XTEK's strong September quarter advances manufacturing and commercialisation goals

XTEK Ltd (ASX:XTE) enjoyed a strong September quarter, completing first deliveries of the XTclave™ plates, enhancing XTclave™ manufacturing capabilities in South Australia and furthering commercialisation goals with orders from the US Department of Defense as well as the Australian Defence Force. The company is also in a strong financial position to make further progress following successful completion of an oversubscribed capital raising. Managing director Phillipe Odouard said: “We are pleased with delivering a strong quarter of growth for the company, in which we achieved several important milestones. “Our ballistic commercialisation is progressing well, with the first XTclave deliveries now complete. “These milestones illustrate the demand for our state-of-the-art technology and capabilities; and represents external validation of our product quality.”  XTclave™ plates delivered Following the order announced on March 19, 2020, XTEK has successfully completed the delivery of its XTclave™ manufactured ballistics armour plates to Tote Systems Australia. This represents the first use of XTclave™ products in the field by law enforcement, with plates to be used by officers within an Australian Specialist Law Enforcement Unit. During the quarter, the company also delivered the first lot of 250 XTclave™ manufactured plates to CPE Production OY for use by the Finnish Defence Force (FDF), which was upsized in June 2020 for a total order worth around A$2 million. Further deliveries of XTclave™ plates to the Finnish Defence Force are expected to be completed in the short term, and XTEK is exploring additional opportunities in conjunction with the CPE Production Oy. US commercialisation progresses Over the quarter, the company has exported multiple deliveries of XTclave™ products to the US for qualification and testing purposes, generating interest with potential law enforcement clients. XTEK has recently received another order from the US Department of Defense (DoD) for further testing of several different hard armour plates - validating the interest of the  DoD for the XTEK XTclave™ technology. Additionally, several products have received National Institute of Justice (NIJ) Certification during the quarter, including the soft armour designed specifically for females and that was first launched earlier this year. This armour addresses a high unmet demand in the US. NIJ is the governing body for ballistic armour performance in the US and this approval is a key milestone in the launch of this unique product. In the medium term, the company plans to establish a US based XTclave™ manufacturing capability which will enable tendering for large US defence contracts that require locally made product. XTclave™ manufacturing enhanced The company has continued to expand its XTclave™ production capacity in its state-of-the-art Adelaide Manufacturing Centre which is funded by an A$2.5 million loan facility from the Commonwealth Bank of Australia and the Sovereign Industry Capability Priority grant of A$830,000, to enhance its ballistic helmet manufacturing line. These new machines are progressing well and should be commissioned later in the year and into 2021 as production ramps up. ADF opportunities XTEK is collaborating with 20 other Australian companies in the government-funded C4 Evolutionary Digital Ground Environment (EDGE) Program. Phase 1 of the program is to scope the development of a sovereign land battlegroup C4 (Command Control Communications and Computing) environment demonstration to the Australian Army. The C4 EDGE Program is expected to deliver the demonstration in late 2021 and provides XTEK the opportunity to leverage the unique capabilities of its proprietary XTatlas™ software to enhance the situational awareness of select frontline soldiers and pass on targets to weapons systems, substantially improving targeting in Army front line operations. SUAS purchase orders XTEK has built a strong and important relationship with the ADF for its SUAS business, with multiple additional purchase orders received during the quarter for the supply of AeroVironment WASP AE SUAS and spare parts. The delivery of 65 systems and spare parts from previous purchase orders was completed, with further deliveries scheduled in FY21. In addition, the company continues to service the long-term SUAS support contract. Space sector In conjunction with Skykraft, XTEK also continues to progress the design for a small satellite launch stack funded by an Australian Space Agency Grant as the advanced composite materials manufactured using its XTclave™ technology have unique technical advantages in space applications.  The collaboration provides a valuable opportunity to commercialise the XTclave™ technology and increase XTEK’s presence in the space sector and is expected to be completed in late 2021. Financial outlook In an oversubscribed capital raising in August the company raised around A$9.2 million via an oversubscribed placement and about A$2.9 million via a Share Purchase Plan (SPP). The total proceeds will be used to execute XTEK’s international ballistic strategy, commercialise the XTclaveTM technology, accelerate growth in other operations and for working capital. Odouard said: “We look forward to accelerating our international ballistics commercialisation strategy, underpinned by the recent oversubscribed capital raising. “In addition, we continue to engage with potential customers and strategic parties to further commercialise our unique actionable intelligence solutions, which are continuing to gain significant traction, momentum and market interest.”