Ann: Company Update, page-2

Xped Limited (ASX: XPE) (“Xped” or “the Company”) is delighted to provide a “market update” regarding recent progress and developments within the organisation relevant to all operational divisions and business development activities. INTEL During the first 2 quarters of this calendar year, Xped has expended engineering resources and used external contractors to integrate the Xped gateway software with Intel’s Smart Home Acceleration Platform (SHDAP). This development represents the first iteration of Xped’s gateway software for the home. Target completion date for this integration is June ’17. The combination of the Xped gateway software with the Smart Home Acceleration Platform will allow the Xped smart home APP to seamlessly onboard and control 100s of off-the-shelf devices that use WiFi, BLE, Zigbee and Z-wave protocols. This gateway software will be used on Intel-based gateway solutions provided by companies like Cybertan, Advantech, and Arcadyan. To date, we have validated roughly 80 devices with our solution and have a target of more than 150 devices prior to the end of Q3 ’17. Similar to our engagement with Lenze, while we are not utilising the full ADRC protocol, we are using the Xped APP, cloud services, RML, and gateway software for the project. One of the key ingredients of Intel’s SHDAP is their use of IoTivity which is a technology integration platform produced by the Open Connectivity Foundation. Xped is a platinum member of the OCF and as such has voting rights, the opportunity to influence the OCF specifications and to demonstrate our technologies to the large technology corporations that are its founding members. The Company would like to note that Intel has been extremely accommodating to Xped. Intel has provided Xped with the “Home Lake” code, and also technical assistance, and will continue to support Xped as part of integration and completion of the “Smart Home APP”. Following completion of the “Smart Home APP”, Xped will continue to work closely with Intel on the development of a “Smart Building APP”. Xped would also like to highlight that MOU’s currently in place continue to be the focus of our business development efforts. The common feature across the majority of our current MOUs, which include the “Vital Xense” Gateway built by Advantech, the “Smart Home” gateway by “Cybertan” and the “Smart Home” router by Arcadyan, is that they all utilise Intel chipsets. The Company is confident that these various MOU’s will progress and deliver revenue streams. Further updates will be provided when material progress has been made. ASX RELEASE // 02.06.17 Xped Limited X P E D . C O M M A K I N G T E C H N O L O G Y E A S Y A G A I N TELINK Xped continues to work closely with Telink. The Lenze opportunity is a direct result of the relationship between Xped and Telink which has been harvested through strong cooperation between directors Dr. Wenjun Sheng and Athan Lekkas. It is important that we draw a distinction between the ADRC port to the Telink 8269 chip and other activity that has been generated via the Telink relationship: - Enterprise Solutions: Winning the protocol fight against WIFI, BLE and Zigbee is unlikely and as such the ADRC port will likely be focused solely on customers who value the security and simplification that ADRC brings to device onboarding. At this time the focus will be on enterprise solutions. An example of this is the enterprise solution that Xped has developed together with Vital Xense for data center management. - Telink Bluetooth Chips: The Lenze opportunity is a direct result of work Xped has completed with the Telink Bluetooth chips. As Xped continues to migrate from an ADRC protocol focus over to the Xped Infrastructure Platform (RML, APP, gateway software and cloud services), the Telink relationship will continue to gain importance and momentum. It is important to note that Lenze uses a range of chipsets for their devices, with Telink being the supplier of preference. It is also important to note that the ADRC protocol is not pertinent in this situation, however, RML, the Xped APP, and cloud services are the key elements of interest with this customer. Telink is a global leader and supplier of BLE and Zigbee chips and Xped is poised to take advantage of this through the present relationships it has established. JCT JCT continues to make steady progress with delivery of the new much awaited Artificial Intelligence (AI) product lines to the various health, disability, and aged care sectors. Importantly, JCT will meet all obligations for the much-anticipated completion of the flagship Lightsview project by July 15, showcasing the technology to various government health care organisations. Delivery Status JCT will be in a position to demonstrate the video analytics component of our AI technology before the end of June, with the final installation of all camera equipment and software to Lightsview. Delivery of the “Elderly Home Automation” system (limited home automation) and “Staff APP” will be delivered before mid-July, 2017. The total value of the Lightsview project is $600,000. JCT has received (pre-acquisition) $300,000 in payments, and anticipates final payment and invoicing to occur during the 4th quarter of this calendar year. ASX RELEASE // 02.06.17 Xped Limited X P E D . C O M M A K I N G T E C H N O L O G Y E A S Y A G A I N Better than anticipated sales have been recorded for the months of April and May, with collective sales approaching $350,000 for this current quarter to date. The increase in sales has been attributed to the completion of integration with Xped, commencement of channel partner training and implementation of relevant capital management procedures that have now been completed. SMART HOME SOLUTION In conjunction with the work that was highlighted above regarding the smart home gateway software, Xped is currently in the final stages of completing a “Smart Home APP” as well as a white-labelled “Smart Home APP” both based on Xped’s unique device browser technology. Xped will focus most our business development effort targeting promotion of the white-labelled APP, however, in under-represented markets, we will consider a Xped branded APP. Completion of these APPs will occur towards the end of August. The Company will integrate 15-20 smart home branded products that will utilise the Xped APP functionality as well as providing support for hundreds of popular off-the-shelf devices, all requiring only one APP to on-board and control them. The Company has commenced early promotion to retailers, telcos and service providers. An announcement on the product offering is expected to occur within the next 6-8 weeks, with inventory orders placed shortly thereafter. The Company is currently in advanced discussions with a major International Telecommunications provider, that has demonstrated a significant amount of interest in white-labelling the Xped “One APP” solution and deploying these integrated products to their retail and wholesale customer base. XPED CORE IP Xped has five core pieces of IP that include: 1. Tap, 2. RML, 3. the Xped APP, 4. the Xped Gateway Software, and 5. the Xped Cloud Services. These five pieces of IP can then be grouped into three main areas that present enormous value to the device market: 1. Tap This is based on our ADRC Device Proxy firmware for devices and is focused on device discovery, onboarding, and provisioning in a local area network. While Tap is unique and an elegant user experience, to take full advantage of the Tap experience, a customer is required to accept the ADRC proprietary communication protocol. This requirement is a challenge in the consumer space where the market pressure is to align along industry standards such as Zigbee, Z-wave, WiFi, Bluetooth, etc. As such we have prioritised industrial opportunities with companies such as Vital Xense for the full implementation of the ADRC Device Proxy. We are also starting investigations around what components of Tap can be extended to Zigbee and Bluetooth standards. A future opportunity may eventuate when Tap is demonstrated to the OCF “Easy Onboarding” project group. 2. Xped APP and RML The Xped APP is unique in that we have taken an approach similar to a browser found in your internet search engine today and extended it via RML to the concept of a device browser on your phone, tablet and eventually your TV, PC, or ASX RELEASE // 02.06.17 Xped Limited X P E D . C O M M A K I N G T E C H N O L O G Y E A S Y A G A I N automated virtual assistant. The Xped APP is a single APP that can display multiple different user interfaces and multiple different user experiences for a device simply by changing the RML description file developed for it. Initially many of our customers only pay limited attention to the Xped APP during our discussions, but as we drive deeper into the engagement the true value of the Xped APP becomes more apparent. The Xped APP and RML combined dramatically reduce time to market in launching an APP and then continue to add life to the APP by allowing our customers to add new devices, features, and services to the APP without having to invest significant effort to rewrite the APP. One final point to highlight about the Xped APP is that we are positioning it to be a white-labelled product that our customers can re-brand and customise for their specific needs. 3. Gateway Software and Cloud Services These two components are the most recent addition to our end-to-end platform strategy. The development of our gateway software allows Xped to integrate and support devices that do not use the ADRC Device Proxy and still display them via RML in our APP. This is significant because now we can present ourselves as one, if not the only, solution in the market that has embraced the concept of an open-standards-based platform that allows our customers to maintain ownership of the data being generated by their customers. Our first implementation of our gateway software is targeted to be completed in June and is an integration of Xped software and Intel’s Smart Home Developer Acceleration Platform. The first hardware to support our gateway software is an IoT Gateway developed by Cybertan. By including our gateway software in the cloud and phone using our virtual gateway concept, we also address the needs of ODMs and OEMs who are launching individual devices that they do not want to encumber the cost of a gateway device. This is the approach that we are using with Lenze where a single device will connect with a custom APP specific to that product. Regarding the cloud services portion of the Xped platform, the key differentiators come from the implementation of Xerts (Xped Adverts) which will allow for direct 1:1 engagement between our customer and their users, the creation of our RML repository which stores the RML code for devices that have not implemented our ADRC Device Proxy firmware and our approach to APP to APP integration via our APIs. This APP to APP integration allows our customers to bring in additional devices, services, and features via a cloud to cloud integration vs having to develop the features themselves. An example of this is the integration of the Jemsoft Deep Learning AI components with the Xped Camera Manager and the JCT Nucams solution. From an external perspective, this approach will allow us to integrate with service providers such as Dominos, Uber, and Amazon as well as device manufactures such as Nest, Netatmo, and Philips Hue. Our original MOU with Microsoft was a key driver in the implementation of our cloud services solution hosted in the Microsoft Azure Cloud. The first examples of the Xped cloud services solution will be the Lightsview project and the Lenze Smart Leads device launch. ASX RELEASE // 02.06.17 Xped Limited X P E D . C O M M A K I N G T E C H N O L O G Y E A S Y A G A I N DEFINING OUR MOU’S An MOU with an OEM, MSO, Telco, builder, service provider or retailer is the first step to a licensing agreement and direct revenue. Generally, the MOU with the OEM et al is the result of an introduction from either a silicon vendor or an ODM. Xped will take either the silicon development kit or the hardware platform to the OEM and show them a generic solution based on a generic set of user requirements. Once the OEM et al is convinced that we have what they want, then an MOU is signed and the OEM provides specific requirements and user experiences that Xped is expected to deliver. This is the stage where the revenue clock can be started. The average development cycle for a new product is between 9-12 months for an OEM and between 12-18 months for a service provider. There are occasions where this timeline can be shortened as a product may already be in development or an MSO/telco may want something nearly identical to a product that we have already developed. However, the general timeline above should be considered the norm. To give specific examples of the MOU process above, let’s look at our engagement with Telink, ST Micro, and Intel. 1. Telink • Xped signs an MOU with Telink to begin porting ADRC Proxy to the 8269 • Telink introduced Xped to several of their customers which led to a direct engagement with several of these customers as well as an MOU with Lenze. • The MOU with Lenze then led to a licensing agreement that will be the base of the revenue we capture at the launch of their first product. 2. ST Micro • Xped signs an MOU with ST Micro. • We began porting our firmware to the ST32MCube platform. • We discussed this platform with Vital Xense and promoted it as a baseline for their solution. • We sign an MOU with Vital Xense to develop hardware reference designs based on the ST32MCube Platform and our ADRC Technology (DiscoverBus). • Vital Xense provides Xped with their specific user requirements and feature set. • Xped customizes our base platform for Vital Xense, then Vital Xense takes our reference designs to their ODM for manufacture. • Vital Xense is now promoting their Xped based solution to their customer base. • In addition to Vital Xense, Xped is invited to participate in ST Micro’s booth at Embedded World where Xped meets with additional opportunities. 3. Intel • Xped signs an MOU with Intel to port our software to their development platforms and to provide a generic APP and cloud services for various generic use cases. • Intel introduces us to their ODM customers in Advantech and Cybertan. • The Advantech platform becomes the baseline hub for the Vital Xense project. • The Cybertan platform becomes the development platform and production platform for the Xped smart home product. ASX RELEASE // 02.06.17 Xped Limited X P E D . C O M M A K I N G T E C H N O L O G Y E A S Y A G A I N • Xped takes the Advatech and Cybertan generic solutions to customer engagements and shows and promotes our DiscoverBus and smart home platforms. Intel sales team also opens doors for these engagements. • Service providers invite Xped to meet for a deeper engagement and discovery. • Xped signs and MOU with a service provider to convert the generic platform to their specific requirements. • The service provider then signs a licensing agreement with Xped The MOU process is complex but it is the first step in allowing Xped to move from a generic concept to actual product that we will receive licensing revenue from. We currently have a rich customer development funnel with over 70 validated opportunities. It is the MOU process that allows us to transition these opportunities from simple opportunities to actual design wins and then eventually revenue. If we were to approach our engineering teams and ask them to support 70 opportunities the exercise would be enormous and the inability to focus and drive a product from concept to production would compromise the chances of the company to secure revenue. It is important to note that Xped is balancing all opportunities and utilising internal and contract suppliers to effectively progress towards the nearest revenue and highest margin opportunities. ASX RELEASE // 02.06.17 Xped Limited X P E D . C O M M A K I N G T E C H N O L O G Y E A S Y A G A I N STATUS OF MOUs Below you will find a high-level disposition and status of all of the MOUs that we have announced in the last year. As you can see, some MOUs have been completed and we have continued to progress the relationship. Other MOUs are in progress and we continue to invest resources. Other MOUs have simply been put on hold until Xped resources or partner resources are available to move forward. The final group is MOUs that we have disengaged either formally or simply through lack of investment by either Xped or our partner. Partner Status Comment ST Micro Complete Original work from MOU complete. Waiting on resources to freeup to develop software libraries that can be provided to ST Micro. ST Micro is the primary SoC on our DiscoverBus solutions. Telink Complete Original work from MOU complete. Extending the ADRC integration to the Telink Bluetooth solutions. Telink providing introductions to their OEM and ODM customers. Intel Complete ADRC gateway software ported to Intel SoC. R&D effort extended to integration with the SHDAP software from Intel as part of the Xped gateway software platform. Cybertan and Advatech gateways based on Intel SoCs. Baseline gateways for DiscoverBus (Vital Xense) and Xped smart home solution. Microsoft Complete Developed cloud-based services on the Azure platform. Microsoft is providing introductions to their SI customers. Arcadyan Pending Waiting on delivery of the new smart home gateway development platform from Arcadyan. Dexatek Progressing First devices have been integrated into the Xped APP and the virtual gateway solution. Key devices of the Xped smart home offering. ASE Pending On hold pending resourcing. Solekai Progressing MOU has transitioned to license agreement. First customer engagement has kicked-off. Unable to announce publicly at this time. Lenze Progressing Relationship has progressed from MOU to License Agreement. First products have been identified and are in final QA prior to completion. Vital Xense Progressing After some delays in execution and changes in user requirements, the final specifications have been agreed upon, and Xped is tracking to complete their deliverables to Vital Xense by the end of June 2017. Leapin Pending To be re-visited once the Xped Smart Home offering is more mature. The company will provide further updates to the market in due course.