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iQ Power Licensing AG publishes Annual Results 2016

  • Korean licensing partner is back to normal production operation, further expansion of production capacity
  • Revenue from license business more than doubled
  • First deliveries to automotive manufacturers (OEM) in Brazil
  • Earnings position from operating business improved by CHF 0.5 million
  • One-time accountable impairment loss in the rehabilitation phase of the Korean licensing partner

 

Zug, Switzerland, May 20, 2017 - iQ Power Licensing AG (ISIN: CH028536338, WKN: A14M1C, Symbol: iQL), the developer and marketer of technologies and their licenses for environmentally friendly and technologically leading starter batteries for motor vehicles, publishes the figures for the fiscal year 2016 and gives an overview of the current business situation.
 

Business Operations
In the year 2016, iQ Power Licensing AG continued its intensive collaboration with the new strategic partner Discover Energy Corporation (DEC) from Vancouver / Canada.

The strategic partner DEC intensified its commitment to the Korean licensing and production partner iQ Power Asia Inc. as well as to iQ Power Licensing AG through extensive financial investments in order to combine the iQ Power technology with the new DEC owned brand “Mixtech” for all major markets. In addition, Discover Energy Corporation made major investments in the expansion of the Korean plant and invested millions of dollars to stabilize and expand the production of the Korean factory. Discover Energy's commitment underscores the confidence of DEC in the future of iQ Power Licensing AG, its technology and the Korean factory, DEC is now the dominant shareholder in Korea and the largest single shareholder (18%) in iQ Power Licensing AG.

Great efforts and investments were made in 2016 to expand the product portfolio from nine battery models to 25 models. In addition to the new types of starter batteries, the Korean factory in 2016 focused on the introduction of a complete product line of commercial vehicle batteries for the North American market which will be launched in 2017. At present, the vast majority of batteries from the Korean license partner's production are sold in North America.

The year 2016 also marked the beginning of the production of the first batteries with iQ-Power technology for use by a major automobile manufacturer (OEM). Moura Baterias S.A. as the largest battery manufacturer on the South American continent, delivered the first batteries for OEM use. This was preceded by very long investment delays by automobile manufacturers in South America, caused by the economic and political crisis in Brazil.
 

Financial Results
Revenues from the operating business of iQ Power Licensing AG doubled in 2016 to CHF 0.63 million (2015: CHF 0.27 million). However, due to unforeseen production bottlenecks in the second half of 2016, IQPA was not able to keep pace with the rapidly growing orders. The increase in sales was therefore lower than originally expected. These bottlenecks were eliminated at the end of the second half of 2016 by corresponding investments in machinery and equipment.

The results from operations in 2016 showed an improvement of CHF 0.5 million compared to the previous year (2016: minus CHF 1.7 million versus 2015: minus CHF 2.2 million). The improvement is the result of higher revenues as well as lower costs for patents.

As already reported at the beginning of this year, the restructuring phase of the Korean licensing partner resulted in an dilution-related non-cash write-down of CHF 2.3 million (impairment loss) of the valuation of assets of the iQ Power Licensing AG in iQ Power Asia for the year 2016, which was necessary as part of the restructuring program. Details on this are explained in the company's annual report 2016. As a result, the total loss of the company for the year 2016 amounts to minus CHF 4.3 million (2015: minus CHF 2.5 million).

The equity of the company decreased from CHF 1.9 million to CHF 1.5 million at the end of the financial year. The decrease is primarily due to the accounting loss resulting from amortization of the asset values in iQ Power Asia Inc. as well as a lower than expected results from license revenues. The equity ratio remains satisfactory at 29% (2015: 38%). The liquidity of the company also remains satisfactory with a cash balance of CHF 0.9 million at the end of 2016.

The North American licensee began with a limited sales of batteries with iQ Power technology. However, the batteries were acquired by customers of Discover Energy in North America, which is why there is no additional license revenue from this limited business, since the revenues are included in the license payments from the Korean partner.
 

Outlook for 2017
Through intensive cooperation with the strategic partner Discover Energy and the establishment of a stable and efficient production as well as a growing sales of the Korean factory iQ Power Licensing AG has created a sustainable and rising sales base. The main focus of the activities in the first half of the year 2017 has been on the growth and stability of the licensee in Korea, as this is the fastest way to achieve rapid revenue growth. In addition to this, further activities are now being intensified during 2017 in order to tap additional new sources of income.

In January 2017, the first license fees were received from the Brazilian licensee. A moderate growth in these revenues is expected during the year. No significant revenue is expected by the licensee in North America for 2017.

Revenue from license revenues from the Korean licensing partner for 2017 will be significantly higher than in 2016, as the capacity of the plant continues to grow and expand. Management expects a positive operating cash flow in 2017. Overall, the management of iQ Power Licensing AG sees the developments in 2017 very positively.

 

About the iQ Power Technology
Batteries with iQ Power technology are designed to generate better performance in Start-Stop applications and to meet the growing demands of electronic usage in vehicles today. It is the first significant innovation to the flooded starter battery in decades. Automatic mixing of electrolyte inside the battery by passive mixing elements ensures uniform acid density for higher sustained performance throughout the entire life of the battery, thus avoiding early loss of capacity (Ah) as usual with ordinary batteries. This prolongs plate life by eliminating acid stratification and thermal gradients, delivering greater material utilization for a lower cost per cycle over conventional batteries. The patented technology was awarded the coveted Automechanika innovation award 1st prize in 2010 and und became a first prize winner of the GreenTec Awards in 2017. – More under: www.iqpower.com/en

 

Download Summary Consolidated Financial Statements 2016

Discover Energy Group increases share in iQ Power Licensing AG

  • The Discover Energy Group executes mandatory convertible bond of EUR 2.56 million in iQ Power Licensing AG
  • Discover Energy Group (DEG) converts the approved and reported mandatory convertible bond in the amount of EUR 2.56 million including interest on April 30, 2017.
  • Growing commitment of the Discover Energy Group increases their stake in iQ Power Licensing AG (IQPLAG) from around 7 percent to 18.5 percent
  • The increased shares owned by DEG also strengthens the equity base of IQPLAG

 

Zug, Switzerland, 07 April 2017 – iQ Power Licensing AG (ISIN: CH0268536338; WKN/Security Number: A14M1C; Symbol: IQL) a developer and marketer of technologies for environmentally friendly and technologically innovative starter batteries for motor vehicles and licenses in these technologies, announces a substantial strong commitment from its strategic partner Discover Energy towards iQ Power Licensing AG.

The Discover Energy Group (DEG), as a strategic partner and investor in iQ Power Licensing AG, has subscribed a mandatory convertible bond in the amount of EUR 2,552,500 approved and reported by the Board of Directors of iQ Power Licensing AG (IQPLAG) in mid-January this year. The subscription reiterates the strong commitment of the Discover Energy Group to iQ Power Licensing AG. As agreed, DEC will convert the subscribed bond on 30 April 2017. At the same time, the share of DEG in iQ Power Licensing AG increases from just under 7 percent to 18.5 percent.

In mid-January this year iQ Power Licensing AG reported on the application of the Discover Energy Group to the convertible bond as well as its approval by the Board of Directors. The terms are identical to those of the existing convertible bond with a conversion price of EUR 0.06 per share.

By subscribing the bond and its subsequent conversion, the Discover Energy Group not only significantly strengthens its commitment in iQ Power Licensing AG but at the same time enforces the equity base of the Swiss company.

Bob Sullivan, CEO of iQ Power Licensing AG, welcomes the increased commitment of the Discover Energy Group as a strategic partner. At the same time, Sullivan stressed that any other capital increase in 2017 is not planned.

 

About the iQ Power Technology

Batteries with iQ Power technology are designed to generate better performance in Start-Stop applications and to meet the growing demands of electronic usage in vehicles today. It is the first significant innovation to the flooded starter battery in decades. Automatic mixing of electrolyte inside the battery by passive mixing elements ensures uniform acid density for higher sustained performance throughout the entire life of the battery, thus avoiding early loss of capacity (Ah) as usual with ordinary batteries. This prolongs plate life by eliminating acid stratification and thermal gradients, delivering greater material utilization for a lower cost per cycle over conventional batteries. The patented technology was awarded the coveted Automechanika innovation award 1st prize in 2010. – More under: www.iqpower.com/en

iQ Power Licensing Status Report with New Events

  • First OEM vehicles equipped with battery technology of iQ Power Licensing
  • Significant step towards iQ Power Asia exiting Financial Restructuring ahead-of-schedule
  • Discover Energy Group subscribes to bond as prelude to share swap between IQPLAG and IQPA
  • First half results in line with expectations

Zug, Switzerland, 12 January 2017 – iQ Power Licensing AG (ISIN: CH0268536338; WKN/Security Number: A14M1C; Symbol: IQL) a developer and marketer of technologies for environmentally friendly and technologically innovative starter batteries for motor vehicles and licenses in these technologies, announces several important events of interest to investors.

 

Summary:
The first vehicles by an automotive manufacturer using a battery containing iQ Power technology, a premium class SUV and a pick-up truck, are now being produced in series in Brazil. The battery is an EFB type battery for extra-long cycle life, because the vehicle uses an engine with start-stop technology. Use of the iQ Power Technology more than doubles the cycle life as per test results at Licensee, Moura Baterias. Contractual obligations do not allow details such as manufacturer and model name to be publicized.

In South Korea, the Court has approved the application by Discover Energy Group (DEG), Canada, which will lead to DEG obtaining majority control of iQ Power Asia Inc. (IQPA), Gwangju, Rep. of Korea. It is anticipated that, following fulfillment of all requirements, the court will exit as administrator after only one year rather than the seven years earlier than planned.

The Board of Directors of iQ Power Licensing AG (IQPLAG) has approved a subscription by Discover Energy Group, Canada (DEG), to a mandatory convertible loan of iQPLAG equaling EUR 2,5 million. The terms of the bond are similar to the existing convertible bond, ISIN: DE000A1GXE20, with the exception that DEG is obligated to convert into shares of IQPLAG at a future time. Further, the Board of Directors of iQ Power Licensing AG (IQPLAG) has approved a subscription to a non-mandatory convertible loan to DEG equaling EUR 2,5 million. Following final negotiations regarding valuation, the loan may be converted into additional shares in IQPA or IQPA’s DEG controlled holding company. Due to the financial restructuring, the current shareholding of iQ Power Licensing AG (IQPLAG) has been greatly reduced through court mandated capital reductions for all shareholders.

The half-year results were in line with expectations but were negatively affected by some extraordinary expenses. The net revenue for the period was more than double the previous period, CHF 344k (vs. 1st 6 months of 2015: CHF 115k). The loss from on-going operations was around CHF 550k, which given the sales revenue and normal fixed costs, are as expected. The results for income after tax improved, with a loss of CHF 1.047k versus a loss after tax was CHF 1.377k in the 1st 6 months of 2015.

 

OEM Battery debut - Status
In Brazil the first vehicles are produced in series by an OEM using batteries with technology of iQ Power Licensing being incorporated. The products manufactured by Moura are EFB batteries (Enhanced Flooded Batteries) with integrated 360-degree electrolyte circulation, a patented technology of iQ Power Licensing AG. The new products are bound for automotive manufacturers (OEM) on the Brazilian market for the use of start-stop engines. The batteries` main characteristics is a high cycle stability.

Moura´s new start-stop EFB batteries with electrolyte mixing go into the top range of two new automobile models which have fuel saving start-stop function.

Moura´s start-stop batteries with mixing technology are targeted on the OEM market.

The goal of Moura is to offer automotive manufacturers (OEMs) on the South American continent robust flooded lead/acid batteries with high cycle performance as starter batteries for fuel-saving start-stop applications. Flooded batteries are regarded as particularly robust products. Combined with an integrated electrolyte circulation, flooded batteries are durable even at high ambient temperatures since the mixing technology of iQ Power Licensing avoids the typical acid stratification which occurs in conventional flooded batteries. Acid stratification causes not only lack in capacity (Ah) performance but also sulfation and premature internal corrosion influenced also by high ambient temperature. The advantage of the acid mixing device is a high cycle stability of the lead/acid battery.

Moura`s newly developed start-stop battery products combine the advantages of two technologies: the special EFB (Enhanced Flooded Battery) technology of Moura plus the electrolyte mixing of iQ Power Licensing using passive mixing elements inside the product. New regulatory requirements in Brazil with regards to lower CO2 emissions of new vehicles require fuel-saving measures such as start-stop engines by the automotive manufacturers also in Brazil. Here, EFB batteries with electrolyte mixing offer the OEM a cost-effective alternative to the more expensive, complex and temperature sensitive AGM batteries (Absorbent Glass Mat), especially for the Brazilian market of compact class vehicles and in the South Americas.

The privately held company Acumuladores Moura S.A. is the largest battery manufacturer in South America, with six large battery factories in Brazil and Argentina and producing over 7,5 million batteries per year. Moura has more than 70 commercial distribution centers and is the largest supplier to OEMs in South America, with a market share of more than 50% of the OEM market in South America. Customers of Moura include the world’s biggest auto manufacturers such as General Motors, Volkswagen, Ford, Iveco, and Fiat-Chrysler among others. Moura also produces batteries for mobile applications (traction), for marine purposes as well as for telecommunications and solar. The company has won many excellence awards.

 

IQ Power Asia Inc. – Status
In 2016, DEG funded many improvements at the factory, including additional equipment for the current production. The demand from North America has been very good and has required a more limited expansion in other markets, such as Europe and Asia. Limited amounts of batteries have been sourced from the Bangladesh factory for certain Asian customers. Further increases to production capacity of iQ Power Asia through a 2nd assembly line are now being intensively discussed.

Several new products are now being developed for release in Q2, 2017. These include high cycle batteries for the recreational vehicle market, new battery sizes for special markets such as Australia and later in 2017, a new line of super heavy duty, vibration resistant batteries for the construction industry and off-road heavy vehicles.

 

Exchange of Convertible Loans – Status
The exchange of loans between DEG and IQPLAG underscores DEG’s confidence in the technology of IQPLAG. At the same time, the exchange also shows the commitment of IQPLAG to support the key Licensee, DEG, and the newest member of the DEG Group, IQPA.

The conversion of the DEG loan into IQPLAG shares is anticipated for the first of half of 2017. The implicit share increase also was key to securing a solid balance sheet for IQPLAG for year-end 2016 following the reduction of the shareholding of IQPLAG in IQPA.

 

• Financial Results
The half-year results were in line with expectations but were negatively affected by some extraordinary expenses. The net revenue for the period was CHF 344k (vs. 1st 6 months of 2015: CHF 115k). The increase was due to the increased sales of the strategic licensee, DEG. The sales increased month-to-month during the first 6 months as customers were able to end previous purchase commitments in order to purchase from iQ Power Asia.

The net revenues are a combination of sales margin from the plastic mixing parts and license income. Since the cost of plastic material was deducted from the net revenue figure, the gross sales were higher. Due to contractual confidentiality commitments, the revenue per licensee may not be disclosed.

The loss after tax was reduced to CHF 1.047k versus a loss after tax was CHF 1.377k in the 1st 6 months of 2015. The loss from on-going operations was around CHF 550k, which given the sales revenue and normal fixed costs, are as expected. Due to several non-operational effects this loss was higher than would normally be anticipated. These negative profit events included a not anticipated expense of CHF 180k from a prior period due to currency loss. In addition, higher than anticipated patent costs, which can not be capitalized, caused a further one-time expense of over CHF 100k. Finally financial expenses net, mainly interest on the convertible bond, added CHF 122k to the losses.

The total assets of the company were largely unchanged at CHF 5,06 million. The equity as a percent of total assets remained largely unchanged at 35% (versus 30.Dec.2015: 38%). The cash balance of the company was adequate at CHF 358k.

 

About the iQ Power Technology
Batteries with iQ Power technology are designed to generate better performance in Start-Stop applications and to meet the growing demands of electronic usage in vehicles today, is the first significant innovation to the flooded starter battery in decades. Automatic mixing of electrolyte inside the battery ensures uniform acid density for higher sustained performance throughout the entire life of the battery. This prolongs plate life by eliminating acid stratification and thermal gradients, delivering greater material utilization for a lower cost per cycle over conventional batteries. The patented technology was awarded the coveted Automechanika innovation award 1st prize in 2010.

iQ Power Licensing: Renewal of existing Convertible Bond

  • Successful negotiation with major subscriber assures necessary majority of creditors for renewal of existing Convertile Bond
  • Renewal of the current bond for 5 years subject to creditor approval
  • CEO of iQ Power Licensing AG will invest EUR 100.000 in Convertible Bonds following renewal

Zug, Switzerland, 13 October 2016 – iQ Power Licensing AG (ISIN: CH0268536338; WKN/Security Number: A14M1C; Symbol: IQL) a developer and marketer of technologies for environmentally friendly and technologically innovative starter batteries for motor vehicles and licenses in these technologies, reports on the intention to renew the convertible bond ending 31.December.2016.

The renewal of the convertible bond will be for a further 5 years. The renewal will give the company further flexibility during the build up phase of license sales and relieve the company from the need of paying off the outstanding debt of EUR 1.2 million at the end of the year. With the renewal, no capital increase will be required for financing.

The CEO of iQ Power Licensing AG, Bob Sullivan, has decided to personally subscribe for 20 convertible bonds at EUR 5.000 per bond, totaling EUR 100.000, and thus showing his commitment to the company. The reason for the purchase was the excellent chance for long-term gains given the improving prospects for the company iQ Power Licensing AG after the reorganization of the Korean partner and licensee iQ Power Asia Inc.

The approval requires a 2/3 majority of current bondholders. A successful negotiation with the major institutional bondholder and other long-term bondholders should assure the passage of the company’s board resolution. The major institutional bondholder holds about 50% of the outstanding bonds. This bondholder required further concessions in order to agree. The major concession is that the company’s patents will be pledged as subordinate security for the bonds. The pledge is limited to the amount of the bonds and would only be triggered in case of default. Further, a small reduction in the strike price of 16% was agreed.

About the iQ Power Technology
Batteries with iQ Power technology are designed to generate better performance in Start-Stop applications and to meet the growing demands of electronic usage in vehicles today, is the first significant innovation to the flooded starter battery in decades. Automatic mixing of electrolyte inside the battery ensures uniform acid density for higher sustained performance throughout the entire life of the battery. This prolongs plate life by eliminating acid stratification and thermal gradients, delivering greater material utilization for a lower cost per cycle over conventional batteries. The patented technology was awarded the coveted Automechanika innovation award 1st prize in 2010.

Financial results for 2nd half 2015 and full year

  • License Income from operations doubled versus 1st half 2015
  • Losses reduced to CHF 1.1 million from CHF 1.4 million
  • Most losses due to one-time asset write-downs
  • Significantly improved Sales and Earnings for 2016 foreseen

Zug/Switzerland, 06.June 2016 – iQ Power Licensing AG (ISIN: CH00268536338; WKN/Security Number: A14M1C; Symbol: IQL) a developer and marketer of technologies for environmentally friendly and technologically innovative starter batteries for motor vehicles and licenses in these technologies, announces the results for the 2nd half of 2015 and full year 2015.

Financial Results 2015
Due to the new corporate structure, the financial reporting and accounting regulations have changed. This makes comparisons difficult for this year especially. Next year comparisons will then return to normal.

Revenues from operations improved in the second half of 2015 from CHF 0.1 million to CHF 0.2 million with a total of CHF 0.3 million for the full year 2015, as the Korean facility used up the old iQ parts inventories and began ordering the new iQP-2 parts. The amount for the 2nd half was reduced by  CHF 0,05 million due to the financial restructuring. For the year, sales decreased from CHF 1.0 million (2014) to only CHF 0.3 million in 2015, mainly due to the one-time license payment in 2014. However, sales revenue could have been much more but major customers held back sales awaiting the re-start in Korea. The delay was prolonged due to the lack of a full product program.

The loss in the second half of 2015 showed an improvement over the first half of 2015 from minus CHF 1.4 million to minus CHF 1.1 million. The operating loss was only CHF 0.5 million, which is in line with the low revenues recorded. One-time write-downs accounted for the additional CHF 0.6 million loss: Write-downs of 0.4 million were for receivables and valuation of assets in iQ Power Asia, which were necessary as part of the re-structuring program. An additional write-down of CHF 0.2 million was required by the financial accounting rules for the investment in the small stationary battery company (formerly iQ Industries).

As usual, normal operational costs were equally divided between engineering, reporting and listing costs, and administration. All significant risks were considered in the financial statements.

The equity capital decreased from CHF 2.5 million to CHF 1.9 million at the end of the year. This was due to the losses incurred during 2015. Due to the financial restructuring the investment and stake in iQ Power Asia was re-classified from shareholding (29,4%) to financial asset because of the formal legal loss of influence on the company during the rehabilitation process at iQ Power Asia. The equity ratio decreased from 48% to 38%. The liquidity of the company remains satisfactory, with cash on hand of CHF 0,2 million at the end of 2015.

Outlook for 2016
Sales for 2016 year-to-date are up significantly from income generated in Korea, with sales already exceeding total year 2015. As orders and capacity expands in Korea, management anticipates significantly stronger sales than in 2015. There are further developments that may also add to profitability. It is too early to make a firm profit forecast for 2016, however, barring major unforeseen events, a worst case/best case scenario would show operative profits anywhere from some hundred thousand CHF loss to a several hundred thousand CHF profit.

Management views the overall situation as very positive for 2016.