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Average Intrinsic Value
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#Market Update
Added 4 months ago

05-March-2020:  Market Update

Another month, another positive market update from MX1, making it two months in a row.  Prior to that, the news was mostly negative.  However, they're seeing increased orders from Carestream Health for their DRX Revolution Nano (mobile digital X-ray machine), which they believe are due to the Nano being used in the fight against Covid-19:

Excerpts from the update:

Australian hi-tech company Micro-X Ltd (ASX:MX1) (Micro-X or the Company), a leader in cold cathode x-ray technology for the health and security markets globally, provides the following Market Update in relation to additional sales of the Carestream DRX Revolution Nano (the Nano) secured since 14 February 2020 by the Company’s distributor Carestream Health, Inc.  Additional $1.0 million in Sales Orders for Nano Following the Market Update provided on 13 February 2020, Micro-X has now received additional purchase orders for Nano units totalling approximately A$1.0 million, bringing the total sales orders to $1.8 million for the current Quarter.  The majority of these sales orders will be recognised as revenue this Quarter and the balance in the June 2020 Quarter.  These $1.8 million of orders demonstrate strong growth and uptake as compared to $0.2M sales for the December 2019 Quarter and $1.9M sales for the whole of FY2019.  These additional purchase orders are for delivery to Asia and Europe.

As with the previous purchase orders there is a requirement for urgent delivery within a 4 week time frame.  The orders do not specify the end customer use although it is understood that due to the size and urgency of the orders, some of these Nano units are to be deployed in connection with the ongoing COVID-19 (formerly 2019-nCoV or Coronavirus) epidemic.  

Micro-X continues to work with its supply chain partners to maximise its ability to respond to any future such requirements to deliver Nano units in a very short time frame.  While the standard lead time for the delivery of a Nano is between 8-12 weeks from order date, Micro-X has been able to deliver its recent February orders within a time frame of approximately 4 weeks from order date. 

As previously announced, early-stage diagnosis of Coronavirus is by a blood test to confirm the infectious agent, and a chest x-ray is used as an essential part of diagnosis of the development and progression of the severity of the illness. Like with pneumonia, a chest x-ray is used to detect fluid in the lungs, particularly with patients presenting with severe acute respiratory distress.   The World Health Organisation has defined a criterion for diagnostic progression of the Coronavirus infection from ‘Confirmed Case’ to ‘Severe Illness’ as a chest x-ray with multi-lobar infiltrates or pulmonary infiltration which has progressed more than 50% within 24-48 hours.

--- click on link above for more ---

MX1 is a tiny company, and while the dollar value of these orders might seem almost insignificant (under $2m), it's a big deal for a company this small, particularly when the Nano is their only fully-commercialised (selling) product to date.  While the Covid-19 coronavirus is clearly a human tragedy, and is creating huge volatility in global markets, Micro-X (MX1) might be one of those very few companies who actually benefit from this particular tragedy.

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#Market Update
Added 5 months ago

13-Feb-2020:  Market Update

MX1 is up around +58% on the back of that today (at 1:53pm Sydney time), and have been higher today (+74% at 27 cps, now 24.5 cps, closed yesterday at 15.5 cps and were as low as 13 cps 9 days ago - Feb 4th).  It seems that Micro-X's only currently selling device, the Nano mobile digital x-ray machine, is going to be used by some governments in the fight against the new coronavirus (for chest x-rays to determine fluid levels in the lungs).  

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#Company Reports
Added 5 months ago

31-Jan-2020:  Quarterly Cash Flow & Business Update

Not well received by the market, with MX1 down -11.76% on the day (from 17cps to 15cps).  They believe they now have enough cash to get through to 2021 but their sales receipts were once again below expectations, being only $0.784 million for the Dec 2019 Quarter (Dec 2018 Quarter: $0.278 million).  Their costs were over $4m.  If it wasn't for another capital raising during the quarter as well as $3.153m in government grants and tax incentives, they would have gone broke.  Unfortunately, for a company that shows as much promise as they do (a lot!), their history has been littered with capital raisings (many of which, like this most recent one, did not involve ordinary retail shareholders) and regulatory stuff-ups.  They have had their shares suspended from trading on numerous occasions due to "oversights" that have resulted in them disobeying the ASX listing rules, and some of those have resulted in MX1 having to obtain relief via the courts.  They have great tech, and quite possibly a very bright future, but they have been underfunded and probably understaffed with regard to administrative personnel who fully understand the requirements of being an ASX-listed company in Australia.  It's been a rocky road indeed for MX1 shareholders.  I tend to trade them these days.  Buy low, sell high, and wait for them to stuff up again, rinse and repeat.  They are trading at 15c now, half a cent off their 12-month low of 14.5c, and they were trading at 33.5c in October (less than 4 months ago).  They look like good buying here as they always seem to find a way to stay in business, despite their obvious occasional incompetencies, and they will probably one day get their sh!t together.  However, they are NOT without risk.  They are not yet profitable, and based on past experience predicting when they WILL be profitable is a hard thing to do.

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#New Product Development
Added 3 weeks ago
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#Market Update
Last edited a month ago

29-May-2020:  Micro-X - Nano shipment and reduction in backlog

Key Points:

  • May 2020 - $0.5m of Nano units built, shipped and invoiced
  • $2.2m Nano built, shipped and invoiced since January 2020
  • Major reduction in backlog of existing orders to under $1.0 million
  • New Order delivery time now less than 4 weeks – required for COVID-19 customers 

Since 1 May 2020, $0.5 million of Nano units have been shipped globally to countries in Europe, North America, and Asia as well as domestically. This has reduced the backlog of existing orders for the Nano to less than $1.0 million which will all be delivered in the month of June. The total Nano units shipped and invoiced since January 2020 is now $2.2 million.

As previously announced, COVID-19 has significantly changed the mobile X-ray market across the world with delivery times required to be less than 4 weeks to meet the urgent need for imaging of infected patients. This demand has been driven largely by government health agencies using emergency procurement processes different from the normal purchasing or tendering cycles of 8-12 week delivery.

In order to ramp up production and reduce delivery times, Micro-X has invested significantly in inventory, capex and additional resources supported by funds from the recent $15.0 million Placement and Entitlement Offer.  With delivery times for new orders now at 4 weeks or less, this is expected to increase the potential demand for new Purchase Orders of the Nano.

Micro-X’s Managing Director, Peter Rowland, commented:

“The team at Micro-X  has worked tremendously hard to reach our goal of reducing the backlog of existing orders and to enable us to offer delivery times for future orders of less than 4 weeks. We believe this will be a key factor in maintaining the momentum of growth in new Nano purchase orders to support health care facilitates internationally in their response to COVID-19.”

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#Market Update
Last edited 2 months ago

13-May-2020:  Micro-X Market Update Nano Production Increasing

MARKET UPDATE - NANO PRODUCTION & DELIVERIES RAMPING UP  

Progressing on all three strategies for capital raising with Nano production and inventory being scaled  

Adelaide, Australia, 13th May 2020: Australian hi-tech company Micro-X Ltd (ASX:MX1), a leader in cold cathode x-ray technology for health and security markets globally, provides the following Market Update on progress of production and shipping of the Carestream DRX Revolution Nano (the Nano).

Key Points

  • COVID-19 continuing to drive strong global demand for mobile x-ray with short delivery times critical for new orders
  • Ramp up in Nano production and inventory well advanced following successful $15.0M Offer
  • April 2020 - $0.5m of Nano units shipped.  Additional $1.5m of Nano units in production of which $0.5m are already substantially complete
  • Prioritising rapid reduction in backlog of existing orders and shortening delivery for new orders

In the month of April 2020, $0.5 million of Nano units from existing purchase orders were completed and shipped to the end customers.  In addition, a further $1.5 million of Nano units are at various stages of production with $0.5 million of these already substantially completed.  The remaining components are now arriving which will enable these Nano partially and substantially complete units to be completed, tested and shipped this Quarter.  Once Nano units are completed and shipped they are invoiced and treated as revenue for Micro-X.

Additionally, following the completion of the $15.0 million offer (the Offer), the ramp up strategy for Nano production is being implemented on an urgent basis.  This ramp up includes $0.6 million in capital equipment which has now been largely ordered and is expected for delivery this Quarter.  There is also an additional investment of $3.4 million in inventory in the form of components and once built, semi complete or complete Nano units.  This ordering has taken place and components will arrive progressively this Quarter.

In total since January 2020, $1.7 million of Nano units have been built, shipped and invoiced. 
 
Attached is a short presentation illustrating the activity and recent changes in manufacturing and production.  [click on link above to view the presentation]
 
Micro-X’s Managing Director, Peter Rowland, commented: “We set out to capture COVID-19 demand for our Nano when we raised funds and with the Placement component completed 2 weeks ago we have been working very hard on this initiative.  I am pleased to report that we’ve been successful in ramping Nano production with the rate of units being built and shipped increasing rapidly.  We have worked through some supply chain challenges due to recent global trade disruption and above all else our priority is to reduce our backlog of existing orders and therefore the delivery times for future orders.” 

--- click on link above for more ---

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#Company Reports
Added 3 months ago

08-Apr-2020:  Quarterly Activities & Cash Flow Report

That report, combined with the Business Update ("Major Nano Adoption [with] Over $1M [of] New Australian Orders") they released after the market closed yesterday afternoon has resulted in a +32% rise in MX1's SP in the first half hour of trading today.  Nano-cap company whose products are based on Nano Technology.  I hold MX1.

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#New Product Development
Added a month ago
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#Capital Raising
Last edited 3 months ago

17-Apr-2020:  Micro-X - $15M Placement & Underwritten Entitlement Offer

Non Renounceable Entitlement Offer Prospectus

Australian high-tech company Micro-X Ltd (MX1), a leader in cold cathode x-ray technology for health and security markets globally, is pleased to announce that it has received funding commitments totalling approximately $15.0 million, being a Placement of $8.75 million and a fully underwritten Entitlement Offer of approximately $6.25 million at 14 cents per share.

Key Points

  • $8.75m of commitments received for a Placement to sophisticated and professional investors
  • $6.25m Non-Renounceable Entitlement Offer on a 1 for 5.6 basis - fully underwritten
  • Funds from the Offers will be used to accelerate Nano scale up in response to COVID-19 demand, accelerate commercialisation of Rover product including high power generator and add funding runway
  • $15m funding from Offers plus $8.1m cash at 31 March 2020 provides funding runway into 2022
  • New institutional investors to join the register
  • Prospectus for the Placement and Entitlement Offer to be lodged today.

Purpose of the Offers

The Company intends to use the proceeds of the Offers to fund key growth strategies, including ramping up of Nano production in response to COVID-19 driven demand and positioning the Company to capture as many Nano sales as possible.  The Company will also accelerate the commercialisation of the Rover product for the military market with an FDA filing and first sales targeted in 2020.  The planned high power generator project will also be accelerated to enable the high powered Rover product from 2021.  The detailed Use of Funds is set out below:

USE OF FUNDS – PLACEMENT + ENTITLEMENT OFFER  

  • Nano - Scale up & inventory:  $4.00m
  • Rover - High power generator:  $3.50m
  • Rover - Regulatory & Commercial launch:  $1.00m
  • Mobile Backscatter Imager - Development:  $1.50m
  • Commercialisation & Working Capital:  $4.00m
  • Costs associated with Placement & Entitlement Offer:  $1.00m
  • Total:  $15.0m 

... click on links above for more...

I do hold MX1 shares, but I bought them at 12 cps most recently, and at lower prices prior to that, so don't think I'll be topping up at 14c (won't be exercising my entitlement) at this stage.  I only have a small position, because this is a very small company that has experienced some regulatory issues over the past couple of years, in terms of sticking to all of the ASX listing rules.  I'm hoping that's behind them now that sales of their first device, the DRX Revolution Nano (mobile digital x-ray device), have taken off and they can afford to put on more staff (including hopefully someone who can better monitor their compliance obligations).  It appears to have been mostly oversights rather than poor behaviour but the associated trading suspensions and court costs incurred by the company have been annoying and a distraction for management as well.  At least MX1 management don't seem to have an axe to grind with the ASX, like ANO and ISX seem to have. Anyway, I still consider MX1 to be at the higher end of the risk spectrum, so I keep my position relatively small. I also often sell out of them completley when the share price gets a little rediculous (on the high side) and then buy back in when the hype dies down again.  If you have a gander at their 3-year chart, you can see that the overall trend has been negative but that within that there has been a lot of volatility and chances to profit from that volatility.  I think that they may have turned the corner now, in terms of finally having a product that is actually selling and bringing in some revenue for them, and COVID-19 has provided them with a handy short-term tailwind actually (as their device is used to help diagnose/treat coronavirus patients via chest x-rays) but they're still not profitable.  Too many irons in the fire.  Their time will come.  Hopefully.  But still high risk at this point. 

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#Market Update
Last edited 3 months ago

07-Apr-2020:  Major Nano Adoption Over $1M New Australian Orders

That announcement was not added until after 4pm this afternoon, but MX1 had already risen +12% from 12.5 cps to 14 cps today.  I would expect some more of that tomorrow on the back of this announcement.  These Australian orders are on the back of the overseas orders that they've previously reported as the DRX Revolution Nano mobile fully-digital x-ray device that incorporates their cold cathode x-ray tech (carbon nanotube technology) is being used in the fight against COVID-19 to x-ray patients' lungs.

Further reading:  https://www.carestream.com/blog/2019/01/22/carbon-nanotube-technology-in-medical-imaging/

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#Market Update
Last edited 3 months ago

26-Mar-2020:  MARKET UPDATE – INCREASE IN NANO PRODUCTION ON RISING GLOBAL DEMAND

Adelaide, Australia, 26th March 2020:  Australian hi-tech company Micro-X Ltd (ASX:MX1), a leader in cold cathode X-ray technology for health and security markets globally, provides the following Market Update of a major scale up in production of the Carestream DRX Revolution Nano (the Nano).

Since last updating the market the Company has seen further increased demand for Carestream’s Nano product to meet the rapidly growing global need for diagnostic X-ray imaging associated with the COVID-19 pandemic.  The Board of Micro-X has today approved a strategic decision to position the Company for these changed market conditions by scaling up the capacity and readiness of the Nano production line.  This is to ensure Micro-X can meet the burst-order volumes and reduced delivery time requirements which characterise this new global purchasing trend.  

Key Points:

  • Additional $0.6M Nano purchase orders – total orders this Quarter now $2.4M
  • Changing market conditions - sustained, major increase in demand for mobile x-ray units
  • Meeting high volumes with < 4 weeks delivery times now key to securing Nano orders
  • Nano production peak capacity scaling up to 2 units per day
  • Cost benefits with higher production volumes and reduced cycle times
  • Supply chain secured with staged investment in inventory and finished goods
  • Small CapEx investment in equipment for increased tube manufacture throughput
  • USD strength against AUD increases customer receipts and overall gross margins
  • Prudent cash management in all other areas of the business to manage funding runway

[click on link above for more]

I had questions whether MX1 would survive - a couple of months ago - but COVID-19 appears to be providing them with a useful tailwind - and much-needed revenue.  They are looking rediculously cheap now at around 10c per share.  However, remember that they have never posted a profit.  They are a young company with some good IP, some great ideas, a number of products in various development stages - but only one product that is actually selling - the Nano (as detailed above).  They're flying right now, but things can still go wrong for them when the current situation normalises.  MX1 have a history of regulatory stuff-ups in terms of breaking the ASX listing rules (apparently unintentionally) and then having to call trading halts and get court orders to allow them to file various forms with the ASX later than what the ASX listing rules allow.  The court orders have so far gone in their favour and have removed the option that the ASX might suspend them from trading for breaching their rules, but the risk remains.  In my view, they weren't entirely prepared for life as a listed public company, they didn't hire someone with the necessary compliance experience to look after that side of the business, and they've been primarily concentrating on product development.  Clearly their compliance has suffered as a result.  Hopefully that is all behind them now.  It's probably cheaper to employ an experienced and competent compliance manager than to keep going to court as they have been to keep the ASX off their backs.

So - what I'm saying is that there are risks, but I think those risks are diminishing with each of these recent positive updates.  I think Micro-X are getting their sh!t together finally, and I think they are going to be trading at significantly higher levels in 12 months and 24 months time.  That's why I've been adding them to my scorecard.

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