REG - AOTI, Inc. - 2024 Interim Results
16/09/2024 07:00
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RNS Number : 2281E AOTI, Inc. 16 September 2024
16 September 2024
AOTI, Inc. (the "Company" or "Group" or "AOTI")
2024 Interim Results
Robust performance and progress achieved against strategy during H1 2024
AOTI, Inc. (AIM: AOTI), a medical technology group focussed on the durable
healing of wounds and prevention of amputations, announces its unaudited
results for the six-month period ended 30 June 2024 ("the Period" or "H1
2024").
Operational Highlights:
· Growth delivered across all business segments, with the higher
margin Medicaid and International segments growing at the fastest rate.
· Veterans Administration (VA) Federal Supply Schedule (FSS) contract
extended for an additional six months in June 2024, while five-year contract
extension process completes.
· Continued expansion of sales team driving strong revenue growth rate
with the number of Full Time Employees (FTEs) increasing to 80 as of 31 August
2024 (growth of c. 27% from H1 2023).
· Signed a distribution agreement for the NEXA™ Negative Pressure
Wound Therapy (NPWT) System with the largest distributor of wholesale
medical-surgical supplies and equipment in the US.
· Strengthened the Group's Senior Management Team with the appointment
of new Chief Financial Officer (CFO) and established an experienced,
independent Board of Directors.
Post Period:
· Received US FDA 510(k) clearance for NEXA(TM) NPWT System extending
its indications to include use in the home care setting in the US.
· Secured a contract for Topical Wound Oxygen (TWO(2)(®)) Therapy with
a leading Workers Compensation services company, which supports c.1 million
patients across the US.
· Entered into a 250 patient evaluation for TWO(2)(®) Therapy funded
by a leading health insurer in the Northeastern US.
Financial Highlights:
$'000 H1 2024 Unaudited H1 2023 Change
Unaudited
Revenue 26,339 20,845 +26.4%
Adjusted EBITDA 3,391 701 +383.9%
Net Cash / (Net Debt) 5,532 (10,070) +154.9%
· Revenues of $26.3m (H1 2023: $20.8m): up 26.4%, driven by growth
across all business segments.
· Adjusted EBITDA of $3.4m (H1 2023: $0.7m): reflecting
improvements in sales team productivity and the high levels of operating
leverage in the business as it scales.
· Successfully completed an Initial Public Offering (IPO) on AIM in
June 2024 raising gross proceeds of £19.5m ($24.7m), allowing the Company to
continue to focus on its strategic growth objectives and extinguish debt.
· Improved net cash position of $5.5m (H1 2023: net debt $10.1m) in
line with expectations following the IPO.
Outlook:
· The Company remains on track to meet market expectations for FY
2024 by delivering greater than 30% revenue growth and adjusted EBITDA margins
of 15-20%.
Dr. Mike Griffiths, Chief Executive Officer & President of AOTI, said: "We
are pleased with our performance for the first half of 2024, with growth seen
across all segments. This was achieved while we executed on a successful IPO
on AIM and continued our strategy to further accelerate the commercial
roll-out of our TWO(2)(®) Therapy and our NEXA™ NPWT System. I would like
to thank all our investors for participating in the IPO where we raised gross
proceeds of £19.5 million.
"We remain firmly committed to helping patients get back to living their lives
to the fullest. Our products have been proven to reduce hospitalisations by
88% and amputations by 71% and this significant impact is reflected in our
monthly treated patient numbers which have increased to c.1,300 in the US
alone. We also continue to make good progress in opening up new Medicaid
states, and in broadening reimbursement within states where we are already
active.
"As we move through the second half of 2024, I am pleased with the operational
progress we have achieved to date. We remain on track to meet market
expectations for the full year as we continue to deliver on our scale-up
strategy which is underpinned by a continued trajectory of profitable growth."
The Interim Results for the Period ended 30 June 2024 will be published on the
Company's website today at https://aotinc.net (https://aotinc.net) .
A presentation for sell-side analysts will be held this morning at the offices
of FTI Consulting, 200 Aldersgate, London, EC1A 4HD. The meeting will commence
at 09:30 British Summer Time (BST) and will also be held via webcast for those
who would prefer to join virtually. If you would like to attend in person or
via the dial-in details, please inform: AOTI@fticonsulting.com
(mailto:AOTI@fticonsulting.com) .
For more information please contact:
AOTI, INC.
Dr. Mike Griffiths, Chief Executive Officer & President +44 (0)20 3727 1000
Jayesh Pankhania, Chief Financial Officer ir@aotinc.net (mailto:ir@aotinc.net)
Peel Hunt LLP (Nominated Adviser and Broker)
Dr. Christopher Golden, Patrick Birkholm +44 (0)20 7418 8900
FTI Consulting (Financial PR & IR)
Ben Atwell, Simon Conway, +44 (0)20 3727 1000
Natalie Garland-Collins, Alex Davis AOTI@fticonsulting.com (mailto:AdvancedOxygenTherapy@fticonsulting.com)
ABOUT AOTI, INC.
AOTI, INC. was founded in 2006 and is based in Oceanside, California, US and
Galway, Ireland, providing innovative solutions to resolve severe and chronic
wounds worldwide. Its products reduce healthcare costs and improve the quality
of life for patients with these debilitating conditions. The Company's
patented non-invasive Topical Wound Oxygen (TWO(2)(®)) Therapy has
demonstrated in differentiating, robust, double-blinded randomised controlled
trials (RCT) and real-world evidence (RWE) studies to more-durably reduce the
recurrence of Diabetic Foot Ulcers (DFUs), resulting in an unprecedented 88
per cent reduction in hospitalisations and 71 per cent reduction in
amputations over 12 months. TWO(2)(®) Therapy can be administered by the
patient at home, improving access to care and enhancing treatment compliance.
TWO(2)(®) Therapy has received regulatory clearance from the US (FDA), Europe
(CE Mark), UK (MHRA), Health Canada, the Chinese National Medical Products
Administration, Australia (TGA) and in Saudi Arabia. Also see www.aotinc.net
(http://www.aotinc.net)
CHIEF EXECUTIVE OFFICER'S REPORT
I am excited to report our maiden set of financial results since our
successful Initial Public Offering (IPO) in June 2024 for the six-month period
ended 30 June 2024.
AOTI is a medical technology group with a clear mission of helping all people
with chronic conditions get back to living their lives to the fullest. Founded
in 2006, we are focussed on the durable healing of wounds and prevention of
amputations that are caused by various chronic wound conditions. To achieve
this, we have developed an innovative, at-home therapy to deliver
cyclically-pressurised oxygen topically to chronic wounds, which includes
diabetic foot ulcers (DFUs), venous leg ulcers (VLUs), as well as pressure
ulcers (PUs), promoting high-quality and more-durable wound healing over a
period of 12 months and longer.
Our proprietary Topical Wound Oxygen (TWO(2)(®)) Therapy, which has treated
>20,000 patients to date, has been demonstrated in pivotal clinical trials
to reduce the recurrence of DFUs six-fold versus standard-of-care, leading to
a 71% reduction in diabetes-related amputations and 88% reduction in
hospitalisations. We also offer an innovative disposable Negative Pressure
Wound Therapy (NPWT) device, the NEXA™ NPWT System.
During the first half of 2024, the business performed well, with the second
quarter correcting some previously reported specific segment underperformance
from the first quarter. We delivered growth across all business segments, with
the proportion of the higher margin Medicaid and International segments
growing at a faster rate, as planned, resulting in the Veterans Administration
(VA) segment accounting for c.64% of revenues in June 2024 compared to c.75%
in June 2023. During the period, we continued to make strong progress against
our phased market access strategy, whilst operationally we increased the
number of US sales representatives in line with expectations, to 80 as of 31
August 2024 (growth of c.27% from H1 2023), to further enhance our growth.
Post period, we were pleased to receive US Food & Drug Administration
(FDA) 510(k) clearance (K241515) for the Company's NEXA(TM) NPWT System
extending its indications to include use in the home care setting in the US,
further increasing its potential addressable market. We also signed a
distribution agreement for the NEXA™ NPWT System with the largest
distributor of wholesale medical-surgical supplies and equipment in the US.
In June 2024, we were admitted to trading on AIM. This was in line with the
Board's strategy to further accelerate the Group's commercial roll-out,
enabling us to reach our full potential. The net proceeds to the Company from
the IPO are being deployed to continue expansion of the Group's sales team in
the US and to open up new territories in which the Group's products can be
sold whilst also repaying the Group's financial debt. In addition, we will
direct some funding towards continuing to enhance the clinical evidence
supporting the differentiating outcomes delivered by our TWO(2)(®) Therapy in
additional wound types.
Market Access Update & Segment Performance
AOTI's approach to market access comprises of three overlapping phases that
are sequentially establishing access to the VA, Medicaid and Medicare market
segments. Ultimately, as these phases are implemented, the remaining payer
categories will also provide reimbursement. The Group is targeting these
sectors because they have the highest diabetes and chronic wound prevalence
rates.
The first phase of the Company's reimbursement strategy has successfully been
completed with reimbursement for the Company's TWO(2)(®) Therapy having been
secured in the VA and New York Medicaid for a number of years. The second
phase of expanding wider state Medicaid payer coverage is ongoing, with access
being secured in five additional Medicaid states, the launch of the NEXA(TM)
NPWT System and International sales being commenced. The third phase of the
Group's market access strategy is to achieve, over time, full US national
coverage and access to the Medicare population.
$'000 H1 24 H1 23 Change
Unaudited Unaudited
Veterans Administration 16,873 15,763 +7.0%
Medicaid 8,926 4,856 +83.8%
Other (NEXA™ and International) 540 226 +139.1%
Total 26,339 20,845 +26.4%
Veterans Administration (VA)
For the Period, revenues from our VA segment were up 7.0% to $16.9m (H1 2023:
$15.8m). Having first secured reimbursement from the VA in 2009 under an
awarded five year Federal Supply Schedule (FSS) contract, the terms of our
existing VA FSS contract were extended for an additional six months in June
2024, while the current five-year contract extension process continues through
the mandated Office of Inspector General (OIG) review due to our contract
size. We expect this extension process to conclude shortly and are confident
in achieving this given the recent grant of a six-month extension.
Our strong clinical efficacy including the ability to save patients' limbs,
lives and ultimately cost for the VA has enabled us to drive growth across
this segment in a time of heightened cost containment by prosthetics
departments within several VA medical centres.
Medicaid
The Company is in the second phase of its market access and commercialisation
strategy. AOTI's strategy is to focus on 15 targeted states and align these
with the major insurance companies who administer Medicaid in those states
through managed care. Once the Group has access to these states, they will
also have access to all the major payers administering the remaining states
across the US Medicaid and Medicare systems, streamlining future negotiations.
Since the start of the Group's accelerated market access strategy in 2022, the
Group has successfully secured Medicaid payers within the states of Arizona,
New Jersey, Massachusetts, Virginia and Tennessee and expects to open two to
three new states on a sustainable basis each year over the coming years and
beyond.
For the Period, Medicaid segment revenues were up 83.8% to $8.9m (H1 2023:
$4.9m). As noted in our Admission Document published in June 2024, in January
and February 2024, trading was slower than expected reflecting territory
restructuring in New York in Q4 2023. These changes have been implemented and
from March 2024 onwards, the Group has been trading in line with expectations.
Whilst all states grew, Arizona Medicaid and New Jersey Medicaid performed
particularly well.
Within the new Medicaid states segment, we have submitted our first claims for
managed Medicaid patients in Tennessee and are continuing to work towards
securing payer coverage in Virginia and Massachusetts. In our targeted
expansion states, we have secured a 250 patient evaluation which is being
funded by a leading insurer in the Northeastern US and is expected to commence
in Q4 2024.
It typically takes 12 to 18 months to open a new state, agree reimbursement
and achieve first payment for TWO(2)(®) Therapy. Negotiations in new Medicaid
states continue to progress well, as are discussions with insurers to broaden
reimbursement within states where the Group is already active. These market
access activities are closely linked to our sales team expansion plans which
will contribute to our growth.
Other
NEXA(TM) NPWT System and International sales have grown by 139% since the
prior period, driven by European and Middle Eastern sales as well as
distributor sales for the NEXA(TM) product.
In the Period, the Company signed a distribution agreement with the nation's
largest distributor of wholesale medical-surgical supplies and equipment in
the US. This coupled with the expanded US FDA 510(k) clearance for home use in
the US is expected to continue to drive further penetration of NEXA(TM) into
the US market.
In July 2024, the Group also secured a contract with a leading Workers
Compensation services company for TWO(2)(®) Therapy, which supported nearly 1
million patients across the US in 2023.
Product & Market Developments
The Group is a leading advocate of the benefits of promoting health equity
with its patient-applied, at-home therapies and during the Period, we have
continued to build on our strategic partnership with the American Diabetes
Association (as a founding member of the Amputation Prevention Alliance to
further address the diabetic-related amputation epidemic) and showcased the
unique limb-saving capabilities of TWO(2)(®) Therapy at their 84th Scientific
Sessions in Orlando, Florida during June 2024.
In addition, we have continued the roll-out of the Company's "Eyes on the
Wound: Engaged Outcomes" platform in key expansion market segments to further
demonstrate our differentiating outcomes in a payer's specific patient
population and successfully rolled out an Enterprise Resource Planning (ERP)
system company-wide to provide enhanced visibility of performance and to
further support improved productivity of the sales team.
We are proud of our efforts to promote health equity and with proven real
world efficacy and a significant overall cost-saving healthcare economic
proposition (including the cost of therapy) for DFUs, in line with our
strategy, we continue to evaluate how to further enhance the clinical claims
attached to our products, for instance, growing the evidence of efficacy in
other indications such as VLUs. We look forward to updating the market on
developments in due course.
Initial Public Offering (IPO) & Board of Directors
Our IPO on the London Stock Exchange completed on 18 June 2024 successfully
raising gross proceeds of £19.5m through a placing of 14,772,918 newly issued
Common Shares at a placing price of 132 pence per Common Share. In addition,
gross proceeds of £15.6m were raised for certain selling shareholders through
the placing of 11,818,336 existing Common Shares at the Placing Price. The net
proceeds allow the Group to focus on its strategic growth objectives. As of 30
June 2024, the Company had in place a loan of $14.5m with SWK Bank: in-line
with the use of proceeds from the IPO, the Company repaid $6.0m in July 2024
and is expecting to repay the remaining facility over the coming few months.
During the Period, we enhanced the Board as part of the IPO process with the
addition of Jayesh Pankhania (Chief Financial Officer), Douglas Le Fort
(Non-Executive Chairman), Richard Cotton (Senior Independent Director), Dr
Ceri Morgan and Anthony Bourne (Non-Executive Directors) to join myself and
Anthony Moffatt (Chief Operating Officer). We now believe we have a seasoned
Board in place who are focussed on scaling and growing the business through
expanding reimbursement in the US and opening up other geographies.
Conclusion
The Board continues to believe that AOTI has all of the building blocks in
place to secure expanded market access and commercialisation of our TWO(2)(®)
Therapy and to continue the staged roll-out of the NEXA™ NPWT System, the
Company's independently differentiated wound care platforms.
On behalf of the Board, I would like to take this opportunity to thank all our
existing and new investors, employees and partners for their significant
support over the past six months. It has been an instrumental period for the
Company, and we look forward to updating the market in the coming periods as
we deliver against our scale-up strategy, underpinned by a continued
trajectory of profitable growth.
DR. MIKE GRIFFITHS
Chief Executive Officer & President of AOTI, Inc.
13 September 2024
CHIEF FINANCIAL OFFICER'S REPORT
Financial Report
Financial highlights
$'000 (unless stated) H1 2024 H1 2023 Change*
Unaudited Unaudited
Revenue 26,339 20,845 +26.4%
Gross Profit 22,986 18,203 +26.3%
Gross Margin (%) 87.3% 87.3% (6) bps
Operating Expenses 25,674 19,461 +31.9%
Loss from Operations (2,688) (1,258) +113.7%
Adjusted EBITDA 3,391 701 +383.7%
Basic and Diluted loss per share (cents per share) (0.05) (0.03) +39.5%
Operating Cash Flow (2,220) (1,715) +29.4%
Financing Cash Flow 21,930 0 na
Net Cash / (Debt) 5,532 (10,070) +154.9%
* Certain changes are calculated on underlying numbers before rounding
Revenue
Revenues grew 26.4% to $26.3m in H1 2024 (H1 2023: $20.8). This was driven by
growth across all market segments, but predominantly through growth in the
Medicaid segment.
Gross Profit
Gross Profit increased 26.3% to $23.0m, and Gross Margin stayed relatively
flat (6 bps) at 87.3%. The mix of business towards the higher margin Medicaid
segment increased from 23.3% to 33.9%, though overall Gross Margins reduced
marginally due to a one off catch up accrual on a rebate and a greater
proportion of international sales to distributors.
Operating expenses
Operating expenses increased 31.9% to $25.7m in the period. This included a
one off non-cash share-based payment charge of $5.1m (H1 2023: $0.8m)
crystallising on IPO further described in Note 7 and our Admission Document;
and Strategic Advisory and IPO preparation costs of $0.1m (H1 2023: $0.4m).
Excluding these items, underlying operating expenses would be $20.5m (H1 2023
$18.2m) an increase of 12.6% and much lower than the increase in revenues,
demonstrating the strong operational leverage in the business from its high
Gross Margins. This trend is expected to continue as the business scales.
Adjusted EBITDA
Adjusted EBITDA was $3.4m (H1 2023: $0.7m) reflecting improvements in sales
team productivity and the high levels of operating leverage in the business as
it scales following earlier significant investment in market access and
building out our sales function.
Loss from Operations
The Loss from Operations was $2.7m (H1 2023: $1.3m) and includes non-cash
share-based payments and strategic advisory and IPO preparation costs as
mentioned above. Excluding these items, there would be a Profit from
Operations of $2.5m (H1 2023: nil).
Loss per share
The basic and diluted loss per share was $0.05 (H1 2023: $0.03), an increase
in loss mainly due to one off IPO related items.
Operating Cash Flow
Operating Cash Outflows were $2.2m (H1 2023: $1.7m) an increase of 29.4%. In
2024, Cash Outflows were impacted by the payment of IPO related and other
costs deferred into 2024. As the proportion of revenue from Medicaid and
International increases, which has longer payment cycles than the VA, we will
be investing in working capital to fund this expansion.
Financing Cash Flow
Financing Cash Flow was $22.0m (H1 2023: Nil) primarily due to the net
proceeds of the IPO. In addition to this, a $2.0m loan was drawn from the SWK
Bank facility and $1.0m from related parties. The $1.0m loan from related
parties was repaid at the time of the IPO. A $6.0m portion of the SWK Bank
facility has been repaid since 30 June 2024.
Net Cash / (Net Debt)
Net Cash is $5.5m (H1 2023: Net Debt $10.1m), predominately reflecting the
funds raised as part of the IPO. Since 30 June 2024, $6.0m of the SWK Facility
has been repaid.
Reconciliation between Net Loss and Adjusted EBITDA
$'000 H1 2024 H1 2023
Unaudited Unaudited
Net Loss (3,867) (2,686)
Provision for income taxes 143 455
Interest expense 1,084 973
Depreciation and amortization 801 669
Loan fees Amortization 48 48
EBITDA (1,791) (541)
Share-based compensation (non-cash) * 5,077 797
Strategic advisory and IPO preparation ** 105 445
Adjusted EBITDA 3,391 701
* Share-based compensation included as a non-recurring expense due to
acceleration as a result of the IPO. See also Note 7 to the Condensed
Consolidated Interim Financial Statements
** The Company has incurred certain costs related to IPO preparation
Post Balance Sheet Events
As outlined above, in July 2024, the Group repaid $6.0m of its SWK Bank
facility in line with the proposed use of proceeds from the IPO and is
expecting to repay the remaining facility over the coming months.
Outlook
The Board believes that the Group remains on track to meet market expectations
for FY 2024 by delivering greater than 30% revenue growth and adjusted EBITDA
margins of 15-20%.
JAYESH PANKHANIA
Chief Financial Officer of AOTI, Inc.
13 September 2024
Condensed Consolidated Interim Financial Statements for the period ended 30
June 2024
Consolidated Statement of Operations
for the period ended 30 June 2024
Note 30 Jun 2024 30 Jun 2023 31 Dec 2023
Unaudited Unaudited Audited
$ $ $
Equipment rentals 16,841,560 14,297,067 28,707,407
Product sales, net of returns and allowance 9,497,226 6,548,280 15,210,427
Total revenues 26,338,786 20,845,347 43,917,834
Cost of equipment rentals 361,708 416,243 610,359
Cost of product sales 2,991,129 2,226,427 5,713,682
Total cost of revenues 3,352,837 2,642,670 6,324,041
Gross profit 22,985,949 18,202,677 37,593,793
Commissions 5,515,338 5,513,956 10,494,683
Salaries, wages and benefits 14,645,915 8,208,863 17,434,923
Other operating expenses 5,513,074 5,737,755 15,200,802
Total operating expenses 25,674,327 19,460,574 43,130,408
Loss from operations (2,688,378) (1,257,897) (5,536,615)
Realized gain (losses) on foreign currency transactions - (226,258)
24,276
Gain on disposal of fixed assets 23,739 - 63,240
Interest expense (1,083,958) (972,892) (1,950,087)
Loss before income taxes (3,724,321) (2,230,789) (7,649,720)
Provision for income taxes 142,543 455,153 537,490
Net loss (3,866,864) (2,685,942) (8,187,210)
Loss per common share
Basic and diluted (cents per share) 4 (0.05) (0.03) (0.10)
Weighted average shares outstanding 4 85,037,628 82,405,340 82,405,340
The above condensed consolidated statement of operations relates to continuing
operations for the Company.
Consolidated Balance Sheet
as at 30 June 2024
Note 30 Jun 2024 30 Jun 2023 31 Dec 2023
Unaudited Unaudited Audited
$ $ $
ASSETS
Non-current assets
Property, plant and equipment 2,870,537 2,148,359 2,653,246
Intangible assets 5 9,165,045 9,676,923 9,423,438
Operating lease right of use assets 630,772 646,157 634,617
Deposits held 26,000 26,000 26,000
Total non-current assets 12,692,354 12,497,439 12,737,301
Current assets
Inventory 1,995,237 1,947,568 2,203,516
Income tax receivable 51,344 238,323 40,145
Trade accounts receivable, net 7,706,753 4,372,608 5,221,915
Other receivables and prepayments 312,840 269,531 99,492
Cash and cash equivalents 19,752,725 1,576,546 778,484
Total current assets 29,818,899 8,404,576 8,343,552
Total assets 42,511,253 20,902,015 21,080,853
EQUITY AND LIABILITIES
Equity
Common stock 1,064 824 824
Additional paid-in capital 35,085,598 9,258,699 9,978,102
Retained earnings (deficit) (19,756,603) (10,388,471) (15,889,739)
Total stockholders' equity (deficit) 15,330,059 (1,128,948) (5,910,813)
Non-current liabilities
Deferred acquisition liability - 242,467 -
Deferred income tax liabilities 1,753,984 2,009,080 1,812,449
Long Term Debt, net 6 14,220,372 11,646,430 11,694,645
Operating lease liabilities 371,371 368,356 370,843
Total non-current liabilities 16,345,727 14,266,333 13,877,937
Current liabilities
Accounts payable - trade 1,725,229 1,462,157 5,789,137
Accrued expenses 6,065,164 3,561,281 4,241,888
Deferred acquisition liability 301,229 - 242,467
Income tax payable 440,885 542,231 612,035
Deferred revenue 2,021,127 1,963,881 1,941,957
Operating lease liabilities 281,833 235,080 286,245
Total current liabilities 10,835,467 7,764,630 13,113,729
Total liabilities 27,181,194 22,030,963 26,991,666
Total equity and liabilities 42,511,253 20,902,015 21,080,853
Consolidated Statement of stockholders' equity
for the period ended 30 June 2024
Common Additional paid in capital Retained earnings Total
stock equity
$ $ $ $
Balance at 1 January 2023 824 8,461,909 (7,702,529) 760,204
Loss for the period and total comprehensive income _ _ (2,685,942) (2,685,942)
Share-based payment expense _ 796,790 _ 796,790
Balance at 30 June 2023 Unaudited 824 9,258,699 (10,388,471) (1,128,948)
Loss for the period and total comprehensive income _ _ (5,501,268) (5,501,268)
Share-based payment expense _ 719,403 _ 719,403
Balance at 31 December 2023 Audited 824 9,978,102 (15,889,739) (5,910,813)
Loss for the period and total comprehensive income _ _ (3,866,864) (3,866,864)
Restricted shares - fully vested at admission date 36 _ _ 36
Exercise of lender warrant 4 (4) _ _
Issuance of new common shares 148 24,734,362 _ 24,734,510
Issuance under share issuance agreement 51 (51) _ _
Shares issued as repayment of debt 1 99,999 _ 100,000
Issuance costs related to IPO _ (4,803,934) _ (4,803,934)
Share-based payment expense _ 5,077,124 _ 5,077,124
Balance at 30 June 2024 Unaudited 1,064 35,085,598 (19,756,603) 15,330,059
Consolidated Statement of Cash Flows
Six months to 30 Jun 2024 Six months to Year end to
31 Dec 2023
Unaudited 30 Jun 2023
Audited
Unaudited
$ $ $
Cash flows from operating activities
Net loss (3,866,864) (2,685,942) (8,187,210)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 800,754 668,649 1,419,044
Gain on disposal of fixed assets (23,739) - (63,240)
Loan fees amortization 48,214 48,214 96,427
Share-based compensation 5,077,124 796,790 1,516,193
Deferred income taxes (58,465) 117,753 (78,878)
Allowance for credit losses (58,687) - 144,857
Paid-in-kind interest capitalized to note 477,513 - -
Other non-cash items - (156,386) (153,223)
Changes in assets and liabilities:
Accounts receivable (2,426,151) (378,929) (1,373,085)
Inventory 208,279 (512,631) (768,580)
Income tax receivable (11,199) - 200,336
Other receivables and prepayments (213,348) (220,777) (50,737)
Accounts payable (4,063,908) 509,712 4,836,692
Accrued expenses and income taxes payable 1,810,925 (97,244) 840,814
Deferred revenue 79,170 195,320 173,396
Net cash used in operating activities (2,220,382) (1,715,471) (1,447,194)
Cash flows from investing activities
Purchase of property, plant and equipment (577,326) (614,493) (1,315,081)
Payment of leases liability (158,627) (107,592) (270,535)
Net cash used in investing activities (735,953) (722,085) (1,585,616)
Cash flow from financing activities
Proceeds from shares issued in the Admission 24,734,510 - -
Issuance costs paid related to the Admission (4,803,934) - -
Proceeds from borrowings under the credit agreement 2,000,000 - -
Proceeds from related party notes payable 1,008,455 - -
Principal payments on related party notes payable (1,008,455) - (202,808)
Net cash generated from / (used in) financing activities 21,930,576 - (202,808)
Increase/(decrease) in cash and cash equivalents 18,974,241 (2,437,556) (3,235,618)
Cash and cash equivalents at beginning of period 778,484 4,014,102 4,014,102
Cash and cash equivalents at the end of the period 19,752,725 1,576,546 778,484
Notes to the unaudited Condensed Consolidated Interim Financial Statements for
the period ended 30 June 2024
1. General Information
AOTI, Inc. (the "Company") is a public limited company which is listed on the
AIM Market of the London Stock Exchange and incorporated in the State of
Florida in the US. Its address of its registered office is 3512 Seagate Way,
Suite 100, Oceanside, CA 92056.
2. Basis of preparation
The condensed consolidated interim financial statements include the results of
Company and its subsidiaries ("the Group") for the six months ended 30 June
2024 and have not been audited.
These condensed consolidated interim financial statements have been prepared
in accordance with the AIM rules and the recognition and measurement
requirements of Generally Accepted Accounting Principles as issued by the
Financial Accounting Standards Board (FASB) ("US GAAP") and adopting the
accounting policies that will be applied in the 31 December 2024 annual
financial statements and consistent with those disclosed in the AIM admission
document.
These condensed consolidated financial statements should be read in
conjunction with the historical financial information contained within the AIM
Admission Document, which is available on the Group's website at:
https://aotinc.net (https://aotinc.net)
These condensed consolidated interim financial statements were approved by the
Board of Directors on 13 September 2024.
3. Accounting policies
Going concern
The Directors believe that the Group has adequate resources to continue
trading for at least 12 months from the date of approval of these condensed
consolidated interim financial statements. Accordingly, the Directors continue
to adopt the going concern basis of accounting in preparing these financial
statements.
Summary of significant accounting policies
The accounting policies applied by the Group in these condensed consolidated
interim financial statements are the same as those applied by the Group in the
financial statements disclosed in the AIM admission document.
4. Loss per share
The calculation of basic and diluted loss per share is based upon the loss
attributable to equity holders divided by the weighted average number of
shares in issue during the period. On 30 May 2024, the Company effected a
share split (the "Share Split") pursuant to which each existing common share
of par value $0.0001 was split into 10 Common Shares of par value $0.00001
each, so increasing the total number of shares in issue by a multiple of 10.
The Amended and Restated Articles of Incorporation increased the number of
authorized shares from 30,000,000 to 300,000,000. Outstanding common shares
for all periods presented have been restated to reflect the Share Split.
The loss incurred by the Group means that the effect of any outstanding
options would be anti-dilutive and is ignored for the purposes of the diluted
loss per share calculation.
Six months to 30 Jun 2024 Six months to Year ended
31 Dec 2023
Unaudited 30 Jun 2023
$
Audited
Unaudited
$
$
Loss for the period from continuing activities (3,866,864) (2,685,942) (8,187,210)
Six months to 30 Jun 2024 Six months to 30 Jun 2023 Year ended
31 Dec 2023
Unaudited Unaudited
No
No Audited
No
Weighted average number of ordinary shares 85,037,628 82,405,340 82,405,340
Six months to 30 Jun 2024 Six months to Year ended
31 Dec 2023
Unaudited 30 Jun 2023
$
Audited
Unaudited
$
$
Basic and diluted loss per share (0.05) (0.03) (0.10)
5. Intangible assets
Licenses agreement Total
$
$ Patents
$
Cost
At 1 January 2024 9,855,853 507,794 10,363,647
Additions - - -
At 30 June 2024 Unaudited 9,855,853 507,794 10,363,647
Amortisation
At 1 January 2024 (574,924) (365,285) (940,209)
Charge for the period (246,396) (11,997) (258,393)
At 30 June 2024 Unaudited (821,320) (377,282) (1,198,602)
Net book
At 30 June 2024 9,034,533 130,512 9,165,045
At 31 December 2023 Audited 9,280,929 142,509 9,423,438
6. Long term debt
30 Jun 2024 30 June 2023 31 Dec 2023
Unaudited Unaudited Audited
$ $ $
Long-term commitments - finance company 14,477,513 12,000,000 12,000,000
Unamortised financing fees (55,316) (76,059) (65,688)
Unamortised debt discount - warrant (201,825) (277,511) (239,667)
Total long term debt 14,220,372 11,646,430 11,694,645
Long-term Commitment
On 21 March 2022, the Company entered into a loan agreement with a finance
company for the principal amount of $12,000,000 with maturity on or before 21
March 2027. The loan bears interest at a contract rate of 3-month LIBOR,
subject to a floor of 1.0%, plus 9.95%, payable on a quarterly basis. In March
2023, the Company entered into the first amendment to the loan agreement which
replaced LIBOR as the reference rate with the Term Secured Overnight Financing
Rate ("SOFR"). In addition, the contract rate on borrowings was amended from
LIBOR plus 9.95% to Term SOFR plus 10.20% (15.55% at 30 June, 2024). In
connection with the loan agreement, the Company also incurred financing fees
of $223,717. Interest expense for the period ended 30 June 2024 was
$1,025,446, including amortization of financing fees and debt discounts. The
effective interest rate on the loan for the period ended 30 June 2024 was
15.9%.
On 14 February 2024, the Company amended its Credit Agreement with the finance
company to capitalize the February 2024 interest payment of $477,513.
On 26 April 2024, the Company amended its Credit Agreement with the finance
company to add an additional $2,000,000 of borrowing capacity, which was fully
drawn down on 9 May 2024. The current total loan balance is $14,477,513,
including capitalized interest.
The loan agreement also provides that the Company comply with certain
financial covenants based on minimum levels of aggregate revenues, EBITDA, and
consolidated unencumbered liquid assets, as defined in the loan agreement. At
30 June 2024, the Company was in compliance with all such covenants.
Warrant
In connection with the long-term borrowing commitment, the Company issued a
warrant to the lender to purchase 924,900 shares of the Company's stock at an
exercise price of $0.956 (adjusted for the stock split). The warrant was
exercisable effective 21 March 2022 and is exercisable for a seven-year period
ending 21 March 2029. The Warrant Agreement provides for the lender to
exercise the warrant in cash or as an option in whole or in part under a
Cashless Exercise, based on a formula as defined in the Warrant Agreement.
Upon the sale of greater than 50% of the Company's outstanding shares
("Acquisition"), the successor entity would assume the liabilities and
obligations under the Warrant Agreement. A portion of the warrant was
exercised by the holder upon Admission and the holder received 402,634 shares
of common stock in the Company.
7. Share-based payment schemes
The Group operates employee share option schemes that are accounted for as
equity-settled share-based payments. The total charge for the period ended 30
June 2024 in respect of share-based payments was $5,077,124 and was recognized
in the consolidated statement of operations. In connection with Admission, the
Company accelerated the vesting of all outstanding share options which had
been granted prior to the date of Admission, and the total charge for share
options for the period was $1,330,025, including $917,626 for the accelerated
portion. Also in connection with the Admission, restricted stock issued to
four employees in lieu of cash vested, with a charge of $3,747,099.
8. Significant events after the reporting date
In July 2024, the Group repaid $6.0m of its SWK Bank facility in line with the
proposed use of proceeds from the IPO and is expecting to repay the remaining
facility over the upcoming months. There have been no other significant events
to report since 30 June 2024 and the date of approving this report on 13
September 2024.
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