Announcement PDF Annual Report For the year ended 30 June 2024 Titomic Limited ABN 77 602 793 644 Contents Company directory 4 Chair of the Board, Dag W.R. Stromme’s Statement 5 Managing Director, Herbert Koeck’s Statement 6 Directors report 15 Auditors independence declaration 38 Financial statements Consolidated statement of profit or loss and other comprehensive income 39 Consolidated statement of financial position 40 Consolidated statement of changes in equity 41 Consolidated statement of cash flows 42 Notes to the financial statements 43 Consolidated Entity Disclosure Statement 86 Directors’ declaration 87 Independent auditors report 88 Shareholder information 92 2 2 3 3 Titomic Annual Report 2024 | Company directory Titomic Annual Report 2024 | Dag W.R. Stomme’s Statement Chair of the Board, Dag W.R. Stromme’s Statement Company Directory Dear Shareholders, DIRECTORS SHARE REGISTRY Mr Dag W.R. Stromme (Independent Non-Executive Chairman) Computershare GPO Box 3224 Melbourne, Victoria 3001, Australia Mr Herbert Koeck (Managing Director) AUDITORS Mr Humphrey Nolan (Independent Non-Executive Director) BDO Audit Pty Ltd Tower Four, Level 18, 727 Collins Street Melbourne, Victoria 3008, Australia Mr Richard Willson (Independent Non-Executive Director) Ms Mira Ricardel (Independent Non-Executive Director) SOLICITORS Dr Andreas Schwer (Independent Non-Executive Director) K&L Gates GPO Box 4388 Melbourne, Victoria 3001, Australia COMPANY SECRETARY SECURITIES QUOTED Mr Christopher Healy Australian Securities Exchange Ordinary Fully Paid Shares (Code: TTT) PRINCIPAL PLACE OF BUSINESS WEBSITE Ground Floor, 365 Ferntree Gully Road Mount Waverley, Victoria 3149, Australia https://titomic.com REGISTERED OFFICE IN AUSTRALIA Ground Floor, 365 Ferntree Gully Road Mount Waverley, Victoria 3149, Australia As I write my first shareholder letter as Titomic’s Chairman, I reflect on the remarkable journey our company has embarked on over the last year. This year marks not only a successful turnaround of our operations, but also a period of substantial foundational growth and transformation. Our performance has been driven by our people, our disciplined focus on cost management and our strategic focus. We have concentrated our efforts specifically on products which lend themselves best to our Cold Spray technology, with a focus on building profitable, recurring revenue streams along two operational verticals: 1) Manufacturing, and 2) Coating & Repair. Building confidence among our stakeholders – customers, shareholders, partners and colleagues – has been critical. Our efforts are now bearing fruit with recent successful sales and acceleration of our growth outlook, underscoring the success of our strategic focus and the growing global recognition of the benefits of Cold Spray technology. We have ongoing development projects for Manufacturing of parts with global defence primes, we have launched our barrels manufacturing joint venture with Repkon, established global partnerships in Coating & Repair with institutions such as the Royal Dutch Army, Airbus, Woodside, City of Melbourne amongst others – all of which provide scalable, varied and profitable revenue streams, including the manufacturing of parts, sale of machines, and the sale of powders and consumables. We are particularly well positioned within the aerospace and defence sectors and the energy sector where we see significant demand for our advanced solutions in the years ahead. With our Cold Spray technology, we are breaking new grounds with our customers which require the ability to execute consistently, innovate relentlessly, and adapt swiftly – all of which have been instrumental in driving our business forward and is central to the culture we are creating. I am proud to report that our significant growth in revenue and cash inflow have been a giant step forward in recent months. This shift not only ensures a stable financial foundation but also allows us to better serve our customers and continue investing for further profitable growth. We will move into a brand new manufacturing facility in Holland early 2025, we are expanding our US presence and we will announce several notable new capabilities in the months ahead which will further advance our technical solutions and revenue outlook. Our achievements would not have been possible without the unwavering dedication of our employees, the trust of our customers, and the steadfast support of you, our shareholders. I extend my deepest gratitude to all of you for your contributions and belief in Titomic’s vision. Looking ahead, the outlook for Titomic is extremely positive. We are committed to driving further growth by leveraging our technological advancements to become a major player in the Manufacturing of Titanium parts and in delivering superior Coating & Repair solutions to a wide range of industries globally. Our strategic focus will continue to be on expanding our market reach within our chosen product categories which we believe are transformational in the value creation we bring to our target customers. Thank you for your continued support as we embark on this exciting journey towards a prosperous future. Sincerely, Dag W.R Stromme Chairman of the Board Titomic 4 5 Titomic Annual Report 2024 | Herbert Koeck’s Statement Managing Director, Herbert Koeck’s Statement Dear Shareholders, As we close another fiscal year, I am immensely proud of the achievements Titomic has made during the 2024 financial year. Our relentless focus on innovation and execution has enabled Titomic to continue its transformation and secure improved revenue growth in key target industries. Last year, I outlined what we saw as the three steps for success in the 2024 financial year and I’m proud to say we have successfully delivered on these: 1. Reduce ongoing costs 2. Successfully raise capital 3. Accelerate commercialisation through successful sales Today, we are primed for strong growth. Our operations have improved and become more streamlined, spurred by our focus on delivering novel and effective solutions to overcome previously unmet challenges faced by multi-billion-dollar industries, including the production of higher-performing components, manufacture of advanced, multimetal coatings, and cost and time effective metal component and surface repairs. Our compelling and unique technological capabilities has allowed us to expand business with existing large customers and has also attracted new customers investigating and ordering our products and services. We have received substantial orders from Boeing, Airbus, Woodside Energy, Repkon, BAE Systems, and Triton Systems, which are just a small sample of our overall customer base. Given these industry leaders having implemented Titomic’s technology to recognise new capabilities, Titomic’s position is reinforced as the world’s leading provider of cold spray solutions. On a macro scale, we are seeing a strong increase in interest and demand from the global aerospace and defence sector, reflected by recent and growing sales in the sector in the 2024 financial year. While recognition of our brand and offering is growing, leading to increased sales, concurrently, operators within defence and aerospace have been challenged by unstable supply chains caused by another year of global geopolitical tensions. Earlier in August, we collaborated with DESE Research, Inc. - a knowledge-based organisation conducting theoretical and analytical research in the fields of Defence, Energy, Space, and Environment - at the Space and Missile Defense Symposium in Huntsville, Alabama, where Titomic advanced interest in our technology relevant to defence manufacturing, including from defence and aerospace companies and varied U.S. Government organisations. Further, we also appointed Dr. Patti Dare, a seasoned executive in the U.S. defence industry, having held previous roles at Raytheon, Boeing, and Lockheed Martin, to lead Titomic’s U.S. defence and aerospace efforts. Regarding distribution into key markets such as the United States and Europe, experienced and embedded resellers are complementary to our success. We have reviewed and updated our existing reseller agreements, and have refined our approach to future onboarding of resellers. During the 2024 financial year, we have enhanced the criteria and terms and conditions of resellers, but perhaps more importantly, we’ve raised our expectations of resellers. We will ensure that only the highest performing and effective resellers remain in place as we tenaciously and meticulously pursue sales growth. As we move into the next financial year, I am more optimistic than ever about Titomic’s future. Our goals are clear and ambitious; we aim to sustain our rapid revenue growth, accelerate cash inflows, and seize new opportunities in breakthrough manufacturing orders. We see vast potential in the U.S. market, where we have already taken action to expand our presence and operations. Significant sales to new customers, OMIC R&D and Triton Systems, are tangible proof points of our accelerated actions in the United States. This will not only enhance our market share but also position us closer to some of our key customers, facilitating even stronger partnerships. In closing, I want to extend my heartfelt thanks to our employees, partners, and shareholders for their unwavering support and dedication. The progress we’ve made would not have been possible without your commitment and hard work. Together we will continue to push the boundaries of innovation, ensuring that we remain at the forefront in the industries we work with. The future is bright for Titomic, and I am excited to embark on this journey of growth and success with all of you. Sincerely, This has caused unprecedented demand to remain unmet and supply chains to become destabilised, bringing the longstanding challenge of supply chain security to the fore, and many operators seeking alternatives to secure metal components, including armaments, vehicle components, replacement parts, and more. We are well-placed to meet this demand with cold spray, as large-scale, high-performance parts can be manufactured ondemand, enabling a reduction in lead times and downtime, consolidated manufacturing processes, and reduced reliability on external providers, and excessive inventory. During the 2024 financial year, we have made strong progress in qualifying and certifying key products manufactured by Titomic to fulfil these needs. Ultimately, our aim is to enable our customers to enhance their self-reliability and ensure their businesses remain operational. Further, service and repair has become an important element of our business, as maximising the up-time of existing machinery has become even more critical with access to new equipment and components limited, posing a risk to businesses’ operations. Herbert Koeck Managing Director Titomic Moving on to Titomic’s results, we generated growing revenue from customers up 126% to $5.9 million. In addition to this over $10.0 million of orders globally were generated by the business showing increasing demand for our products and services. At the very beginning of the fiscal year, we raised AUD 6.5 million at 1 cent per share. That allowed us to build out and expand our infrastructure to handle the growing business. The combination of growing customer receipts and additional funding from a private placement provided Titomic the capacity to start expanding its European operations and to proactively engage key segments in the United States. More broadly, we are taking proactive and strategic initiatives to further capitalise on the growing demand of our cold spray solutions. Our expansion of the Netherlands manufacturing facility is fully funded and on track, with completion scheduled for early calendar year 2025. This expansion will result in increased manufacturing capacity to service anticipated increases in demand across our business in the 2025 financial year. Further, our commercial focus within the United States is already showing early results, including growing sales and a healthy, growing lead pipeline. 6 7 Titomic Overview Additive manufacturing applications The world’s leading provider of cold spray solutions STRUCTURES TOOLING BALLISTICS SHIELDING Cold spray creates large structures with minimal size constraints from titanium, steel, and more, comparable to the properties of cast or forged parts with shorter lead time. Produce stronger, lighter, thinner and corrosion-resistant near-net shape faceplates – with reduced welding, assembly and lead times. Create complex, freeform ballistics protection from multiple metals or titanium to produce larger, lighter, more versatile armour. Titomic is the world’s only publicly listed company with cold spray at the core of its operations. With this technology, Titomic is providing new capabilities for the manufacture, coating, and repair of metal parts. Coating & repair applications Systems FUNCTIONAL COATINGS CORROSION WEAR RESISTANCE TKF1000 Heat-resistant layers, electrical conductivity, anti-fouling properties, and antibacterial surfaces, all achievable with significant thickness, no thermal distortion, unlimited size capacity, and on-site application. Apply corrosion-resistant materials such as titanium, aluminium, zinc, and nickel to new or existing parts, enhancing their lifespan in corrosive environments across marine, chemical, and oil and gas applications. Protect moulds, handling equipment, and more from wear, and replace hard chrome coatings. ENGINE REMANUFACTURING EMBEDDED SENSORS REPAIRS Refurbish engines without heat to restore and protect components, enhancing durability and performance with a costeffective, easy to use solution. Build and incorporate electronic sensors directly into parts, providing hard-wearing and anti-corrosion analytical sensors for offshore oil and gas, subterranean piping and more. Rapidly repair metal parts, restoring them to working order in applications across aerospace, mining, defence, boilermaking and more. Spray metal in seconds, so you can restore parts in minutes. D523 / D623 ISB-L Greater process control and efficiency Create large, strong multi-metal parts For the repair and restoration of numerous metal parts like engine components and moulds, sealing, corrosion protection, electrical conductivity and special applications. Titomic’s turnkey Integrated Spray Booth systems bring together low-to-medium pressure cold spray, handling, and dust extraction. Titomic’s TKF 1000 is a modular additive manufacturing system. Limitless possibilities including prototyping to R&D, small-run production and on-demand manufacturing. Faster, stronger metal coatings and repairs How does cold spray work? Cold spray accelerates metal powders to supersonic speeds, carried by air or nitrogen. As the powders exit the nozzle, they collide and mechanically bond to the surface and each other. As millions of powder particles collide every minute, they quickly build up strong, high-adhesion layers of metal to create coatings or free-form, 3D parts. Unlike traditional manufacturing methods like casting or forging, the particles don’t need to melt to be bonded together. This results in several significant capabilities, including: Parts are made to a near-net shape, reducing the amount of material that needs to be removed from the part by up to 90%, significantly reducing material costs. As the metals aren’t melted, cumulative thermal stress is mitigated and an inert environment is not needed, enabling Titomic to manufacture parts with minimal size constraints. TKF 3250 Leading cold spray manufacturing capability Metals with different melting points are still able to be combined into a single, seamless part, such as aluminium and titanium, steel and copper, and much more. This allows manufacturers to leverage the strengths of multiple metals in a single part or coating. The TKF 3250 is an example of Titomic’s capability to meet industry demands with high-performance cold spray systems. Designed and optimised for aerospace and defence manufacturing. Faster output 8 8 Scalable systems Combine metals 9 No size restrictions Cost competitive Titomic Annual Report 2024 | Review of operations and significant events for the period Titomic Annual Report 2024 | Review of operations and significant events for the period Operational highlights Systems sales TKF System sold to Triton Systems for U.S. manufacturing capability Sale of high-pressure cold spray system to Sabanci University Titomic sold a TKF System to U.S.-based Triton Systems Inc. for USD 808,000, marking Titomic’s first sale of a TKF System within the United States and signifying an important step in Titomic’s partnership with Triton. A high-pressure cold spray system was sold to Sabanci University’s Integrated Manufacturing Technologies Research and Application Center for EUR 1.4 million (AUD 2.4 million), expected to enhance novel additive manufacturing, material science, and surface engineering capabilities. The TKF System will enhance Triton’s manufacturing capabilities by enabling the rapid and cost-effective production of large, high-performance parts. The System was successfully installed and has passed Site Acceptance Testing as planned in the fourth quarter of FY2024, allowing Titomic to fully recognise the associated revenue of the System sale. Integrated Spray Booth sold to EPCOR Ongoing engagement and system sales to Airbus Titomic sold an Integrated Spray Booth (ISB) to Epcor for EUR 310,000 (AUD 516,615). Airbus selected Titomic as its supplier for cold spray equipment, purchasing two systems for EUR 386,900 (AUD 645,000). It’s expected that EPCOR will utilise the ISB to enhance their maintenance, repair, and overhaul (MRO) operations. Titomic’s technology will be integrated into Airbus’ maintenance protocols, ensuring that Titomic cold spray is used across all Airbus Maintenance, Repair, and Overhaul (MRO) facilities ​​where cold spray will be utilised. EPCOR is a subsidiary of Air France Industries and KLM Engineering & Maintenance and specialises in maintenance, repair, and overhaul activities of pneumatic aircraft components and Auxiliary Power Units (APUs) of a wide range of aircraft, such as the Boeing 737 Next Generation, 777 and 787. Airbus purchased a high-pressure cold spray system, deployed at Titomic’s facility in the Netherlands. This system is being used by Titomic and Airbus to further develop coatings for aerospace applications. Airbus also purchased a D623 cold spray system for MRO operations. The powder selection process has been complete, with final spray trials nearing completion. Based on these results, Titomic and Airbus will select the preliminary applications of cold spray for real-world use, with implementation expected in the first quarter of FY2025. Installation of Integrated Spray Booth at Perron038 Titomic announced the sale of an Integrated Spray Booth to Perron038 for AUD 707,302, which will house a robotised Titomic D623 medium-pressure cold spray unit. TKF 3250 installed at Titomic’s Melbourne Facility The TKF 3250, an advanced high-pressure cold spray system, was installed and commissioned during the year at Titomic’s Melbourne Manufacturing Facility. This system is supporting manufacturing projects and generating revenue through its contributions to the defence and aerospace sectors. Titomic has successfully installed and commissioned the Integrated Spray Booth at Perron038. In adherence to the delivery schedule communicated in June 2023, the AUD 707,302 project was completed within the stipulated time frame of the calendar year-end, marking a significant deployment of Titomic’s advanced manufacturing solutions. The TKF 3250 is one of the world’s most advanced cold spray systems, and is enabling new possibiliites for coatings and manufacturing within aerospace and defence. CTME purchases multiple cold spray systems to enhance research capability Titomic completed the sale of multiple cold spray systems to the Spanish technology centre, Fundación Centro Tecnológico Miranda de Ebro (CTME), for EUR 300,000 (AUD 495,000). The systems, including the D623 medium-pressure and D523 low-pressure cold spray systems, were provided to enhance CTME’s research capabilities in advanced manufacturing. This sale supports CTME’s efforts in developing and integrating manufacturing technologies for sectors such as aerospace, defence, and automotive. $1.2m sale to leading U.S. Innovation Centre, OMIC R&D Titomic completed the sale of a custom high-pressure cold spray system to the Oregon Manufacturing Innovation Center (OMIC R&D) for USD 790,000 (AUD 1.2 million). TKF 3250 This system, designed to enhance OMIC R&D’s capabilities in advanced additive manufacturing and advanced alloy development, further expanded Titomic’s presence in the United States. The world’s leading cold spray system, located at Titomic’s Melbourne Innovation & Manufacturing Centre. OMIC R&D, with its expertise in providing commercial research and development services to major companies, acquired the system to leverage its high-pressure cold spray technology for additive manufacturing and multimetal coatings. This transaction also supported Titomic’s R&D initiatives, broadening industry awareness of the benefits of cold spray technology and contributing to potential sales growth. 10 Examples of the Integrated Spray Booth - Titomic’s fully consolidated cold spray system. 11 Titomic Annual Report 2024 | Review of operations and significant events for the period Titomic Annual Report 2024 | Review of operations and significant events for the period Operational highlights Operational highlights 23 D-Series cold spray systems ordered Joint venture with Repkon D-Series sales Joint venture update in FY2024 In 2022, Titomic signed a joint venture with Repkon to deliver the world’s first hybrid cold-spray, flowforming manufacturing facility. Repkon-Titomic is now a registered and capitalised company within Turkey. D523 sales in EMEA D523 sales in the United States Numerous important and reaffirming sales were made within EMEA, primarily in Europe. Sales of the D523 are spread across various industries, including education, aerospace, and manufacturing. The Volvo Group, headquartered in Gothenburg, Sweden, purchased a D523 for maintenance, repair, and overhaul, representing an expansion within the automotive and heavy equipment MRO sector. Titomic sold a D523 system to Oklahoma State University, primarily for use in research and development, as well as vocational training. A D523 was sold to Rensselaer Polytechnic Institute in the USA for education and R&D. The French Ministry of the Armed Forces has purchased a D523 low-pressure cold spray system. The sale was made to the Ministry, which purchased the D523 on behalf of the Fleet Support Service of the Navy Nationale (French Navy). A D523 system was sold to an industrial processing facility within Texas, which is expected to be used for the maintenance and repair of manufacturing plant equipment, ultimately reducing downtime and part replacement costs. Titomic received an order for 10 D523 systems from the Royal Netherlands Army for EUR 772,000 (AUD 1.3 million), marking the Company’s largest D523 order to date. Repkon-Titomic kicks off with TKF 1000 order In July 2024, Titomic sold a TKF 1000 cold spray system to its joint venture with Repkon in Turkey for AUD 2.3 million. The TKF 1000 is integral to the establishment of the hybrid cold spray manufacturing facility, which will combine Titomic’s technology with Repkon’s flowforming processes to revolutionise barrel manufacturing. This sale is part of Titomic’s ongoing strategy to expand its presence in the defence sector. The joint venture anticipates purchasing additional systems, including a bespoke TKF 3250, as the joint venture moves towards commercialisation. Titomic will also supply consumables and share in the profits from barrel production. The TKF 1000 is Titomic’s fully-integrated cold spray system for additive manufacturing, functional coatings, and research and development. A fourth system was sold to ASI Aircraft, a company with primary activities within the maintenance, repair, and overhaul of aircraft and aircraft components. A D523 was sold to a German manufacturing consulting company, primarily for R&D use and contractual repair and maintenance. D623 sales As aforementioned, Titomic’s next-generation of portable cold spray systems, the D623, has been successfully brought to market. D523 sales in Asia Pacific Several systems were sold within Asia Pacific, primarily for maintenance, repair, and overhaul (MRO) in the mining industry, as well as for broader repairs and coatings needs. One D623 was sold to Airbus - setting a strong foundation for the use of cold spray within their repair, maintenance, and overhaul operations - in addition to the custom highpressure system ordered. A D523 was sold to a Singaporean coating and repair company for use in industrial coatings and repeatable repairs. Additionally, a D623 system comprised part of the order received from CTME, located in Spain. A second D523 was sold to Alliance Singapore - Titomic’s Singaporean reseller, indicating growing demand in the region. With the successful introduction of the D623, these systems have been adopted by leading organisations including Universidad Rey Juan Carlos, Neue Materialien Bayreuth, TU Delft, KLM Engineering, and Airbus. A third D523 was sold within the Western Australian mining services sector for MRO of heavy vehicles and assets. A fourth D523 was sold within the South Asian mining and transport industry for MRO of heavy vehicles and assets. 12 13 Titomic Annual Report 2024 | Review of operations and significant events for the period Titomic Annual Report 2024 | Directors’ report Operational highlights Directors’ report Increasing engagements in global defence sector Titomic increasingly penetrating U.S. defence and aerospace sector Titomic made significant advances in the U.S. aerospace and defence industries, securing highly sensitive orders from an international aerospace and defence prime, leveraging its world-class cold spray capabilities. The relationship with this customer has now spanned several years and reflects the long qualification period required to build and nurture these type of opportunities. In total, and including the order received post 30 June 2024, total orders received from this global U.S. aerospace and defence prime are over AUD 1.0 million. This development aligns with Titomic’s broader successes in defence and aerospace, including projects with Triton Systems, OMIC R&D, and a joint venture with Repkon, adding to the Company’s positive momentum with AUD 8.0 million in new orders since March 2024. Developments since year-end Titomic appoints Dr Patricia Dare to lead U.S. defence and aerospace efforts Titomic has appointed Dr Patricia Dare to head its defence and aerospace efforts in the United States. Dr Dare brings over 30 years of program management and business development experience in the defence industry and has held key roles at Raytheon Technologies, Boeing, Lockheed Martin, and Honeywell International. The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘Consolidated entity’) consisting of Titomic Limited (referred to hereafter as the ‘Company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2024. Directors, Key Management Personnel and Company Secretary The following persons were Directors of Titomic Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Mr Dag W.R. Stromme Independent Non-Executive Chairman Mr Christopher Healy Company Secretary Mr Herbert Koeck Managing Director Mr Jonathan Nield Chief Financial Officer (retired 17 May 2024) Mr Richard Willson Independent Non-Executive Director Mr Geoff Hollis Chief Financial Officer (commenced 13 May 2024 ) Repkon-Titomic kicks off with TKF 1000 order Mr Humphrey Nolan Independent Non-Executive Director In July 2024, Titomic sold a TKF 1000 cold spray system to its joint venture with Repkon in Turkey for AUD 2.3 million. Ms Mira Ricardel Independent Non-Executive Director Mr Andreas Schwer Independent Non-Executive Director Titomic maintains quality assurance standards Titomic recently participated in a review of its adherence to quality systems and was found to have complied with all relevant standards. Further engagement in U.S. defence and aerospace sector As announched on the 14th of August, 2024, Titomic received additional purchase orders totalling AUD 577k from a global U.S. aerospace and defence prime, marking a significant milestone in the long-term relationship. This brings the cumulative orders on this project to over AUD 1.0 million. Principal activities Titomic Limited is an Australian publicly listed company specialising in manufacturing and technology solutions for highperformance metal additive manufacturing, metal coatings, and repairs using its unique patented Titomic Kinetic Fusion® cold spray technology with its principal activities in the global defence, aerospace, mining, energy and transport industries. 14 15 Titomic Annual Report 2024 | Directors’ information Titomic Annual Report 2023 | Directors’ information Information on Directors, Company Secretary and Chief Financial Officer Information on Directors, Company Secretary and Chief Financial Officer continued The qualifications and experience of each person who has been a Director of the Company at any time during or since 1 July 2023 is provided bel