, the Company achieved several new design wins in industrial, wearables, consumer, medical, and automotive products.

Of particular importance, the Company is seeing increasing interest in its products from global multinational companies. The Company has notably achieved a design win with Continental, a global Tier-1 automotive component supplier, and has signed a supply agreement for models to be produced in 2024 - 2030.

The Board believes that demand for both non-cellular and cellular IoT devices will continue to grow rapidly. This is reflected by the Company's sales pipeline now growing to in excess of US$50 million per annum. This pipeline has been growing rapidly and the rate of design wins has been accelerating.

As previously reported, the global pandemic has continued to impact parts of the Company's operations, most noticeably in our various manufacturing activities at Seven Hills as well as in Asia. Disrupted supply chains, shortages of technicians and operators, global travel restrictions, limited international flights and mandatory quarantine requirements have presented headwinds. Nevertheless, as a whole, the Company has made excellent operational progress.

Production at Seven Hills continues to improve to plan. Gross margins for products made at Seven Hills now exceed 50% (FY 2021: 37%) and are expected to increase further. The current output and key performance metrics are tracking in line with our expectations. As expected at this stage of production, the Company is continuing to address small incremental improvements and is hiring additional staff for the Seven Hills facility. We expect to see steady improvement over the remainder of 2022. The Board is confident that target outputs and other key performance metrics will be reached as expected. The commissioning of the fourth production line, the DMH line, is expected to be completed within 12 months, with production expected to start in the first quarter of 2023 as time and resources allow and subject to customer demand.

CAP-XX's Asian operations have also been impacted by the pandemic. Various government mandated lockdowns have restricted the Company's ability to increase output as fast as management would have liked in response to the growing sales order book. Most noticeably, we have faced delays in recruiting additional staff and have been unable to travel from Seven Hills to Asia to oversee pre-production manufacturing of new products and processes. Nevertheless, CAP-XX has successfully increased output and expects normal travel to resume shortly.

The Australian Government recently released the Government's first List of Critical Technologies in the National Interest. The Government lists supercapacitors as a critical technology of national interest. CAP-XX is the only manufacturer in Australia of supercapacitors and the only Australian company manufacturing supercapacitors. The Company has won projects with Australian government agencies for the supply of supercapacitors for the development of critical technologies. During the half year one of these projects was successfully completed and delivered to the Government.

These and other R&D activities continue to progress and promising developments in new intellectual property were established to reduce supercapacitor production costs, increase cell voltage and improve product performance, using new materials. The Company is in discussions with other companies regarding licencing and partnering opportunities. The Company expects several new products to eventually be launched on the back of these combined efforts, including an even thinner and cheaper supercapacitor and large supercapacitor modules.

Although no royalty or licence income was recorded in the period, licensing remains an important potential revenue stream for CAP-XX and the Company continues to defend its intellectual property. CAP-XX continues to vigorously pursue its patent infringement action against Maxwell Technologies, now a wholly owned subsidiary of Tesla Inc. and other companies. The same Delaware court which ruled in favour of CAP-XX against Ioxus is also hearing the case against Maxwell Technologies and has issued a timetable for resolution of this matter. Efforts at mediation have so far been unsuccessful and the Company is preparing for a trial date starting in October 2022. The Board remains optimistic of the Company's prospects in this matter. We are currently in a dispute with Kyocera AVX Components Corporation (formerly AVX Corporation) (AVX) in respect of allegations that AVX breached our patent licence agreement, including by failing to pay all royalties payable to CAP-XX. The matter is currently before the Supreme Court of New South Wales. A further announcement will be made at the appropriate time and the Company's expectation is that this will be resolved in the current financial year.

The Board is confident that the growth of sales for IoT devices and the new Seven Hills production lines will transform the Company's revenue position with a consequential benefit to cash flow and the cash position of the Company. We expect to be EBITDA positive in the next financial year and turn cashflow positive during the second half of the same financial year. Further, as the sales pipeline is currently in excess of US$50 million, there is also the possibility of bringing these milestones forward should we secure large orders.

Patrick Elliott

Chairman

Consolidated

Half-year 2021

Half-year 2020

Currency: Australian Dollars

$

$

Revenue from sale of goods and services

2,428,416

2,126,564

Cost of sale of goods and services

(1,604,829)

(1,158,340)

Gross margin (loss) on sale of goods and services

823,587

968,224

Other revenue

3,120

501

Other income

1,169,442

2,292,781

General and administrative expenses

(1,484,788)

(944,949)

Process and engineering expenses

(490,505)

(229,994)

Selling and marketing expenses

(392,564)

(437,791)

Research and Development expenses

(729,501)

(740,021)

Project expenses

-

(2,017,614)

Share based payments

(435,053)

(68,192)

Other expenses

(200,186)

(67,250)

(Loss) before income tax

(1,736,448)

(1,244,305)

Income tax benefit/(expense)

-

-

Net loss after income tax for the half year

(1,736,448)

(1,244,305)

(Loss) attributable to members of CAP-XX Limited

(1,736,448)

(1,244,305)

Loss per share attributable to the ordinary equity holders of the company

Cents

Cents

Basic loss per share

(0.35)

(0.28)

Diluted loss per share

(0.35)

(0.28)

Consolidated

2021

2020

Currency: Australian Dollars

$

$

Loss for the half year

(1.736,448)

(1,244,305)

Other comprehensive income

Items that may be reclassified subsequently to profit or loss

Exchange differences on translation of foreign operations

(33,476)

102,943

Other comprehensive loss for the half year, net of tax

(33,476)

102,943

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

(1,769,924)

(1,141,362)

Consolidated

31 December 2021

31 December 2020

Currency: Australian Dollars

$

$

ASSETS

Current assets

Cash and cash equivalents

5,055,747

469,472

Receivables

1,123,331

455,454

Inventories

1,076,799

1,041,169

Other

1,203,308

5,698,264

Total current assets

8,459,185

7,664,359

Non-current assets

Property, plant and equipment

2,872,517

2,624,744

Right of Use Assets

2,727,890

3,059,608

Other

397,063

204,808

Total non-current assets

5,997,470

5,889,160

TOTAL ASSETS

14,456,655

13,553,519

LIABILITIES

Current liabilities

Payables

1,050,141

1,489,078

Lease Liabilities

134,546

268,051

Advance payments - Current

-

1,442,900

Provisions

795,164

1,401,354

Total current liabilities

1,979,851

4,601,383

Non-current liabilities

Lease Liabilities

2,348,248

2,241,620

Provisions

761,529

53,332

Total non-current liabilities

3,109,777

2,294,952

TOTAL LIABILITIES

5,089,628

6,896,335

NET ASSETS

9,367,027

6,657,184

EQUITY

Contributed equity

114,511,789

108,153,306

Reserves

6,835,441

6,461,120

Accumulated losses

(111,980,203)

(107,957,242)

TOTAL EQUITY

9,367,027

6,657,184

Consolidated

Contributed

Equity

$

Reserve

$

Accumulated losses

$

Total

$

Balance at 1 July 2020

108,010,106

6,289,985

(106,712,937)

7,587,154

Loss for the period as reported in the 2020 financial statements

- 

(3,530,818)

(3,530,818)

Other comprehensive loss

- 

38,766

-

38,766

Transactions with owners in their capacity as owners:

Contributions of equity, net of transaction costs and tax

756,424

756,424

Employee share options ‑ value of employee services

-

105,113

-

105,113

Balance at 30 June 2021

108,766,530

6,433,864

(110,243,755)

 4,956,639

Profit for the period as reported in the 2021 interim financial statements

- 

-

(1,736,448)

(1,736,448)

Other comprehensive income

- 

(33,476)

-

(33,476)

Transactions with owners in their capacity as owners:

Contributions of equity, net of transaction costs and tax

5,745,259

 -

 -

5,745,259

Employee share options ‑ value of employee services

-

435,053

-

435,053

Balance at 31 December 2021

114,511,789

6,835,441

 (111,980,203)

9,367,027

Consolidated

Half-year 2021

Half-year 2020

Currency: Australian Dollars

$

$

Cash flows from operating activities

Receipts from customers (inclusive of goods and services tax)

2,565,957

2,460,431

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

(5,191,497)

(5,397,193)

(2,625,540)

(2,936,762)

Tax credit received

3,211,314

-

Interest received

3,121

501

Net cash (outflow) from operating activities

588,895

(2,936,261)

Cash flows from investing activities

Payments for property, plant and equipment

(27,532)

(1,178,792)

Net cash (outflow) from investing activities

(27,532)

(1,178,792)

Cash flows from financing activities

Proceeds from issue of shares

5,745,259

143,200

Advance payments

(1,400,000)

1,442,900

Net cash inflow from financing activities

4,345,259

1,586,100

Net (decrease) in cash and cash equivalents

4,906,622

(2,528,953)

Cash and cash equivalents at the beginning of the half-year

182,601

2,895,482

Effects of exchange rate changes on cash and cash equivalents

(33,476)

102,943

Cash and cash equivalents at the end of the half-year

5,055,747

469,472