AOTI, Inc. 2024 Interim Results

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 (TWO₂^®) Therapy with a leading Workers Compensation services company, which supports c.1 million patients across the US.

 

·     Entered into a 250 patient evaluation for TWO₂^® Therapy funded by a leading health insurer in the Northeastern US.

 

Financial Highlights:

 

$'000	H1 2024 Unaudited	H1 2023 Unaudited	Change
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 TWO₂^® 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.

 

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: [e-mail].

 

 

For more information please contact:

 

AOTI, INC. Dr. Mike Griffiths, Chief Executive Officer & President Jayesh Pankhania, Chief Financial Officer	[phone] [e-mail]
Peel Hunt LLP (Nominated Adviser and Broker) Dr. Christopher Golden, Patrick Birkholm	[phone]
FTI Consulting (Financial PR & IR) Ben Atwell, Simon Conway, Natalie Garland-Collins, Alex Davis	[phone] [e-mail]

 

 

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 (TWO₂^®) 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. TWO₂^® Therapy can be administered by the patient at home, improving access to care and enhancing treatment compliance. TWO₂^® 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

 

 

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 (TWO₂^®) 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 TWO₂^® 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 TWO₂^® 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 Unaudited	H1 23 Unaudited	Change
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 TWO₂^® 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 TWO₂^® 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 TWO₂^® 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 TWO₂^® 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 Unaudited	H1 2023 Unaudited	Change*
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 Unaudited	H1 2023 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 Unaudited	30 Jun 2023 Unaudited		31 Dec 2023 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		24,276	-		(226,258)
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 Unaudited	30 Jun 2023 Unaudited	31 Dec 2023 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 stock	Additional paid in capital	Retained earnings	Total 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 Unaudited	Six months to 30 Jun 2023 Unaudited	Year end to 31 Dec 2023 Audited
	$	$	$
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

 

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 Unaudited $	Six months to 30 Jun 2023 Unaudited $	Year ended 31 Dec 2023 Audited $
Loss for the period from continuing activities	(3,866,864)	(2,685,942)	(8,187,210)
	Six months to 30 Jun 2024 Unaudited No	Six months to 30 Jun 2023 Unaudited No	Year ended 31 Dec 2023 Audited No
Weighted average number of ordinary shares	85,037,628	82,405,340	82,405,340
	Six months to 30 Jun 2024 Unaudited $	Six months to 30 Jun 2023 Unaudited $	Year ended 31 Dec 2023 Audited $
Basic and diluted loss per share	(0.05)	(0.03)	(0.10)

 

 

5.  Intangible assets

	Licenses agreement $	Patents $	Total $
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 Unaudited	30 June 2023 Unaudited	31 Dec 2023 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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