QPX - ASX Company Announcement
$tel4 THIS IS A PRIORITY ITEM
24 May 2002
Part 1/1
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QPSX LIMITED
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HOMEX - Perth
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QPSX Market Update
Leading technology commercialisation company QPSX Ltd (ASX: QPX)
today advised on progress in the company's flagship SAR licensing
program, third party licensing programs including Telstra and FST
patent portfolios, SafeGuard security technology commercialisation,
together with a financial performance update.
QPSX's objective is to be the premier intellectual property
commercialisation company in Asia Pacific. The company has expanded
its management team and developed the strategies, systems and
processes to achieve this goal and to generate diversified,
sustainable revenue streams. A core part of the strategy is to build
strong relationships with sources of research and development, and
become their commercialisation partner of choice. Outsourcing of
patent portfolio licensing by large corporations and research
institutions is becoming common practice internationally. The
worldwide market for licensing Intellectual Property (IP) represented
some US$150 billion last year and is forecast to grow at more than 30
per cent annually over the next five years.
QPSX represents the emergence of a new asset class in Asia Pacific.
The company's IP licensing programs typically involve QPSX taking
technologies from the region onto the world stage, and securing a
fair return for both QPSX and the technology developers. Where there
is a retrospective element to the use of the IP, then patent
enforcement sometimes is also necessary, as evidenced by QPSX's
current SAR licensing program.
The purpose of this update is to provide a progress report on QPSX's
activities since listing in December 2000 as well as current
performance indicators.
QPSX's flagship licensing program focuses on the Segmentation and
Reassembly ('SAR') patent portfolio a technology developed in the
late '80s and owned 100% by QPSX. In April 2001, QPSX launched a SAR
licensing program in Europe with the objective of establishing
substantial new royalty revenue streams in addition to those
generated historically. In July 2001, the company announced the first
SAR licensing agreement, with European telecommunications giant
Ericsson. The agreement specified a royalty bearing licence for QPSX
technology, including the SAR patent, and is expected to deliver QPSX
royalties commencing in financial year to 30 June 2003. Negotiations
with a number of other global vendors are in progress and further
meetings are scheduled with these vendors in Europe in June this
year.
To support the licensing program, in April 2001 QPSX Europe GmbH, a
wholly owned subsidiary of QPSX and licensee of the SAR German
patent, filed a DM125 million (A$115 million) writ in Germany against
Siemens and Deutsche Telekom for infringement of the SAR patent.
Various arguments have been presented by all parties and a formal
court communication confirming the court's position, as stated on
March 14 th 2002, is expected on June 6 th 2002. QPSX's legal counsel
have advised that achieving this next stage is a significant
milestone.
In January 2002, QPSX announced that the US Patent covering the SAR
technology had been issued, running retrospectively from 1991 through
to 2008. QPSX had previously been granted SAR patents for the United
Kingdom and Germany (which together represent approximately 10% of
the world market) and for Canada (approx 30%). The US patent provides
QPSX with recourse to equipment manufacturers and vendors controlling
approximately 50% of the global market for ATM technology.
As part of the company's diversification strategy, QPSX announced
this week an agreement with Telstra's research and development group,
Telstra New Wave Pty Ltd (TNW), which grants QPSX the exclusive
licensing rights to a portfolio of patents. Telstra has the financial
and intellectual resources to identify and invest in new technologies
and QPSX has the track record and expertise to successfully
commercialise technologies and deliver licensing revenue streams to
both companies.
In January 2002, QPSX also acquired exclusive licensing rights to a
portfolio of patents covering fundamental database and relationship
pricing functions owned by Melbourne based Financial Systems
Technology Pty Ltd ('FST'). FST pioneered the concept of relationship
pricing for transaction based services in the banking sector and the
technology currently processes financial transactions worth trillions
of U.S. dollars every day. QPSX's has conducted extensive due
diligence on the FST portfolio to determine the best licensing
approach, revenue potential and timing. Following initial US based
licensing discussions, a comprehensive update on this program will be
provided during the next 3 months. For the Telstra and FST programs,
QPSX will receive at least of 50% of the revenues generated. QPSX has
also been selected by the Australian Telecommunications Cooperative
Research Centre (ATcrc) as a commercialisation partner. The ATcrc
comprises tertiary research institutions, including CSIRO, Curtin
University of Technology, Monash University, Royal Melbourne
Institute of Technology (RMIT), Victorian University of Technology,
Strategic Industry Research Foundation and University of Western
Australia, as well as commercial partners, including Ericsson
Australia, Agilent, Vodafone Network and QPSX. This partnership
provides QPSX access to a number of R&D initiatives which should
result in commercialisation opportunities for QPSX.
On the product front, QPSX is commercialising a 100% QPSX owned
security product, SafeGuard, which (historically) had over $8m
invested in R&D. It is a high grade, multi-function, communications
security device that protects sensitive voice, fax and data
communications. The market for SafeGuard includes non-US governments,
defence, police, taxation, telecommunications companies, banks and
health services as well as other privacy conscious organisations.
With an estimated current market size of some US $6.7 billion and a
compound annual growth rate of 25%, the communications security
market is booming. Following recent events in the United States and
the reaction of world governments to the September 11 attacks, QPSX
conducted further market assessment and successful trials with the
Australian government and a number of Asian governments. QPSX
concluded that a significant market opportunity exists for the
SafeGuard product, and in May 2002 launched it's latest updated
model. Pleasingly, this has enabled QPSX to secure its first Asian
government customer order, a pilot order that whilst not financially
material, will position QPSX well for identified regional sales
opportunties. QPSX is also currently negotiating a number of
distribution agreements for the product globally. perational Modes
PSTN Voice Clear and Cipher
FINANCIAL PERFORMANCE
Management have been very careful to ensure that outgoings are
sustainable until new SAR royalties and other revenues commence.
For the FY '01, QPSX reported a net profit after tax of $0.4m, on
revenues of $1.8m, which exceeded the projections contained in the
QPSX November 2000 prospectus of an after tax loss of $32,000, on
revenues of $1.1m.
Non SAR revenues in FY2001 & FY2002 are forecast at $1.2M & $0.3M
against $0.8M and $nil respectively in the projections contained in
the November 2000 prospectus. The projected SAR European revenues for
2002 were estimated at $18M resulting in a NPAT of $7.7M. Projected
royalty returns from Canada and the US were not included in the
prospectus but represent considerable upside to QPSX. Key assumptions
underlying the projections included the timing of potential licensees
taking up licences and the lump sum/royalty rates agreed. The
potential SAR revenue stream is in the hundreds of millions of
dollars, and the view of both our German legal counsel and US based
licensing partner is that there is a strong probability of success.
Whilst excellent progress as described above has been made,
attainment of these revenues prior to June 30 th 2002 is still
subject to negotiations underway and accelerating post June 6 th 2002
or from an out of court settlement. If QPSX is unable to finalise
licensing agreements by 30 th June 2002, this would result in an
after tax loss forecast at $0.8M. The company's cash position remains
strong and cash is forecast to be $3.7M at June 30 2002, with an
annual expense rate forecast of $1.5M.
QPSX has minimised its exposure to the costs and risks associated
with the SAR litigation by sourcing up to US$4 million of funding
from Lloyds to support the action. This amount is considerably higher
than the anticipated costs of the current litigation and the bulk of
the German litigation costs (court and legal fees) have already been
paid.
In addition, QPSX's US venture capital partner CRL is contributing
25% of QPSX SAR related licensing program costs, including
litigation. Expenses and amortisation costs (net of CRL
contributions) in 2001 and 2002 came to $1.1M & $1.7M against
projections of $0.9M & $1.5M respectively.
Whilst QPSX originally allowed $2M for acquisition of new
technologies (which was capitalised in the projections), we have been
able to acquire exlusive licensing rights to the FST & Telstra
technologies at no upfront cost.
In summary, the Company's cash position will be sufficient to meet
all outgoings until SAR related revenues commence to flow. QPSX
expects such revenues to commence during FY2003.
Further Information:
Graham Griffiths,
CHIEF EXECUTIVE OFFICER, QPSX Ltd
Tel: 08 9381 9518
Email: graham.griffithsqpsx.com
Website: http://www.qpsx.com
ends - AAP
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