Half-year Report

Belluscura plc

("Belluscura" or the "Company" or "Group")

Unaudited Interim Results for the six months to 30 June 2024

LONDON, U.K. AND PLANO, TX, U.S. (26 September 2024). Belluscura plc (AIM:BELL), a leading medical device developer focused on lightweight and portable oxygen enrichment technology, announces its Unaudited Interim Results for the six months to 30 June 2024.

Financial Headlines

· Revenue of $1.35 million up 264% (2023 H1: $0.37m; 2023: $0.83m)

· Product Gross Profit of $0.51m (2023 H1: Loss $0.06m; 2023: Loss $0.07m)

· Adjusted EBITDA** Loss of $3.5m (2023 H1: $2.9m; 2023: $6.3m)

· Loss before tax of $6.5m (2023 H1: $6.4m; 2023: $18.5m)

· Basic loss per share of $0.041 (2023 H1: $0.052; 2023: $0.142)

· Net Cash as at 30 June 2024 of $0.9m (31 December 2023: $0.9m)

· Convertible Loan Note and Share issues raised £1.92m post 30 June 2024

· Completed the acquisition of TMT Acquisition plc

Current trading and outlook:

· Sales continue to grow and with (unaudited) Q3 sales of $1.6m, 20% up on H1 2024 and 40% up on Q2 2024.

· Strong sales to continue with the broader market acceptance of the X-PLOR® and the upcoming full release of its new patented DISCOV-R™ device.

· Demand for the new DISCOV-R™ portable oxygen concentrator, introduced to US market via a soft launch in June 2024, has been strong with every DISCOV-R™ unit manufactured in Q3 being sold. Full commercial launch of the DISCOV-R™ remains planned for the middle of Q4.

· Q4 sales target of $4.0m subject to timely receipt of Pricing Data Analysis and Coding (PDAC) codes to enable Durable Medical Equipment (DME) distributers to claim reimbursement from Medicare for sales of DISCOV-R and for the Company to finalise appropriate debt-based funding and invoice discounting to meet increasing working capital requirement arising from sales growth.

Robert Rauker, CEO, Belluscura plc, commented:

"We are delighted with the growth in sales and distribution over the past nine months for both the X-PLOR® and DISCOV-R™ portable oxygen concentrators. Whilst it has taken time to bring both products to market, and we are grateful for the patience of our shareholders, we now have two leading lightweight portable oxygen enrichment concentrators that meet the stringent requirements of the FDA, with the full commercial launch of DISCOV-R™ coming later in the year. We look forward to the remainder of 2024 and into 2025 with a real sense of confidence."

**Adjusted EBITDA excludes; Foreign exchange translation differences along with unrealised and unrealised foreign exchange movements, depreciation and amortisation of product development, costs relating to fundraising activities, surrendered share options and share option taxes, minimum royalties in excess of sales royalties, share based payments, obsolete 1st generation X-PLOR inventory adjustments and contract manufacturer capacity costs.

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CHAIRMAN & CHIEF EXECTUTIVE'S STATEMENT

We are pleased to present our Interim Results covering a period in which Belluscura has made significant progress.

Sales continue to grow with Q3 sales of $1.6m, 20% up on H1 2024 and 40% up on Q2 2024.

The Company expects strong sales to continue with the broader market acceptance of the X-PLOR® and the upcoming full release of its new patented DISCOV-R™ device.

Demand for the new DISCOV-R™ portable oxygen concentrator, which was introduced to the US market via a soft launch in June 2024, has been strong, with every unit manufactured in Q3 being sold.

The DISCOV-R™ weighs a little over 6 pounds (2.75kg), provides fifty percent (50%) more oxygen than the leading oxygen concentrator and produces more oxygen by weight than any portable oxygen concentrator on the market. The full commercial launch of the DISCOV-R™ remains planned for the middle of Q4.

Financial Review

Revenue for the period was $1.35 m (2023 H1: $0.37m; FY 2023: $0.83m), an increase of 264% on the same period last year. The Group made a Product Gross Profit in the period $0.51m (2023 H1: Loss $0.05m; FY 2023: Loss: $0.07m).

We saw operating cost increases in staffing, up from $1.6m to $1.8m, marketing spend, up from $0.3m to $0.8m in Direct to Consumer advertising and other admin expenses up from $0.9m to $1.1m. This was largely counteracted by a positive FX benefit of $350k (previously loss $2.2m).

Non-recurring items include restricting costs of $120k and impairment charge of $1.5m on the TMT acquisition.

Operating Loss for the period was $6.0m (2023 H1: $6.2m; FY2023: $17.7m). Total Comprehensive Loss was $6.8m (2023 H1: $4.4m; FY 2023: $16.3m).

Adjusted EBITDA Loss of $3.5m (2023 H1: $2.9m; FY 2023: $6.3m), (See note 16). The Board considers that Adjusted EBITDA to be an important key performance indicator, reflecting underlying business performance.

The basic and diluted loss per share was $0.041 (2023 H1: $0.052; FY 2023: $0.142).

The Group net assets at the end of the period were $18.6m (2023 H1: $25.2m; FY 2023: $17.7m). This comprised total assets of $21.2m (2023 H1: $27.2m; FY 2023: $0.8m) and total liabilities of $2.6m (2023 H1: $2.0m; FY 2023: $3.1m).

The total assets included intangible assets (capitalised research and development costs), property, plant and equipment and right-of-use assets of $12.0m (2023 H1: $10.6m; FY 2023: $12.3m).

At the end of the period the Group had net cash of $0.9m (2023 H1: $3.8m; FY 2023: $0.9m). Post period end, £1.92m was raised via a CLN/share issue.

During the period:

· Net cash inflow from funds raised in the period was $5.6m (2023 H1: $7.1m; FY 2023: $12.5m).

· Net cash outflow from operating activities was $4.1m (2023 H1: $4.9m; FY 2023: $9.1m).

· Net cash used in investing activities was $1.6m (2023 H1: $2.2m; FY 2023: $4.5m).

Outlook

We are delighted with the growth in sales and distribution over the past nine months for both the X-PLOR® and DISCOV-R™ portable oxygen concentrators.

Furthermore, we are thankful for our shareholders' understanding during the development process for both products, which has taken time. Following this, we now have two premier lightweight portable oxygen enrichment concentrators that satisfy the strict criteria of the FDA and are excited about the forthcoming full commercial launch of DISCOV-R™ in Q4.

Q4 sales are expected to be not less than $4M. However, delivery of these sales will be dependent upon two key factors:

· Timely receipt of Pricing Data Analysis and Coding (PDAC) codes that allow Durable Medical Equipment (DME) distributers to claim reimbursement from Medicare for sales of DISCOV-R to patients.

· Finalising further funding facilities to meet the significant increase in working capital requirements resulting from the anticipated strong Q4 sales demand in order for DISCOV-R. The Company has received several debt proposals and is evaluating and in discussion with prospective lenders to arrive at the optimal funding instruments, which are expected to be a combination of debt and invoice discounting.

We look forward to the remainder of 2024 and into 2025 with a real sense of confidence."

Adam Reynolds Robert Rauker

Chairman Chief Executive Officer

26 September 2024

CONDENSED CONSOLIDATED STATEMENT OF PROFIT & LOSS AND OTHER COMPREHENSIVE INCOME

Adjusted EBITDA1

1 Reconciliation to Adjusted EBITDA measure

Adjusted EBITDA is the Group's key adjusted profit measure. Total comprehensive loss for the period is adjusted to exclude; Foreign exchange translation differences along with unrealised and unrealised foreign exchange movements, depreciation and amortisation of product development, costs relating to fundraising activities, surrendered share options and share option taxes, minimum royalties in excess of sales royalties, share based payments, obsolete 1st generation X-PLOR inventory adjustments and contract manufacturer capacity costs.

2 Net foreign exchange movements

£Sterling to US$ stayed broadly the same during the period (1 January 2024 - $1.27:£1.00; 30 June 2024 - $1.27:£1.00). Due to the size of the Intercompany Loan from the PLC to the US subsidiary which is fixed in £Sterling, this creates an accounting presentational impact between Administration Expenses and Other Comprehensive Income, which to a large extent can be netted off against one another.

· Realised FX movements in administrative expenses arise from the revaluation of £Sterling cash balances into US$

· Unrealised FX movements in administrative expenses arise from the revaluation of the Intercompany Loan fixed in £Sterling into US$

· Foreign currency translation differences in Other Comprehensive Income arise from the revaluation of the PLC balance sheet into US$

CONDENSED CONSOLIDATED BALANCE SHEET

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Six months to 30 June 2023

(Unaudited)

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the period ended 30 June 2024.

1. General Information

Belluscura plc is a public company limited by shares incorporated in England and Wales and domiciled in the UK. Company No. 09910883. On 28 November 2017 the Company changed its name from Belluscura Limited to Belluscura plc.

The principal accounting policies applied in the preparation of these condensed interim consolidated financial statements are set out below. These policies have been consistently applied, unless otherwise stated.

2. Electronic communications

Copies of this Interim Report for the six months ended 30 June 2024 will not be sent to shareholders unless specifically requested by individual shareholders. The Board believes that by utilising electronic communication it delivers savings to the Company in terms of administration, printing and postage, and environmental benefits through reduced consumption of paper and inks, as well as speeding up the provision of information to shareholders.

News updates, Regulatory News and Financial statements can be viewed and downloaded from the Group's website, www.belluscura.com. Copies can also be requested from; Company Secretary, Belluscura plc, 15 Fetter Lane, London EC4A 1BW or by email: [email protected].

3. Accounting Policies

These condensed consolidated financial statements are prepared in accordance with United Kingdom adopted International Financial Reporting Standards (IFRS) and issued by the International Accounting Standards Board (IASB). The consolidated financial statements are presented in US Dollars, the Group's functional currency. The preparation of this financial information in conformity with IFRS requires the use of certain critical accounting estimates and consistent with the accounting policies used in the Financial Statements for the year ended 31 December 2023.

The condensed consolidated interim financial information for the six months ended 30 June 2024 has been prepared in accordance with International Accounting Standard No. 34, 'Interim Financial Reporting'. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of Belluscura plc "the Company" as at and for the year ended 31 December 2023. These condensed interim financial statements for the six months ended 30 June 2024 and 30 June 2023 are unaudited and do not constitute full accounts. The comparative figures for the period ended 31 December 2023 are extracted from the 2023 audited financial statements.

The independent auditor's report on page 12 of the 2023 financial statements noted a Material uncertainty related to going concern:

"We draw attention to note 2.1.1 of the financial statements which notes the uncertainty in the Group's and Company's level of projected production of DISCOV-R products and financial returns thereon following the expected launch of the new product in Summer 2024 and the potential consequential impact on the Group's ability to secure additional funding. As stated in note 2.1.1, these conditions are necessarily considered to represent a material uncertainty that may cast significant doubt over the Group's and the Company's ability to continue as a going concern.

Our opinion is not modified in respect of this matter. In auditing the financial statements, we have concluded that the Directors use of the going concern basis of accounting in the preparation of the financial statements is appropriate."

4. Going concern

Commercial Background

US FDA 510(k) clearance of the Group's X-PLOR was received on 2 March 2021 and was launched in the US in September 2021. The Group launched the next generation X-PLOR in October 2022 and released the DISCOV-R for Pre-Market Evaluation in June 2023.

In March 2022, the Group signed a manufacturing Master Supply Agreement ("MSA") with InnoMax Medical Technology, Ltd ("InnoMax") to manufacture our devices in China alongside US manufacturing.

In April 2022, the Group took the decision to transfer its US manufacturing in-house, to increase production output at high quality standards, and achieve a significant reduction in production costs. This was successfully completed at the end of July 2022. The decision to bring our US manufacturing in-house from our contract manufacturer along with the initial support of the set-up of InnoMax manufacturing in China, resulted in significant investment in Raw Material Inventory and Deposits which at 31 December 2022 stood at $10.8m. The Group has transferred Raw Materials to InnoMax for utilisation in China manufacturing and alongside this, as anticipated, InnoMax is beginning to directly source most of their own components, which will progressively result in a significant margin improvement through lower unit cost of sales and has resulted in a reduction in the Company's inventory levels of components.

Cash at 30 June 2024 was $0.9m (30 June 2023: $3.8m; 31 December 2023: $0.9m). 

Prospects and Forecasts

The Board is confident the full commercial launch of the award winning DISCOV-R product in Q4 2024 will be transformational for the Group. Demand is expected to be very strong because a major competitor has left the market, the two others have larger, more bulky products, and the small size of our product is very appealing to the customer base. Additionally, most of the development and capital costs for DISCOV-R have already been incurred. 

At 30 June 2024 the Group had $0.9m in cash (30 June 2023: $3.8m; 31 December 2023: $0.9m), $3.1m in Finished Goods & Raw Material inventory and £5.2m in Current Debtors and other Receivables.

Strong sales of X-PLOR and the expected significant demand for the DISCOV-R, alongside the release of working capital through the sale of goods from its existing inventory, and capital raise in July, indicate that the Group has sufficient cash reserves to operate within the level of its current facilities for a period of 12 months from the date of approval of the financial statements.

Given that projected sales and prices may not materialize as anticipated in the Group's forecasts, the Board continues to actively consider further fundraising and other mitigating actions.

These conditions are necessarily considered to represent a material uncertainty that may cast significant doubt over the Group's and the Company's ability to continue as a going concern.

The Group's forecasts, taking account of reasonably possible downsides in trading performance and development costs/timelines, and the risks to these projections have been considered by the Board in its assessment of these forecasts.

Based on the above, the Directors believe it remains appropriate to prepare the financial statements on a going concern basis.

5. Segmental reporting

The chief operating decision makers consider that in the period to 30 June 2024 there is only one operating segment, being the sale of oxygen concentrators in the United States.

The Group generated gross revenue of $1,345,757 in the period (2023 H1: $366,221; 2023: $825,409). All sales were in the United States.

6. Other operating income and administrative expenses

6.1 Inventory impairments and adjustments

6.1 Other operating income

6.2 Other direct costs

6.3 Expenses by nature 

7. Finance income and costs

8. Income tax expense

Due to the Group still being loss making there is no tax charge in the period or previous periods.

9 Loss per share

Potentially dilutive items are disregarded when calculating diluted earnings per share as they are considered antidilutive.

10. Property, plant and equipment

11. Intangible assets

12. Inventory

13. Share capital and premium

Share capital

Share premium

Other equity instruments