Securing Future Operations: Financing and Incentive Schemes at XTPL
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Secured financing for future operations
Since its inception, XTPL has financed itself mainly through share issues (total proceeds of PLN 40mn in 2016-20). In 2020, the company decided to issue series A registered bonds convertible into series U shares of the company (total value of the bonds is PLN 3.6mn). As a result of discussions with bondholders in July 2022, bonds worth PLN 0.2mn (2.993 series A bonds) were redeemed, and for the remaining bonds worth PLN 3.4mn, the maturity date was extended from July 30, 2022, to January 30, 2024, and the interest rate was increased from 2% to 5% per annum.
At the end of 1Q23, the company held PLN 3.7mn in cash and bank deposits. In 2Q23, 275,000 shares were issued at a price of PLN 133 per share (total value PLN 36.6mn, issue cost PLN 2mn). Taking into account the share issue and the estimated net loss, the company should have about PLN 40mn in cash at the end of 2Q23. Such a level of funds should ensure a solid base to carry out investments in business growth planned for 2023-26 (the financing of investments also includes funds generated from operations and proceeds from grants).
Incentive scheme
In April 2019, an incentive program was passed. On the basis of the program resolution, a conditional increase in share capital was made by issuing no more than 182,622 Series R ordinary shares with a nominal value of PLN 0.10 each. Series R shares will be available for acquisition by holders of registered series A subscription warrants issued in a number not exceeding 182,622 at a price of PLN 165.84. The incentive program covers the years 2019-21. Participants in the program will have the right to exercise the warrants no later than April 23, 2029. On March 31, 2022, XTPL employees and associates were granted the right to purchase 22,105 shares and 50,000 warrants. The valuation of the granted financial instruments in 2022 amounts to PLN 1,149 thousand and was included in the financial data for 2022. From 2019 to the end of 2022, the costs of the incentive program totaled PLN 16.2mn.
2Q23 results preview
The company will publish its 2Q23 results on September 20, 2023, probably after the close of the trading session. According to preliminary data released by the company, we assume PLN 3mn in revenue in 2Q23, down q/q and y/y. We assume R&D costs at a similar level q/q and slightly lower y/y. Increased activity on the sales side should boost G&A expenses. We assume a slightly positive balance on financing activities q/q. In summary, we assume worse net income q/q and y/y, due to lower sales (lower subsidy income y/y) and rising costs, due to investments in sales growth. We note that the high volume of orders for DPS equipment in 1H23 should have a positive impact on revenue recognized in 2H23.
