Interim report January-September 2020
October 22, 2020
• Insplorion's hydrogen sensor was a finalist for Shell’s “New Energy Challenge 2020”.
• The Company strengthens its organization with Jonas Ehinger as new Chairman.
Outcome July to September
• Net sales amounted to kSEK 508 (733).
• Profit after net financial items amounted to kSEK -2 517 (-2 084).
• Basic and diluted earnings per share: SEK -0,26 (-0,21).
• Cash flow from operating activities and investing activities: kSEK -3 774 (-2 763).
Significant events July – September
• Insplorion initiate feasibility study of battery sensor with global sensor technology company.
• An Extraordinary General Meeting was held on September 30, where Jonas Ehinger was elected new Chairman of the Board and Gunilla Almgren resigned from the Board.
Significant events after the end of the period
• No significant events to report.
A word from the CEO
Insplorion’s development of the fastest hydrogen sensor in the world, partly in cooperation with Chalmers University of Technology and PowerCell, has received global attention during the third quarter of the year. The hydrogen sensor may become an essential enabling component in the quickly growing market related to hydrogen-based energy systems. We are reassured to note the interest in our work from the wider world. During the quarter, development has progressed according to plan. We have in a short period of time moved out of academic research to approach the commercial phase. A telltale sign is that we have reached the finals in Shell’s “New Energy Challenge 2020”, where we are participating with the hydrogen sensor. Out of a total of 160 different international companies, Insplorion was in September selected as one of five companies that will further their projects within the competition. The challenge is jointly organized by Shell, Rockstart, YES!Delft and Get in the Ring, and is designed for entrepreneurial companies in Europe and Israel that develop advanced technologies and disruptive solutions that could be vital in accelerating the transition from fossile-based to renewable energy. Hydrogen is an effective energy carrier, with potential to accelerate the energy transition in an efficient manner. Our hydrogen sensor is receiving attention because it is the world’s fastest and hence has the potential to enhance the safety of the entire hydrogen chain – from production to storage, refueling and use, in stationary as well as vehicle applications.
The research instruments business area remains impacted by the ongoing pandemic. Due to COVID-19, a significant proportion of universities were shut down, which rendered it difficult to conduct the necessary demonstrations that are key in the early stages of the sales process. Fortunately enough, we have noted several indications that markets are reopening. During the latter part of the quarter, we have been able to conduct physical meetings with promising prospective customers, and the trend is that we gradually create more and more business opportunities.
The air quality and battery sensor businesses have seen less impact of COVID-19, and operations can be described as “business as usual”. Development work is proceeding as planned, as are marketing activities. During the third quarter, there has been a growing interest in the use of our air quality sensor in partially enclosed spaces where nitrogen dioxide could be a problem, such as parking garages, mines and tunnels. As regards the battery sensor, one of the main activities is a feasibility study for a global sensor company. Our sensor will provide the sensor company’s battery management system with a better control signal, thus improving the performance and lifespan of the battery package significantly.
Insplorion’s extraordinary general meeting on September 30 resolved to elect Jonas Ehinger as new member as well as Chairman of the Board of Directors. Jonas has more than 20 years of experience as CEO, with a focus on commercialization and growth, from several innovative, technology-based and international companies. He holds a M.Sc. from Gothenburg University. Since 2010, Jonas is the CEO of Osstell AB, a global company in diagnostic products for the dental implant market. He is also the Chairman of the Board of Gapwawes, a technology company listed on First North Growth. All in all, Jonas will contribute valuable skills and experience relating to the business development of technology-oriented companies as well as the commercial reality that Insplorion faces in niche market areas.
Gothenburg, October 22, 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. Covid-19 has had negative effect on instrument sales during the first half of the year, see also note below. 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 15 288 (25 144) as of 30 September. 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 4 542 (4 703).
Cash flow for the period (1 July – 30 September) amounted to kSEK -3 824 (-3 519), of which cash flow from operating activities amounted to kSEK -2 813 (-2 082). This is mostly attributable to the negative operating result in the amount of kSEK 2 455, combined with changes in working capital of kSEK -388. During the period, the Group has invested kSEK 961 (681), mostly attributable to the capitalized development and investments in laboratory equipment. Financing activities contributed kSEK -50 (-755).
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 June 30th, 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. As 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 cooperation’s 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 July – 30 September amounted to kSEK 928 (1 153), and the profit after net financial items amounted to kSEK -2 698 (-2 304). The parent company’s equity totaled MSEK 19,6, of which MSEK 2,4 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 allotted 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 been reviewed by the Company’s auditors.
Upcoming financial reports
2021-02-23 Year-end report for the financial year 2020
Presentation of the interim report, Gothenburg, October 22, 2020.
Insplorion AB (publ)
Board of Directors
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