Half-year Report

Belluscura PLC
13 September 2023
 

Belluscura plc

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

 Half Year Report

Unaudited Interim Results for the six months ended 30 June 2023

 

LONDON, U.K. AND PLANO, TX, U.S. (13 September 2023). Belluscura plc (AIM:BELL), a leading medical device developer focused on lightweight and portable oxygen enrichment technology, announces its unaudited half year results for the six months to 30 June 2023.

 

Financial Highlights:

·       Group revenue of $0.4m (2022 H1: $0.6m; FY 2022: $1.4m)

·       Adjusted EBITDA of $2.9m (2022 H1: $4.1m; FY 2022: $6.2m)

·       Basic loss per share of $0.052 (2022 H1: $0.039; 2022 FY: $0.068)

·       Inventory at 30 June 2023 of $8.8m (2022 H1: $5.7m; FY 2022: $8.4m)

·       The Company has raised net proceeds of £7.0m ($8.8m), through the issue of 10% Unsecured Convertible Loan Notes, via a Placing and Broker Option in January and February, to raise £4.2m ($5.3m) net of expenses, and an equity issue, via a Placing, a Subscription by certain Directors, and a Retail Offer in May, which raised £2.8m ($3.5m) net of expenses

·       Net cash as at 30 June 2023 of $3.8m (30 June 2022: $11.6m; 31 December 2022: $2.0m)

 

Operational highlights:

·       Continue to build significant US distribution and commenced international roll-out

·       Established high quality manufacturing facilities in both the US and China. Both the US in-house and China partner facilities provide outstanding quality, lower costs and increased capacity to support the Board's plans for scaling the business

·       Launched upgraded next generation X-PLOR® in April 2023, which provides more oxygen by weight than any portable oxygen concentrator in its class and is gaining good momentum, with initial new standing purchase orders exceeding 1,000 units, as we lay foundations for international expansion

·       in March 2023 at Medtrade in Dallas, Texas, unveiled the new DISCOV-RTM portable oxygen concentrator was awarded the Silver Award in the Best New Product category and commenced its premarket evaluation in Q2 2023

 

Post Period End:

Transformational Exclusive License and Royalty Generating Agreement with InnoMax

·       Belluscura exclusively licensed its proprietary technology to InnoMax in China, Hong Kong, Macau and Singapore in a deal valued at $55m in minimum royalties over the term of the license

Strong demand for DISCOV-R™

·       Orders for over 6,500 DISCOV-R received

Signed Distribution Agreement with Subsidiary of World's Largest Drug Distributor

·       X-PLOR® portable oxygen concentrator now available through the online catalogue of McKesson Medical-Surgical Corporation, one of the largest distributors of pharmaceuticals and medical devices in North America

 

 

Bob Rauker, Chief Executive Officer Belluscura, commented:

"I am very pleased with the substantial progress the Group has made this period.

 

"The signing of new distribution agreements, the strong reception and orders for DISCOV-R, the continuing progression of X-PLOR and the signing of the significant licensing agreement with Innomax sets a strong foundation for great progress next year and beyond.

 

"The Portable Oxygen Concentrator Market is predicted1 to grow at a compound annual growth rate ("CAGR") of 14.0% from $1.63 billion in 2022 to $2.76 billion by 2026, making this is a very exciting time for Belluscura's category leading products."

 

Adam Reynolds, Chairman of Belluscura, commented:

"The team at Belluscura has made considerable headway which will enable significant momentum in the business.

 

"We believe the signing of the groundbreaking Exclusive License and Royalty Generating Agreement with InnoMax, an affiliate of the world's leading electronics manufacturing company, will be transformational for the Group.

 

"Belluscura is, therefore, well positioned to achieve its expectations in the coming years. The initial response from the market in the Group's products is hugely positive and, as we scale up the business, we expect substantial growth over the coming years, leaving the Board highly confident in Belluscura's future."  

 1 Source: https://www.precedenceresearch.com/portable-oxygen-concentrators-market

 

For further information please contact:

  

Belluscura plc

Tel: +44 (0)20 3128 8100

Adam Reynolds, Chairman
Robert Rauker, Chief Executive Officer
Anthony Dyer, Chief Financial Officer




SPARK Advisory Partners Limited

Nominated Adviser

Tel: +44 (0)20 3368 3550

Neil Baldwin / Jade Bayat




Dowgate Capital Limited

Broker

Tel: +44 (0)20 3903 7715

James Serjeant / Russell Cook




MHP

Financial PR & Investor Relations

Tel: +44 (0)20 3128 8100

Katie Hunt/Matthew Taylor

 email: Belluscura@mhpgroup.com

 

About Belluscura plc (www.belluscura.com)

Belluscura is a UK medical device company focused on developing oxygen enrichment technology spanning broad industries and therapies. Our innovative oxygen technologies are designed with a global purpose: to create improved health and economic outcomes for the patients, healthcare providers and insurance organisations.

 

 

CHAIRMAN'S STATEMENT

 

Introduction

I am pleased to present our Half Year Report, covering a period in which Belluscura has made significant progress:

 

·       Good momentum with X-PLOR®, as we lay the foundations for international expansion

·      Released DISCOV-RTM for Pre-Market Evaluation in June 2023 - significant pre-launch demand for DISCOV-R with over 125 distributors having requested access to the device which we expect to be covered by two Centers for Medicare and Medicaid Services ("CMS") codes making the device significantly more profitable for Durable Medical Equipment providers

·       Further strengthened the Board with the appointment of Robert Fary as Senior VP of Sales

 

Post period end

·      Signed transformational exclusive License and Royalty Generating Agreement with InnoMax in a deal valued at $55m in minimum royalties over the 10-year term of the license

·       Strong demand for DISCOV-R with orders for over 6,500 already received

·      Announced distribution agreement with McKesson Medical-Surgical, a division of McKesson, which delivers a third of all pharmaceuticals used in North America and operates the fourth-largest pharmacy chain in North America

 

Significant pre-launch demand for DISCOV-R

In March 2023, the Company unveiled its new DISCOV-R portable oxygen concentrator ("POC") at Medtrade in Dallas, Texas, and was awarded the Silver Award in the Best New Product category. This is a considerable achievement when taking account of the fact that most of the leading respiratory device companies were exhibiting at the show which is the largest home medical equipment ("HME") trade show and conference in the US.

 

The Company started it premarket evaluation of the DISCOV-R POC in Q2 2023, with full commercialisation anticipated in H2 2023.  DISCOV-R is the first ambulatory pulse-dose and two-litre continuous flow POC in the world. Weighing c.40% less than any comparable dual flow oxygen concentrator on the market, the DISCOV-R produces nearly three times the oxygen by weight than concentrators in its class. The DISCOV-R will also include the transformational NOMAD Biometric App.

 

The DISCOV-R was met with significant pre-launch demand with over 125 durable medical equipment providers and internet retailers already requesting access to this innovative device. We have now received purchase orders for over 6,500 for DISCOV-R, representing approximately $15 million of potential revenue, with initial production expected to begin by the end of this quarter.

 

With two litres of continuous flow and eight levels of pulse dose delivery, the Company anticipates the product being covered by both Centres for Medicare & Medicaid Services ("CMS") codes E1390 and E1392, for stationary and portable concentrators respectively. The DISCOV-R being covered by both CMS codes makes the device significantly more profitable for Durable Medical Equipment providers.

 

We believe the significant technical advantages of the DISCOV-R over its competitors, combined with the anticipated dual CMS reimbursement codes, will result in the DISCOV-R accounting for 70% of the Group's production volume and 80% to 85% of revenue by 2025. 

 

The Company has been focusing significant resources to bring the DISCOV-R to market as soon as possible and to increase production and manufacturing capacity in both the US and China where the product will be manufactured.

 

Good momentum with X-PLOR, as we lay foundations for international expansion

Having fine-tuned our X-PLOR product to suit the target market, the Company is pleased with the sales momentum we are now seeing of the latest generation X-PLOR portable oxygen concentrator released in April 2023, for which initial new standing purchase orders exceeding 1,000 units were secured.

 

Having begun its global expansion in December 2022 with sales of the X-PLOR in South Africa, Shenzhen Belluscura Technology Company Limited was registered in April 2023 in preparation for commercial launch of the X-PLOR in China later in 2023, once China National Medical Products Administration registration is received. The Company expects further global expansion from late 2023 and early 2024 once CE and UKCA marks are approved and anticipated regulatory clearances are received in Hong Kong, Europe, UK, Canada, Singapore and Australia.

 

In August 2023 we signed a distribution agreement with McKesson Medical-Surgical, a division of McKesson, the 9th largest company by revenue in the US. McKesson delivers a third of all pharmaceuticals used in North America and operates the fourth-largest pharmacy chain in North America. The X-PLOR® portable oxygen concentrator is now available to McKesson's customers through their online catalogue.

 

Groundbreaking Exclusive License and Royalty Generating Agreement

On 29 August 2023 we entered into an Exclusive License, Marketing and Distribution Agreement ("Exclusive Agreement") with our global manufacturing partner, lnnoMax Medical Technology Ltd ("InnoMax"), which is a leading manufacturer and service provider of high-end medical devices in China. InnoMax, headquartered in Shenzhen, China, has acquired the exclusive right to manufacture and distribute Belluscura's award winning X-PLOR® portable oxygen concentrator in China, Hong Kong, Macau and Singapore ("the Territories").

 

Under the terms of the ten-year Agreement, effective from 1 October 2023, Belluscura is to receive annually increasing minimum cumulative royalties over the term of the Agreement. In addition to receiving royalties on licensed products (subject to annually increasing minimum amounts), Belluscura will receive a share of the net profits on sales of accessories. 

 

The Agreement will be exclusive for a minimum of 5 years, though if minimum sales quantities are not achieved, Belluscura and InnoMax can mutually agree to grant InnoMax a non-exclusive license for the remainder of the term. Minimum cumulative royalties over the term of the Agreement will therefore range from $27.5m if the license is converted to non-exclusive from year 6 and up to $55m in minimum cumulative royalties if the license remains exclusive for the entire term.

 

Licensed products include the X-PLOR and DISCOV-R portable oxygen concentrators when registration is received in the Territories.

 

Belluscura, under the terms of the Exclusive Agreement and to further promote Belluscura technology in China, will perform sales and marketing activities on behalf of InnoMax in the Territories, with both parties financially contributing to these marketing activities. The first product registration and initial sales are expected to take place in Q4 of this year. Belluscura will continue to sell and distribute its products outside the Territories.

 

InnoMax is a leading manufacturer and service provider of high-end medical devices in China, mainly engaged in the design, development, manufacturing and sales of in vitro diagnostic equipment, medical imaging devices, medical oxygen generating devices, respiratory AIDS, ophthalmic devices, intelligent rehabilitation devices and epidemic prevention products. Relying on the National Innovation Center For Advanced Medical Devices and Foxconn Technology Group, a global leader in electronics manufacturing, InnoMax is committed to "creating a global open high-end medical device manufacturing platform of innovation and industrial integration.

 

Further strengthened the Board and Global Sales

As announced in May 2023, the Board has decided to reinforce the executive team with the addition of relevant skills and expertise in global sales, by the appointment to the Board of Robert Fary as Executive Director, who joined the Company as Senior Vice President of Global Sales in January.

 

Robert's deep knowledge of the portable oxygen concentrator sector and its channels to market will be invaluable in driving sales of both the DISCOV-R and X-PLOR globally. He has thirty-years of experience in the respiratory industry where he has held leadership roles at major oxygen concentrator manufacturers and durable medical equipment companies. During the past two decades, Robert's industry leading team was directly responsible for or contributed to the sale of over 1 million portable oxygen concentrators, generating revenues in excess of $1 billion. He has already had a successful impact on sales of the X-PLOR, having secured standing purchase orders exceeding 1,000 units for the next generation X-PLOR following its launch in April 2023 and for the purchase orders for over 6,500 of its next-generation DISCOV-R portable oxygen concentrator.

 

Good progress to support future growth and market expansion 

The recent purchase orders follow the signing of several distribution agreements with medical device distributors and other home healthcare providers, including a distribution agreement with a division of McKesson (noted above) and a marketing agreement with GoodRx®, a leading digital healthcare platform, in February 2023. The Company has received multiple additional requests from leading oxygen homecare providers in the US to distribute the DISCOV-R. 

  

The Company continues to evaluate several proposals with third parties interested in white labelling the X-PLOR product for the US market. Such proposals will require the Company to evaluate the set up and potential additional production costs with the anticipated increased sales volume.

 

At the same time, the Company continues to progress its CE and UKCA registration mark application for its X-PLOR portable oxygen concentrator. Since resources in the US were redirected to completing the development and launch of the DISCOV-R, production of X-PLOR by our Chinese partner, InnoMax Medical Technology Ltd (InnoMax), has now progressed, with 1,500 units recently being manufactured and shipped to the US for distribution. 

 

The Company recently established a subsidiary and hired its first employees in Shenzhen, China as it prepares for the anticipated registration of the X-PLOR for sale and distribution in China and Hong Kong later this year. The Company and InnoMax believe there is a significant market opportunity in China, as noted above, with approximately 100 million people suffering from COPD1, approximately six times the number of patients in the US.

 

Additionally, the Company continues to drive innovation in telemedicine and artificial intelligence with its proprietary NOMAD biometric app. The NOMAD app will allow users of the DISCOV-R to track performance data on their concentrator and connected devices such as an Apple® or Samsung® Watch, FitBit® device or Nonin® and Masimo® pulse oximeters. The collective information can then be provided to a patient's healthcare provider in person or remotely.

 

The Company is already working on the next-generation NOMAD app that will alert patients when their blood oxygen saturation level has varied beyond parameters set by their doctor, which is expected to help patients better monitor their conditions, but also improve the efficiency of the device by delivering supplemental oxygen as needed.

 

1Source:     ScienceDaily - https://www.sciencedaily.com/releases/2018/04/180409185331.htm

 

FINANCIAL REVIEW

Revenue for the period was $0.4m (2022 H1: $0.6m; FY 2022: $1.4m) reflecting the decision to fine-tune our X-PLOR product to suit the target market, pausing production for a period of time. Production re-commenced in June.

 

There was a small Gross Loss in the period $0.056m (2022 H1: $0.053m; FY 2022 Gross Profit: $0.068m). With the Group trying to establish its products in the market, pricing was deliberately competitive to establish early B2B sales combined with cost of goods sold reflecting the initial volume higher input costs.

 

Operating Loss for the period was $6.2m (2022 H1: $4.6m; FY2022: $8.1m). Total Comprehensive Loss was $4.4m (2022 H1: $8.1m; FY 2022: $12.0m).

 

Adjusted EBITDA Loss of $2.9m (2022 H1: $4.1m; FY 2022: $6.2m), (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 $0.052 (2022 H1: $0.039; FY 2022: $0.068).

 

The Group net assets at the end of the period were $25.2m (2022 H1: $23.8m; FY 2022: $20.4m). This comprised total assets of $27.2m (2022 H1: $26.9m; FY 2022: $23.6m) and total liabilities of $2.0m (2022 H1: $3.1m; FY 2022: $3.2m). The total assets included intangible assets (capitalised research and development costs), property, plant and equipment and right-of-use assets of $10.6m (2022 H1: $6.1m; FY 2022: $9.1m).

 

At the end of the period the Group had net cash of $3.8m (2022 H1: $11.6m; FY 2022: $2.0m). During the period, net cash inflow from funds raised in the period was $8.8m (2022 H1: $7.1m; FY 2022: $7.5m). Net cash outflow from operating activities was $4.9m (2022 H1: $9.2m; FY 2022: $14.9m).

 

Both 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 which, at the end of the period, stood at $8.8m (2022 H1: $5.7m; FY 2022: $8.4m)

 

Since the beginning of 2023, the Company has raised net proceeds of £7.0m ($8.8m), through the issue of 10% Unsecured Convertible Loan Notes, via a Placing and Broker Option in January and February, to raise £4.2m ($5.3m) net of expenses, and an equity issue, via a Placing, a Subscription by certain Directors, and a Retail Offer in May, which raised £2.8m ($3.5m) net of expenses.

 

The Convertible Loan Note Instruments ("CLNs") are three-year £1.00 Convertible Unsecured Loan Notes issued at par. The CLNs are convertible into ordinary shares at a conversion price of 50 pence per share. Conversion is at the holder's election on the final business day of each quarter, commencing on 30 June 2023 and otherwise automatically at 3 years from the date of the Instrument subject to satisfaction of the conversion condition which the company is committed to satisfy upon election during the aforementioned period. The CLNs receive a Coupon of 10% per annum.

 

It is the Board's intention to fully convert the CLNs into shares and to capitalise the Coupon annually. Consequently, and pursuant to IAS32/IFRS9, the CLNs are treated as an equity instrument. Assuming all interest on the CLNs is capitalised, upon conversion of the CLNs, this will result in the issue, of up to 12,462,281 new ordinary shares of £0.01 each in the Company.

 

Outlook

We have made considerable progress with building the foundations for significant growth in the coming years.

 

Trading since the period end is in line with our expectations for the full year, which is significantly second half weighted. Demand for X-PLOR®, which is predominantly a Direct-to-Consumer unit, is growing, and we expect that our affiliation with GoodRX, and our own direct sales will lead to significantly higher Gross Margins as we utilise the Company's previously high inventory levels.

 

The demand and orders already received for DISCOV-R are very exciting, and we believe the signing of the groundbreaking Exclusive License and Royalty Generating Agreement with InnoMax, an affiliate of the world's leading electronics manufacturing company, will be transformational for the Group.

 

The Company is well positioned to deliver substantial growth in the coming years, and we look forward to the future with confidence.

 

Adam Reynolds

Chairman

13 September 2023

CONSOLIDATED STATEMENT OF PROFIT & LOSS AND OTHER COMPREHENSIVE INCOME

 

Group



Unaudited 6 months to 30/06/2023

Unaudited 6 months to 30/06/2022

Audited 12 months to 31/12/2022

 


Note


US $

US $

US $

 

Continuing Operations






 

Revenue

5


366,221

561,745

1,398,082

 

Cost of sales



(421,994)

(615,235)

(1,329,977)

 

Gross Profit/(Loss)



(55,773)

(53,490)

68,105

 




 



 

Other operating income

6.1


9,864

-

8,703

 

Other direct costs

6.2


(66,503)

(107,418)

(136,825)

 

Administrative expenses

6.3


(6,080,457)

(4,398,654)

(8,068,895)

 

Operating Loss



(6,192,869)

(4,559,562)

(8,128,912)

 

 



 



 

Finance income and costs

7


(226,263)

(10,938)

(24,073)

 

Finance costs - net



(226,263)

(10,938)

(24,073)

 

 



 



 

Loss before income tax



(6,419,132)

(4,570,500)

(8,152,985)

 

 



 



 

Income tax expense

8


-

-

-

 

Loss after tax for the period



(6,419,132)

(4,570,500)

(8,152,985)

 

 



 



 

Other comprehensive income



 



 

Items that are or may be reclassified subsequently to profit or loss:

 





 

Foreign currency translation differences - foreign operations


2,040,395

(3,534,564)

(3,827,807)



Total other comprehensive income



2,040,395

(3,534,564)

(3,827,808)

 

 



 



 

Total comprehensive loss for the period attributable to the equity holders

(4,378,737)

(8,105,064)

(11,980,792)



 

Earnings per share






Basic: Loss per share

9


(0.052)

(0.039)

(0.068)

Diluted: Loss per share

9


(0.052)

(0.039)

(0.068)

 

 

Adjusted EBITDA1

Group



Unaudited 6 months to 30/06/2023

Unaudited 6months to 30/06/20223

Audited 12 months to 31/12/2022

 




US $

US $

US $

 

Total comprehensive loss for the period



(4,378,737)

(8,105,064)

(11,980,792)

 

Add back:



 



 

Administrative expenses Realised & unrealised FX movements in



2,185,856

(2,609,050)

(2,877,886)

 

Other comprehensive income FX currency translation differences



(2,040,395)

3,534,564

3,827,807

 

Net foreign exchange movement2

 

 

145,461

925,514

949,921

 







 

Finance Costs



226,263

10,938

24,073

 

Product development amortisation



580,142

1,968,229

2,911,988

 

Costs relating to fundraising activities



13,567

-

-

 

Surrendered share options and share option tax



-

-

162,505

 

Minimum royalties in excess of sales royalties



250,211

808,054

763,430

 

Obsolete raw material inventory and inventory adjustments



109,185

153,181

609,848

 

Contract Manufacturer Capacity Costs



-

-

128,607

 

Share based payments



103,948

139,131

229,241

 

Adjusted EBITDA

(2,949,960)

(4,100,017)

(6,201,179)



 

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 strengthened against US$ by 5% during the period (1 January 2023 - $1.21:£1.00; 30 June 2023 - $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$

 

3    Restated to reflect Minimum Royalties in excess of sales royalties and inventory adjustments.

CONSOLIDATED BALANCE SHEET

 

Group


Unaudited

 30/06/2023

Unaudited

30/06/20221

Audited

 31/12/2022


US $

US $

US $

Assets





Non-current assets





Tangible assets

10

135,593

74,316

152,717

Product development

11

10,263,039

5,830,149

8,668,732

Right of use asset

10

193,550

228,779

246,924

Non-current assets


10,592,182

6,133,244

9,068,373



 



Current assets


 



Inventory

12

8,803,762

5,670,662

8,431,031

Trade and other receivables


3,957,967

3,501,379

4,054,102

Cash and cash equivalents

3,825,391

11,604,313

2,044,836

Current assets

16,587,120

20,776,354

14,529,969



 



Total assets


27,179,302

26,909,598

23,598,342



 



Current liabilities


 



Trade and other payables


(1,866,633)

(2,946,422)

(3,045,788)

Current liabilities


(1,866,633)

(2,946,422)

(3,045,788)



 



Non-current liabilities


 



Trade and other payables


(111,377)

(171,534)

(200,432)

Non-current liabilities


(111,377)

(171,534)

(200,432)


 



Total liabilities

(1,978,010)

(3,117,956)

(3,246,220)

 

 



Net assets


25,201,292

23,791,642

20,352,122



 



 


 



Equity attributable to the owners of the parent


 



Share capital

13

1,809,806

1,642,500

1,662,185

Share premium

13

36,859,049

33,054,658

33,379,947

Other equity instruments

13

5,497,236

-

-

Capital contribution

14

165,000

165,000

165,000

Retained earnings

14

(16,625,857)

(6,819,423)

(10,310,673)

Translation reserve

(2,503,942)

(4,251,093)

(4,544,337)

Total equity

 

25,201,292

23,791,642

20,352,122

 

1 Results are restated to reflect the consolidation of the Employee Benefit Trust into the Group Accounts


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

Six months to 30 June 2022

(Unaudited)                                                                                      


 

 

Attributable to equity holders of the parent company

 

 

 

 

Group

 

 

 Note

 

Ordinary Shares

US $

 

Share Premium

US $

 

Capital Contribution

US $

 

Retained earnings

US $

 

 

 

Balance at 1 January 2022

1,548,227

26,025,760

-

(716,529)

165,000

(2,349,966)

24,672,492



 











 

Issue of ordinary shares

13

94,273

7,028,898

-

-

-

-

7,123,171



 

 

 

 

 

 

 

 

 

 



 

Loss for the period

14

-

-

-

-

-

(4,570,500)

(4,570,500)



 

Other comprehensive income

14

-

-

-

-



 

Total comprehensive income


-

-

-

(3,534,564)

-

(4,570,500)

(8,105,064)



 












 

Share based payments

14

-

-

-

  101,043



 

Balance at 30 June 2022

1,642,500

33,054,658

-

(4,251,093)

165,000

(6,819,423)

23,791,642

 

 

 












 

 

Twelve months to 31 December 2021

(Audited)

 









 

Balance at 1 January 2022

1,548,227

26,025,760

-

(716,529)

165,000

(2,349,966)

24,672,492

 

 

 











 

Issue of ordinary shares

13

113,958

7,402,187

-

-

-

-

7,516,145



 

 

 

 

 

 

 

 

 

 



 

Loss for the period

14

-

-

-

-

-

(8,152,985)

(8,152,985)



 

Other comprehensive income

14

-

-

-

-



 

Total comprehensive income


-

-

-

(3,827,808)

-

(8,152,985)

(11,980,793)



 












 

Share based payments

14

-

-

-

-

-

192,278

192,278



 

Purchase of share by EBT


-

(48,000)

-

-



 

Balance at 31 December 2022

1,662,185

33,379,947

165,000

(10,310,673)

 

 

 

 

 

Six months to 30 June 2023

(Unaudited)

 











 

Balance at 1 January 2023

1,662,185

33,379,947

-

(4,544,337)

165,000

(10,310,673)

20,352,122

 

 

 











 

Issue of ordinary shares

13

147,621

3,479,102

-

-

-

-

3,626,723



 

Convertible Loan Note

13

-

-

5,497,236

-

-

-

5,497,236



 

 

 

 

 

 

 

 

 

 



 

Loss for the period

14

-

-

-

-

-

(6,419,132)

(6,419,132)



 

Other comprehensive income

14

-

-

-

2,040,395

-

-

2,040,395



 

Total comprehensive income


-

-

-

2,040,395

-

(6,419,132)

(4,378,737)



 












 

Share based payments

14

-

-

-

-

-

103,948

103,948



 

Balance at 30 June 2023

1,809,806

36,859,049

5,497,236

(2,503,942)

165,000

(16,625,857)

25,201,292

 

 

 

 

 


CONSOLIDATED STATEMENT OF CASH FLOWS1

 

Group



Unaudited 6 months to 30/06/2023

Unaudited 6 months to 30/06/20222

Audited 12 months to 31/12/2022



Note


US $

US $

US $



 


 




Cash flows from operating activities







Cash generated from operations

15


(4,889,949)

(9,243,635)

(14,906,368)


Net cash used in operating activities



(4,889,949)

(9,243,635)

(14,906,368)





 




Cash flows from investing activities



 




Purchases of property, plant and equipment

10


(6,841)

(39,702)

(144,776)


Intangible assets under development

11


(2,174,449)

(951,615)

(4,856,846)


Purchase of ROU asset

10




(75,509)


Net cash used in investing activities



(2,181,290)

(991,317)

(5,077,131)





 




Cash flows from financing activities



 




Proceeds from issuance of ordinary shares (net)

13


3,536,649

7,123,171

7,467,030


Proceeds from issuance of other equity instruments (net)

13


5,265,184




Purchase of share by EBT

13


-

-

(48,000)


Lease Payments



(73,481)

(60,780)

(130,780)


Net cash generated from financing activities


8,728,351

7,062,392

7,288,250

 




 



 

Net (decrease)/increase in cash and cash equivalents


1,657,112

(3,172,560)

(12,695,249)

 

Cash and cash equivalents at beginning of period


2,044,836

15,889,552

15,889,552

 

Exchange loss on cash and cash equivalents


123,443

(1,112,679)

(1,149,467)

 

Cash and cash equivalents at end of period


3,825,391

11,604,313

2,044,836

 

 

1        Cashflows amounts are converted at average FX rate for the period and differ from the balance sheet movements which are converted at closing FX rate

2        Results are restated to reflect the consolidation of the Employee Benefit Trust into the Group Accounts

 

 


 


NOTES TO THE ACCOUNTS

For the period ended 30 June 2023.

 

1.         General Information

Belluscura plc is a public company limited by shares incorporated in England and Wales and domiciled in the UK. Company Registration 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 consolidated financial statements are set out below. These policies have been consistently applied, unless otherwise stated.

 

 

2.         Electronic communications

The Company is not proposing to bulk print and distribute hard copies of this Interim Report for the six months ended 30 June 2022 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: tony.dyer@belluscura.com.

 

 

3.         Accounting Policies

This financial information has been prepared and approved by the directors in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 (''Adopted IFRSs'').  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 2022.

 

The Board has considered and updated certain critical accounting estimates in connection with the amortisation of Intangible Assets. Further information is provided in Note 11 Intangible Assets below.

 

The condensed consolidated interim financial information for the six months ended 30 June 2023 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 the Company as at and for the year ended 31 December 2022. These condensed interim financial statements for the six months ended 30 June 2023 and 30 June 2022 are unaudited and do not constitute full accounts. The comparative figures for the period ended 31 December 2022 are extracted from the 2022 audited financial statements. The independent auditor's report on the 2022 financial statements was not qualified.

 

 

4.         Going concern

The Group meets its day to day working capital requirements through sales of its products and funds raised historically, and the Group continues to utilise its high inventory levels to manufacture its products.

 

To support expansion plans for future development, the Group regularly reviews its financing arrangements and cash flows to ensure there is sufficient funding in place.

 

The Directors have a reasonable expectation that the Group will have access to adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing this financial information.

 

 

5.         Segmental reporting

The chief operating decision makers consider that in the period to 30 June 2023 there is only one operating segment, being the sale of oxygen concentrators in the United States. The Group generated gross revenue of $0.4m in the period (2022 H1: $0.6m; 2022 $1.4m). The Group generated gross revenue of $0.4m in the period (2022 H1: $0.6m; FY 2022 $1.4m). In the period two customers made up 43% of sales (2022 H1: two customers 66%; FY 2022: one customer 54%)

 

 

6.         Other operating income and administrative expenses

6.1       Other operating income

 

Group

Unaudited

6 months to

30/06/2023

US $

Unaudited

6 months to

30/06/2022

US $

Audited

12 months to

31/12/2022

US $


Freight Charged

9,758

-

6,805


 

Other Direct Income

106

-

1,898


 

Total

9,864

-

8,703

 

 

 

 

 

 

6.2       Other direct costs

 

Group


Unaudited

6 months to

30/06/2023

US $

Unaudited

6 months to

30/06/2022

US $

Audited

12 months to

31/12/2022

US $


Sales Royalties


27,690

28,087

69,904


Freight Costs


38,813

79,331

66,921


Total

 

66,503

107,418

136,825

 

 



 




 

6.3       Expenses by nature                                                                                                                   

Group

Unaudited

6 months to

30/06/2023

US $

Unaudited

6 months to

30/06/2022

US $

Audited

12 months to

31/12/2022

US $


Depreciation of property plant and equipment

24,281

12,033

38,619


Depreciation of right of use asset

56,552

49,024

104,869


Amortisation of product development

580,142

1,968,229

2,911,998


Costs related to fundraising activities

13,567

-

-


Realised and Unrealised foreign exchange movements

2,185,856

(2,609,050)

(2,877,886)


Employee benefit expense

1,624,637

2,229,921

2,999,299


IFRS2 Share Based Payment Charge

103,948

139,131

229,241


Surrendered Share Options and Share Option Tax

-

-

162,505


Sales & Marketing

274,871

567,489

1,420,134


Obsolete raw material inventory and inventory adjustments

109,185

153,181

609,848


Minimum Royalties in excess of Sales Royalties

250,211

808,054

763,430


Contract Manufacturer Capacity Costs

-

-

128,607


Other administration expenses

857,207

1,080,642

1,578,231


Administration expenses

6,080,457

4,398,654

8,068,895


 

 

7.         Finance income and costs

 

Group

Unaudited

6 months to

30/06/2023

US $

Unaudited

6 months to

30/06/2022

US $

Audited

12 months to

31/12/2022

US $

Finance Income:

 



-       Interest Income

(28)

-

-

Finance Cost




-       Interest cost on Right of Use Asset

10,668

10,938

23,617

-       Accrued Coupon on Other Equity Instruments

214,493

-

-

-       Other Interest Income and Costs

1,130

-

456

Finance Cost

226,263

10,938

24,073

 


 

8.         Income tax expense

 

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

 

           

9          Earnings/(Loss) per share

 

Group

Unaudited

6 months to

30/06/2023

US $

Unaudited

6 months to

30/06/2022

US $

Audited

12 months to

31/12/2022

US $


Profit/(Loss) for the period US$

(6,419,132)

(4,570,500)

(8,152,985)







Weighted Average Shares in Issue

124,216,681

115,776,189

119,398,219


Basic Loss per Share US$

(0.052)

(0.039)

(0.068)







Weighted Average Shares, Warrants and Options in Issue

136,357,669

128,723,060

131,797,259


Diluted Loss per Share US$

(0.052)

(0.039)

(0.068)




 



All potentially dilutive items are disregarded for the purpose of the diluted earnings per share as they are considered antidilutive.

 


 

10.       Property, plant and equipment

 

Group

 

Cost

Land & buildings

(Right of Use Asset)

US$

Furniture and Equipment

US $

 

Computer Equipment

US $

 

 

Vehicles

US $

At 1 January 2022

571,950

52,042

34,253

-

-

658,245

Additions during the period

-

-

25,675

13,387

-

39,062

Disposals during the period

-

-

-

-

At 30 June 2022

571,950

52,042

59,928

-

697,307








Additions during the period

73,838

1,664

18,495

51,638

33,173

178,808

At 31 December 2022

645,788

53,706

78,423

65,025

33,173

876,115








Additions during the period

-

-

6,841

-

-

6,841

At 30 June 2023

645,788

53,706

85,264

65,025

33,173

882,956

 

 

 

 

 

 

 

Accumulated depreciation







At 1 January 2022

(294,147)

(32,029)

(7,110)

-

-

(333,286)

Depreciation charge for the period

(49,024)

(3,732)

(7,270)

(900)

-

(60,926)

Depreciation charge on disposals

-

-

-

-

At 30 June 2022

(343,171)

(35,761)

(14,380)

-

(394,212)

 

 

 

 

 

 

 

Depreciation charge for the period

(55,693)

(3,624)

(12,191)

(9,372)

(1,382)

(82,262)

At 31 December 2022

(398,864)

(39,385)

(26,571)

(10,272)

(1,382)

(476,474)

 

 

 

 

 

 

 

Depreciation charge for the period

(53,374)

(1,073)

(13,468)

(6,659)

(2,765)

(77,339)

At 30 June 2023

(452,238)

(40,458)

(40,039)

(16,931)

(4,147)

(553,813)








Net book value







At 30 June 2022

228,779

16,281

45,548

12,487

-

303,095

At 31 December 2022

246,924

14,321

51,852

54,753

31,791

399,641

At 30 June 2023

193,550

13,248

45,225

48,094

29,026

329,143

 

 

11.       Intangible assets

Group

Purchased intangible assets

 

 

 

Cost

 

 

Product Development

US$

 

Total

US$

 

At 1 January 2022



7,150,807

7,150,807

 

Additions during the period



986,615

986,615

 

At 30 June 2022

 

 

8,137,422

8,137,422

 






 

Additions during the period



3,870,231

3,870,231

 

Disposal during the period



(270,150)

(270,150)

 

At 31 December 2022

 

 

11,737,503

11,737,503

 






 

Additions during the period



2,174,449

2,174,449

 

At 30 June 2023

 

 

13,911,952

13,911,952

 






 

Accumulated amortisation and impairment

 

 

 

 

 

At 1 January 2022



(426,924)

(426,924)

 

Amortisation during the period



(1,968,229)

(1,968,229)

 

At 30 June 2022

 

 

(2,395,153)

(2,395,153)

 






 

Amortisation during the period

 


(943,768)

(943,768)

 

Amortisation on disposal

 


270,150

270,150

 

At 31 December 2022

 

 

(3,068,771)

(3,068,771)

 






 

Amortisation during the period



(580,142)

(580,142)

 

At 30 June 2023

 

 

(3,648,913)

(3,648,913)

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

At 30 June 2022



5,742,269

5,742,269

 

At 31 December 2022



8,668,732

8,668,732

 

At 30 June 2023

 

 

10,263,039

10,263,039

 


 

 

 

 

  

 

12.       Inventory

Group

Unaudited

6 months to

30/06/2023

US $

Unaudited

6 months to

30/06/2022

US $

Audited

12 months to

31/12/2022

US $


Raw Materials and Finished goods

8,803,762

5,670,662

8,431,031


Total inventory

8,803,762

5,670,662

8,431,031


 

 

13.       Share capital and premium

             Share capital

Group

No of shares of £0.01 each

Total

US $

Issued and fully paid up



At 1 January 2022    

113,835,444

1,548,227

Shares issued for cash

7,392,157

94,273

At 30 June 2022                                                                            

121,227,601

1,642,500

 

 

 

Shares issued for cash

1,789,560

19,685

At 31 December 2022                                                                 

123,017,161

1,662,185

 

Shares issued for cash

12,652,906

147,621

At 30 June 2023                                                                            

135,670,067

1,809,806

 

Share premium

Group

 

Ordinary Shares US $

Total

US $

Allotted and fully paid up




At 1 January 2022


26,025,760

26,025,760

Premium on shares issued

Cost of issue of shares


7,461,616

(432,718)

7,461,616

(432,718)

Purchase of shares by EBT


-

-

At 30 June 2022                                                                            

 

33,054,658

33,054,658

 

 

 

 

Premium on shares issued

 

385,241

385,241

Cost of issue of shares

 

(11,952)

(11,952)

Purchase of shares by EBT

 

(48,000)

(48,000)

At 31 December 2022                                                                 

 

33,379,947

33,379,947

 

Premium on shares issued

 

3,819,878

3,819,878

Cost of issue of shares

 

(340,776)

(340,776)

At 30 June 2023                                                                            

 

36,859,049

36,859,049

 

Other equity instruments

Group

 

 

Total

US $

At 1 January 2022



-

At 30 June 2022                                                                            



-

At 31 December 2022                                                                  



-

 

At 1 January 2023

 


-

Convertible loan notes issued

 


5,861,272

Costs related to issuance

 


(579,217)

10% coupon accrual

 


215,181

At 30 June 2023                                                                            

 

 

5,497,236

 

In February 2023 the Group raised approximately £4.7m ($5.8m) through the issue of Convertible Loan Notes. The issue was approved at the General Meeting held on 16 February 2023.

 

The Convertible Loan Note Instruments are three-year £1.00 Convertible Unsecured Loan Notes issued at par. The notes are convertible into ordinary shares at a conversion price of 50 pence per share. Conversion is at the holder's election on the final business day of each quarter, commencing on 30 June 2023 and otherwise automatically at 3 years from the date of the Instrument subject to satisfaction of the conversion condition which the company is committed to satisfy upon election during the aforementioned period. The notes receive a Coupon of 10% per annum.

 

It is the Boards intention to fully convert the loan notes into shares and to capitalise the Coupon annually. Pursuant to IAS32/IFRS9, the loan notes are consequently treated as an equity instrument. Assuming all interest on the Loan Notes is capitalised, upon conversion of the Loan Notes, this will result in the issue, of up to 12,462,281 new ordinary shares of £0.01 each in the Company.

 

 

 

14.       Reserves

 

Retained earnings


 

Group

US $

At 1 January 2022



(2,349,666)

Loss for the period



(4,570,500)

Share based payments charge



101,043

At 30 June 2022


 

(6,819,423)

 


 

 

Loss for the period


 

(3,582,485)

Share based payments charge


 

91,235

At 31 December 2022


 

(10,310,673)

 

Loss for the period


 


(6,419,132)

Share based payments charge


 


103,948

At 30 June 2023


 

 

(16,625,857)

 

 

Capital Contribution


 

Group

US $

At 1 January 2022



165,000

Capital contribution received



-

At 30 June 2022


 

165,000

 


 

 

Capital contribution received



-


 

165,000

 


 

 

Capital contribution received



-

At 30 June 2023


 

165,000

 


 

 

The Capital Contribution relates to the acquisition of intangible product licences.

 

 

Translation reserve


 

 

Company

US $

At 1 January 2022




(716,529)

Foreign exchange (loss)/gain




(3,534,564)

At 30 June 2022


 

 

(4,251,093)

 


 

 


Foreign exchange (loss)/gain




(293,244)

At 31 December 2022


 

 

(4,544,337)

 

Foreign exchange (loss)/gain




2,040,395

At 30 June 2023


 

 

(2,503,942)

 

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations, primarily relating to the statement of financial position at the reporting dates.

 

 

15.       Cash generated from operating activities

 

Group


Unaudited

6 months to

30/06/2023

US $

Unaudited

6 months to

30/06/20221

US $

Audited

12 months to

31/12/2022

US $

Loss before income tax


(6,419,132)

(4,547,800)

(8,152,985)

Adjustments for





-       Depreciation


24,282

12,067

38,619

-       ROU Depreciation


56,552

40,854

104,869

-       Amortisation and impairment


580,142

1,968,225

2,911,999

-       No cash interest expense


222,941

10,938

20,279

-       Movement in foreign exchange


602,454

(2,077,833)

(914,871)

-       Share based payments


103,948

139,131

229,241

Movement in trade and other receivables


48,079

(1,991,393)

(3,502,980)

Inventory movement


(372,731)

(4,473,644)

(8,121,778)

Movement in trade and other payables


263,516

1,675,820

2,481,239

Cash generated from operating activities


(4,889,949)

(9,243,635)

(14,906,368)

 

1 Results are restated to reflect the consolidation of the Employee Benefit Trust into the Group Accounts

 

 

16.       Alternative Performance Measures

 

Adjusted EBITDA1

 

Group



Unaudited 6 months to 30/06/2023

Unaudited 6 months to 30/06/20223

Audited 12 months to 31/12/2022

 




US $

US $

US $

 

Total comprehensive loss for the period



(4,378,737)

(8,108,064)

(11,980,792)

 

Add back:



 



 

Administrative expenses Realised & unrealised FX movements in



2,185,856

(2,609,050)

(2,877,886)

 

Other comprehensive income FX currency translation differences



(2,040,395)

3,534,564

3,827,808

 

Net foreign exchange movement2

 

 

145,461

925,514

949,922

 







 

Finance Costs



226,263

10,938

24,073

 

Product development amortisation



580,142

1,968,229

2,911,988

 

Costs relating to fundraising activities



13,567

-

-

 

Surrendered share options and share option tax



-

-

162,505

 

Minimum royalties in excess of sales royalties



250,211

808,054

763,430

 

Obsolete raw material inventory and inventory adjustments



109,185

153,181

609,848

 

Contract Manufacturer Capacity Costs



-

-

128,607

 

Share based payments



103,948

139,131

229,241

 

Adjusted EBITDA

(2,949,960)

(4,103,017)

(6,201,178)



 

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 strengthened against US$ by 5% during the period (1 January 2023 - $1.21:£1.00; 30 June 2023 - $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$

 

Restated to reflect Minimum Royalties in excess of sales royalties and inventory adjustments

 

 

17.       Related party transactions

As disclosed in the Admission Document, prior to Robert Rauker joining the Company, he undertook independent patent work for Separation Design Group IP Holdings LLC ("SDG"). Pursuant to a Patent Broker Agreement dated 22 October 2015 SDG entered into an agreement with Medicinus IP LLC ("Medicinus"), of which Robert Rauker is the sole shareholder, under which Medicinus has agreed to facilitate the sale and/or licence of intellectual property owned by SDG which includes soliciting potential buyers and licencees of such intellectual property. In consideration for the provision of these services, Medicinus receives a fee of 12.5 per cent. of the licence fees, sales price and/or royalties received by SDG which will include 12.5 per cent. of the royalties the Company will pay to SDG in relation to sales of the X-PLOR and DISCOV-R, pursuant to the agreement entered into between SDG and the Company. The agreement can be terminated by either party by written notice.

 

The non-executive fees paid to Adam Reynolds were paid through his company Reyco Limited.

 

In the period the Company paid $0.58m (2022 H1: $0.41m; FY 2022: $0.43m) to Dowgate Capital Limited in relation to brokerage fees, research and fundraising activities. David Poutney is the Chief Executive Officer of Dowgate Capital Limited.

 

 

18.       Contingent Liability

On 24 February 2017, the Company entered into a co-exclusive licence and development agreement with Separation Design Group, LLC and SDG (together the "SDG Parties") ("SDG Licence") which was subsequently amended by an amendment agreement dated 19 March 2022. Pursuant to the SDG Licence: if by 3 September 2025, cumulative sales of the X-PLOR and DISCOV-R have not exceeded $20 million dollars, Belluscura must make a one-time payment of $3 million to the SDG Parties to maintain the exclusive SDG licence.

 

 

 

 

 

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Belluscura (BELL)
UK 100

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