Proposed Placing and Notice of General Meeting

 

CAP-XX Limited

("CAP-XX" or the "Company")

Proposed Placing and Notice of General Meeting

 

The Board of CAP-XX is pleased to announce that it has raised, subject to certain conditions, £1.55 million (approximately £1.33 million net of expenses) through the placing of up to 28,181,819 new ordinary shares in the Company (the "Placing") at a price of 5.5 pence per share (the "Placing Price").  The funds raised will be used by the CAP-XX to provide the Company with sufficient funds to enhance the current automotive technology offering (including plant and equipment), complete the surface mountable device ("SMD") packaging and to provide samples to potential licensees, complete and deploy the supercapacitor cost reduction programme and provide the Company with additional working capital.

The placing is conditional, inter alia, on the passing of the Resolution by shareholder to be proposed at the General Meeting convened for 29 August 2013.

 

A circular containing the details of the Placing (the "Circular") will be posted to shareholders shortly and will be available on the Company's website:  www.cap-xx.com.

 

The same definitions apply throughout this announcement as are applied in the Circular.

 

 

Commenting, Anthony Kongats, CEO of CAP-XX said, "The placing will allow us to further develop our large supercapacitor for Micro-Hybrid automotive applications, which has already seen considerable demand for evaluation samples from automobile manufacturers and their teir 1 component suppliers, from our recently commissioned production line.  It additionally enables us to complete the development of our surface mount supercapacitor for high volume small mobile devices and to provide samples to prospective licensees."

 

For further information please contact:

CAP-XX Limited   Anthony Kongats (Chief Executive Officer)	+61 (0) 2 9428 0139
Cenkos Securities Stephen Keys/Camilla Hume (Corporate Finance)	+44 (0) 20 7397 8900
Kreab Gavin Anderson & Company Robert Speed (Financial PR)	+44 (0) 20 7074 1800

 

 

 

Background to and reasons for the Placing

As noted in the Company's interim results announced on 5 March 2013 tangible progress has been made in the development of the Company's supercapacitor product for CAP-XX's key target markets of portable electronic devices and micro hybrid automotive applications.  Revenue continues to increase with the average selling price remaining steady and the current sales order book is running at historical averages.  This resulted in the Company reporting a reduced net loss at the half year of A$1.4 million. 

As a result of CAP-XX's accelerated development of a large form supercapacitor, specifically targeted at the automotive market, the Company has received considerable interest in its technology from automobile manufacturers and tier 1 component suppliers. This led to the Company completing the development of a small production line for the production of supercapacitors and supercapacitor based systems for customer evaluation.  On 6 June 2013 the Company announced that following the successful commissioning of this line it had received firm orders for sample volumes of its large supercapacitors and large supercapacitor systems from a number of global automotive manufacturers and tier 1 global automotive component suppliers.  These companies are understood to be evaluating CAP-XX supercapacitors for incorporation into vehicle Stop-Start and regenerative braking/energy capture systems, as well as for enhanced cold cranking. Extensive testing and in vehicle trials of the CAP-XX supercapacitors are achieving good results. In one evaluation undertaken in April 2013 the Company successfully completed an in vehicle trial with Club Assist, a leading global supplier of roadside vehicle breakdown assistance.  Club Assist and CAP-XX are in discussions to trial the Company's product in a number of Club Assist vans.  The Board expects the availability of sample scale quantities of this new small-scale production line will hasten the development of commercial systems which incorporate this technology into automotive Stop-Start and other energy intensive automotive regenerative systems.

 

To date, a significant number of non disclosure agreements are in place with potential licensees from Europe, USA, India, China and Japan and patents have been drafted and applications filed and the Board expects that at least one licensee will be in place before the end of the current financial year.

 

CAP-XX has completed the development work on its next-generation supercapacitor product, namely the surface mountable device ("SMD").  The real benefits of the SMD product are its lower manufacturing costs and reduced assembly costs for CAP-XX's customers. Again, external interest in this product development is encouraging, with a number of high profile component manufacturers in early stage discussions. The focus is now on producing sufficient samples to meet the demand from these interested parties which is expected to be completed before the end of the current financial year.

The Board and management are actively focussed on reducing manufacturing costs associated with the existing supercapacitor business and are currently implementing these initiatives, which have included the procurement and evaluation of new cheaper raw materials, upgrading existing plant and machinery and improving current product processes which the Directors hope will assist in increasing yield. The added benefit will be an improved supercapacitor which is expected to increase the overall competiveness of the CAP-XX product. The cost savings comprise improved production processes, investment in new plant and equipment, sourcing cheaper raw materials and labour reductions. The overall cost reduction on the Company's own manufactured product expected, by the Directors, to accrue from this programme is around 30 per cent with the majority of the identified savings expected to positively impact the results for the current financial year.  The Directors believe that such a cost reduction will hasten adoption of its current generation product in key markets including small portable devices, solid state drives, industrial controls and energy harvesting. The Board is forecasting that the second stage of this cost reduction process will require additional investment in the evaluation of additional raw materials and upgraded equipment which, the Board expects, will significantly reduce the current production cycle as well as eliminate further costs.

The royalty revenue received from Murata remains at modest levels. The total revenue recognised for the six month period to 31 March 2013 was flat at A$22,000. Murata has been able to release additional generations of its supercapacitor range over the past year and have also added additional manufacturing capacity. Murata have also advised that it has dedicated additional resources to its supercapacitor sales force and the Board expects to see the benefit of these initiatives through an increase in royalty revenue during the current financial year.

The Company's cash reserves as at the end of June 2013 were approximately A$1 million. 

In light of the above, the Board believes that it is appropriate to raise additional funds at the current time in order to provide the Company with sufficient funds to enhance the current automotive technology offering (including plant and equipment), complete the SMD packaging and to provide samples to potential licensees, complete and deploy the supercapacitor cost reduction programme, and provide the Company with additional working capital.

Shareholders should be aware that, if the Resolution is not approved at the General Meeting, the Company will be unable to complete the Placing.  If the Placing does not proceed the working capital available to CAP-XX may not be sufficient for its requirements for the next 12 months from the date of the Circular.

Current trading and prospects

New sales opportunities and requests for quotes continue to increase as the market acceptance of supercapacitors as reliable and proven energy storage devices grows. The majority of the opportunities currently under evaluation are for high volume applications for large multi-national customers and their Tier-1 component suppliers.

CAP-XX is in the process of identifying potential partners who have the necessary manufacturing experience and scale to successfully partner with CAP-XX in the automotive market and for surface mount supercapacitors.

 

The major short term focus for CAP-XX will be to complete licensing of its automotive and surface mount technologies; complete the cost reduction program currently underway and to continue the development of the Company automotive products.

The Placing

The Company proposes to raise gross proceeds of £1.55 million (approximately £1.33 million net of estimated expenses) through the issue of the Placing Shares. The Placing Price represents a discount of approximately 13.8 per cent. to the closing mid-market price of 6.38 pence on 19 July 2013, being the latest practicable date prior to the publication of the Circular. The Placing Shares will represent approximately 24.6 per cent. of the Enlarged Share Capital immediately following Admission.

The Placing is conditional, inter alia, upon:

·        the Resolution being passed at the General Meeting;

·        the Placing Agreement becoming unconditional in all respects (save for Admission) and not being terminated in accordance with its terms prior to Admission occurring; and

·        Admission occurring by 8:00 a.m. BST on 30 August 2013 (or such later date as Cenkos Securities may agree not being later than 13 September 2013).

 

The Placing Shares will be issued credited as fully paid and will rank in full for all dividends and other distributions declared, made or paid in respect of the Ordinary Shares after the date of Admission and will otherwise rank pari passu in all respects with the Existing Ordinary Shares.  The Placing Agreement contains provisions entitling Cenkos to terminate the Placing Agreement at any time prior to Admission in certain circumstances. If this right is exercised the Placing will lapse.

 

Certain fees and commissions payable to Cenkos Securities in relation to its obligations under the Placing Agreement will be satisfied by the issue of 863,636 Ordinary Shares to Cenkos Securities at the Placing Price. These Ordinary Shares, which will form part of the Placing Shares, will be issued if the Placing is completed.

 

The Directors have agreed to subscribe for Placing Shares as follows:

 

Directors	Number of Placing Shares	No. of Shares held post transaction (% of enlarged share capital)
Patrick Elliott	945,455	1,745,455 (1.5%)
Bruce Grey	917,273	917,273 (0.8%)
Anthony Kongats	428,182	5,660,333 (4.9%)

 

Pursuant to the terms of his director's service agreement ("Service Agreement") with the Company Patrick Elliott is entitled to annual fees of £24,000.  He has agreed that his unpaid fees for the financial years 2012, 2013 and 2014 totalling £52,000 will be not paid in cash but, in lieu of cash, by Mr Elliott subscribing for 945,455 Placing Shares at the Placing Price.

 

Pursuant to the terms of his Service Agreement with the Company Bruce Grey is entitled to annual fees of £24,000.  He has agreed that his unpaid fees for the financial years 2013 and 2014 totalling £50,450 will be not paid in cash but by Mr Grey subscribing for 917,273 Placing Shares at the Placing Price, comprising 808,182 Placing Shares in lieu of cash and 109,091 Placing Shares as an additional cash investment.

 

Dealings

Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM.  It is expected that subject to passing the Resolution at the General Meeting and the Placing Agreement becoming unconditional in all respects (save for Admission) Admission will become effective, and dealings in the Placing Shares will commence, at 8:00 am BST on 30 August 2013.

Recommendation

The Directors consider that the Placing is in the best interests of the Company and the Shareholders as a whole.  The Directors unanimously recommend Shareholders to vote in favour of the Resolution to be proposed at the General Meeting as they intend to do so in respect of their own beneficial holdings amounting, in aggregate, to 6,032,151 Existing Ordinary Shares representing approximately 7.0 per cent of the Existing Ordinary Shares.

 

Expected timetable of principal events

 

This document posted to Shareholders	24 July 2013
Latest time and date for receipt of Forms of Instruction	10:00 am (BST) 23 August 2013
Latest time and date for receipt of Forms of Proxy	7 pm (AEST) on 27 August 2013
General Meeting	7 pm (AEST) on 29 August 2013
Admission and dealings in the Placing Shares expected to commence on AIM	8:00 am (BST) on 30 August 2013
CREST accounts credited in respect of the Placing Shares (CREST shareholders only)	30 August 2013
Share certificates despatched in respect of the Placing Shares	by 6 September 2013
(non-CREST shareholders only)