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CODEIFAI LIMITED Interim / Quarterly Report 2018
64630_rns_2018-04-30_e7aa0b46-7647-49a0-85a8-609f0fffb234.pdf
Interim / Quarterly Report
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PROTECT | DETECT | CONNECT
ASX/MEDIA ANNOUNCEMENT ASX: YPB | 30th April 2018
REVIEW OF Q1 2018 ACTIVITIES
- Temporary increase in operating cash consumption in Q1 to reverse in Q2
- Recurring revenue improving and costs stable
- Highly significant strategic developments in Q1 with Motif Micro, AliHealth, Australian Made, proposed Blockchain Token Sale Event
Brand Protection and Consumer Connection solutions company YPB Group Ltd (ASX: YPB) presents a summary of activities for the quarter ended 31 March 2018.
The quarter saw a temporary reversal of the prior quarterly trend of lower cash burn due to lower receipts and higher outflows. The lower receipts in Q1 2018 v. Q4 2017 were due to lumpy receipts in Q4 normalising. Higher operating outflows in Q1 were due to the tail end of predominantly staff related but non-recurring restructuring payouts, timing of supplier invoicing and elevated legal and accounting costs abnormally incurred. Net operating cash outflows are expected to show a solid improvement in the current quarter and exceed the prior trend of improvement. In short YPB is on track for our reduction in overheads previously reported.
The fall in Q1 2018 cash receipts of \$165k was due to the receipt of unusually lumpy receipts in Q4 2017 from several clients. Actual Q1 2018 invoicing, and hence reported revenue, (cf. cash receipts) was higher than Q4 and the 2017 full year average quarterly revenue of \$0.5m. In other words, the sales performance of the business improved in Q1 2018 and further improvement is expected in the current and subsequent quarters. Large new contracts did not close as expected in Q1 but are still on foot and valuable new clients are expected in the current quarter.
Gross operating costs increased \$650k in Q1 but this was temporary and will see a large reversal in the current quarter. Staff costs rose \$350k in Q1 2018 v. Q4 2017 due to final staff restructuring payouts and unusual timing on contractor payments. Legal costs were also elevated due to an unprecedented ASX application of Listing Rules leading to unusually heavy reliance on legal advice. Accounting and audit fees were in line with pcp but rose on Q4 2017 due to the preparation of the annual accounts. In future, accounting costs will trend down permanently with greater efficiency and significant savings from improved in-house capabilities.
Operating costs ex cogs remain 40% below the cost base as at start 2017, running at \$6.5m per annum following the large cost-out drive of 2017. Increased sales resource to drive revenues is being funded internally and at lower fixed cost via greater pay-for-performance. The cost of the business is smarter and more productive. Clearly, the cost base is set for a much higher revenue base and if clearly defined sales targets are not achieved will be aggressively reviewed again.
ypbsystems.com brandreporter.com
Lvl 29, 66 Goulburn St SYDNEY NSW 2000
Developments in Q1 2018
Highly significant corporate developments occurred in Q1:
- Motif Micro. In January 2018, the acquisition of the global rights to the Motif Micro technology developed at MIT was completed. Motif Micro is the most significant development in Anti-Counterfeit technology in a generation. Its key value lies in being able to offer unfakeable, forensic level Anti-Counterfeit protection that is smartphone readable. That is, it provides a low-cost, easily deployed solution for mass market application with the highest level of counterfeit protection. Directors are strongly of the view that the value-creation capacity of Motif Micro will more than offset the dilution of the equity issuance to fund the acquisition. There are numerous routes to monetising Motif Micro with solid interesting in licencing the technology the most significant near term opportunity.
-
- Proposed Blockchain Token Sale Event. Blockchain specialist, Enhanced Society, was appointed to explore the undertaking of a Token Sale Event (TSE) for YPB. While still under consideration, a successfully executed TSE would be highly value-creating for shareholders.
-
- AliHealth. In March 2018, YPB China was appointed the first commercial distribution partner for the serialisation and customer connection platform of AliHealth, a subsidiary of Alibaba Group. YPB has struggled with sales traction in China despite the enormous counterfeit issues there. The AliHealth relationship is expected to open previously closed doors and provide a clear path to strong revenue growth and profitability of YPB's China business. Broader opportunities with AliHealth are possible in future.
-
- Australian Made. In March 2018 an MOU was signed with the Australian Made Campaign to offer YPB's full PROTECT DETECT CONNECT product suite to Australian Made licensees. The collaboration has no fixed term and took immediate effect but will launch officially in May 2018. Under the agreement Australian Made commits to (amongst other things) recommend YPB's solutions to its 2700+ licensees. This relationship opens a significant opportunity for more rapid sales cycles to a broader market and to drive revenues of the Australian business.
Other comments on financial items
New equity of \$5.7m at \$0.035 per share was raised in the quarter.
Please note that the Appendix 4C includes "estimated cash outflows for next quarter" at item 9. Please be aware that this is a gross cash outflows forecast and should not be compared to the net cash flow figure in item 1 of the Appendix 4C. Q2 2018 gross cash outflow is likely to be clearly lower than Q! 2018. Net cash outflow should also clearly improve as cash receipts are also expected to be rise.
YPB Executive Chairman John Houston said: "The first fruits of our strenuous restructuring efforts appeared in the strategic achievements of 2018 but not yet the financials which do not reflect the current state of the business. We have more opportunity and more prospect of converting that to revenue and shareholder wealth than ever. We now have a lower, far more productive cost base and a sharper more talented team. The payoff from our efforts will accelerate as 2018 progresses."
ypbsystems.com brandreporter.com
Lvl 29, 66 Goulburn St SYDNEY NSW 2000
PROTECT DETECT CONNECT
For further information please contact;
Mr. John Houston Executive Chairman YPB Group Limited T: +61 458 701 088 E: [email protected] W: www.ypbsystems.com
Mr. Gerard Eakin Director YPB Group Limited T: +61 427 011 596 E: [email protected]
ABOUT YPB (ASX: YPB)
In a rapidly changing world, brands need to do more than make great products, they need to PROTECT their consumer by allowing them to verify that their purchase is real and as a result buy with confidence. This is a proven initiative to trigger the consumer to CONNECT with brands.
YPB provides real protection for quality brands with a focus on product authenticity. Simultaneously, we provide a gateway for brands to connect with their consumers and engender trust in authenticity by utilising the power of the smartphone.
In an evolving marketplace and with the rapid growth of cross border commerce, YPB leverages serialisation and patented authentication solutions so that insightful data can flow between brands and their consumers.
YPB is the obvious choice to PROTECT, DETECT and CONNECT.
ypbsystems.com brandreporter.com
Lvl 29, 66 Goulburn St SYDNEY NSW 2000
$+Rule 4.7B$
Appendix 4C
Quarterly report for entities subject to Listing Rule 4.7B
Name of entity
YPB Group Limited
ABN
Quarter ended ("current quarter")
68 108 649 421
March 2018
| Consolidated statement of cash flows | Current quarter \$A'000 |
Year to date (3 months) \$A'000 |
|
|---|---|---|---|
| 1. | Cash flows from operating activities | ||
| 1.1 | Receipts from customers | 547 | 547 |
| 1.2 | Payments for | ||
| (a) research and development | (120) | (120) | |
| (b) product manufacturing and operating costs |
(218) | (218) | |
| (c) advertising and marketing |
|||
| (d) leased assets |
(48) | (48) | |
| staff costs (e) |
(1, 424) | (1, 424) | |
| (f) administration and corporate costs |
(673) | (673) | |
| 1.3 | Dividends received (see note 3) | ||
| 1.4 | Interest received | 7 | $\overline{7}$ |
| 1.5 | Interest and other costs of finance paid | (33) | (33) |
| 1.6 | Income taxes paid | ||
| 1.7 | Government grants and tax incentives | 90 | 90 |
| 1.8 | Other (provide details if material) | 48 | 48 |
| 1.9 | Net cash from / (used in) operating activities |
(1824) | (1824) |
| 2. | Cash flows from investing activities | STATISTICS | |
|---|---|---|---|
| 2.1 | Payments to acquire: | ||
| property, plant and equipment (a) |
٠ | ||
| businesses (see item 10) (b) |
(1, 444) | (1, 444) | |
| investments $\left( c\right)$ |
٠ |
- See chapter 19 for defined terms
1 September 2016
Appendix 4C
Quarterly report for entities subject to Listing Rule 4.7B
| Consolidated statement of cash flows | Current quarter \$A'000 |
Year to date (3 months) \$A'000 |
|
|---|---|---|---|
| (d) intellectual property |
|||
| (e) other non-current assets |
$\overline{\phantom{a}}$ | ||
| 2.2 | Proceeds from disposal of: | ||
| (a) property, plant and equipment |
Ω | ||
| (b) businesses (see item 10) |
÷ | ||
| (c) investments |
|||
| (d) intellectual property |
÷. | $\equiv$ | |
| (e) other non-current assets |
٠ | ||
| 2.3 | Cash flows from loans to other entities | ||
| 2.4 | Dividends received (see note 3) | ||
| 2.5 | Other (provide details if material) | ||
| 2.6 | Net cash from / (used in) investing activities |
(1, 444) | (1, 444) |
| 3. | Cash flows from financing activities | ||
|---|---|---|---|
| 3.1 | Proceeds from issues of shares | 5,745 | 5,745 |
| 3.2 | Proceeds from issue of convertible notes | $\sim$ | |
| 3.3 | Proceeds from exercise of share options | $\overline{\phantom{a}}$ | |
| 3.4 | Transaction costs related to issues of shares, convertible notes or options |
(176) | (176) |
| 3.5 | Proceeds from borrowings | ||
| 3.6 | Repayment of borrowings | (1,205) | (1,205) |
| 3.7 | Transaction costs related to loans and borrowings |
||
| 3.8 | Dividends paid | ||
| 3.9 | Other (provide details if material) | ||
| 3.10 | Net cash from / (used in) financing activities |
4,364 | 4,364 |
| 4. | Net increase / (decrease) in cash and cash equivalents for the period |
||
|---|---|---|---|
| 4.1 | Cash and cash equivalents at beginning of quarter/year to date |
860 | 860 |
| 4.2 | Net cash from / (used in) operating activities (item 1.9 above) |
(1,824) | (1,824) |
| 4.3 | Net cash from / (used in) investing activities (item 2.6 above) |
(1, 444) | (1, 444) |
| 4.4 | Net cash from / (used in) financing activities (item 3.10 above) |
4,364 | 4,364 |
- See chapter 19 for defined terms
1 September 2016
Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B
| Consolidated statement of cash flows | Current quarter \$A'000 |
Year to date (3 months) \$A'000 |
|
|---|---|---|---|
| 4.5 | Effect of movement in exchange rates on cash held |
20 | (20) |
| 4.6 | Cash and cash equivalents at end of quarter |
1,976 | 1,976 |
| 5. | Reconciliation of cash and cash equivalents at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts |
Current quarter \$A'000 |
Previous quarter \$A'000 |
|---|---|---|---|
| 5.1 | Bank balances | 1,976 | 859 |
| 5.2 | Call deposits | ||
| 5.3 | Bank overdrafts | ||
| 5.4 | Other (provide details) | ||
| 5.5 | Cash and cash equivalents at end of quarter (should equal item 4.6 above) |
1,976 | 859 |
| 6. | Payments to directors of the entity and their associates | Current quarter \$A'000 |
|---|---|---|
| 6.1 | Aggregate amount of payments to these parties included in item 1.2 | 210 |
| 6.2 | Aggregate amount of cash flow from loans to these parties included in item 2.3 |
6.3 Include below any explanation necessary to understand the transactions included in items $6.1$ and $6.2$
| ۴, | |
|---|---|
| × |
| 7. | Payments to related entities of the entity and their associates |
|---|---|
| 7.1 | Aggregate amount of payments to these parties included in item 1.2 |
| Current quarter \$A'000 |
||
|---|---|---|
- $7.2$ Aggregate amount of cash flow from loans to these parties included in item 2.3
- Include below any explanation necessary to understand the transactions included in $7.3$ items 7.1 and 7.2
$N/A$
| 8. | Financing facilities available |
|---|---|
| Add notes as necessary for an | |
| understanding of the position |
- $8.1$ Loan facilities
- 8.2 Credit standby arrangements
- 8.3 Other (please specify)
| Total facility amount at quarter end \$A'000 |
Amount drawn at quarter end \$A'000 |
|---|---|
Include below a description of each facility above, including the lender, interest rate and $8.4$ whether it is secured or unsecured. If any additional facilities have been entered into or are proposed to be entered into after quarter end, include details of those facilities as well.
$N/A$
| 9. | Estimated cash outflows for next quarter | \$A'000 |
|---|---|---|
| 9.1 | Research and development | (20) |
| 9.2 | Product manufacturing and operating costs | (200) |
| 9.3 | Advertising and marketing | (20) |
| 9.4 | Leased assets | (40) |
| 9.5 | Staff costs | (1000) |
| 9.6 | Administration and corporate costs | (480) |
| 9.7 | Other (provide details if material) | |
| 9.8 | Total estimated cash outflows | (1,760) |
| 10. | Acquisitions and disposals of business entities (items $2.1(b)$ and $2.2(b)$ above) |
Acquisitions | Disposals |
|---|---|---|---|
| 10.1 | Name of entity | ||
| 10.2 | Place of incorporation or registration |
||
| 10.3 | Consideration for acquisition or disposal |
||
| 10.4 | Total net assets | ||
| 10.5 | Nature of business |
Compliance statement
- This statement has been prepared in accordance with accounting standards and policies which $\mathbf{1}$ comply with Listing Rule 19.11A.
- $\overline{2}$ This statement gives article and fair view of the matters disclosed.
Sign here: (Company Secretary)
Date: 30 April 2018.
Print name: Robert Whitton...
Notes
- The quarterly report provides a basis for informing the market how the entity's activities have been $1.$ financed for the past quarter and the effect on its cash position. An entity that wishes to disclose additional information is encouraged to do so, in a note or notes included in or attached to this report.
- $2.$ If this quarterly report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 107: Statement of Cash Flows apply to this report. If this quarterly report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standard applies to this report.
- Dividends received may be classified either as cash flows from operating activities or cash flows 3. from investing activities, depending on the accounting policy of the entity.