06 - CAP-XX
Transcript of 06 - CAP-XX
CAP-XX Limited is a world leader in the design and manufacture of revolutionary thin-form supercapacitors predominately for use in small portable electronic devices. Supercapacitors can considerably extend battery run-times and provide power-hungry functions that are not possible with current battery technology. The photograph shows part of the automated production process in Sydney, Australia
CAP-XX LimitedABN 47 050 845 291
Units 9 & 10, Ph +61 2 9420 0690 12 Mars Road Fax +61 2 9420 0692 Lane Cove NSW 2066 email [email protected] www.cap-xx.com
06 A N N U A L R E P O R T 2 0 0 6
CAP-XX Limited is a world
leader in the design and
manufacture of revolutionary
thin-form supercapacitors
predominately for use in small
portable electronic devices.
Supercapacitors can
considerably extend battery
run-times and provide
power-hungry functions that
are not possible with current
battery technology.
CAP-XX LimitedABN 47 050 845 291
Units 9 & 10, Ph +61 2 9420 0690 12 Mars Road Fax +61 2 9420 0692 Lane Cove NSW 2066 email [email protected] www.cap-xx.com
CAP-XX LimitedABN 47 050 845 291
Units 9 & 10, Ph +61 2 9420 0690 12 Mars Road Fax +61 2 9420 0692 Lane Cove NSW 2066 email [email protected] www.cap-xx.com
�CAP-XX LIMITED ANNUAL REPORT 200606
Contents Page
Corporatedirectory 2
Chairman’sstatement 4
Businessreview 5
Directors’report 8
Independencedeclaration 15
Corporategovernancestatement 16
Financialstatements 18
Directors’declaration 61
Independentauditreporttothemembers 62
2 CAP-XX LIMITED ANNUAL REPORT 2006 06
Directors MichaelQuinnChairman
AnthonyKongatsManagingDirector
GrahamTitcombe
JohnMurray
ChristerHarkonen
Secretaries RobertBuckingham
ChrisCampbellChiefFinancialOfficer
Notice of annual general meeting TheannualgeneralmeetingofCAP-XXLimitedwill be held attheofficesof:
Faegre&BensonLLP7PilgrimStreetLondonEC4V6LBUnitedKingdom
time:9.30am 16November2006
Aformalnoticeofmeetingisenclosed.
Registered office Level3 685PittwaterRoad DeeWhyNSW2099 Australia
Principal place of business Units9and1012MarsRoadLaneCoveNSW2066Australia
Registrars to shares ComputershareInvestorServicesPtyLtdYarraFalls452JohnstonStreetAbbotsfordVIC3067Australia
Corporate DireCtory
�CAP-XX LIMITED ANNUAL REPORT 200606
Registrars to depositary interests ComputershareInvestorServicesplcThePavilionsBridgwaterRoadBristolBS997NHUnitedKingdom
Nominated adviser and broker to the Company CollinsStewartLimited9thFloor88WoodStreetLondonEC2V7QRUnitedKingdom
Auditor PricewaterhouseCoopers201SussexStreetSydneyNSW1171Australia
Solicitors to the Company as to Australian law DibbsAbbotStillmanLevel9,AngelPlace123PittStreetSydneyNSW2000Australia
Solicitors to the Company as to English law Faegre&BensonLLP7PilgrimStreetLondonEC4V6LBUnitedKingdom
Bankers CommonwealthBankofAustralia120PittStreetSydney,NSW2000Australia
Stock exchange listings SharesarelistedasDepositaryInterestsonAIM,amarketregulatedbyLondonStockExchangeplcunderthecodeCPX
Website address www.cap-xx.com
Corporate DireCtorycontinued
� CAP-XX LIMITED ANNUAL REPORT 2006 06
Iampleasedtoreport,inthefirstsetoffullyearresultssinceitsadmissiontotradingonAIMon20April2006,thatCAP-XXLimited(theCompany)anditscontrolledentities(togethertheGroup)hasperformedaheadoftheprioryearandinlinewithourexpectations.
Revenueforthe12monthsto30June2006increased16.2%toAUD$2.6million(2005:AUD$2.2million),withsalesgrowthforthequarterended30June2006aheadbymorethan40%overthepreviousquarter.
Ouroverallresultforthetwelvemonthsto30June2006wasalossofAUD$10.3million(2005lossofAUD$11.7million).TheoperatinglossfromtradingoperationswasAUD$9.7million(2005lossAUD$10.9million)withnegativeEBITDAofAUD$6.0million(2005negativeAUD$7.0million).
CAP-XXhasastrongbalancesheetwithAUD$20.1millioncashandnodebt.InApril,2006theCompanyraisedAUD$37.5million(netoflistingcosts)throughthesuccessfulfloatationoftheCompanyontheAlternateInvestmentMarket(AIM),apartoftheLondonStockExchange.AUD$16.7millionofthefloatproceedswasusedtoretiredebt,resultinginAUD$20.1millioncashinbankandnootherfinancialdebtontheBalanceSheetat30June,2006.
Companyexecutiveshavecontinueddiscussionsaimedatsecuringbusinesswithanumberofglobaloriginalequipmentmanufacturersactiveinmobilephoneandportableconsumerelectronics.Naturally,astheopportunitiesareconsiderablylargerthantheCompany’spreviousexperiencetheleadtimefromfirstdiscussionsthroughtoinitialdesignwinscanbemanymonthsbutweareoptimisticwiththecurrentoutlook.
Wehavemetfinancialexpectationswhilstmakingsignificantinvestmentsinpeople,andaddressinginfrastructureandprocessestoensurethecreationoflongtermshareholdervalue.Inparticular,wehavebolsteredtheCompany’ssalesandmarketingcapabilityandenhancedtheCompany’sresearchandproductdevelopmentfunction.Asisusuallythecasewithearlystagecompanies,salesandmarketingspendwillremainhighrelativetorevenuesforthisfinancialyearasCAP-XXestablishesitscustomerbase.
AsCAP-XXishighlydependentonitsuniqueintellectualpropertytoestablishitselfinthemarketandgeneratehighreturns,theCompanywillbeexpendingmoreonresearchanddevelopmenttomaintainandenhanceitsposition.Wehavemajorprogramsinplacewithobjectivesthatincludeimprovingthemanufacturingprocessforhighervolumemanufacturing,thedevelopmentofsmallerdevicesandcostreduction.
TheCompanyadvanceditscontractmanufacturingstrategywiththeobjectiveofbeinginapositiontomeetplannedmanufacturinggrowth.OurexistingcontractmanufacturercontinuestorampuptheirproductionvolumesandexpandoverallcapacityattheirfacilityinPenang,Malaysia.Weareverypleasedwiththeircommitmentandco-operation.
TheinitialpublicofferingrequiredasubstantialrestructuringoftheCompanytomaximisefutureshareholdervalueandwasaccomplishedwithenormousenthusiasmandenergybystaff.Thefinancialteamhandledthecorporaterestructureandfloatationexpeditiouslyagainsttighttimelinesandthesales,production,anddevelopmentteamsdidanoutstandingjobofmaintainingtheiroperationsaswellashelpingthefinancialteamwhererequired.Weareallgratefulfortheircommitmentandgoodhumourunderpressure.
TheCompanyhascommencedthenewfinancialyearwithafirmorderbookfromexistingcustomersandwecontinuetoseeagoodflowofnewprospectsandopportunitiesacrossallourtargetmarketscoveringwireless,consumerandcommercialapplications.WhilstthisflowremainsstrongacrossNorthAmericaandAsia,weareparticularlyexcitedaboutanumberofnewprospectsandopportunitiesemergingfromEurope.
CAP-XXiswellplacedtobenefitsubstantiallyfromtheincreasingenergymanagementdemandsofportableelectronicdevicesandwelookforwardtoayearofgoodprogress.
MichaelQuinnChairman
5October2006
Chairman’s statement
�CAP-XX LIMITED ANNUAL REPORT 200606
About CAP-XX LimitedCAP-XXLimitedisaworldleaderinthedesignandmanufactureofrevolutionarythin-formsupercapacitorspredominatelyforuseinsmallportableelectronicdevices.Supercapacitorscanconsiderablyextendbatteryrun-timesandprovidepower-hungryfunctionsthatarenotpossiblewithcurrentbatterytechnology.
CAP-XXsupercapacitorshaveacompact,thin-formdesignandtheycanstorehighervolumesofenergyandoutputhigherpowerlevelsthancompetingsupercapacitorproducts.Theseattributesarecriticalforcurrentandfuturegenerationelectronicdevices,suchasmobilephonecameraswithaqualityflashphotographycapability.Otherpotentialapplicationsincludedigitalstillcameras,MP3players,portabledrugdeliverysystems,wirelesssensors,uninterruptedpowersupplies,tolltagsandlocationtrackingdevices.TheCompanybelievesthatfuelcellswillhaveaparttoplayinthesolutiontobatterylimitationsandbelievesthatthisalsooffersanothersignificantopportunitytoCAP-XX.
Portabledevicesareafast-growingsegmentoftheelectronicsmarket.In2004,approximately900millionportableelectronicdevicesweresold,includingover600millionmobilephones,approximately50millionlaptops,andtoys,digitalcamerasandMP3players.Manyofthesedevicescouldbenefitfromsupercapacitors.
In2005-2006CAP-XXsuppliedsupercapacitorstoanumberofbluechipconsumerelectronicscompaniesforuseincurrentgenerationwirelessdevicessuchasruggedisedPDAs(personaldigitalassistants)andPCMCIA(personalcomputermemorycardinternationalassociation)cards.CAP-XXisnowfocussingonthecameraphonemarketandisindiscussionswithleadingmobilephonemanufacturers.
CAP-XXisincorporatedinAustraliaandhasitsheadquartersandresearchanddevelopmentandmanufacturingfacilitiesinSydney,Australiaemploying48staff.ThesefacilitieshaveISO9000status.AsimilarbutlargermanufacturingfacilityisoperatedinMalaysiabyPolarTwinAdvanceSdnBhdunderamanufacturingagreementwithCAP-XX.
Historical MilestonesIn1994,acompanyassociatedwithAnthonyKongats,nowManagingDirectorofCAP-XXLimited,enteredintoanagreementwithCSIRO(theAustralianCommonwealthScientificandIndustrialResearchOrganisation)toresearchandcommercialisesupercapacitortechnologythathadresultedfromCSIROresearch.
CAP-XXLimited(formerlyknownasEnergyStorageSystemsPtyLimited)wasestablishedin1996byAnthonyKongatsasthevehicletoholdtheintellectualpropertyresultingfromthepartnershipwithCSIRO.CAP-XXreceivedresearchanddevelopmentgrantsfromtheAustralianGovernmentandwasbackedbysomeoftheworld'sleadingtechnologyinvestors,includingIntel,Acer,ABNAmroandWaldenandwellsupportedbyAustralianbasedventurecapitalistsInnovationCapitalandTechnologyVenturePartners.
TheCompanybuiltapilotproductionplantin1999inLaneCove,Sydney,Australia,andprogressivelyimprovedproductioncapacity.Itbeganshippingsupercapacitorproductstocustomersin2003.CustomerssuppliedtodateincludeSony,SonyEricsson,IPWireless,Option,SierraWireless,Flextronics,andproductshippedtoSymbolTechnologiesandHandHeldProductshasbeenincorporatedinfield-criticaldevicesusedbyleadingparceldeliverycompaniessuchasFedExandUPS.
Inlate2004thecompanyenteredintoamanufacturingagreementwithPolarTwinAdvanceSdnBhd(“PTA”)ofMalaysiatoprovidehighvolumemanufacturingservices.TheproductionflowprocessdevelopedinSydneyhasbeensuccessfullyreplicatedinMalaysiaandPTAisintheprocessofexpandingitsproductioncapacity.
Business review
6 CAP-XX LIMITED ANNUAL REPORT 2006 06
CAP-XXwasnameda2005TechnologyPioneerbytheWorldEconomicForumindevelopingandapplyinginnovativeandtransformationaltechnology.
InFebruary2006theCAP-XXtechnologywasrecognisedbyFrost&Sullivan's2005TechnologyInnovationoftheYearAwardasa‘breakthroughnanotechnologyprocessforproducingsupercapacitorstomeetthepulse-powerrequirementsofportabledevices’.TheAwardrecognisesresearchexpectedtomakesignificantcontributionstotheelectronicsindustry.
Review of Operations and Activities TheCompanyhascontinuedtogrowitsrevenueyearonyearsinceitsfirstshipmentsin2003withrevenueforthe12monthsto30June2006increasingby16.2%toAUD$2.6million(2005:AUD$2.2million).Theoverallresultforthetwelvemonthsto30June2006wasalossofAUD$10.3million(2005lossofAUD$11.7million).
InJanuary2006thecompanystatuswaschangedfromaproprietarycompanylimitedbysharestoapubliccompanylimitedbyshares.On5April2006theCompanydemergedfromitsformerparentCAP-XXInc,acompanyincorporatedintheUSAandthenamewaschangedfromEnergyStorageSystemsLimitedtoCAP-XXLimited.
On20April2006CAP-XXLimitedwaslistedontheAIMmarketoftheLondonStockExchangeinconjunctionwithaplacementof18,433,333sharesat93pencepersharewhichraisedgrossproceedsofAUD$41million(£17.1million)andincreasedthetotalshareholdingto48,565,893shares
andmarketcapitalisation(at93ppershare)toaboutAUD$108million(£45.2million).
Thefundsraisedwereusedtopayexistingdebtleavingthecompanyfreeoffinancialdebtasof30June2006andwithcashassetsofAUD$20.1milliontofundfutureoperations.
Business EnvironmentPortabledevicesareoneofthefastestgrowingsegmentsoftheelectronicsmarketandprovidesthegreatestopportunitiesforCAP-XX'sproducts.
In2004,approximately900millionportableelectronicdevicesweresold,includingover600millionmobilephones,approximately50millionlaptops,andtoys,digitalcamerasandMP3players.Thenumberandtypesofportableelectronicdevicesareexpectedtocontinuetoexpandrapidly.Almostallofthesedevicescouldbenefitfromsupercapacitorstoincreasebatteryruntimeandprovidenewfunctionsthatrequirehigherpowerlevelsthatarenotpossiblewithexistingbatterytechnology.
CAP-XXtechnologyprovidesacompetitiveadvantageoverothersupercapacitormanufacturers,whichincludeAVX,MaxwellTechnologiesandNEC/TokinCorporation.OthermanufacturersareunabletomatchtheCAP-XXtechnologyforthinness,energydensityandpowerdensity.Manycompetitorsmanufacturehigher-capacity,largepackagedevicesandfocusonapplicationswherethecombinationofthinness,energydensityandpowerdensityisnotanissue.
CAP-XX'sproductsarealreadyanestablishedtechnologyforcurrentgenerationwirelessdevices,suchasruggedisedPDAsandPCMCIAcards.
OpportunitiesTherapidlygrowingcameraphonemarketisanareaofopportunityasmobilehandsetprovidersseektoprovideincreasinglypowerhungryapplications,suchasqualitycameraflashphotography.Atpresentthereisawideninggapbetweenthepowertheseapplicationsrequireandthepowercurrentbatterytechnologycanprovide.
CAP-XXisideallyplacedtoprovideanimmediatesolutiontotheissueofpowerinmobiledevicesandisindiscussionswithleadingmobilephonehandsetmanufacturersforthecommercialdeploymentofitstechnologyforcamera-phoneflashapplications.Thisincludesinteractionswithinternationalintegratedcircuit(IC)companiesthataredevelopingnewchipstoworkwithsupercapacitorproductstoprovidethepowerrequired.
Business reviewcontinued
�CAP-XX LIMITED ANNUAL REPORT 200606
Otherpotentialapplicationsincludedigitalstillcameras,MP3players,portabledrugdeliverysystems,wirelesssensors,uninterruptedpowersupplies,tolltagsandlocationtrackingdevices.TheCompanybelievesthatfuelcellswillhaveaparttoplayinthesolutiontobatterylimitationsandbelievesthatthisalsooffersanothersignificantopportunitytoCAP-XX.
Leadingplayersinthemobiledeviceindustryarecurrentlyattemptingtoredesignthepowerarchitectureoftheirdevicesbasedonbatterieswithhigherenergydensities.Thekeyaimwiththesebatterieswillbetoincreaseruntimebutasideeffectofthisbenefitwillbeadifferentvoltagedischargecurve,whichtheCompanybelieveswillrequiretheinclusionofsupercapacitorsforbuffering.
CAP-XXhasidentifiedpossibleresistancebyapplicationsdesignersandengineerstoacceptinganewtechnologytobeapotentialbarriertoentrytonewmarketsandhasplacedastrongfocusonprovidingsamplekits,andengineeringanddesignsupportservicestoapplicationdeveloperstofacilitateconsiderationandacceptanceofCAP-XXproducts.
Strategies for GrowthTheCompanycontinuestohavediscussionsaimedatsecuringbusinesswithanumberofglobaloriginalequipmentmanufacturersactiveinmobilephoneandportableconsumerelectronics.
CAP-XXhasanexperiencedtechnicalsalesteamandsalesofficesinTaipei,TaiwanandinSouthCarolina,USAandisintheprocessofestablishingasalesofficeinEurope.Mostsalestodatehavebeenachievedbydirectsalesandthecompanyplanstomaintaindirectsalescontactswithkeycustomers.Togainbroadermarketcoverage,theCompanyhasenteredintodistributionagreementswithanumberofwell-qualifieddistributorscoveringAsia(inclusiveofJapan,SouthKoreaandChina)andEurope.
CAP-XXundertakesselectedmarketingcampaigns,attendstradeshowsandhasawebsite,www.cap-xx.com.Inaddition,CAP-XXstronglysupportselectronicsystemdesignersbyprovidingengineeringanddesignservicesforselectionandapplicationofsupercapacitors,evaluationsamplekitsforexperimentationanddevelopmentwork,andapplicationbriefsandnotesincludingexamples.
Research and DevelopmentCAP-XXhasaresearchfacilityatitsheadquartersinLaneCove,Australiawherearesearchanddevelopmentteamcomprisedof
11engineersandscientistsiscontinuingdevelopmentworktomaintainCAP-XX’sleadpositionintheengineeringofelectrode,separatorandelectrolytematerialinsupercapacitordevices.
OutlookThemarketinwhichtheCompanyoperatesiscompetitiveandischaracterisedbyrapidtechnologicalchange.Thereareanumberofothersupercapacitormanufacturersthatmaybeabletooffernewtechnologiesandproductsatlowerprices,orsuperiorperformancelevelsorwithgreatermarketacceptance,thatwouldcompetewithCAP-XXsupercapacitors.TheCompanybelievesthatitcurrentlyhasastrongcompetitivepositioninallitstargetmarketscoveringwireless,consumerandcommercialapplicationswithitscapabilitytoproducesupercapacitorswithahighenergydensityandpowerdensityinasmallconvenientlysizedflatpackage.Furthermore,theCAP-XXdevicesarelightweight,workoverabroadtemperaturerangeandhaveanoperatinglifetimemeasuredinyears.
TheCompany’ssuccessdependsonitsabilitytoprotectitsintellectualpropertyandtoavoidanyinfringementsofothers’intellectualproperty.CAP-XXhassoughttoprotectitsintellectualpropertyandhasconsiderableintellectualpropertyembodiedinpatentscoveringthedesign,manufactureanduseofitshighperformancesupercapacitors.TheCAP-XXpatentportfoliocurrentlyconsistsof19patentfamilies,9grantedUSpatents,13USpatentapplicationsandcorrespondinginternationalpatentsandapplications.Thepatentscoversupercapacitivedevices,techniquesformanufacturingdevicesandapplicationsofthedevicesinelectroniccircuits.
Asignificantareaofuncertaintyliesinthetimingofexpandingtheproductioncapacitytomeettheanticipatedsubstantialincreaseddemandforsupercapacitorproducts.Managingthescale-upofmanufacturingcapacitybyCAP-XXoritsmanufacturingpartner,orlicensingthetechnologytoanotherpartytoprovidetheproductioncapacityrequiredtomatchthegrowthindemandwillbeacriticalfactorinthegrowthofthebusiness.Byend2006CAP-XXcontractmanufacturerPTAplanstobuildfurthermanufacturingcapabilitytoincreaseproductiontomeettheanticipateddemandforCAP-XXsupercapacitors.
Overall,theCompanyishappywiththeprogresstodateinbuildingitsrelationshipswithglobaloriginalequipmentmanufacturers,andwithexistingandpotentialmanufacturingpartners,andbelievesitisontrackwithplanstocreatelongtermshareholdervalue.
Business reviewcontinued
� CAP-XX LIMITED ANNUAL REPORT 2006 06
Yourdirectorspresenttheirreportontheconsolidatedentity(referredtohereafterastheGroup)consistingofCAP-XXLimited(theCompanyorCAP-XX)andtheentitiesitcontrolledattheendof,orduring,theyearended30June2006.
DirectorsThefollowingpersonsweredirectorsofCAP-XXLimitedduringthefinancialyearanduptothedateofthisreport:
MichaelQuinn ChairmanAnthonyKongats ManagingDirectorJohnMurrayChristerHarkonen Appointed20April2006GrahamTitcombe Appointed20April2006AndrewBailey Resigned6April2006HockVoonLoo Resigned6April2006IngoSusing Resigned27March2006AllanAaron Resigned6April2006(alternatedirectortoJohnMurray)JohnPaulKaumeyer Resigned27March2006
(alternatedirectortoIngoSusing)
Principal activitiesTheGroup’sprincipalcontinuingactivitiesduringthefinancialyearconsistedofthedevelopment,manufactureandsaleofsupercapacitors.TherehavebeennosignificantchangesinthenatureoftheGroup’sactivities.
DividendsNodividendswerepaid,declaredorrecommendedduringthefinancialyearorsince30June2006.
Review of operationsTheGroupexperiencednetlossesof$10,322,000duringtheyearended30June2006(2005:lossof$11,683,000).InformationontheoperationsandfinancialpositionoftheGroupanditsbusinessstrategiesandprospectsissetoutonpages5-7ofthisAnnualReport.
Significant changes in the state of affairsSignificantchangesintheGroup’sstateofaffairsduringthefinancialyearwereasfollows:
(a)Anincreaseincontributedequityof$34,460,000(from$41,128,000to$75,588,000)asaresultof: $ ‘ 000
Issueof18,433,333fullypaidordinarysharesat93penceeachinconjunctionwiththeadmissionofCAP-XXonAIM 41,017IssueoffullypaidordinarysharesatUS$0.01eachupontheexerciseofwarrantsbyholdersofConvertibleNotes 4Issueof75,118fullypaidordinarysharesat$0.47eachonexerciseofoptionsgrantedunderthe2006ShareOptionExchange 35
41,056Less:Purchaseandcancellationof932,761ordinaryshares (2,630)Transactionalcostsarisingonshareissue (3,966)
��,�60
DireCtors’ report
�CAP-XX LIMITED ANNUAL REPORT 200606
(b)On5April2006aspartoftheDemerger(seenote25(f))holdersofconvertiblenotesinCAP-XX,IncexchangedtheirconvertiblenotesforsubstantiallysimilarconvertiblenotesofCAP-XX.ThisresultedinthenetissueofUS$6,404,000(A$8,983,000)ofadditionalconvertiblenotesbyCAP-XX.On27April2006thetotalconvertiblenoteliabilityinclusiveofaccruedinterestofUS$12,455,000(A$16,671,000)wasrepaidoutoftheproceedsoftheinitialpublicoffering(IPO).
(c)On5October2004,theGroupsignedacontractfortheoutsourcingofvolumeassemblymanufacturingwithPolarTwinAdvance(M)Sdn.Bhd.(PTA).AsaresultoftheoutsourcedvolumeassemblymanufacturingcapacityatPTA,thebookvalueoftheplantandequipmentheldattheGroup’sSydney,Australiamanufacturingfacilitywasreviewedforimpairment.Itwasreasonablybelievedthatby1July2006allvolumeassemblymanufacturingwouldbeoutsourcedtoPTAandtheaffectedplantandequipmentremaininginSydney,Australiawouldbeusedforproductdevelopmentandprocessimprovementpurposesonly.
Accordingly,theGroupwroteoff$1,029,000ofplantandequipmentat30June2005andaccelerateddepreciationofotherplantandequipmentfrom1July2004resultinginanincreaseindepreciationchargesof$1,907,000fortheyearended30June2006and$1,942,000fortheyearended30June2005.
Use of fundsFundsspentsincetheIPOhavebeenspentinaccordancewiththeOfferdocumentdated12April2006.
Matters subsequent to the end of the financial yearNomatterorcircumstancehasarisensince30June2006thathassignificantlyaffected,ormaysignificantlyaffect:
(a) theGroup’soperationsinfuturefinancialyears,or(b) theresultsofthoseoperationsinfuturefinancialyears,or(c) theGroup’sstateofaffairsinfuturefinancialyears.
Likely developments and expected results of operationsInformationonlikelydevelopmentsintheGroup’soperationsandtheexpectedresultsofoperationshavenotbeenincludedinthisreportbecausethedirectorsbelieveitwouldbelikelytoresultinunreasonableprejudicetotheGroup.
Environmental regulationTheGroupissubjecttostandardwastemanagementenvironmentalregulationsinrespectofitsresearchandmanufacturingactivitiesconductedatLaneCove,Sydney,Australia.
Information on directors
Michael Quinn Chairman.Age59
Experience and qualificationsMichaelbecameadirectoron12November1998.Heisexecutivechairmanofventurecapitalfundmanager,InnovationCapitalAssociatesPtyLtd,andwaspreviouslyco-founderofMemtecLtd,thehightechnologyfiltrationcompany,whichwaslistedontheASX,NASDAQandthenNYSE.MichaelisalsoadirectorofResMedInc.,whichislistedonNYSE,andisontheboardoftwonot-for-profitorganisations.Priortoitsacquisition,hewasexecutivechairmanofthelistedcompanyPhoenixScientificIndustriesLtdthatmanufacturedandimportedmedicalandscientificequipment.Michaelhasalsoheldexecutivepositionsinthebanking,transportandhigh-technologyplasticsindustriesandhasbeenadirectorofnumerouslistedandunlistedcompanies.HehasanMBAfromHarvard.
Special responsibilitiesChairmanofauditcommittee.
Interests in shares and options2,522,998ordinarysharesinCAP-XXLimited(includingsharesheldbyInnovationCapitalLimited,InnovationCapitalLLCandKaylaraPtyLimited)
123,864optionsoverordinarysharesinCAP-XXLimited(includingoptionsheldbyInnovationCapitalLimited,InnovationCapitalLLCandKaylaraPtyLimited)
Anthony Kongats ManagingDirector.Age48
Experience and qualificationsAnthonyfoundedtheCompanyin1996.PriortoCAP-XX,hewasthemanagingdirectorofamanufacturerofpassivecomponentsbeforesellingthebusinesstoacompetitor.AnthonypreviouslyworkedasamanagementconsultantwithMcKinsey&CompanyandheldvariousengineeringpositionsinAustraliaandEurope.Hehasabachelor’sdegree(honours)inengineeringfromtheUniversityofNewSouthWales,abachelorofsciencedegree
DireCtors’ reportcontinued
�0 CAP-XX LIMITED ANNUAL REPORT 2006 06
fromtheUniversityofSydneyandanMBAfromtheAustralianGraduateSchoolofManagement.
Special responsibilitiesNil
Interests in shares and options3,231,028ordinarysharesinCAP-XXLimited(includingsharesheldbyDuconManagementPtyLimited).123,336optionsoverordinarysharesinCAP-XXLimited.
Christer Harkonen Non-executiveDirector.Age49
Experience and qualificationsChristerisSeniorVicePresidentofUPMRaflatac,responsiblefortheRadioFrequencyIdentificationBusiness.BeforejoiningthatcompanyheheldvariousmanagementpositionsatElcoteq,aglobalelectronicsmanufacturingservicescompany.During2000-2004heheadedElcoteq’slargestbusinessarea,TerminalProducts,andwasresponsibleforstrategicaccounts.Christerhasheldvariousproduction,logisticsandpurchasingpositionsintheelectronicsindustrysince1984includingcompaniessuchasNokia,ICLPersonalSystemsOyandEspoo.Hehasamaster’sdegreeinengineering.
Special responsibilitiesMemberofauditcommittee.Memberofremunerationcommittee
Interests in shares and optionsNil
John Murray Non-executivedirector.Age47
Experience and qualificationsJohnbecameadirectoron18September2000.Hehas14years’experienceinprovidingventurecapitaltotechnologycompaniesintheAsiaPacificregionwithBankofAmerica,AustralianTechnologyGroupandTechnologyVenturePartners.Johnisaco-founderofTechnologyVenturePartners,oneoftheleadingVCfirmsinAustralia.HehasbeenchairmanoftheAustralianVentureCapitalAssociation;amemberoftheAustradeICTExportAdvisoryPanel;andamemberofthe2002CooperativeResearchCentreExpertReviewPanel.JohnhaspersonallybeeninvolvedinfinancingandassistingthedevelopmentofanumberofAustraliancompanieswhichhavesuccessfullycommercialisedtechnology,includingSecurityDomain,IntegratedSiliconDesignandManageSoft.Hehasalawdegree(honours)fromtheUniversityofEdinburghandisamemberoftheInstituteofCharteredAccountantsofScotland.
Special responsibilitiesMemberofauditcommittee.Memberofremunerationcommittee.
Interests in shares and options5,230,700ordinarysharesinCAP-XXLimited(includingsharesheldbyTVPNo2FundNomineesPtyLimitedandTVPNo3FundNomineesPtyLimited).3,501optionsoverordinarysharesinCAP-XXLimited.(includingoptionsheldbyTVPPtyLimited)
Graham Titcombe Non-executivedirector.Age64.
Experience and qualificationsGrahamworkedforJohnsonMattheyplcfor42yearsretiringin2002asgroupmanagingdirector.HewasamemberoftheJohnsonMattheyBoardfor12yearsandwasresponsibleatvarioustimesfortheJohnsonMattheygroup’spreciousmetals,catalystsandceramicsdivisions.HewasalsotheJohnsonMattheyboardmemberresponsiblefortechnology.Graham’soutsidedirectorshipshaveincludedBallardPowerSystems,TheWorldFuelCellCouncil,WagonplcandInfastGroupplc.HewaschairmanofInfastbeforesteppingdowninJuly2005.HeiscurrentlyseniorindependentdirectorontheboardofPolyFuelInc,whichlistedonAIMinJune2005.
Special responsibilitiesChairmanofremunerationcommittee.Seniorindependentdirector
Interests in shares and options20,000ordinarysharesinCAP-XXLimited.
Company secretaryThecompanysecretariesareRobertBuckinghamandChrisCampbell.Chris,theCompany’sChiefFinancialOfficer,wasappointedasacompanysecretaryon13August2006.RobertismanagingpartnerofAllanHallPartnership,CharteredAccountants,apositionhehasheldsince1989.Hehasabachelorofcommercedegree(honours)fromtheUniversityofNewSouthWalesandisanassociatedmemberofInstituteofCharteredAccountantsinAustraliaandanassociatedmemberofCertifiedPractisingAccountantsinAustralia.
DireCtors’ reportcontinued
��CAP-XX LIMITED ANNUAL REPORT 200606
Meetings of directorsThenumbersofmeetingsoftheCompany’sboardofdirectorsandofeachboardcommitteeheldduringtheyearended30June2006,andthenumbersofmeetingsattendedbyeachdirectorwere:
Full meetings of directors A B
MichaelQuinn 11 12AnthonyKongats 12 12JohnMurray 12 12ChristerHarkonen(appointed20April2006) 1 1GrahamTitcombe(appointed20April2006) 1 1AndrewBailey(resigned6April2006) 8 10HockVoonLoo(resigned6April2006) 7 10IngoSusing(resigned27March2006) 8 10
A=NumberofmeetingsattendedB=Numberofmeetingsheldduringthetimethedirectorheldofficeorwasamemberofthecommitteeduringtheyear
ThetermsofreferenceandcompositionoftheauditandremunerationcommitteesweredeterminedaspartoftheprocessofthelistingoftheCompany.Listingoccurredon20April2006andatyear-endthecommitteeshadnotmet.
Directors’ remunerationDetailsoftheremunerationofeachdirectorofCAP-XXLimitedfortheyearended30June2006aresetoutinthefollowingtable.Thecashbonusesaredependentonthesatisfactionofperformanceconditions.Allotherelementsofremunerationarenotdirectlyrelatedtoperformance.
Directors of CAP-XX Limited Primary Post-employment Equity
Name Cash salary and Cash Non-monetary Super- Retirement Options Total accrued fees bonus benefits annuation benefits $ $ $ $ $ $ $
Executive directors AnthonyKongats 199,196 - - 16,710 - 3,714 219,620
Non-executive directorsMichaelQuinn 15,219 - - 1,369 - 3,419 20,007JohnMurray 11,414 - - 1,027 - - 12,441ChristerHarkonen 12,441 - - - - - 12,441GrahamTitcombe 15,839 - - - - - 15,839AndrewBailey - - - - - 4,302 4,302HockVoonLoo - - - - - - -IngoSusing - - - - - - -
Total 2��,�0� - - ��,�06 - ��,��� 2��,6�0
DireCtors’ reportcontinued
�2 CAP-XX LIMITED ANNUAL REPORT 2006 06
Loans to directors and executivesTheGrouphasnoloanstodirectorsand/orexecutives.
Share options granted to directors and the most highly remunerated officers OptionsoverunissuedordinarysharesofCAP-XXgrantedduringtheyearended30June2006toanyofthedirectorsorthe5mosthighlyremuneratedofficersoftheCompanyandGroupaspartoftheirremunerationwereasfollows:
Directors Options grantedAnthonyKongats 111,327MichaelQuinn 103,170AndrewBailey 129,810
Other executives of CAP-XX Limited
GeorgeKarhan 225,000ChrisCampbell 77,649PierreMars 60,903PaulKhoo 72,468PhillipAitchison 50,001
Theoptionsweregrantedunderthe2006ShareOptionExchange-seenote29(a).Theyaretheresultoftheapplicationofa3:1splitaspartoftheDemergeroftheCompanyfromCAP-XX,Incon5April2006andinexchangeforthesurrenderofunexercisedoptionspreviouslygrantedtotheoptionholderson1July2005byCAP-XX,Inc.
OptionsoverunissuedordinarysharesofCAP-XXgrantedsince30June2006toanyofthedirectorsorthe5mosthighlyremuneratedofficersoftheCompanyandGroupaspartoftheirremunerationwereasfollows:
Directors Options GrantedAnthonyKongats 150,000
Other executives of CAP-XX Limited GeorgeKarhan 150,000ChrisCampbell 150,000PierreMars 150,000PaulKhoo 100,000PhillipAitchison 100,000
Theoptionsweregrantedon19September2006underthetermsandconditionsofthe2006EmployeeShareOptionPlan.
DireCtors’ reportcontinued
��CAP-XX LIMITED ANNUAL REPORT 200606
Shares under optionUnissuedordinarysharesofCAP-XXLimitedunderoptionatthedateofthisreportareasfollows:
Date options granted Expiry date Issue price of shares Number under option28August2001 31May2008 $2.96 28,49728August2001 29January2009 $11.84 13,50028August2001 10October2009 $8.88 5101November2002 30September2012 $15.64 48,0031April2004 31May2008 $2.96 9,9991April2004 29January2009 $11.84 1,5091April2004 30September2012 $4.19 19,5001April2004 30September2012 $15.64 14,50230June2004 31May2014 $0.47 30,00026August2004 25July2014 $0.23 48,00021March2005 20February2015 $0.23 48,0001July2005 31May2015 $0.47 1,357,7111July2005 31May2015 $15.64 18,00920April2006 20April2009 93pence 503,35020April2006 22February2011 $1.40 60,00019September2006 19September2016 $2.38 1,760,000
�,�6�,0�0
Nooptionholderhasanyrightundertheoptionstoparticipateinanyothershareissueofthecompanyorofanyotherentity.
DireCtors’ reportcontinued
�� CAP-XX LIMITED ANNUAL REPORT 2006 06
Shares issued on the exercise of optionsThefollowingordinarysharesofCAP-XXwereissuedduringtheyearended30June2006ontheexerciseofoptionsgrantedunderthe2006ShareOptionExchange.37,413furthershareshavebeenissuedsincethatdate.Noamountsareunpaidonanyoftheshares.
Date options granted Issue price of shares Number under option1July2005 $0.47 75,118
Indemnification and Insurance of Officers
IndemnificationCAP-XXhasagreedtoindemnifythecurrentdirectorsandexecutiveofficersoftheGroupandformerdirectorsoftheCompanyagainstallliabilitiestoanotherperson(otherthantheCompanyorarelatedbodycorporate)thatmayarisefromtheirpositionasdirectorsandexecutiveofficersoftheCompanyanditscontrolledentities,exceptwheretheliabilityarisesoutofconductinvolvingalackofgoodfaith.TheagreementstipulatesthattheCompanywillmeetthefullamountofanysuchliabilities,includingcostsandexpenses.
Insurance PremiumsThedirectorshavenotincludeddetailsofthenatureoftheliabilitiescoverednortheamountofthepremiumpaidinrespectoftheDirectors’andOfficersliabilityinsurancecontracts,assuchdisclosureisprohibitedunderthetermsofthecontract.
Auditor’s independence declarationAcopyoftheauditor’sindependencedeclarationasrequiredundersection307CoftheCorporationsAct2001issetoutonpage15.
Rounding of amountsTheCompanyisofakindreferredtoinClassOrder98/0100,issuedbytheAustralianSecuritiesandInvestmentsCommission,relatingtothe“roundingoff”ofamountsinthedirectors’report.Amountsinthedirectors’reporthavebeenroundedoffinaccordancewiththatClassOrdertothenearestthousanddollars,orincertaincases,tothenearestdollar.
AuditorPricewaterhouseCooperscontinuesinofficeinaccordancewithsection327oftheCorporationsAct2001.
Thisreportismadeinaccordancewitharesolutionofthedirectors.
MichaelQuinnDirector
Sydney5October2006
DireCtors’ reportcontinued
��CAP-XX LIMITED ANNUAL REPORT 200606
PricewaterhouseCoopersABN 52 780 433 757
Auditor’s Independence Declaration
auDitor’s inDepenDenCe report
�6 CAP-XX LIMITED ANNUAL REPORT 2006 06
Corporate governance statementOverthepastyeartheBoardhasconductedtheaffairsoftheCompanyinaccordancewithprinciplesofgoodcorporategovernance.However,theCompanydidnothaveformalgovernanceproceduresinplaceuntillistinginApril2006whereuponagreaterfocuswasgiventothisissue.
WhilstcompanieswhosesharesarelistedonAIMarenotformallyrequiredtocomplywiththeCombinedCodeonCorporateGovernance(July2003),theBoardsupportstheCodeandappliesitinsofarasispracticableandappropriateforapubliccompanyofitssize.TheBoardiscommittedtoensuringthathighstandardsofcorporategovernancearemaintained.
ThereisacleardivisionofresponsibilitybetweentheChairmanandtheManagingDirector.TheBoardcomprisesfivedirectors,fourofwhomarenon-executivedirectorsandtwoofwhomareindependentnon-executivedirectors.Noneofthenon-executivedirectorshaveanyday-to-dayinvolvementintherunningofthebusiness.
TheBoardisresponsibleforoverallstrategy,thepolicyanddecisionmakingframeworkinwhichthisstrategyisimplemented,approvalofbudgets,monitoringperformance,andriskmanagement.
TheBoardmeetsatregularscheduledintervalsandfollowsaformalagenda.Italsomeetsasandwhenrequired.Betweenlistingon20April2006and30June2006oneBoardmeetingwasheld.
ThedirectorsmaytakeindependentprofessionaladviceattheCompany’sexpense.
Board CommitteesTheCompanyhasanauditcommitteeandaremunerationcommitteebothconsistingofthreenon-executivedirectors.ThetermsofreferenceandcompositionoftheauditandremunerationcommitteesweredeterminedaspartoftheprocessofthelistingoftheCompany.Atyearendthecommitteeshadnotmetalthoughboththeauditcommitteeandtheremunerationcommitteehavesincemet.Eachcommitteeistomeetatleasttwiceayear.
TheauditcommitteecomprisesMichaelQuinn(Chairman),ChristerHarkonenandJohnMurray.TheremunerationcommitteecomprisesGrahamTitcombe(Chairman),ChristerHarkonenandJohnMurray.
TheauditcommitteereviewsthefinancialstatementsoftheCompanyandmonitorstheintegrityofthefinancialstatements.TheauditcommitteealsokeepsunderreviewtheeffectivenessoftheCompany’sinternalcontrolsandriskmanagementsystems.
Theremunerationcommitteedetermines,agreesandreviewswiththeBoardtheframeworkorbroadpolicyfortheremunerationoftheCompany’sChairmanandexecutivesandwithinthetermsoftheagreedpolicy(inconsultationwiththeChairmanand/orchiefexecutiveasappropriate)determinesthetotalindividualremunerationpackageofeachseniorexecutive.TheremunerationcommitteealsoreviewsandnotesannuallytheremunerationtrendsacrosstheGroup.
Relationships with ShareholdersTheBoardunderstandstheneedforclearcommunicationswithitsshareholders.Inadditiontopresentationsafterpublicationofresultsandtheannualgeneralmeeting,meetingsareheldwithfundmanagers,analysts,andinstitutionalinvestors.InformationispostedontheCompany’swebsite,www.cap-xx.com.
Corporate GovernanCe statement
��CAP-XX LIMITED ANNUAL REPORT 200606
Intellectual PropertyTheBoardhasalwaysbeenvigilantinmanagingtheCompany’sintellectualproperty(IP)portfoliowhichcurrentlyconsistsof19patentfamilies,9grantedUSpatents,13USpatentapplicationsandcorrespondinginternationalpatentsandapplications.TheCompany’sIPstrategyhasbeentobuildcompanyvaluebyfocussingonopportunitiestocapturemarketshareandexcludecompetitionwithanIPportfoliocapableofgeneratinglicensingrevenue.
Thedirectorsbelievecomprehensiveembodimentsandinterlockingpatentgroups,combinedwitha‘quicktofile,quicktoabandon’policy,havegiventheCompanyastrongandfocussedIPportfolio.
Corporate GovernanCe statementcontinued
�� CAP-XX LIMITED ANNUAL REPORT 2006 06
Contents PageIncomestatements 19Balancesheets 20Statementsofchangesinequity 21Cashflowstatements 22Notestothefinancialstatements 23
ThisfinancialreportcoversbothCAP-XXLimitedasanindividualentityandtheconsolidatedentityconsistingofCAP-XXLimitedanditssubsidiaries.ThefinancialreportispresentedintheAustralian currency.
CAP-XXLimitedisacompanylimitedbyshares,incorporatedanddomiciledinAustralia.Itsprincipalplaceofbusinessis:
Units9-1012MarsRoadLaneCoveNSW2066
Itsregisteredofficeis:
Level3685PittwaterRoadDeeWhyNSW2099
Adescriptionofthenatureoftheconsolidatedentity’soperationsanditsprincipalactivitiesisincludedinthechairman’sstatementonpage4,businessreviewonpages5-7andinthedirectors’reportonpages8-14,allofwhicharenotpartofthisfinancialreport.
Thefinancialreportwasauthorisedforissuebythedirectorson3October2006.Thecompanyhasthepowertoamendandreissuethefinancialreport.
Throughtheuseoftheinternet,wehaveensuredthatourcorporatereportingistimely,complete,andavailablegloballyatminimumcosttothecompany.Allpressreleases,financialreportsandotherinformationareavailableatourInvestors’Centreonourwebsite:www.cap-xx.com.
FinanCial statements30 June 2006
��CAP-XX LIMITED ANNUAL REPORT 200606
income statements for the year ended 30 June 2006
Consolidated Parent Entity 2006 200� 2006 200�Currency: Australian Dollars Notes $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Revenuefromsaleofgoods 5 2,581 2,222 - -Costofsaleofgoods 7 (6,751) (7,839) - -
Gross margin (loss) on sale of goods (4,170) (5,617) - -
Otherrevenue 5 764 479 684 405Otherincome 6 176 1,214 451 -
Generalandadministrativeexpenses (2,415) (2,263) (137) (15)Sellingandmarketingexpenses (1,217) (1,002) (3) -Researchanddevelopmentexpenses (1,904) (2,023) (5,431) (6,570)Financecosts 7 (911) (333) (594) (200)Otherexpenses 7 (645) (2,138) (9,931) (2,736)
(Loss) before income tax (10,322) (11,683) (14,961) (9,116)
Incometaxbenefit 8 - - - -
Net (loss) for the year (�0,�22) (��,6��) (��,�6�) (�,��6)
(Loss) attributable to members of CAP-XX Limited (�0,�22) (��,6��) (��,�6�) (�,��6)
Earnings per share for (loss) attributable to the ordinary equity holders of the company Cents CentsBasicearningspershare 31 (31.1) (38.8)Dilutedearningspershare 31 (31.1) (38.8)
the above income statements should be read in conjunction with the accompanying notes.
20 CAP-XX LIMITED ANNUAL REPORT 2006 06
Balance sheets as at 30 June 2006
Consolidated Parent Entity 2006 200� 2006 200�Currency: Australian Dollars Notes $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
ASSETSCurrent assets Cashandcashequivalents 9 20,107 1,191 19,696 26Receivables 10 850 4,722 - 3,521Inventories 11 351 361 - -Other 12 126 80 43 58
Totalcurrentassets 21,434 6,354 19,739 3,605
Non-current assets Property,plantandequipment 13 1,678 5,428 - -Other 14 153 153 - -Totalnon-currentassets 1,831 5,581 - -Total assets 2�,26� ��,��� ��,��� �,60�
LIABILITIES Current liabilities Payables 15 1,070 1,681 42 -Borrowings 17 - 12,669 - 3,823Provisions 16 449 482 - -Totalcurrentliabilities 1,519 14,832 42 3,823
Non-current liabilities Provisions 18 113 23 - -Totalnon-currentliabilities 113 23 - -Total liabilities �,6�2 ��,��� �2 �,�2�
NET ASSETS (DEFICIENCy) 2�,6�� (2,�20) ��,6�� (2��)
EQUITyContributedequity 19 75,588 41,128 75,588 41,128Reserves 20 414 (1) 416 -Accumulatedlosses 20 (54,369) (44,047) (56,307) (41,346)
TOTAL EQUITy 2�,6�� (2,�20) ��,6�� (2��)
the above balance sheets should be read in conjunction with the accompanying notes.
2�CAP-XX LIMITED ANNUAL REPORT 200606
statements of changes in equity for the year ended 30 June 2006
Consolidated Parent Entity 2006 200� 2006 200�Currency: Australian Dollars Notes $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Totalequityatthebeginningofthefinancialyear (2,920) 8,763 (218) 8,898
Exchangedifferencesontranslationofforeignoperations (1) - - -
Net(loss)recogniseddirectlyinequity (1) - - -(Loss)fortheyear (10,322) (11,683) (14,961) (9,116)
Total recognised income and expenses for the year (10,323) (11,683) (14,961) (9,116)
Transactionswithequityholdersintheircapacityasequityholders:Employeeshareoptions 20 416 - 416 -Exerciseofoptions 19 35 - 35 -Sharebuy-back 19 (2,630) - (2,630) -Contributionsofequity,netofissuancecosts 19 37,055 - 37,055 - 34,876 - 34,876 -
Total equity at the end of the financial year 2�,6�� (2,�20) ��,6�� (2��)
the above statements of changes in equity should be read in conjunction with the accompanying notes.
22 CAP-XX LIMITED ANNUAL REPORT 2006 06
Cash flow statements for the year ended 30 June 2006
Consolidated Parent Entity 2006 200� 2006 200�Currency: Australian Dollars Notes $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Cash flows from operating activitiesReceiptsfromcustomers(inclusiveofgoodsandservicestax) 1,996 2,175 - -Paymentstosuppliersandemployees(inclusiveofgoodsandservicestax) (8,814) (8,209) (176) (58)
(6,818) (6,034) (176) (58)Grantsreceived 150 786 - -Interestreceived 289 46 250 45
Net cash (outflow) inflow from operating activities 28 (6,���) (�,202) �� (��)
Cash flows from investing activitiesPaymentsforproperty,plantandequipment (839) (1,199) - -Advancedproceedsfromsaleofplantandequipment - 723 - -Proceedsfromsaleofproperty,plantandequipment 53 583 - -Loanstorelatedparties - - (4,945) (3,335)
Net cash (outflow) inflow from investing activities (��6) �0� (�,���) (�,���)
Cash flows from financing activitiesProceedsfromissueofshares 41,056 - 41,056 -Paymentsforissuancecostsofshares (3,606) - (3,606) -Proceedsfromissueofconvertiblenotes 3,783 3,378 3,783 3,378Paymentsforissuancecostsofconvertiblenotes (21) (40) (21) (40)Repaymentofconvertiblenotesincludingaccruedinterest (16,671) - (16,671) -Loansfromrelatedparties 1,540 2,736 - -
Net cash inflow from financing activities 26,0�� 6,0�� 2�,��� �,���
Net increase (decrease) in cash and cash equivalents 18,916 979 19,670 (10)Cashandcashequivalentsatthebeginningofthefinancialyear 1,191 212 26 36
Cash and cash equivalents at the end of the financial year 9 20,�0� �,��� ��,6�6 26
Financingarrangements 17 Non-cashfinancingandinvestingactivities 25
the above cash flow statements should be read in conjunction with the accompanying notes.
2�CAP-XX LIMITED ANNUAL REPORT 200606
notes to the financial statements 30 June 2006
Contents of the notes to the financial statements Page
1 Summaryofsignificantaccountingpolicies 24
2 Financialriskmanagement 32
3 Criticalaccountingestimatesandjudgements 33
4 Segmentinformation 34
5 Revenue 35
6 Otherincome 35
7 Expenses 36
8 Incometaxbenefit 37
9 Currentassets‐Cashandcashequivalents 38
10 Currentassets‐Receivables 38
11 Currentassets‐Inventories 39
12 Currentassets‐Other 39
13 Non‐currentassets‐Property,plantandequipment 40
14 Non‐currentassets‐Other 41
15 Currentliabilities‐Payables 41
16 Currentliabilities‐Provisions 42
17 Currentliabilities‐Borrowings 43
18 Non‐currentliabilities‐Provisions 45
19 Contributedequity 46
20 Reservesandaccumulatedlosses 47
21 Keymanagementpersonneldisclosures 48
22 Remunerationofauditors 49
23 Contingencies 49
24 Commitments 50
25 Relatedpartytransactionsanddemerger 50
26 Subsidiaries 54
27 Eventsoccurringafterthebalancesheetdate 54
28 Reconciliationofprofitafterincometaxtonetcash(outflow)inflowfromoperatingactivities 55
29 Share‐basedpayments 55
30 Economicdependency 59
31 Earningspershare 60
32 ExplanationoftransitiontoAustralianequivalentstoIFRSs 60
2� CAP-XX LIMITED ANNUAL REPORT 2006 06
Note � Summary of significant accounting policiesTheprincipalaccountingpoliciesadoptedinthepreparationofthefinancialreportaresetoutbelow.Thesepolicieshavebeenconsistentlyappliedtoalltheyearspresented,unlessotherwisestated.ThefinancialreportincludesseparatefinancialstatementsforCAP-XXLimitedanindividualentityandtheconsolidatedentityconsistingofCAP-XXLimitedanditssubsidiaries.
On20January2006theCompanychangeditsstatusfromaproprietarycompanylimitedbysharestoapubliccompanylimitedbysharesandon5April2006itchangeditsnamefromEnergyStorageSystemsLimitedtoCAP-XXLimited.
AllamountsshownareinAustralianDollarsunlessotherwisestated.
(a) Basis of preparationThisgeneralpurposefinancialreporthasbeenpreparedinaccordancewithAustralianequivalentstoInternationalFinancialReportingStandards(AIFRSs),otherauthoritativepronouncementsoftheAustralianAccountingStandardsBoard,UrgentIssuesGroupInterpretationsandtheCorporationsAct2001.
Compliance with IFRSsAustralianAccountingStandardsincludeAIFRSs.CompliancewithAIFRSsensuresthattheconsolidatedfinancialstatementsandnotescomplywithInternationalFinancialReportingStandards(IFRSs).TheparententityfinancialstatementsandnotesalsocomplywithIFRSsexceptthatithaselectedtoapplythereliefprovidedtoparententitiesinrespectofcertaindisclosurerequirementscontainedinAASB132FinancialInstruments:PresentationandDisclosure.
Application of AASB 1 First time Adoption of Australian Equivalents to International Financial Reporting StandardsThesefinancialstatementsarethefirstCAP-XXLimitedfinancialstatementstobepreparedinaccordancewithAIFRSs.AASB1FirsttimeAdoptionofAustralianEquivalentstoInternationalFinancialReportingStandardshasbeenappliedinpreparingthesefinancialstatements.
FinancialstatementsofCAP-XXLimiteduntil30June2005hadbeenpreparedinaccordancewithpreviousAustralianGenerallyAcceptedAccountingPrinciples(AGAAP).AGAAPdiffersincertainrespectsfromAIFRS.WhenpreparingCAP-XXLimited2006financialstatements,managementhasamendedcertainaccounting,valuationandconsolidationmethodsappliedintheAGAAPfinancialstatementstocomplywithAIFRS.Withtheexceptionoffinancialinstruments,thecomparativefiguresinrespectof2005wererestatedtoreflecttheseadjustments.TheGrouphastakentheexemptionavailableunderAASB1toonlyapplyAASB132andAASB139from1July2005.
ReconciliationsanddescriptionsoftheeffectoftransitionfrompreviousAGAAPtoAIFRSsontheGroup’sequityanditsnetincomearegiveninnote32.
Historical cost conventionThesefinancialstatementshavebeenpreparedunderthehistoricalcostconvention.
Critical accounting estimatesThepreparationoffinancialstatementsinconformitywithAIFRSrequirestheuseofcertaincriticalaccountingestimates.ItalsorequiresmanagementtoexerciseitsjudgementintheprocessofapplyingtheGroup’saccountingpolicies.Theareasinvolvingahigherdegreeofjudgementorcomplexity,orareaswhereassumptionsandestimatesaresignificanttothefinancialstatementsaredisclosedinnote3.
(b) Continuation as a going concern TheGrouphasexperiencedsignificantrecurringoperatinglossesandnegativecashflowsfromoperatingactivitiessinceitsinception.DuringtheyeartheGrouphasundergonesignificantrestructuringincludingrationalisationoftheGroup’soperations,completionofitslistingontheAlternativeInvestmentMarket(AIM)ontheLondonStockExchangeandtheraisingoffundsviatheInitialPublicOffering.
notes to the financial statements 30 June 2006
continued
2�CAP-XX LIMITED ANNUAL REPORT 200606
Thedirectorshaveconsideredthesignificanceandpossibleeffectsofthesecircumstancesinordertodeterminethesuitabilityofadoptingthegoingconcernbasisforthepreparationofthisfinancialreport.
Havingcarefullyassessedthefinancialandoperatingimplicationsoftheabovematters,thedirectorsconsiderthatthecompanywillbeabletopayitsdebtsasandwhentheyfalldueforat12leastmonthsfollowingthedateofthesefinancialstatementsandthatitisappropriatefortheaccountstobepreparedonagoingconcernbasis.
(c) Principles of ConsolidationTheconsolidatedfinancialstatementsincorporatetheassetsandliabilitiesofallsubsidiariesofCAP-XXLimited(‘’company’’or‘’parententity’’)asat30June2006andtheresultsofallsubsidiariesfortheyearthenended.CAP-XXLimitedanditssubsidiariestogetherarereferredtointhisfinancialreportastheGrouportheconsolidatedentity.
Subsidiariesareallthoseentities(includingspecialpurposeentities)overwhichtheGrouphasthepowertogovernthefinancialandoperatingpolicies,generallyaccompanyingashareholdingofmorethanone‐halfofthevotingrights.TheexistenceandeffectofpotentialvotingrightsthatarecurrentlyexercisableorconvertibleareconsideredwhenassessingwhethertheGroupcontrolsanotherentity.
SubsidiariesarefullyconsolidatedfromthedateonwhichcontrolistransferredtotheGroup.Theyarede-consolidatedfromthedatethatcontrolceases.
ThepurchasemethodofaccountingisusedtoaccountfortheacquisitionofsubsidiariesbytheGroup(refertonote1(j)).
Intercompanytransactions,balancesandunrealisedgainsontransactionsbetweenGroupcompaniesareeliminated.Unrealisedlossesarealsoeliminatedunlessthetransactionprovidesevidenceoftheimpairmentoftheassettransferred.AccountingpoliciesofsubsidiarieshavebeenchangedwherenecessarytoensureconsistencywiththepoliciesadoptedbytheGroup.
Investmentsinsubsidiariesareaccountedforatcostlessimpairmentintheindividualfinancialstatementsoftheparententity.
(d) Segment reportingAbusinesssegmentisagroupofassetsandoperationsengagedinprovidingproductsorservicesthataresubjecttorisksandreturnsthataredifferenttothoseofotherbusinesssegments.Ageographicalsegmentisengagedinprovidingproductswithinaparticulareconomicenvironmentandissubjecttorisksandreturnsthataredifferentfromthoseofsegmentsoperatinginothereconomicenvironments.
(e) Foreign currency translation
(i) Functional and presentation currency ItemsincludedinthefinancialstatementsofeachoftheGroup’sentitiesaremeasuredusingthecurrencyoftheprimaryeconomicenvironmentinwhichtheentityoperates(‘thefunctionalcurrency’).TheconsolidatedfinancialstatementsarepresentedinAustraliandollars,whichisCAP-XXLimited’sfunctionalandpresentationcurrency.
(ii) Transactions and balances Foreigncurrencytransactionsaretranslatedintothefunctionalcurrencyusingtheexchangeratesprevailingatthedatesofthetransactions.Foreignexchangegainsandlossesresultingfromthesettlementofsuchtransactionsandfromthetranslationatyear‐endexchangeratesofmonetaryassetsandliabilitiesdenominatedinforeigncurrenciesarerecognisedintheincomestatement,exceptwhendeferredinequityasqualifyingcashflowhedges.
(iii) Group companiesTheresultsandfinancialpositionofalltheGroupentities(noneofwhichhasthecurrencyofahyperinflationaryeconomy)thathaveafunctionalcurrencydifferentfromthepresentationcurrencyaretranslatedintothepresentationcurrencyasfollows:
notes to the financial statements 30 June 2006
continued
26 CAP-XX LIMITED ANNUAL REPORT 2006 06
• assetsandliabilitiesforeachbalancesheetpresentedaretranslatedattheclosingrateatthedateofthatbalancesheet;• incomeandexpensesforeachincomestatementaretranslatedataverageexchangerates(unlessthisisnotareasonable
approximationofthecumulativeeffectoftheratesprevailingonthetransactiondates,inwhichcaseincomeandexpensesaretranslatedatthedatesofthetransactions);and
• allresultingexchangedifferencesarerecognisedasaseparatecomponentofequity.
Whenaforeignoperationissoldorborrowingsrepaid,aproportionateshareofsuchexchangedifferencesarerecognisedintheincomestatementaspartofthegainorlossonsale.
Goodwillandfairvalueadjustmentsarisingontheacquisitionofaforeignentityaretreatedasassetsandliabilitiesoftheforeignentitiesandtranslatedattheclosingrate.
(f) Revenue recognitionRevenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivable.Amountsdisclosedasrevenuearenetofreturns,tradeallowancesanddutiesandtaxespaid.
Asaleisrecordedwhengoodshavebeendeliveredtothecustomer,thecustomerhasacceptedthegoodsandcollectibilityoftherelatedreceivablesisprobable.
Interestincomeisrecognisedonatimeproportionbasisusingtheeffectiveinterestmethod.
(g) Government grantsGrantsfromthegovernmentarerecognisedattheirfairvaluewherethereisareasonableassurancethatthegrantwillbereceivedandtheGroupwillcomplywithallattachedconditions.Governmentgrantsrelatingtocostsaredeferredandrecognisedintheincomestatementovertheperiodnecessarytomatchthemwiththecoststhattheyareintendedtocompensate.
(h) Income taxTheincometaxexpenseorrevenuefortheperiodisthetaxpayableonthecurrentperiod’staxableincomebasedonthenationalincometaxrateforeachjurisdictionadjustedbychangesindeferredtaxassetsandliabilitiesattributabletotemporarydifferencesbetweenthetaxbasesofassetsandliabilitiesandtheircarryingamountsinthefinancialstatements,andtounusedtaxlosses.
Deferredtaxassetsandliabilitiesarerecognisedfortemporarydifferencesatthetaxratesexpectedtoapplywhentheassetsarerecoveredorliabilitiesaresettled,basedonthosetaxrateswhichareenactedorsubstantivelyenactedforeachjurisdiction.Therelevanttaxratesareappliedtothecumulativeamountsofdeductibleandtaxabletemporarydifferencestomeasurethedeferredtaxassetorliability.Anexceptionismadeforcertaintemporarydifferencesarisingfromtheinitialrecognitionofanassetoraliability.Nodeferredtaxassetorliabilityisrecognisedinrelationtothesetemporarydifferencesiftheyaroseinatransaction,otherthanabusinesscombination,thatatthetimeofthetransactiondidnotaffecteitheraccountingprofitortaxableprofitorloss.
Deferredtaxassetsarerecognisedfordeductibletemporarydifferencesandunusedtaxlossesonlyifitisprobablethatfuturetaxableamountswillbeavailabletoutilisethosetemporarydifferencesandlosses.
Deferredtaxliabilitiesandassetsarenotrecognisedfortemporarydifferencesbetweenthecarryingamountandtaxbasesofinvestmentsincontrolledentitieswheretheparententityisabletocontrolthetimingofthereversalofthetemporarydifferencesanditisprobablethatthedifferenceswillnotreverseintheforeseeablefuture.
Deferredtaxassetsandliabilitiesareoffsetwhenthereisalegallyenforceablerighttooffsetcurrenttaxassetsandliabilitiesandwhenthedeferredtaxbalancesrelatetothesametaxationauthority.Currenttaxassetsandtaxliabilitiesareoffsetwheretheentityhasalegallyenforceablerighttooffsetandintendseithertosettleonanetbasis,ortorealisetheassetandsettletheliabilitysimultaneously.
Currentanddeferredtaxbalancesattributabletoamountsrecogniseddirectlyinequityarealsorecogniseddirectlyinequity.
notes to the financial statements 30 June 2006
continued
2�CAP-XX LIMITED ANNUAL REPORT 200606
Tax consolidation legislationCAP-XXLimitedanditswhollyownedAustraliancontrolledentitieshaveimplementedthetaxconsolidationlegislationasof1July2002.
Theheadentity,CAP-XXLimited,andthecontrolledentitiesinthetaxconsolidatedgroupcontinuetoaccountfortheirowncurrentanddeferredtaxamounts.Thesetaxamountsaremeasuredasifeachentityinthetaxconsolidatedgroupcontinuestobeastandalonetaxpayerinitsownright.
Inadditiontoitsowncurrentanddeferredtaxamounts,CAP-XXLimitedalsorecognisesthecurrenttaxliabilities(orassets)andthedeferredtaxassetsarisingfromunusedtaxlossesandunusedtaxcreditsassumedfromcontrolledentitiesinthetaxconsolidatedgroup.
Taxfundingagreementsarecurrentlynotinplace.Amountsassumedarerecognisedasacontributionto(ordistributionfrom)whollyownedtaxconsolidatedentities.
(i) LeasesLeasesofproperty,plantandequipmentwheretheGrouphassubstantiallyalltherisksandrewardsofownershipareclassifiedasfinanceleases.Financeleasesarecapitalisedatthelease’sinceptionatthelowerofthefairvalueoftheleasedpropertyandthepresentvalueoftheminimumleasepayments.Thecorrespondingrentalobligations,netoffinancecharges,areincludedinotherlongtermpayables.
Leasesinwhichasignificantportionoftherisksandrewardsofownershipareretainedbythelessorareclassifiedasoperatingleases(note24).Paymentsmadeunderoperatingleasesarechargedtotheincomestatementonastraight‐linebasisovertheperiodofthelease.
(j) Business combinationsThepurchasemethodofaccountingisusedtoaccountforallbusinesscombinations,includingbusinesscombinationsinvolvingentitiesorbusinessesundercommoncontrol,regardlessofwhetherequityinstrumentsorotherassetsareacquired.Costismeasuredasthefairvalueoftheassetsgiven,sharesissuedorliabilitiesincurredorassumedatthedateofexchangepluscostsdirectlyattributabletotheacquisition.Whereequityinstrumentsareissuedinanacquisition,thevalueoftheinstrumentsistheirpublishedmarketpriceasatthedateofexchangeunless,inrarecircumstances,itcanbedemonstratedthatthepublishedpriceatthedateofexchangeisanunreliableindicatoroffairvalueandthatotherevidenceandvaluationmethodsprovideamorereliablemeasureoffairvalue.Transactioncostsarisingontheissueofequityinstrumentsarerecogniseddirectlyinequity.
Identifiableassetsacquiredandliabilitiesandcontingentliabilitiesassumedinabusinesscombinationaremeasuredinitiallyattheirfairvaluesattheacquisitiondate,irrespectiveoftheextentofanyminorityinterest.TheexcessofthecostofacquisitionoverthefairvalueoftheGroup’sshareoftheidentifiablenetassetsacquiredisrecordedasgoodwill.Ifthecostofacquisitionislessthanthefairvalueofthenetassetsofthesubsidiaryacquired,thedifferenceisrecogniseddirectlyintheincomestatement,butonlyafterareassessmentoftheidentificationandmeasurementofthenetassetsacquired.
(k) Impairment of assetsAssetsthathaveanindefiniteusefullifearenotsubjecttoamortisationandaretestedannuallyforimpairment.Assetsthataresubjecttoamortisationarereviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountmaynotberecoverable.Animpairmentlossisrecognisedfortheamountbywhichtheasset’scarryingamountexceedsitsrecoverableamount.Therecoverableamountisthehigherofanasset’sfairvaluelesscoststosellandvalueinuse.Forthepurposesofassessingimpairment,assetsaregroupedatthelowestlevelsforwhichthereareseparatelyidentifiablecashinflowswhicharelargelyindependentofthecashinflowsfromotherassetsorgroupsofassets(cashgeneratingunits).Non-financialassetsotherthangoodwillthatsufferedanimpairmentarereviewedforpossiblereversaloftheimpairmentateachreportingdate.
(l) Cash and cash equivalentsCashandcashequivalentsincludescashonhand,depositsheldatcallwithfinancialinstitutions,othershort‐term,highlyliquid
notes to the financial statements 30 June 2006
continued
2� CAP-XX LIMITED ANNUAL REPORT 2006 06
investmentswithoriginalmaturitiesofthreemonthsorlessthatarereadilyconvertibletoknownamountsofcashandwhicharesubjecttoaninsignificantriskofchangesinvalue.
(m) Trade receivablesTradereceivablesarerecognisedinitiallyatfairvalueandsubsequentlymeasuredatamortisedcost,lessprovisionfordoubtfuldebts.Tradereceivablesaredueforsettlementnomorethan30daysfromthedateofrecognition.
Collectibilityoftradereceivablesisreviewedonanongoingbasis.Debtswhichareknowntobeuncollectiblearewrittenoff.AprovisionfordoubtfulreceivablesisestablishedwhenthereisobjectiveevidencethattheGroupwillnotbeabletocollectallamountsdueaccordingtotheoriginaltermsofreceivables.Theamountoftheprovisionisthedifferencebetweentheasset’scarryingamountandthepresentvalueofestimatedfuturecashflows,discountedattheeffectiveinterestrate.Cashflowsrelatingtoshort-termreceivablesarenotdiscountediftheeffectofdiscountingisimmaterial.Theamountoftheprovisionisrecognisedintheincomestatement.
(n) InventoriesRawmaterials,workinprogressandfinishedgoodsarestatedatthelowerofcostandnetrealisablevalue.Costcomprisesdirectmaterials,directlabourandanappropriateproportionofvariableandfixedoverheadexpenditure,thelatterbeingallocatedonthebasisofnormaloperatingcapacity.Costsareassignedtoindividualitemsofinventoryonthebasisofweightedaveragecosts.Netrealisablevalueistheestimatedsellingpriceintheordinarycourseofbusinesslesstheestimatedcostsofcompletionandtheestimatedcostsnecessarytomakethesale.
Rawmaterialsheldfordevelopmentpurposesarealsostatedatthelowerofcostandnetrealisablevalue,hencearegenerallyrecognisedintheincomestatementasanexpensewhenreceived.
(o) Fair value estimation Thefairvalueoffinancialassetsandfinancialliabilitiesmustbeestimatedforrecognitionandmeasurementorfordisclosurepurposes.Thenominalvaluelessestimatedcreditadjustmentsoftradereceivablesandpayablesareassumedtoapproximatetheirfairvalues.
(p) Property, plant and equipmentProperty,plantandequipmentisstatedathistoricalcostlessdepreciation.Historicalcostincludesexpenditurethatisdirectlyattributabletotheacquisitionoftheitems.
Subsequentcostsareincludedintheasset’scarryingamountorrecognisedasaseparateasset,asappropriate,onlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtotheGroupandthecostoftheitemcanbemeasuredreliably.Allotherrepairsandmaintenancearechargedtotheincomestatementduringthefinancialperiodinwhichtheyareincurred.
Depreciationonassetsiscalculatedusingthestraight-linemethodtoallocatetheircostamounts,netoftheirresidualvaluesovertheirestimateusefullivesasfollows:
Leaseholdimprovements 2-5yearsFurnitureandfittings 2-10yearsPlantandequipment–Manufacturing 2-10yearsPlantandequipment–Research&Development 2-10years
Theassets’residualvaluesandusefullivesarereviewed,andadjustedifappropriate,ateachbalancesheetdate.
Anasset’scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset’scarryingamountisgreaterthanitsestimatedrecoverableamount(note1(k)).
notes to the financial statements 30 June 2006
continued
2�CAP-XX LIMITED ANNUAL REPORT 200606
Gainsandlossesondisposalsaredeterminedbycomparingproceedswithcarryingamount.Theseareincludedintheincomestatement.
(q) IntangiblesExpenditureonresearchactivities,undertakenwiththeprospectofobtainingnewscientificortechnicalknowledgeandunderstanding,isrecognisedintheincomestatementasanexpensewhenitisincurred.
Expenditureondevelopmentactivities,beingtheapplicationofresearchfindingsorotherknowledgetoaplanordesignfortheproductionofneworsubstantiallyimprovedproductsorservicesbeforethestartofcommercialproductionoruse,iscapitalisediftheproductorserviceistechnicallyandcommerciallyfeasibleandadequateresourcesareavailabletocompletedevelopment.Theexpenditurecapitalisedcomprisesalldirectlyattributablecosts,includingcostsofmaterials,services,directlabourandanappropriateproportionofoverheads.Otherdevelopmentexpenditureisrecognisedintheincomestatementasanexpenseasincurred.Capitaliseddevelopmentexpenditureisstatedatcostlessaccumulatedamortisation.Amortisationiscalculatedusingthestraight‐linemethodtoallocatethecostovertheperiodoftheexpectedbenefit.ThedirectorsbelievetheGrouphavenotincurreddevelopmentexpenditurethatmettheconditionsforcapitalisation.
Expenditureonpatentsarecapitalisedwhenthepatentisofasignificantvalue.Otherwise,theexpenditureisrecognisedintheincomestatementasanexpensewhenitisincurred.NosignificantpatentshavebeencapitalisedasthetimebetweenachievingtechnicalfeasibilityandthegeneralavailabilityoftheGroup’sproducthasbeenrelativelyshort.
(r) Trade and other payablesTheseamountsrepresentliabilitiesforgoodsandservicesprovidedtotheGrouppriortotheendoffinancialyearwhichareunpaid.Theamountsareunsecuredandareusuallypaidwithin55daysofrecognition.
(s) BorrowingsBorrowingsareinitiallyrecognisedatfairvalue,netoftransactioncostsincurred.Borrowingsaresubsequentlymeasuredatamortisedcost.Anydifferencebetweentheproceeds(netoftransactioncosts)andtheredemptionamountisrecognisedintheincomestatementovertheperiodoftheborrowingsusingtheeffectiveinterestmethod.
Thefairvalueoftheliabilityportionofaconvertiblebondisdeterminedusingamarketinterestrateforanequivalentnon‐convertiblebond.Thisamountisrecordedasaliabilityonanamortisedcostbasisuntilextinguishedonconversionormaturityofthebonds.Theremainderoftheproceedsisallocatedtotheconversionoption.Thisisrecognisedandincludedinshareholders’equity,netofincometaxeffects.Thedirectorsdeterminedthatthereisnoremainderofproceedswhichcouldbeallocatedtotheconversionoption.
BorrowingsareclassifiedascurrentliabilitiesunlesstheGrouphasanunconditionalrighttodefersettlementoftheliabilityforatleast12monthsafterthebalancesheetdate.
(t) Borrowing costsBorrowingcostsareexpensed.
(u) ProvisionsProvisionsarerecognisedwhen:theGrouphasapresentlegalorconstructiveobligationasaresultofpastevents;itismorelikelythannotthatanoutflowofresourceswillberequiredtosettletheobligation;andtheamounthasbeenreliablyestimated.Provisionsarenotrecognisedforfutureoperatinglosses.
Wherethereareanumberofsimilarobligations,thelikelihoodthatanoutflowwillberequiredinsettlementisdeterminedbyconsideringtheclassofobligationsasawhole.Aprovisionisrecognisedevenifthelikelihoodofanoutflowwithrespecttoanyoneitemincludedinthesameclassofobligationsmaybesmall.
notes to the financial statements 30 June 2006
continued
�0 CAP-XX LIMITED ANNUAL REPORT 2006 06
(v) Employee benefits
(i) Wages and salaries and annual leave Liabilitiesforwagesandsalaries,includingnon‐monetarybenefitsandannualleaveexpectedtobesettledwithin12monthsofthereportingdatearerecognisedinotherpayablesinrespectofemployees’servicesuptothereportingdateandaremeasuredattheamountsexpectedtobepaidwhentheliabilitiesaresettled.
(ii) Long service leaveTheliabilityforlongserviceleaveisrecognisedintheprovisionforemployeebenefitsandmeasuredasthepresentvalueofexpectedfuturepaymentstobemadeinrespectofservicesprovidedbyemployeesuptothereportingdateusingtheprojectedunitcreditmethod.Considerationisgiventoexpectedfuturewageandsalarylevels,experienceofemployeedeparturesandperiodsofservice.Expectedfuturepaymentsarediscountedusingmarketyieldsatthereportingdateonnationalgovernmentbondswithtermstomaturityandcurrencythatmatch,ascloselyaspossible,theestimatedfuturecashoutflows.
(iii) Retirement benefit obligations TheGroupdoesnotmaintainaGroupsuperannuationplan.TheGroupmakesfixedpercentagecontributionsforallAustralianresidentemployeestocomplyingthirdpartysuperannuationfunds.TheGroup’slegalorconstructiveobligationislimitedtothesecontributions.
Contributionstothecomplyingthirdpartysuperannuationfundsarerecognisedasanexpenseastheybecomepayable.Prepaidcontributionsarerecognisedasanassettotheextentthatacashrefundorareductioninthefuturepaymentsisavailable.
(iv) Share-based paymentsShare-basedcompensationbenefitsareprovidedtoemployeesviathe2006ShareOptionExchangeandthe2006EmployeeShareOptionPlan.Informationrelatingtotheseschemesissetoutinnote29.
shares options granted before 7 november 2002 and/or vested before 1 January 2005
Noexpenseisrecognisedinrespectoftheseoptions.Thesharesarerecognisedwhentheoptionsareexercisedandtheproceedsreceivedallocatedtosharecapital.
shares options granted after 7 november 2002 and vested after 1 January 2005
Thefairvalueofoptionsgrantedunderthe2006ShareOptionExchangePlanandthe2006EmployeeShareOptionPlanisrecognisedasanemployeebenefitexpensewithacorrespondingincreaseinequity.Thefairvalueismeasuredatgrantdateandrecognisedovertheperiodduringwhichtheemployeesbecomeunconditionallyentitledtotheoptions.
ThefairvalueatgrantdateisindependentlydeterminedusingaBlack‐Scholesoptionpricingmodelthattakesintoaccounttheexerciseprice,thetermoftheoption,theimpactofdilution,thenon‐tradeablenatureoftheoption,thesharepriceatgrantdateandexpectedpricevolatilityoftheunderlyingshare,theexpecteddividendyieldandtherisk‐freeinterestrateforthetermoftheoption.
Thefairvalueoftheoptionsgrantedexcludestheimpactofanynon‐marketvestingconditions(forexample,profitabilityandsalesgrowthtargets).Non‐marketvestingconditionsareincludedinassumptionsaboutthenumberofoptionsthatareexpectedtobecomeexercisable.Ateachbalancesheetdate,theentityrevisesitsestimateofthenumberofoptionsthatareexpectedtobecomeexercisable.Theemployeebenefitexpenserecognisedeachperiodtakesintoaccountthemostrecentestimate.
Upontheexerciseofoptions,theproceedsreceived,netofanydirectlyattributabletransactioncosts,arecreditedtosharecapital.
(v) Bonus plansTheGrouprecognisesaliabilityandanexpenseforbonuseswherecontractuallyobligedorwherethereisapastpracticethathascreatedaconstructiveobligation.
notes to the financial statements 30 June 2006
continued
��CAP-XX LIMITED ANNUAL REPORT 200606
(w) Contributed equity
Ordinarysharesareclassifiedasequity.Incrementalcostsdirectlyattributabletotheissueofnewsharesoroptionsareshowninequityasadeduction,netoftax,fromtheproceeds.
Iftheentityreacquiresitsownequityinstruments,egastheresultofasharebuyback,thoseinstrumentsaredeductedfromequityandtheassociatedsharesarecancelled.Nogainorlossisrecognisedintheprofitorlossandtheconsiderationpaidincludinganydirectlyattributableincrementalcosts(netofincometaxes)isrecogniseddirectlyinequity.
(x) Earnings per share
(i) Basic earnings per shareBasicearningspershareiscalculatedbydividingtheprofitattributabletoequityholdersofthecompany,excludinganycostsofservicingequityotherthanordinaryshares,bytheweightedaveragenumberofordinarysharesoutstandingduringthefinancialyear,adjustedforbonuselementsinordinarysharesissuedduringtheyear.
(ii) Diluted earnings per shareDilutedearningspershareadjuststhefiguresusedinthedeterminationofbasicearningspersharetotakeintoaccounttheafterincometaxeffectofinterestandotherfinancingcostsassociatedwithdilutivepotentialordinarysharesandtheweightedaveragenumberofsharesassumedtohavebeenissuedfornoconsiderationinrelationtodilutivepotentialordinaryshares.
(y) Goods and Services Tax (GST)Revenues,expensesandassetsarerecognisednetoftheamountofassociatedGST,unlesstheGSTincurredisnotrecoverablefromthetaxationauthority.Inthiscaseitisrecognisedaspartofthecostofacquisitionoftheassetoraspartoftheexpense.
ReceivablesandpayablesarestatedinclusiveoftheamountofGSTreceivableorpayable.ThenetamountofGSTrecoverablefrom,orpayableto,thetaxationauthorityisincludedwithotherreceivablesorpayablesinthebalancesheet.
Cashflowsarepresentedonagrossbasis.TheGSTcomponentsofcashflowsarisingfrominvestingorfinancingactivitieswhicharerecoverablefrom,orpayabletothetaxationauthority,arepresentedasoperatingcashflow.
(z) Rounding of amountsThecompanyisofakindreferredtoinClassorder98/0100,issuedbytheAustralianSecuritiesandInvestmentsCommission,relatingtothe‘’roundingoff’’ofamountsinthefinancialreport.AmountsinthefinancialreporthavebeenroundedoffinaccordancewiththatClassOrdertothenearestthousanddollars,orincertaincases,thenearestdollar.
(aa) New accounting standards and UIG interpretationsCertainnewaccountingstandardsandUIGinterpretationshavebeenpublishedthatarenotmandatoryfor30June2006reportingperiods.TheGroup’sassessmentoftheimpactofthesenewstandardsandinterpretationsissetoutbelow.
(i) UIG 4 Determining whether an Asset Contains a LeaseUIG4isapplicabletoannualperiodsbeginningonorafter1January2006.TheGrouphasnotelectedtoadoptUIG4early.ItwillapplyUIG4inits2007financialstatementsandtheUIG4transitionprovisions.TheGroupwillthereforeapplyUIG4onthebasisoffactsandcircumstancesthatexistedasof1July2006.ImplementationofUIG4isnotexpectedtochangetheaccountingforanyoftheGroup’scurrentarrangements.
(ii) UIG 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation FundsTheGroupdoesnothaveinterestsindecommissioning,restorationandenvironmentalrehabilitationfunds.ThisinterpretationwillnotaffecttheGroup’sfinancialstatements.
notes to the financial statements 30 June 2006
continued
�2 CAP-XX LIMITED ANNUAL REPORT 2006 06
(iii) AASB 2005 9 Amendments to Australian Accounting Standards [AASB 4, AASB 1023, AASB 139 & AASB 132]AASB20059isapplicabletoannualreportingperiodsbeginningonorafter1January2006.Theamendmentsrelatetotheaccountingforfinancialguaranteecontracts.TheGrouphasnotelectedtoadopttheamendmentsearly.Itwillapplytherevisedstandardsinits2007financialstatements.Applicationoftherevisedrulesmayresultintherecognitionoffinancialliabilitiesinthefinancialstatementsoftheparententityunderguaranteesgiveninrespectofamountspayablebywhollyownedsubsidiaries.Anassessmentofthefairvalueoftheseguaranteeshasnotyetbeenperformed.ThenewruleswillbeimplementedretrospectivelywitharestatementofthecomparativesasrequiredbyAASB108AccountingPolicies,ChangesinAccountingEstimatesandErrors.
(iv) AASB 7 Financial Instruments: Disclosures and AASB 2005 10 Amendments to Australian Accounting Standards [AASB 132, AASB 101, AASB 114, AASB 117, AASB 133, AASB 139, AASB 1, AASB 4, AASB 1023 & AASB 1038]AASB7andAASB200510areapplicabletoannualreportingperiodsbeginningonorafter1January2007.TheGrouphasnotadoptedthestandardsearly.Applicationofthestandardswillnotaffectanyoftheamountsrecognisedinthefinancialstatements,butwillimpactthetypeofinformationdisclosedinrelationtotheGroup’sfinancialinstruments.
(v) UIG 6 Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic EquipmentUIG6isapplicabletoannualreportingperiodsbeginningonorafter1December2005.TheGrouphasnotsoldanyelectronicorelectricalequipmentontheEuropeanmarketandhasnotincurredanyassociatedliabilities.ThisinterpretationwillnotaffecttheGroup’sfinancialstatements.
(vi) AASB 2006 1 Amendments to Australian Accounting Standards [AASB 121]AASB2006-1isapplicabletoannualreportingperiodsendingonorafter31December2006.Theamendmentrelatestomonetaryitemsthatformpartofareportingentity’snetinvestmentinaforeignoperation.Itremovestherequirementthatsuchmonetaryitemshadtobedenominatedeitherinthefunctionalcurrencyofthereportingentityortheforeignoperation.CAP-XXLimiteddoesnothaveanymonetaryitemsformingpartofanetinvestmentinaforeignoperation.TheamendmenttoAASB121willthereforehavenoimpactontheGroup’sfinancialstatements.
Note 2 Financial risk managementTheGroup’sactivitiesexposeittoavarietyoffinancialrisks;marketrisk(includingcurrencyrisk,fairvalueinterestrateriskandpricerisk),creditrisk,liquidityriskandcashflowinterestraterisk.TheGroup’soverallriskmanagementprogramfocusesontheunpredictabilityoffinancialmarketsandseekstominimisepotentialadverseeffectsonthefinancialperformanceoftheGroup.
(a) Market risk
(i) Foreign exchange riskForeignexchangeriskariseswhenfuturecommercialtransactionsandrecognisedassetsandliabilitiesaredenominatedinacurrencythatisnottheentity’sfunctionalcurrency.
TheGroupoperatesinternationallyandisexposedtoforeignexchangeriskarisingparticularlyfromcurrencyexposurestotheUSdollar.TheGrouphastodatemanagedthisriskbysellingUSdollarswhenforeignexchangerateshavebeenfavourableandcappingexposuresthroughforeignexchange“stop-loss”sellorders.Forwardcurrencycontractsarealsousedtomanageforeignexchangerisk.
(ii) Price riskTheGroupisnotexposedtoequitysecuritiespricerisknortocommoditypricerisk.
(iii) Fair value interest rate riskReferto(d)below.
(b) Credit riskTheGrouphassomeconcentrationsofcreditrisk.TheGrouphaspoliciesinplacetoensurethatsalesofproductsaremadetocustomerswithanappropriatecredithistory.TheGrouphasnocreditexposuretoanyfinancialinstitution.
notes to the financial statements 30 June 2006
continued
��CAP-XX LIMITED ANNUAL REPORT 200606
(c) Liquidity riskPrudentliquidityriskmanagementimpliesmaintainingsufficientcash,theavailabilityoffundingthroughtheabilitytoclose‐outmarketpositions.TheGrouphasexperiencedrecurringoperatinglossesandoperatingcashoutflowssinceinceptionto30June2006astheGroupistransitioningfromadevelopmentstage.DuetothenegativecashflowpositiontheGrouphasnotcommittedtoanycreditfacilitiesratherrelieduponequityanddebtfinancingthroughprivateandpublicequityinvestors.
(d) Cash flow and fair value interest rate riskTheGroup’sinterest-rateriskmainlyarisesfrominterestbearingassets,withtheGroup’sincomeandoperatingcashflowsexposedtochangesinmarketinterestrates.TheinterestbearingassetshavebeenpredominantlydepositedatshorttermfixedratesexposingtheGrouptocashflowinterest-raterisk.
TheGroup’sinterestrateriskalsoarosefromborrowings.TheseborrowingshadbeenissuedatfixedratesexposingtheGrouptofairvalueinterestraterisk.Asat30June2006,theGrouphasnoborrowings.
Note � Critical accounting estimates and judgements Estimatesandjudgementsarecontinuallyevaluatedandarebasedonhistoricalexperienceandotherfactors,includingexpectationsoffutureeventsthatarebelievedtobereasonableunderthecircumstances.
(a) Critical accounting estimates and assumptions TheGroupmakesestimatesandassumptionsconcerningthefuture.Theresultingaccountingestimateswill,bydefinition,seldomequaltherelatedactualresults.Apartfromthegoingconcernassumptionasdiscussedinnote1(b),theestimatesandassumptionsthathaveasignificantriskofcausingamaterialadjustmenttothecarryingamountsofassetsandliabilitieswithinthenextfinancialyeararediscussedbelow.
(b) Critical judgements in applying the entity’s accounting policies
(i) Impairment loss and accelerated depreciation plant and equipmentTheGroupsignedacontractfortheoutsourcingofvolumeassemblymanufacturingwithPolarTwinAdvance(M)Sdn.Bhd.(PTA)on5October2004.WiththeintroductionoftheoutsourcedvolumeassemblymanufacturingcapacityatPTA,thebookvalueoftheplantandequipmentheldattheGroup’sSydney,Australiamanufacturingfacilitywasreviewedforimpairmentinaccordancewiththeaccountingpolicystatedinnote1(k)and1(p).Itwasreasonablybelievedthatby1July2006allvolumeassemblymanufacturingwillbeoutsourcedtoPTAandtheaffectedplantandequipmentremaininginSydney,Australiawillbeusedforproductdevelopmentandprocessimprovementpurposesonly.Accordingly,assetswithawrittendownvalueof$896,000andcapitalworksinprogressof$133,000werewrittendowntonilat30June2005andotherassetshavebeensubjectedtoaccelerateddepreciationfrom1July2004resultinginanincreasedepreciationchargesof$1,907,000fortheyearended30June2006and$1,942,000fortheyearended30June2005.
Asat30June2005theGrouphasalsorecognisedalossonthesaleofacertainitemofplantandequipmenttoPTA.TheGroupwasoriginallycontractedtosupplyasecondhandmachinetoPTAundertheoutsourcedManufacturerAgreementdated5October2004.SubsequenttothisdatetheGroupelectedtosupplytoPTAanewmachinewhichwasmoretechnicallyadvancedandefficientforhighvolumemanufacturingthantheproposedsecondhandmachine.ThenewmachinewasunderconstructionandwascompletedinAugust2005andtheGroupagreedtobeartheloss.ThenewmachinehasbeeninstalledatPTAandisnowfullyoperational.Asat30June2005PTAhadpaidforthemachineandthesaleproceedsareincludedinnote15.Asat30June2005theGroupalsowrotedownthenewmachinetoitsrecoverableamount,beingtheadvancedsaleproceeds,whichresultedinanimpairmentlossof$708,000.
notes to the financial statements 30 June 2006
continued
�� CAP-XX LIMITED ANNUAL REPORT 2006 06
InsummarytheGroupincurredthefollowingone-offcharges:
$ ‘ 000
year ended 30 June 2005Impairmentlossassetsduetooutsourcingmanufacturingcapacity 1,029Impairmentmachinetoitsnetrealisablevalue,beingitsproceeds 708
Impairmentloss 1,737
Accelerateddepreciationplantandequipment 1,942
Totalone-offcharges 3,679
Yearended30June2006Accelerateddepreciationplantandequipment 1,907
Totalone-offcharges 1,907
Note � Segment information
(a) Description of segments
Business segments - primary reportingTheconsolidatedentityoperatesinasinglebusinesssegmentwhichisthedevelopment,manufactureandsaleofsupercapacitors.
Geographical segments - secondary reportingAlthoughtheconsolidatedentityismanagedonaglobalbasis,itoperatesin3maingeographicalareasbeingAsia,NorthAmericaandEurope.
Geographicalsegmentscanbesummarisedasfollows:
Segment revenues from sales to external customers Segment assets 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Australia - - 22,235 7,202Asia 1,017 1,266 400 176NorthAmerica 1,007 783 454 4,540Europe 557 173 176 17
2,��� 2,222 2�,26� ��,���
Segmentrevenuesareallocatedbasedonthecountryinwhichthecustomerislocated.Segmentassetsandcapitalexpenditureareallocatedbasedonwheretheassetsarelocated.
(b) Notes to and forming part of the segment information
(i) Accounting policiesSegmentinformationispreparedinconformitywiththeaccountingpoliciesoftheentityasdisclosedinnote1andaccountingstandardAASB114SegmentReporting.Segmentrevenuesandassetsarethosethataredirectlyattributabletoasegmentandtherelevantportionthatcanbeallocatedtothesegmentonareasonablebasis.Segmentassetsincludeallassetsusedbyasegmentandconsistprimarilyofoperatingcash,receivables,inventoriesandproperty,plantandequipment,netofrelatedprovisions.Segmentassetsdonotincludeincometaxes.
notes to the financial statements 30 June 2006
continued
��CAP-XX LIMITED ANNUAL REPORT 200606
(ii) Inter-segment transfers
Segmentrevenuesincludetransfersbetweensegments.Suchtransfersarepricedonan‘’arm’s‐length’’basisandareeliminatedonconsolidationandnotdisclosedinthisnote.
(iii) Acquisitions of property, plant and equipment, intangibles and other non-current segment assets.
Theacquisitionsofnon-currentsegmentassets(refernote13and14)relatetotheAustraliansegment.
Note � Revenue Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Sales revenueSaleofgoods 2,581 2,222 - -
Other revenueManagementandotherfees 339 379 - -Licencefees - - 322 322Interest 425 100 362 83
764 479 684 405
Total revenue �,��� 2,�0� 6�� �0�
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Note 6 Other IncomeNetgainondisposalofproperty,plantandequipment 26 237 - -Foreignexchangegains(net) - 191 451 -Governmentgrants(note(a)) 150 786 - -
��6 �,2�� ��� -
(a) Government grantsExportmarketdevelopmentgrantsof$150,000(2005:$150,000)andresearchanddevelopmentstartgrantsof$Nil(2005:$636,000)wererecognisedasotherincomebytheGroupduringtheyearended30June2006.Therearenounfulfilledconditionsattachingtothesegrants.
Theresearchanddevelopmentstartgrantsaresubjecttoalimiteddiscretionaryrightto“claw-back”aproportionoffundingonaslidingscaleforupto5yearsfromthecompletionoftheproject.Theresearchanddevelopmentstartgrantreceivedtotalling$3,172,000wascompletedon30March2005andnoclaimfor“claw-back”hasbeenmadeontheGroup.
TheGroupdidnotbenefitdirectlyfromanyotherformsofgovernmentassistance.
notes to the financial statements 30 June 2006
continued
�6 CAP-XX LIMITED ANNUAL REPORT 2006 06
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Note � ExpensesLossbeforeincometaxincludesthefollowingspecificexpenses:
Cost of sale of goodsDirectmaterialsandlabour 1,958 2,387 - -Indirectmanufacturingexpenses 4,793 5,452 - -
Totalcostofsaleofgoods 6,��� �,��� - -
DepreciationPlantandequipment 3,685 4,341 - -Furnitureandfittings 4 4 - -Leaseholdimprovements 151 123 - -
Totaldepreciation �,��0 �,�6� - -
Finance costs – netConvertiblenoteissuancecosts 21 40 21 40Amortisationofconvertiblenoteissuancecosts 39 38 39 38Interestandfinancechargespayable 872 295 555 162
932 373 615 240Amountcapitalised (21) (40) (21) (40)
Finance costs expensed ��� ��� ��� 200
other expenses Demergercosts 602 - 580 -Foreignexchangelosses(refernote6fornetgains) 58 - - 84Provisionfornonrecoveryrelatedpartiesloans/(write-back) (401) 401 9,351 2,652Impairmentlossonplantandequipment(refernote3(b)) - 1,737 - -Impairmentlossongoodwill 386 - - -
6�� 2,��� �,��� 2,��6
rental expense relating to operating leasesMinimumleasepayments 388 377 - -
Employeebenefitsexpense 3,828 4,532 - -
notes to the financial statements 30 June 2006
continued
��CAP-XX LIMITED ANNUAL REPORT 200606
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Note � Income Tax Benefit
(a) Income tax benefitCurrenttax - - - -Deferredtax - - - -
- - - -
(b) Numerical reconciliation of income tax benefit to prima facie tax benefit(Loss)beforeincometaxbenefit (10,322) (11,683) (14,961) (9,116)
TaxattheAustraliantaxrateof30% (3,097) (3,505) (4,488) (2,735)Taxeffectofamountswhicharenotdeductible(taxable)incalculatingtaxableincome:
Goodwillimpairment 116 - - -Sharebasedpayments 17 - 17 -Sundryitems 11 15 - -
(2,953) (3,490) (4,471) (2,735)Benefitarisingfromtemporarydifferencesnotrecognised (91) 238 2,804 784Benefitarisingfromtaxlossesnotrecognised 3,044 3,252 1,667 1,951
Income tax benefit - - - -
(c) Tax losses Unusedtaxlossesforwhichnodeferredtaxassethasbeenrecognised 52,946 42,800 52,946 42,800
Potentialtaxbenefit@30% 15,884 12,840 15,884 12,840
AllunusedtaxlosseswereincurredbyAustralianentities.Thedeferredtaxassetsinrelationtothetaxlosseswillonlybeobtainedif:
(i) theconsolidatedentityderivesfutureassessableincomeofanatureandofanamountsufficienttoenablethebenefitfromthedeductionsforthelossestoberealised,and
(ii) theconsolidatedentitycontinuestocomplywiththeconditionsfordeductibilityimposedbytaxlegislation,and(iii)nochangesintaxlegislationadverselyaffecttheconsolidatedentityinrealisingthebenefitfromthedeductionsforthelosses.
(d) Unrecognised temporary differencesTemporarydifferenceforwhichnodeferredtaxassethasbeenrecognised 798 1,101 23,971 14,623
Potentialtaxbenefit@30% 239 330 7,191 4,387
(e) Tax consolidation legislationCAP-XXLimitedanditswhollyownedAustraliancontrolledentitieshaveimplementedthetaxconsolidationlegislationasof1July2002.Theaccountingpolicyinrelationtothislegislationissetoutinnote1(h).CAP-XXLimitedhasnotrecognisedanytaxconsolidationdistributionfromortowhollyownedtaxconsolidatedentities.
notes to the financial statements 30 June 2006
continued
�� CAP-XX LIMITED ANNUAL REPORT 2006 06
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Note � - Current assets - Cash and cash equivalentsCashatbankandonhand 384 117 5 3Cashondeposits 19,723 1,074 19,691 23
20,�0� �,��� ��,6�6 26
(a) Cash at bank and on hand Thesearebearingfloatinginterestratesbetween0%and3%(2005:0%and2.5%).
(b) Deposits at callThedepositsarebearingfloatinginterestratesbetween3%and5.8%(2005:1.5%and5.3%).Thesedepositshaveanaveragematurityof30to60days.
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Note �0 Current assets – ReceivablesTradereceivables 886 300 - -Provisionfordoubtfulreceivables (38) (17) - -
848 283 - -Amountsduefromrelatedparties - 4,757 24,014 18,183Provisionfordoubtfulreceivables - (401) (24,014) (14,662)
- 4,356 - 3,521Otherreceivables 2 83 - -
��0 �,�22 - �,�2�
(a) Bad and doubtful trade receivablesTheGrouphasrecognisedalossof$21,000(2005:$17,000)inrespectofbadanddoubtfultradereceivablesduringtheyearended30June2006.Thelosshasbeenincludedin“Generalandadministrativeexpenses”intheincomestatement.Theparententityhasrecognisedalossof$9,351,000(2005:$2,652,000)inrespectofdoubtfulamountsduefromrelatedpartiesduringtheyearended30June2006.Thelosshasbeenincludedin“Otherexpenses”intheincomestatement.
(b) Other receivablesTheseamountsgenerallyarisefromtransactionsoutsidetheusualoperatingactivitiesoftheGroup.Collateralisnotnormallyobtained.
(c) Interest rate risk and credit riskWiththeexceptionofsomeamountsduefromrelatedparties,thecurrentreceivablesarenon-interestbearing.Furtherinformationrelatingtoamountsduefromrelatedpartiesissetoutinnote25.Thereissomeconcentrationofcreditriskwithrespecttocurrentreceivables,astheGrouphasalimitednumberofcustomers,internationallydispersed.Refertonote2formoreinformationontheriskmanagementpolicyoftheGroup.
notes to the financial statements 30 June 2006
continued
��CAP-XX LIMITED ANNUAL REPORT 200606
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Note �� Current assets - InventoriesRawmaterialsandstores-atcost 206 245 - -Finishedgoods-atcost - 116 - -Finishedgoods-atnetrealisablevalue 145 - - -
145 116 - -Developmentmaterials-atnetrealisablevalue - - - -
��� �6� - -
(a) Inventory expenseInventoriesrecognisedasexpenseduringtheyearended30June2006amountedto$455,000(2005:$388,000).
Write‐downsofinventoriestonetrealisablevaluerecognisedasanexpenseduringtheyearended30June2006amountedto$83,000(2005:$238,000).Theexpenseforfinishedgoodshasbeenincludedin‘costofsaleofgoods’intheincomestatement.Theexpensefordevelopmentmaterialshasbeenincludedin‘researchanddevelopmentexpenses’intheincomestatement.
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Note �2 Current assets - OtherPrepayments 126 62 43 40Convertiblenoteissuancecosts - 56 - 56Amortisationofissuancecosts - (38) - (38)
- 18 - 18
�26 �0 �� ��
notes to the financial statements 30 June 2006
continued
�0 CAP-XX LIMITED ANNUAL REPORT 2006 06
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Note �� Non-current assets - Property, plant and equipment Plantandequipmentatcost 12,515 12,259 - -Accumulateddepreciation (11,187) (7,502) - -
Netbookamount 1,328 4,757 - -
Capitalworksinprogress 283 449 - - Furnitureandfittingsatcost 64 64 - -Accumulateddepreciation (29) (25) - -
Netbookamount 35 39 - -
Leaseholdimprovementsatcost 437 437 - -Accumulateddepreciation (405) (254) - -
Netbookamount 32 183 - -
Totalproperty,plantandequipment 13,299 13,209 - -Totalaccumulateddepreciation (11,621) (7,781) - -
Total net book amount �,6�� �,�2� - -
Movement in classes of assets: Plant and Capital works Furniture Leasehold TotalConsolidated equipment in progress and fittings improvements
$ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Year ended 30 June 2005Openingnetbookamount 9,824 670 43 243 10,780Additions - 1,136 - 63 1,199Transfersfromcapitalworksinprogress 516 (516) - - -Disposals (346) - - - (346)Writeoffofassets1 (896) (841) - - (1,737)Depreciationcharge (4,341) - (4) (123) (4,468)
Closing net book amount �,��� ��� �� ��� �,�2�
Year ended 30 June 2006 Openingnetbookamount 4,757 449 39 183 5,428Additions - 840 - - 840Transferstoplantandequipment 256 (256) - - -Disposals - (750) - - (750)Depreciation (3,685) - (4) (151) (3,840)
Closingnetbookamount 1,328 283 35 32 1,678
1Thewriteoffofassetsisaresultofthereviewforimpairmenttogetherwiththewritedownofassetsunderconstructiontotheirnetrealisablevalueasdescribedinnote3(b).
notes to the financial statements 30 June 2006
continued
��CAP-XX LIMITED ANNUAL REPORT 200606
Parent entityTherewerenomovementsinproperty,plantandequipmentintheparententity.
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Note �� Non-current assets - OtherRentalbond 153 153 - -Sharesinsubsidiaries(note26) - - - -Goodwill(note26) - - - -
��� ��� - -
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Note �� Current liabilities - PayablesTradepayables 841 636 42 -Othercreditorsandaccruedexpenses 229 322 - -Advancepaymentonsaleofplantandequipment2 - 723 - -
�,0�0 �,6�� �2 -
2Thisliabilityisdescribedinnote3(b).
notes to the financial statements 30 June 2006
continued
�2 CAP-XX LIMITED ANNUAL REPORT 2006 06
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Note �6 Current liabilities - ProvisionsEmployeebenefits 287 377 - -Productreturnsandwarranties 162 105 - -
��� ��2 - -
(a) Product returns and warrantiesProvisionismadeforestimatedproductreturnsandwarrantyclaimsinrespectofproductssold.TheGroupprovidesaoneyearwarrantyonproductssoldtocustomers.TheGrouphastodateexperiencedminimalproductreturnsandwarrantyclaims;howevermanagementconsidersitprudenttomaintainaprovisionagainstanyestimatedproductreturnsandwarrantyclaims.
(b) Movements in provisionsMovementsintheproductreturnsandwarrantiesprovisionduringthefinancialyearsaresetoutbelow:
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Carryingamountatstartofyear 105 23 - -Additionalprovisionsrecognisedduringtheyear 57 82 - -
Carryingamountatendofyear �62 �0� - -
notes to the financial statements 30 June 2006
continued
��CAP-XX LIMITED ANNUAL REPORT 200606
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Note �� Current liabilities - BorrowingsUnsecuredConvertiblenotes - 3,823 - 3,823
SecuredAmountsduetorelatedparties - 8,846 - -
- �2,66� - �,�2�
(a) Convertible notesThefollowingconvertiblenoteshavebeenissuedinUSdollarsandcanbesummarisedasfollows:
Consolidated Parent Entity 2006 200� 2006 200� US$ ‘ 000 US$ ‘ 000 US$ ‘ 000 US$ ‘ 000
CAP-XXLimitedA-Notes–19April2004 - 170 - 170CAP-XXLimitedA-Notes–17September2004 - 113 - 113CAP-XXLimitedA-Notes–7February2005 - 2,500 - 2,500
ConvertibleA-Notes - 2,783 - 2,783Accruedinterest* - 124 - 124
TotalconvertiblenoteliabilityinUSdollars - 2,907 - 2,907
A$ ‘ 000 A$ ‘ 000 A$ ‘ 000 A$ ‘ 000Total convertible note liability in Australian dollars (using the closing rate) - �,�2� - �,�2�
*interestexpenseiscalculatedbyapplyingtheeffectiveinterestrateof10%totheliabilitycomponent.
Movementsintheconvertiblenoteliabilityduringthefinancialyeararesetoutbelow:
Consolidated and parent entity US$ ‘ 000 A$ ‘ 000Balanceasat30June2005 2,907 3,823B-Notes-4January2006 1,659 2,270B-Notes-17February2006 1,106 1,513A&B-Notes-5April2006 6,404 8,983Accruedinterestcharges 379 510Foreignexchangegains - (428)
12,455 16,671Less:Repaymenton27April2006 (12,455) (16,671)
Balance as at �0 June 2006 - -
notes to the financial statements 30 June 2006
continued
�� CAP-XX LIMITED ANNUAL REPORT 2006 06
Initial and Second ClosingsOn19April2004,CAP-XX,IncandCAP-XXLimitedcollectivelysoldUS$5,000,000ofconvertiblenotestoparticipatingstockholdersofCAP-XX,Inc(the“NoteFinancing”),ofwhichUS$3,000,000ofconvertiblenoteswereissuedatanInitialClosingthatoccurredon19April2004andUS$2,000,000ofconvertiblenoteswereissuedattheSecondClosingthatoccurredon17September2004raisingA$3,992,000andA$2,880,000respectively.AtboththeInitialandSecondClosings,CAP-XXLimitedissuedandsoldA-NotestotwostockholdersandCAP-XX,IncissuesandsoldA-NotesandB-Notestootherstockholders.TheStockholderswhopurchasedNoteswereissuedA-WarrantsandB-Warrants.
BoththeA-NotesandB-Noteswereduetomatureon19May2005,unlessotherwiseaccelerateduponoccurrenceofcertaineventsofdefault.Thenoteholdersagreedon7February2005toamendthematuritydateuntilnoearlierthan31January2006.
Supplemental issueOn7February2005,CAP-XX,IncandCAP-XXLimitedcollectivelysoldafurtherUS$3,271,000ofconvertiblenotesasasupplementalissueraisingA$4,207,000.A-NotesonlywereissuedthetermsofwhichwerethesameasthepreviousA-Notes(asamended)andwereduetomaturenoearlierthan31January2006unlessotherwiseaccelerateduponoccurrenceofcertaineventsofdefault.Onmaturity,thenotes(inclusiveofaccruedinterestof10%perannumcompoundingmonthly)attheoptionofthenoteholdermayhave,eitherbedueandpayableorbeconvertedintoSeriesBPreferredStockofCAP-XX,Inc.Noobligationtorepaythenotesoutstandingexistedonorafterthatdateunlessnoticefromatleast65%oftheaggregateofallnotesoutstanding(inclusiveof3noteholderswhoheldSeriesBPreferredStockinCAP-XX,Incasdefined)wasreceived.
Second supplemental issue On4January2006,CAP-XXLimitedsoldafurtherUS$2,766,000(A$3,783,000)ofconvertibleB-notesasasecondsupplementalissue.US$1,659,000(A$2,270,000)ofconvertiblenoteswereissuedattheInitialClosingon4January2006andUS$1,106,000(A$1,513,000)ofconvertiblenoteswereissuedattheSecondClosingthatoccurredon17February2006.
TheseB-NotescarriedliquidationandrepaymentpreferencesthatrankedabovethepreviousA&B-NotesissuedbyCAP-XX,IncorCAP-XXLimited.OtherwisethetermsarethesameasthepreviousB-Notes(asamended)andwereduetomaturenoearlierthan30June2006unlessotherwiseaccelerateduponoccurrenceofcertaineventsofdefault.Onmaturity,thenotes(inclusiveofaccruedinterestof10%perannumcompoundingmonthly)attheoptionofthenoteholdermayeitherbedueandpayableorbeconvertedintoSeriesBPreferredStockofCAP-XX,Inc.Noobligationtorepaythenotesoutstandingexistedonorafterthatdateunlessnoticefromatleast65%oftheaggregateofallnotesoutstanding(inclusiveof3noteholderswhoheldSeriesBPreferredStockinCAP-XX,Incasdefined)wasreceived.
Demerger and IPOOn5April2006aspartofDemerger(seenote25(f))holdersofconvertiblenotesinCAP-XX,IncexchangedtheirconvertiblenotesforsubstantiallysimilarconvertiblenotesofCAP-XXLimited.ThisresultedinthenetissueofUS$6,404,000(A$8,983,000)ofadditionalconvertiblenotesbyCAP-XXLimited.On27April2006thetotalconvertiblenoteliabilityinclusiveofaccruedinterestofUS$12,455,000(A$16,671,000)wasrepaidoutoftheproceedsoftheIPO.
A-Warrants and B-WarrantsAsdetailedabove,CAP-XX,Incand/orCAP-XXLimitedissuedA-WarrantsandB-WarrantsintheNoteFinancings.Thewarrantswereexercisableatanytimeaftertheearliertooccurof(X)theSecondClosing,(Y)fifteen(15)daysprecedingtheclosingdateofanyliquidationeventordeemedliquidationeventinvolvingtheCompany,or(Z)30November2004,uptotheearliertooccurof(i)thedateoftheclosingofCAP-XX,IncinitialpublicofferingpursuanttoaregistrationstatementundertheUSSecuritiesAct,(ii)ten(10)daysprecedingtheclosingdateofanydeemedliquidationeventinvolvingCAP-XX,Inc,(iii)theten(10)yearanniversaryofthedateofissuanceofthewarrants,or(iv)thedateoftheclosingoftheAIMlisting,suchdatesbeingtherespectivedatesofthevariousClosings.
TheA-WarrantsentitletheholdersthereoftoreceiveuponexercisesuchnumberofsharesofSeriesBPreferredequaltodividing(X)theproductobtainedbymultiplyingtheaggregateamountofA-Notespurchasedbytheholderby0.2,by(Y)thelowerofthethen
notes to the financial statements 30 June 2006
continued
��CAP-XX LIMITED ANNUAL REPORT 200606
effectiveconversionpricefortheSeriesBPreferredorthepricepershareatwhichCAP-XX,Incissuesequitysecuritiesinanewequityfinancing(asdefined)(the“StockPurchasePrice”).TheB-WarrantsentitletheholdersthereoftoreceiveuponexercisesuchnumberofsharesofSeriesBPreferredequaltodividing(X)theproductobtainedbymultiplyingtheaggregateamountofB-Notespurchasedbytheholderby0.4,by(Y)theStockPurchasePrice.
ThesharesofSeriesBPreferredissuablepursuanttotheA-WarrantsandB-WarrantswereexercisableatapriceofUS$0.01pershare.On5April2006aspartofDemergerholdersofexistingwarrantsofCAP-XX,IncexchangedtheirwarrantsforsubstantiallysimilarwarrantsofCAP-XXLimitedadjustedfora3:1sharesplitthatoccurredonDemerger.ThesewarrantswerefullyexercisedbyallnoteholdersforSeriesBpreferredsharesofCAP-XXLimitedon20April2006.
(c) Financing arrangementsDetailsofconvertiblenotesarenotedabove.TheGroupdoesnothaveaccesstoanyotherlinesofcredit.
(d) Interest rate risk exposureTheinterestratewasfixedat10%perannumcompoundedmonthly.Interestcommencedfromthedateofeachissueandcontinuedontheoutstandingprincipalamountuntilthenotewaspaid.
(e) Fair valueThecarryingamountofconvertiblenotesapproximatesthefairvalueastheywerenotreadilytradedonorganisedmarketsinstandardisedform.
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Note �� Non-current liabilities – ProvisionsEmployeebenefits–longserviceleave ��� 2� - -
notes to the financial statements 30 June 2006
continued
�6 CAP-XX LIMITED ANNUAL REPORT 2006 06
Parent Entity Parent Entity 2006 200� 2006 200� Shares Shares $ ‘ 000 $ ‘ 000
Note �� Contributed equity
(a) Share capital Fullypaidordinaryshares(noparvalue) ��,6��,0�� �,0��,0�� ��,��� ��,�2�
(b) Movement in ordinary share capital:Date Details Notes Number of shares Issue price $ ‘ 0001July2004 Openingbalance 3,394,169 - 41,1284February2005 Shareconsolidationon45:40basis (d) (377,130) - -
�0 June 200� Balance �,0��,0�� - 41,128
5April2006 Sharebuy-back (e) (932,761) $2.82 (2,630)5April2006 Shareconsolidation (d) (2,084,277) - -5April2006 Shareissue (f) 6,785,312 - -20April2006 ConversionofSeriesAPreferredShares (f) 3,920,744 - -20April2006 ConversionofSeriesBPreferredShares (f) 19,426,503 - 420April2006 ShareissuethroughIPO (g) 18,433,333 $2.23 41,01727June2006 Exerciseofstockoptions (h) 75,118 $0.47 35
��,��� Less:Costof20April2006shareissue (3,966)
�0 June 2006 Balance ��,6��,0�� ��,���
(c) Ordinary sharesAt30June2006,therewere48,641,011issuedordinaryshareswhichwerefullypaid,withnoparvalue.Ordinarysharesentitletheholdertoparticipateindividendsandtheproceedsonwindingupofthecompanyinproportiontothenumberofandamountspaidonthesharesheld.
Onashowofhandseveryholderofordinarysharespresentatameetinginpersonorbyproxy,isentitledtoonevote,anduponapolleachshareisentitledtoonevote.
(d) Share consolidationOn5February2005,theCompanycompletedaconsolidationofordinarysharesona45:40basis.Thenon5April2006,theCompanycompletedanotherconsolidationofordinarysharestoreducealloutstandingordinarysharestooneordinaryshare.
(e) Share buy-backOn5April2006theCompanypurchasedandcancelled932,761ordinarysharesoffmarketinordertosettleamountsduefromrelatedpartiesasdescribedinnote25(f)for$2,630,000.
(f) Share issue, exercise of warrants and conversion of preferred shares On5April2006,theCompanydistributedordinarysharesandpreferredsharestotheexistingstockholdersofCAP-XX,IncinsuchnumberstoreplicateintheCompanytheequityownershipstructureofthestockholdersinCAP-XX,Incwhichwasalsoinclusiveofa3:1sharesplit.Subsequently,asdescribedinnote25(f)on20April,2006preferredsharesissuedbythecompanywereconvertedtoordinaryshareswithApreferredsharesconvertedonbasisof1:2.872397andBpreferredsharesconvertedonbasisof1:3.828762.Furthermore,asdetailedinnote17on20April2006theholdersofConvertibleNotesexercisedallwarrantsoutstandingatUS$0.01nettingadditionalsharecapitalof$4,000.
notes to the financial statements 30 June 2006
continued
��CAP-XX LIMITED ANNUAL REPORT 200606
(g) Share issue through IPOAsdescribedinnote25(f)theCompanycompletedaninitialpublicoffering(IPO)ontheAlternativeInvestmentMarket(AIM),apartoftheLondonStockExchangeon20April2006whereonCAP-XXLimitedissued18,433,333ordinarysharesraisingnewcapitalof$37,051,000(netoflistingcostsof$3,966,000).Includedinthelistingcostsis$360,000ofsharebasedpayments,refertonote29forfurtherdetails.
(h) OptionsInformationrelatingtothe2006ShareOptionExchangeand2006EmployeeShareOptionPlan,includingdetailsofoptionsissued,exercisedandlapsedduringthefinancialyearandoptionsoutstandingattheendofthefinancialyear,issetoutinnote29.
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Note 20 Reserves and accumulated losses
(a) Reserves Foreigncurrencytranslationreserve (2) (1) - -Share-basedpaymentsreserve 416 - 416 -
��� (�) ��6 -
Movements: Foreign currency translation reserve Balance1July (1) (1) - -Currencytranslationdifferencesarisingduringtheyear (1) - - -
Balance30June (2) (1) - -
share-based payments reserve Balance1July - - - -Optionexpense 416 - 416 -
Balance30June 416 - 416 -
(b) Accumulated losses Movementsinaccumulatedlosseswereasfollows:
Balance1July (44,047) (32,364) (41,346) (32,230)Net(loss)fortheyear (10,322) (11,683) (14,961) (9,116)
Balance30June (��,�6�) (��,0��) (�6,�0�) (��,��6)
(c) Nature and purpose of reserves
(i) Foreign currency translation reserveExchangedifferencesarisingontranslationoftheforeigncontrolledentityaretakentotheforeigncurrencytranslationreserve,asdescribedinnote1(e).Thereserveisrecognisedinprofitandlosswhenthenetinvestmentisdisposedof.
(ii) Share-based payments reserveTheshare-basedpaymentsreserveisusedtorecognisethefairvalueofoptionsissuedbutnotexercised.
notes to the financial statements 30 June 2006
continued
�� CAP-XX LIMITED ANNUAL REPORT 2006 06
Note 2� Key management personnel disclosures
(a) Directors Thenamesofthedirectorswhohaveheldofficeduringthefinancialyearareasfollows:
Executive directorAnthonyKongats(ManagingDirector)
Non-executive directorsMichaelQuinn(Chairman) JohnMurray GrahamTitcombe (appointed20April2006)ChristerHarkonen (appointed20April2006)HockVoonLoo (resigned6April2006)IngoSusing (resigned27March2006) AndrewBailey (resigned6April2006) AllanAaron(alternatedirectortoJohnMurray) (resigned6April2006) JohnPaulKaumeyer(alternatedirectortoIngoSusing) (resigned27March2006)
(b) Key management and personnel compensation Keymanagementpersonnelcompensationissetoutbelow.ThekeymanagementpersonnelincludeallthedirectorsofthecompanyandthoseexecutivesthatreportdirectlytotheManagingDirector.
Consolidated Parent Entity 2006 200� 2006 200� $ $ $ $
Short-termbenefits 474,078 416,999 54,913 -Post-employmentbenefits 38,907 35,100 2,396 -Share-basedpayments 21,176 - 7,721 -Total ���,�6� ��2,0�� 6�,0�0 -
(c) Other transactions with key management personnel or entities related to them Informationontransactionswithkeymanagementpersonnelorentitiesrelatedtothem,otherthancompensation,aresetoutbelow.
TheCompanyhadenteredintoamanagementincentiveagreementwithkeymanagementandotherexecutivesforabonuspaymentifthecompanywassuccessfulwithatradesaleoftheGroupbefore30June2006.Thisagreementhasnotbeenextendedandexpiredon30June2006.Noexpensehasbeenrecognised.
Therearenoothertransactionswithkeymanagementpersonnel.
notes to the financial statements 30 June 2006
continued
��CAP-XX LIMITED ANNUAL REPORT 200606
Consolidated Parent Entity 2006 200� 2006 200� $ $ $ $
Note 22 Remuneration of auditors DuringtheyearthefollowingfeeswerepaidorpayableforservicesprovidedbytheauditoroftheGroup,itsrelatedpracticesandnon-relatedauditfirms:
(a) Assurance services
Audit servicesPricewaterhouseCoopersAustralianfirmAuditoffinancialreport 77,500 58,200 - -AuditoffinancialreportsofCAP-XX,Inc.forthepurposeoftheIPO 120,000 - 120,000 -AuditofAIFRSopeningbalancesheets 20,000 - 20,000 -
Total remuneration for audit services 2��,�00 ��,200 ��0,000 -
(b) Taxation servicesPricewaterhouseCoopersAustralianfirm
Taxcomplianceservices,includingreviewofcompanyincometaxreturns 54,527 146,905 - -InternationaltaxconsultingandtaxadviceondemergerandCompanyrestructure 278,665 - 278,665 -
RelatedpracticesofPricewaterhouseCoopersAustralianfirmTaxcomplianceservices,includingreviewofcompanyincometaxreturns 50,934 46,700 - -InternationaltaxconsultingandtaxadviceondemergerandCompanyrestructure 98,106 - 98,106 -
Total remuneration for taxation services ��2,2�2 ���,60� ��6,��� -
ItistheGroup’spolicytoemployPricewaterhouseCoopersonassignmentsadditionaltotheirstatutoryauditdutieswherePricewaterhouseCoopers’expertiseandexperiencewiththeGroupareimportant.Theseassignmentsareprincipallytaxadvice,orwherePricewaterhouseCoopersisawardedassignmentsonacompetitivebasis.ItistheGroup’spolicytoseekcompetitivetendersforallmajorconsultingprojects.
Note 2� ContingenciesWhilenoclaimshavebeenmadeasyet,theresearchanddevelopmentstartgrantsaresubjecttoalimiteddiscretionaryrightoftheAustraliangovernmentto“claw-back”aproportionofthefundingonaslidingscaleforuptofiveyearsfrom30March2005.Thedirectorsbelievehoweverthatthecompanyhasmetallconditionsattachedtothegrants.
Aletterofcomfortdated5April2006wasprovidedbytheCompanytoCAP-XX,IncaspartoftheDemerger(refernote25(f)).Pursuanttotheletterofcomfort,theCompanyundertakestosupportthefinancialcommitmentsofCAP-XX,Inc.Theundertakingislimitedfor12monthsfromthedateoftheletterandiscappedatUS$100,000.
notes to the financial statements 30 June 2006
continued
�0 CAP-XX LIMITED ANNUAL REPORT 2006 06
Note 2� Commitments
(a) Capital commitmentsCapitalexpenditurecontractedforatreportingdatebutnotrecognisedasliabilitiesisasfollows:
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
property, plant and equipment Withinoneyear 555 507 - -Laterthanoneyearbutnotlaterthan5years - - - -Laterthan5years - - - -
��� �0� - -
(b) Lease commitments: Group / company as lesseeTheGroupleasesfactoryspacewithanofficeandwarehouseunderanon‐cancellableoperatingleaseduetoexpireon3October2007.TheGrouphasarenewalrightoptionwhichexpires6monthsbeforetheexpirationofthelease.Onrenewal,thetermsoftheleasearerenegotiated.
TheGroupalsoleasesofficeequipmentandofficespaceundercancellableoperatingleases.TheGroupisrequiredtogive3monthsnoticeforterminationoftheseleases.
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Commitmentsforminimumleasepaymentsinrelationtonon‐cancellableoperatingleasesarepayableasfollows:
Withinoneyear 310 328 - -Laterthanoneyearbutnotlaterthan5years 89 - - -Laterthan5years - - - -
��� �2� - -
Note 2� Related party transactions and demerger
(a) Parent entitySince5April2006theultimateparententitywithintheGroupisCAP-XXLimited.Priorto5April2006,theCompanywasawholly-ownedsubsidiaryofCAP-XX,Inc,aDelawarecompanyincorporatedintheUnitedStatesofAmerica.Aspartofthedemergerprocess,alltheissuedsharesofCAP-XXLimitedwereconsolidatedintoasingleOrdinaryShareon5April2006,whichwassubsequentlytransferredtoAnthonyKongats,uponwhichthecompanyissuedfurtherOrdinarySharesasdescribedinnote19.
(b) SubsidiariesInterestsinsubsidiariesaresetoutinnote26.
notes to the financial statements 30 June 2006
continued
��CAP-XX LIMITED ANNUAL REPORT 200606
(c) Key management personnelDisclosuresrelatingtokeymanagementpersonnelaresetoutinnote21.
(d) Transactions with related parties and outstanding balances Consolidated Parent Entity 2006 200� 2006 200� $ $ $ $
Thefollowingtransactionsoccurredwithrelatedpartiesotherthankeymanagementpersonnelorentitiesrelatedtothem:
Expenses Researchanddevelopmentservicesfromsubsidiaries - - 5,116,131 6,319,978
Interestexpensefromultimateholdingcompany 361,172 132,493 - -Managementandsalessupportfeesfromotherrelatedparties 768,919 561,528 - -
Revenue
Saleofgoodstootherrelatedparty 890,607 563,405 - -Managementfeestoultimateholdingcompany 238,024 379,912 - -Licencefeesfromsubsidiaries - - 321,873 321,695Interestincomefromultimateholdingcompany 136,260 37,392 112,221 25,416Interestincomefromotherrelatedparties 31,999 16,344 21,136 12,442
Theamountsoutstandingatthereportingdatedtogetherwiththeirmovementsduringtheyearcanbesummarisedasfollows:
Loans to subsidiaries
Beginningofyear - - 14,203,761 20,527,387
Netloansadvanced/(paid) - - 4,959,504 (82,400)Loanset-off(non-cash) - - 9,946,320 -Revenuechargesandcreditsreceived - - 321,873 321,695Expensechargesandcostsincurredapplied - - (6,082,250) (6,562,921)Transferfromotherrelatedparties - - 664,668 -
- - 24,013,876 14,203,761Provisionfordoubtfuldebts - - (24,013,876) (14,203,761)
Endofyear - - - -
notes to the financial statements 30 June 2006
continued
�2 CAP-XX LIMITED ANNUAL REPORT 2006 06
Consolidated Parent Entity 2006 200� 2006 200� $ $ $ $
Amounts due to other related parties
Beginningofyear 400,786 395,048 458,804 492,437Loanset-off(non-cash) 178,337 - 178,337 -Revenuechargesandcreditsreceivedapplied 890,607 563,405 - -Expensechargesandcostsincurredapplied (832,380) (573,614) (3,213) -Interestcharged 31,999 16,344 21,136 12,442Foreignexchangevariance 34,325 (397) 9,604 (46,075)Transfertosubsidiaries (703,674) - (664,668) -
- 400,786 - 458,804Provisionfordoubtfuldebts - (400,786) - (458,804)
Endofyear - - - -
Loans to ultimate holding company (CAP-XX, Inc)
Beginningofyear 4,355,871 586,060 3,520,570 58,692Netloansadvanced/(paid) (15,616) 3,417,451 (14,066) 3,417,451Convertiblenoteexchange(non-cash) 8,983,123 - 8,983,123 -Loanset-off(non-cash) (11,031,373) - (10,124,657) -Sharebuy-back(non-cash) (2,630,386) - (2,630,386) -Revenuechargesandcreditsreceivedapplied - 379,912 - -Expensechargesandcostsincurredapplied - (34,147) - -Interestcharged 136,260 37,392 112,221 25,416Foreignexchangevariance 202,121 (30,797) 153,195 19,011
- 4,355,871 - 3,520,570Provisionfordoubtfuldebts - - - -
Endofyear - �,���,��� - �,�20,��0
Loans from ultimate holding company (CAP-XX, Inc)
Beginningofyear (8,845,996) (2,911,163) - -Netloans(advanced)/paid (1,524,809) (6,153,460) - -Loanset-off(non-cash) 10,853,036 - - -Revenuechargesandcreditsreceivedapplied - (27,615) - -Expensechargesandcostsincurredapplied 449,393 2,745 - -Interestcharged (361,172) (132,493) - -Foreignexchangevariance (570,452) 375,990 - - - (8,845,996) - -Provisionfordoubtfuldebts - - - -
Endofyear - (�,���,��6) - -
Provisionsraisedfordoubtfuldebtshavebeendisclosedabove.Expensesrecognisedinrespectofbadordoubtfuldebtsduefromrelatedpartiesaredisclosedinnote7.
notes to the financial statements 30 June 2006
continued
��CAP-XX LIMITED ANNUAL REPORT 200606
(e) Terms and conditionsTherearenofixedtermsfortherepaymentofamountsdue/loansbetweenentitiesandunlessotherwisestatedamountsdue/loansareunsecuredandrepayableincash.Aloanof$10,853,036(2005:$nil)advancedbyParenttoasubsidiaryissecuredbyafixedandfloatingchargeovertheassetsofthatsubsidiary.Aloanof$nil(2005:$8,845,996)advancedbyCAP-XX,Inctoarelatedpartywassecuredbyafixedandfloatingchargeovertheassetsofthatrelatedparty.
Nointerestischargedonamountsdue/loansbetweenentitieswithinAustralia.Theaverageinterestrateonamountsdue/loanswithoverseasentitiesduringtheyearwas4%(2005:3%).
AllothertransactionswithintheGroupweremadeonnormalcommercialtermsandconditionsandatmarketrates.
(f) Demerger and Initial Public OfferingTheBoardofDirectorsrecommendedandStockholdersofCAP-XX,Inc(the“formerparententity”)agreedinMarch2006,thattofundthefuturegrowthoftheCAP-XXGroup,itwasinthebestinterestoftheStockholdersthatCAP-XX,Incaffectaninitialpublicoffering(IPO)ontheAlternateInvestmentMarket(AIM),apartoftheLondonStockExchange.ItwasdeemedthatthelistingofordinarysharesofCAP-XXLimited,athenwhollyownedsubsidiaryofCAP-XX,IncrepresentedthebestprospectsforanIPOonAIMandon5April2006thedemerger(“Demerger”)ofCAP-XXLimitedfromCAP-XX,Incwaseffected.TheadmissionofCAP-XXLimitedonAIMwascompletedon20April,2006whereonCAP-XXLimitedissued18,433,333ordinarysharesraisingnewcapitalof$37,050,901(netoflistingcostsof$3,966,126).Includedinthelistingcostsis$359,671ofsharebasedpayments,refertonote29forfurtherdetails.
Thefollowingtransactions,amongothers,werecompletedinconnectionwithDemergerandtheIPO:
(i) CAP-XXLimiteddistributedordinarysharesandpreferredsharestotheexistingstockholdersofCAP-XX,IncinsuchnumberstoreplicateinCAP-XXLimitedtheequityownershipstructureofthestockholdersinCAP-XX,Incwhichwasalsoinclusiveofa3:1sharesplit;
(ii) holdersofconvertiblenotes(“Notes”)inCAP-XX,IncexchangedtheirNotesforsubstantiallysimilarnotesofCAP-XXLimited;(iii)holdersofexistingwarrantsofCAP-XX,IncexchangedtheirwarrantsforsubstantiallysimilarwarrantsofCAP-XXLimited;(iv) holdersofoptionstopurchaseCommonStock(“Options”)pursuanttotheCAP-XX,Inc2001StockOptionExchangePlanand
2002StockIncentivePlanexchangedtheirOptionsforsubstantiallysimilaroptionsofCAP-XXLimited;(v) CAP-XX,InctransferredallofitsequityinterestsinCAP-XXUSA,Inc.,awholly-ownedsubsidiarytoCAP-XXLimited;(vi) aset-offofvariousinter-companyloansbetweenCAP-XX,Incanditswholly-ownedsubsidiarieswascompletedtogetherwiththe
buy-back(the“Buy-Back”)byCAP-XXLimitedofacertainnumberofordinarysharesheldbyCAP-XX,Inc;(vii)investmentagreementsofCAP-XX,IncrelatingtopriorfinancingsdidnotenvisagetheAIMlistingwithrespecttotheconversion
rightsofthePreferredStockofCAP-XX,Inc(the“PreferredStock”)toCommonStockofCAP-XX,Inc(the“CommonStock”).CertainholdersofPreferredStockandCommonStockofCAP-XX,Inc,negotiatedaconversionmethodologyforthepreferredsharesonIPOthatgenerallyfollowedthecommercialintentionoftheinvestmentagreements,withallowanceforpracticalissues,andprotectionofpartiesintheeventofmarketfluctuationsandfairness.ThePreferredStockconversiononIPOofApreferredshareswas1:2.872397andBpreferredshares-1:3.828762.TheprotectionofpartiesissupportedbythegrantofCallOptionsbytheformerpreferredshareholdersofCAP-XXLimitedinfavourofcertainordinaryshareholders(inclusiveofoptionholders)ofCAP-XXLimitedwhichwassubjecttoandconditionaluponthecompletionofIPO;
(viii)on20January2006theParentEntitychangeditsstatusfroma“private”to“public”companyandchangeditsnamefromEnergyStorageSystemsPtyLimitedtoEnergyStorageSystemsLimitedandsubsequentlyon5April2006toCAP-XXLimited.
notes to the financial statements 30 June 2006
continued
�� CAP-XX LIMITED ANNUAL REPORT 2006 06
Note 26 SubsidiariesTheconsolidatedfinancialstatementsincorporatetheassets,liabilitiesandresultsofthefollowingsubsidiariesandbranchinaccordancewiththeaccountingpolicydescribedinnote1(c):
Name of entity Country of incorporation Class of shares Equity holding * 30June2006 30June2005 % %CAP-XX(Australia)PtyLtd Australia Ordinary 100 100CAP-XXResearchPtyLtd Australia Ordinary 100 100CAP-XXUSA,Inc** UnitedStates Ordinary 100 -CAP-XX(Australia)PtyLtd(TaiwanBranch) Taiwan
* Theproportionofownershipinterestisequaltotheproportionofvotingpowerheld.** On5April2006,theparententityacquired100%oftheissuedsharecapitalofCAP-XXUSA,Inc,theUSsalesoperationofthe
CAP-XXGroup,fromCAP-XX,Inc.TheacquiredbusinessdidnotcontributematerialrevenuesnorprofitstotheGroup.Iftheacquisitionhadoccurredon1July2005,revenuesandresultswouldalsonothaveresultedinamaterialchange.
Detailsofthefairvalueoftheassetsandliabilitiesacquiredandgoodwillareasfollows:
$ ‘ 000Tradereceivables 230Tradepayables (90)Amountsduetorelatedparties (526)
Netidentifiableassetsacquired (386)
Purchaseconsideration–cash -
Goodwill ��6
Giventheacquiredbusinesshasnotrackrecordofyearonyearprofits,managementhaveperformedanassessmentoftherecoverableamountofthegoodwillbasedonhistoricalresults.Thisresultedinexpensingthegoodwillarisingonacquisitiondirectlyintheincomestatementof$386,000.
Note 2� Events occurring after the balance sheet dateNosignificanteventshaveoccurredafterbalancesheetdatewhichwouldhaveamaterialimpactonthefinancialresultsoftheCompany.
notes to the financial statements 30 June 2006
continued
��CAP-XX LIMITED ANNUAL REPORT 200606
Note 2� Reconciliation of profit after tax to net cash (outflow) inflow from operating activities Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Netloss (10,322) (11,683) (14,961) (9,116)Depreciationandamortisation 3,840 4,468 - -Profitonsaleofplantandequipment (26) (237) - -Impairmentlossonplantandequipment - 1,737 - -Non-cashemployeebenefitexpense–sharebasedpayments 56 - 56 -Accruedfinancesharesonconvertiblenotes 510 162 510 162Provisionfornonrecoveryofrelatedpartyloans (401) 401 9,351 2,652Write-offgoodwillonconsolidation 386 - - -Netunrealisedexchangeloss/(gains) (61) (286) (580) 85
Changes in assets and liabilities: (Increase)/decreaseinreceivables (484) (61) - -(Increase)/decreaseininventories 11 99 - -(Increase)/decreaseinamountswithrelatedparties (32) (232) 5,620 6,203(Increase)/decreaseinotherassets (25) 61 37 (1)Increaseinprovisions 57 115 - -Increase/(decrease)inpayables 112 254 41 2
Netcash(outflow)inflowfromoperatingactivities (6,���) (�,202) �� (��)
Note 2� Share-based payments
(a) 2006 Share Option Exchange Theestablishmentofthe2006ShareOptionExchange(the“2006Exchange”)wasapprovedbytheCompany’sBoardofDirectorswitheffectfromon5April2006.The2006ExchangeprovidesfortheissuanceofstockoptionsforthepurchaseofordinarysharesoftheCompanyinexchangeforthesurrenderofoptionspreviouslygrantedbutunexercisedinCAP-XX,Inc.The2006ExchangeprovidesforthegrantofshareoptionsforthepurchaseofsharesoftheCompany’sordinarysharesbyofficers,employees,independentcontractors,consultants,advisersanddirectorsoftheCompanyand/oranyofitssubsidiaries.TheBoardisresponsibleforadministrationofthe2006Exchange.
notes to the financial statements 30 June 2006
continued
�6 CAP-XX LIMITED ANNUAL REPORT 2006 06
SetoutbelowaresummariesofoptionsgrantedundertheExchange:
Grant Date Expiry date Exercise Balance at Granted Exercised Forfeited Balance at Exercisable price� start of during during during end of end of the year the year the year the year theyear the year
A$ Number Number Number Number Number Number
Consolidated and parent entity – 2006 28August2001 31May2008 $2.96 9,499 18,998 - - 28,497 28,49728August2001 29January2009 $11.84 4,500 9,000 - - 13,500 13,50028August2001 10October2009 $8.88 170 340 - - 510 5101November2002 30September2012 $15.64 16,000 32,003 - - 48,003 48,0031April2004 31May2008 $2.96 3,333 6,666 - - 9,999 9,9991April2004 29January2009 $11.84 503 1,006 - - 1,509 1,5091April2004 30September2012 $4.19 6,500 13,000 - - 19,500 19,4081April2004 30September2012 $15.64 4,835 9,667 - - 14,502 13,71330June2004 31May2014 $0.47 10,000 20,000 - - 30,000 22,50026August2004 25July2014 $0.23 16,000 32,000 - - 48,000 48,00021March2005 20February2015 $0.23 16,000 32,000 - - 48,000 48,0001July2005 31May2015 $0.47 - 1,500,117 (88,680)4 - 1,411,437 1,018,5591July2005 31May2015 $15.64 - 20,511 - - 20,511 18,341
��,��0 �,6��,�0� (��,6�0) - �,6��,�6� �,2�0,���
Weighted Average Exercise Price $�.�� $�.�6 $0.�� $ - $�.�0 $�.66
Grant Date Expiry date Exercise Balance at Granted Exercised Forfeited Balance at Exercisable price start of during during during end of end of the year the year the year the year theyear the year
A$ Number Number Number Number Number Number
Consolidated and parent entity – 2005 28August2001 31May2008 $8.88 9,499 - - - 9,499 9,49928August2001 29January2009 $35.52 4,500 - - - 4,500 4,50028August2001 10October2009 $26.64 170 - - - 170 1701November2002 30September2012 $46.92 16,000 - - - 16,000 15,8021April2004 31May2008 $8.88 3,333 - - - 3,333 3,3331April2004 29January2009 $35.52 503 - - - 503 5031April2004 30September2012 $12.57 6,500 - - - 6,500 5,1111April2004 30September2012 $46.92 4,835 - - - 4,835 4,16930June2004 31May2014 $1.41 10,000 - - - 10,000 5,00026August2004 25July2014 $0.69 - 16,000 - - 16,000 16,00021March2005 20February2015 $0.69 - 16,000 - - 16,000 16,000
55,340 32,000 - - 87,340 80,087
Weighted Average Exercise Price $2�.�� $0.6� $ - $ - $��.�� $�6.�6
3Asdetailedinnote25(f)on5April2006aspartofDemergerexistingsharecapitalwassubjecttoa3:1splitresultingintheissueof1,179,391additionalshareoptionsoverordinaryshareandtheadjustmentoftheexercisepricebeingtheexercisepriceperordinarysharepriortoDemergerdividedbythesplitfactorof3.
4Duringtheyear75,118shareoptionswereexercisedinCAP-XXLimitedwiththebalanceexercisedinCAP-XX,IncpriortoDemerger.
notes to the financial statements 30 June 2006
continued
��CAP-XX LIMITED ANNUAL REPORT 200606
Exceptfortheadjustmenttotheexercisepriceandnumberofordinarysharessubjecttotheshareoption,theshareoptionsaregovernedbytheiroriginaltermsandconditionsandwillcontinuetovestpursuanttothesamevestingschedule.
Apartfromthe3:1split,shareoptionsof500,039(after3:1split1,500,117shareoptionswithexerciseprice$0.47)and6,837(after3:1split20,511shareoptionswithexercisepriceof$15.64)wereissuedon1July2005.Noshareoptionswereforfeitedduringtheyearscoveredbytheabovetables.
Noshareoptionshaveexpiredduringtheyearscoveredbytheabovetables.Theweightedaverageremainingcontractuallifeofshareoptionsoutstandingattheendoftheperiodwas8.7years(2005:8.5years).
(b) 2006 Employee Share Option PlanOn12April2006theBoardapprovedthe2006EmployeeShareOptionPlan(the“2006Plan”),whichprovidesforthegrantofshareoptionsforthepurchaseofordinarysharesoftheCompanybyofficers,employees,consultants,advisorsanddirectorsoftheCompanyorarelatedbodycorporate.TheBoardisresponsibleforadministrationofthe2006Plan.TheBoarddeterminesthetermofeachoption,theoptionexerciseprice,andthenumberofsharesforwhicheachoptionisgrantedandtherateatwhicheachoptionisexercisable.UnlessotherwisedeterminedbytheBoardanofferofOptionmustnotprovideforanexercisepricethatislessthanthevolumeweightedaveragesalepriceofasharetradedonAIMoveradefinedperiod.
Setoutbelowisasummaryofoptionsgrantedundertheplan:
Grant Date Expiry date Exercise Balance at Granted Exercised Forfeited Balance at Exercisable price start of during during during end of end of the year the year the year the year theyear the year
A$ Number Number Number Number Number Number
Consolidated and parent entity - 2006 20April2006 22February2011 $1.40 - 60,000 - - 60,000 -
- 60,000 - - 60,000 -
Weighted Average Exercise Price $ - $�.�0 $ - $ - $�.�0 $ -
TheStockOptionsaregovernedbytheiroriginaltermsandconditionsandwillcontinuetovestpursuanttothesamevestingschedule.
Noshareoptionswereforfeitedduringtheyearcoveredbytheabovetables.
Noshareoptionshaveexpiredduringtheyearcoveredbytheabovetables.
Theweightedaverageremainingcontractuallifeofshareoptionsoutstandingattheendoftheperiodwas4.8years
notes to the financial statements 30 June 2006
continued
�� CAP-XX LIMITED ANNUAL REPORT 2006 06
(c) Collins Stewart Limited Share Option DeedInconsiderationofcovenantsandobligationsthatCollinsStewartLimited(“CollinsStewart”)agreedundertheCompanyAIMPlacingAgreementanditsservicesprovidedthereunder,theBoardon12April2006approvedtheCollinsStewartLimitedShareOptionDeed(the“CSDeed”).TheCSDeedprovidedforthegrantofshareoptionsofupto1%oftheissuedordinarysharecapitaloftheCompanyonafullydilutedbasisimmediatelyfollowingadmissiontoAIM,conditionaluponadmissionoccurringnolaterthan4May2006.Asdetailedinnote25(f)admissionwascompletedon20April2006whereontheCompanyissuedthebelowdetailedshareoptionstoCollinsStewart.Theoptionswerefullyvestedatdateofgrantandcanbeexercisedovera3yearperiodthroughto20April2009,withtheoptionexercisepricebeing93pence(A$2.23).
Setoutbelowisasummaryofoptionsgrantedunderthedeed:
Grant Date Expiry date Exercise Balance at Granted Exercised Forfeited Balance at Exercisable price start of during during during end of end of the year the year the year the year theyear the year GBP Number Number Number Number Number Number
Consolidated and parent entity - 2006 20April2006 20April2009 93pence - 503,350 - - 503,350 503,350
- 503,350 - - 503,350 503,350
Weighted Average Exercise Price �� pence - - �� pence �� pence
TheStockOptionsaregovernedbytheiroriginaltermsandconditions.
Noshareoptionswereforfeitedduringtheyearcoveredbytheabovetables.
Noshareoptionshaveexpiredduringtheyearcoveredbytheabovetables.
Theweightedaverageremainingcontractuallifeofshareoptionsoutstandingattheendoftheperiodwas2.8years
Fair value of options grantedTheassessedfairvalueatgrantdateofoptionsgrantedduringtheyearended30June2006underthe2006PlanandtheCSDeedwereAUD1.49andAUD0.72peroptionrespectively.ThefairvalueatgrantdateisindependentlydeterminedusingaBlack‐Scholesoptionpricingmodelthattakesintoaccounttheexerciseprice,thetermoftheoption,thevestingandperformancecriteria,theimpactofdilution,thenon‐tradeablenatureoftheoption,thesharepriceatgrantdateandexpectedpricevolatilityoftheunderlyingshare,theexpecteddividendyieldandtherisk‐freeinterestrateforthetermoftheoption.
Themodelinputsforoptionsgrantedduringtheyearended30June2006included:
(a) optionsaregrantedfornoconsideration,havea: • 3yearlifeandfullyvestedonthedateofgrant(CSDeed) • 5yearlifeandwillvestonsatisfactionofcertainperformancecriteria(2006Plan) • 10yearlifeand25%vest12monthsaftertheVestingCommencementDate,and1/48ofTotalOptionshallvestoneach
monthlyanniversaryoftheVestingCommencementDatethereafter.(b) exerciseprice:refertablesabove(c) grantdate:refertablesabove(d) expirydate:refertablesabove(e) sharepriceatgrantdate:GBP0.93(2005:US$0.50)(f) expectedpricevolatilityofthecompany’sshares:60%(2005:60%)(g) noexpecteddividendyield(h) risk-freeinterestrate:5.5%(2005:5.5%)Theexpectedpricevolatilityisbasedonthehistoricvolatility(basedontheremaininglifeoftheoptions),adjustedforanyexpectedchangestofuturevolatilityduetopubliclyavailableinformation.
notes to the financial statements 30 June 2006
continued
��CAP-XX LIMITED ANNUAL REPORT 200606
(d) Expenses arising from share-based payment transactionsTotalexpensesarisingfromshare-basedpaymenttransactionsrecognisedduringtheperiodaspartofemployeebenefitexpensewereasfollows:
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
Optionsissuedunder2006ShareOptionExchange 53 - 53 -Optionsissuedunder2006EmployeeShareOptionPlan 3 - 3 -
56 - 56 -
Totalexpensesarisingfromshare-basedpaymenttransactionsrecognisedduringtheperiodaspartofcostofissueonnewcapitalwereasfollows:
Consolidated Parent Entity 2006 200� 2006 200� $ ‘ 000 $ ‘ 000 $ ‘ 000 $ ‘ 000
OptionsissuedunderCollinsStewartLimitedShareOptionDeed 360 - 360 -
Note �0 Economic dependencyTheGroupishighlydependentuponasmallnumberofcustomersandpotentialcustomers.Alternativesourcesofrevenuearebeingsoughttoreducefuturedependencyonanyparticularentity.
notes to the financial statements 30 June 2006
continued
60 CAP-XX LIMITED ANNUAL REPORT 2006 06
Note �� Earnings per shareEarningspersharefor(loss)attributabletotheordinaryequityholdersofthecompany
Consolidated 2006 200� Cents Cents
(a) Basic earnings per share (Loss)attributabletotheordinaryequityholdersofthecompany (31.1) (38.8)
(b) Diluted earnings per share
(Loss)attributabletotheordinaryequityholdersofthecompany (31.1) (38.8)
Consolidated 2006 200� Number Number
(c) Weighted average number of shares used as the denominatorWeightedaveragenumberofordinarysharesusedasthedenominatorincalculatingbasicearningspershare 33,204,782 30,132,560Weightedaveragenumberofordinarysharesandpotentialordinarysharesusedasthedenominatorincalculatingdilutedearningspershare 33,204,782 30,132,560
Optionsareconsideredtobepotentialordinaryshares.Theoptionsarenotincludedinthecalculationofdilutedearningspersharebecausetheyareantidilutive.Theseoptionscouldpotentiallydilutebasicearningspershareinthefuture.
Note �2 Explanation of transition to Australian equivalents of IFRSs
(a) Reconciliation of equity reported under previous Australian Generally Accepted Accounting Principles (AGAAP) to equity under Australian equivalents to IFRSs (AIFRS)TheadoptionofAIFRSshasnotresultedinanymaterialadjustmentstothenetassets.
(b) Reconciliation of (loss) for the year ended �0 June 200�TheadoptionofAIFRSshasnotresultedinanymaterialadjustmentstotheincomestatement.
(c) Reconciliation of cash flow statement for the year ended �0 June 200�TheadoptionofAIFRSshasnotresultedinanymaterialadjustmentstothecashflowstatement.
notes to the financial statements 30 June 2006
continued
6�CAP-XX LIMITED ANNUAL REPORT 200606
Cap-XX limited Directors’ declaration 30 June 2006
Inthedirectors’opinion:
(a) thefinancialstatementsandnotessetoutonpages18-60areinaccordancewiththeCorporationsAct2001,including: (i) complyingwithAccountingStandards,theCorporationsRegulations2001andmandatoryprofessionalreporting
requirements;and (ii) givingatrueandfairviewofthecompany’sandconsolidatedentity’sfinancialpositionasat30June2006andoftheir
performance,asrepresentedbytheresultsoftheiroperations,changesinequityandtheircashflows,forthefinancialyearendedonthatdate;and
(b) therearereasonablegroundstobelievethatthecompanywillbeabletopayitsdebtsasandwhentheybecomedueandpayable;and
Thedirectorshavebeengiventhedeclarationsbythechiefexecutiveofficerandchieffinancialofficerintheformcontainedinsection295AoftheCorporationsAct2001.
Thisdeclarationismadeinaccordancewitharesolutionofthedirectors.
MichaelQuinn
Director
Sydney
5October2006
62 CAP-XX LIMITED ANNUAL REPORT 2006 06
63CAP-XX LIMITED ANNUAL REPORT 200606
64 CAP-XX LIMITED ANNUAL REPORT 2006 0606
Notes
CAP-XX Limited is a world
leader in the design and
manufacture of revolutionary
thin-form supercapacitors
predominately for use in small
portable electronic devices.
Supercapacitors can
considerably extend battery
run-times and provide
power-hungry functions that
are not possible with current
battery technology.
CAP-XX LimitedABN 47 050 845 291
Units 9 & 10, Ph +61 2 9420 0690 12 Mars Road Fax +61 2 9420 0692 Lane Cove NSW 2066 email [email protected] www.cap-xx.com
CAP-XX LimitedABN 47 050 845 291
Units 9 & 10, Ph +61 2 9420 0690 12 Mars Road Fax +61 2 9420 0692 Lane Cove NSW 2066 email [email protected] www.cap-xx.com
CAP-XX Limited is a world leader in the design and manufacture of revolutionary thin-form supercapacitors predominately for use in small portable electronic devices. Supercapacitors can considerably extend battery run-times and provide power-hungry functions that are not possible with current battery technology. The photograph shows part of the automated production process in Sydney, Australia
CAP-XX LimitedABN 47 050 845 291
Units 9 & 10, Ph +61 2 9420 0690 12 Mars Road Fax +61 2 9420 0692 Lane Cove NSW 2066 email [email protected] www.cap-xx.com
06 A N N U A L R E P O R T 2 0 0 6