Interim Report January-March 2020
May 14, 2020
• The gas sensor platform extends to monitor NO2 levels in addition to air quality.
Outcome January – March
• Net sales amounted to kSEK 346 (5).
• Profit after net financial items amounted to kSEK -2 550 (-2 206).
• Basic and diluted earnings per share: SEK -0,26 (-0,31).
• Cash flow from operating activities and investing activities: kSEK -5 007 (-1 356).
Significant events January – March
• Insplorion sold an XNano instrument to Dr. Tim Craggs at the University of Sheffield, UK.
• As part of Insplorion’s previous funding strategy with ESGO, the Company has allotted warrants free of charge to the Company's shareholders to counteract dilution. The second subscription period to exchange warrants (TO1) for shares commenced on 22 January. The subscription period continued until 5 February 2020, providing the Company SEK 820 548 in proceeds. The number of shares increased by 71 352.
• Approval of battery sensor patent in Japan.
Significant events after the end of the period
• Insplorion's annual general meeting was held on April 16th where Anders Sandell was elected as a new member of the board and Ulla-Britt Fräjdin-Hellqvist was elected chairman of the board.
A word from the CEO
Overall, the work has progressed as planned during the quarter, some negative impact from the covid-19 pandemic notwithstanding.
A few customer processes within the instrument business have been delayed due to the covid-19 pandemic. Nevertheless, our ambition to grow the instrument business in 2020 persists. Some of the universities we have engaged in sales processes with were closed down during the second half of the quarter. As a result, administration and laboratory activities ground to a halt, thus making it difficult to complete the sales. The university shutdowns have, however, provided opportunities for more and deeper dialogue with the professors responsible for acquisitions, since they now have more time at hand to plan their future research.
In the air quality sensor business, work has generally progressed according to plan as well. Both the customer processes and the technology development adapting the sensor for specific applications have been able to continue. Single customer processes have been delayed when the customer has performed temporary lay-offs, but all indications are that the projects will resume later this year. Field testing with the sensor within the LoV-IoT project intensified in the beginning of the year with a planned ending during summer.
Hydrogen is on the rise in transportation as well as in industry as an alternative to fossil energy. In heavy vehicles, this was noticed in the recently published collaboration between AB Volvo and Daimler-Benz. The steel industry is working to replace coal with hydrogen in the Hybrit project, backed by SSAB, LKAB and Vattenfall. This development has resulted in a higher prioritization of the hydrogen sensor. We have during the first quarter, among others, initiated the project “Nano-plasmonic ultra-fast H2 sensor for a safe hydrogen economy”. In this project, we are cooperating with Chalmers and PowerCell; the hydrogen sensor chip from Chalmers will be integrated with Insplorion's sensor platform. In the next step, it will be adapted to the requirements of PowerCell for optimization of fuel cell technology. Our goal is to develop the fastest hydrogen sensor in the world, as rapid response time is the key feature: to warn about possible leakage fast. A demo product will be finalized during the fall to use as a tool in the interaction with future customers. The development of hydrogen fuel cells is in an expansion phase, which opens a valuable market for our technology – and in the project, we are able to take advantage of the previous development efforts related to Insplorion’s gas sensor platform. We find it stimulating that we can contribute with sensors in the transition to fossil-free energy, with increased safety related to hydrogen and to optimize and get the best out of batteries.
Within the battery sensor business, our operations are more strongly intertwined with the international market and thus more affected by the impact of covid-19. Some of our European partners have suffered shutdowns during the second half of the quarter. Previously planned customer meetings and seminars have been postponed or replaced by web meetings. All in all, the assessment is that our efficiency in the development work decreased during the first quarter in a number of sub-projects, due to the current limitations of our international partners, but in our view, we will be able to continue to find routes forward and keep our pace up even with the limitations that arise due to the covid-19 situation.
We continue to focus heavily on seeking soft future funding, applying for research grants and establishing cooperations with professional operators, all in a methodical and continuous manner. We will center on increasing our marketing activities in the near future, and this will gradually strengthen the financial basis of our operations.
Gothenburg, 14 May 2020
Patrik Dahlqvist, CEO
The Company's sales within the research instruments business area is characterized by few measuring instruments sold but at high prices per unit. The variation in sales can therefore be high from one quarter to the next, making it difficult to compare quarterly results. The Company’s aim is to grow the instrument business continuously, but sales usually depend on our customers’ availability of funding.
The performance is still negative as development costs have increased. Investments in marketing and customer adaptation in air quality, product development in battery sensor, and strengthening of the organization are the most important reasons for the higher costs, which are in line with plan.
Financial position and liquidity
Cash and cash equivalents amounted to kSEK 18 131 (5 828) as of 31 March. As previously disclosed, the Company will receive MSEK 2,1 from the Eurostar project during the year. In total, the Company will be provided MSEK 5 during the project’s 3 years. For the 3BeLiEVe project, MSEK 1,8 will be received during this year and in total, the company will receive SEK 4,9 million during the project's 2,5 years. These funds will be recognized as revenue as they are generated. At the end of the period, the Group's interest-bearing liabilities totaled kSEK 4 591 (4 813).
Cash flow for the period (1 January – 31 March) amounted to kSEK -4 205 (-1 097), of which cash flow from operating activities amounted to kSEK -3 578 (-458). This is mostly attributable to the negative operating result in the amount of kSEK 2 502, in combination with changes in working capital with a negative impact on cash flow of kSEK 1 118. During the period, the Group has invested kSEK 1,430 (897), mostly attributable to the capitalized development and investments in laboratory equipment. Financing activities contributed kSEK 802 (259) as a result of a new share issue.
Insplorion follows the developments relating to covid-19 closely. The personnel’s health and safety is being prioritized and Insplorion complies with all official instructions and guidelines. As of March 31st, the virus outbreak has had minor impact on the company’s business, with delays in instrument sales being the most prominent effect. However, the virus’ future impact on business and society is creating uncertainty and long-term effects are difficult to assess.
In research instruments, sales are expected to grow gradually as more and more customer processes reach the phase for internal or external funding. A a consequence of covid-19, it has been difficult to finalize sales during parts of the quarter. During 2020, the nitrogen dioxide sensor is projected to generate revenue as well. The Company intends to continue to seek grant funding at national and EU level for sub-projects characterized by higher degree of technical risk that are in line with the development plan. In addition, this is a way to build cooperations with industrial operators and to leverage the funding by shareholders.
Risks and uncertainties
The Group is considered to still be subject to the same risks and uncertainties that are detailed in the 2019 annual report.
The net sales of the parent company for the period 1 January – 31 March amounted to kSEK 761 (420), and the profit after net financial items amounted to kSEK -2,834 (-2,229). The parent company’s equity totaled MSEK 25,7, of which MSEK 2,3 restricted.
As of 31 March 2020, the number of shares totaled 9,852,557. The Annual General Meeting held on 16 April 2020 resolved to authorize the Board of Directors to carry out a directed share issue of no more than 20 percent of the Company's total number of shares outstanding at the time of the Board of Directors’s decision to utilize the authorization. If a new issue under the authorization is carried out without deviation from the shareholders' preferential rights, no such restrictions apply, and the issue of new shares is limited only by the stipulations regarding share capital and number of shares in the Articles of Association. Such share issues can be carried out in conjunction with business acquisitions or as a mean to fund future expansion.
The current warrant programmes are:
Incentive programme TO2018/2020: Pursuant to the AGM’s resolution on 17 April 2018, 120,000 subscription warrants were subscribed by senior executives and staff of the Company. Each warrant corresponds to 1.014 shares, and the number of warrants correspond to approximately 1.2 percent of the Company’s current number of shares. The subscription warrants are offered at market conditions in line with the valuation in accordance with Black & Schole's valuation method. Warrants shall be exercised during the period between 31 June 2019 and 31 December 2020 inclusive. The subscription price for shares subscribed with warrants is SEK 47.3 per share.
- Subscription warrants programme TO1 2018/2023: As part of the funding agreement established in 2018, the financier ESGO and existing shareholders were alloted subscription warrants free of charge. Each subscription warrant entitles the holder to purchase one Insplorion share at a subscription price of SEK 11.50 per share. Warrants for less than SEK 500,000 in total may be exercised at five occasions during the two-week periods that precede the dates 12, 24, 36, 48 and 60 months after the date of registration, which was 5 February 2018. In total, 392,604 warrants have been issued, corresponding to approximately 4.0 percent of the Company’s current number of shares. In February 2020, 71,352 warrants were converted into shares. The remaining number of warrants outstanding is thus 321,252.
Policies for the preparation of the interim report
This report was prepared in accordance with the Swedish Annual Accounts Act and pursuant to the general recommendations of the Swedish Accounting Standards board BFNAR 2012:1 Annual accounts and consolidated (K3). Intangible assets are recognized according to the capitalization model in the general recommendations.
This report has not been reviewed by the Company’s auditors.
Upcoming financial reports
2020-08-26 Half-yearly report 2020
2020-10-22 Interim report for the third quarter 2020
2021-02-23 Year-end report for the financial year 2020
Presentation of the interim report, Gothenburg, 14 May 2020
Insplorion AB (publ)
Board of Directors
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