Audientes’ Annual Report 2022

Company announcement no. 19-2023
June 13, 2023

Today, Audientes A/S releases its financial results for 2022.  Both the financial and operational results are in line with the previously published updated version of the Q4/Year-end 2022 Financial Report.

Audientes A/S’ (CVR 36047631) financial results for the period January 01 – December 31, 2022 have been approved by the Board of Directors, and the company has now published its Annual Report 2022.

Both the financial and operational results are in line with the previously published updated version of the Q4/Year-end 2022 Financial Report.

Adverse opinion from the Company’s auditor Deloitte

Based on the Board of Directors belief in achieving the needed funding including refinancing or prolongation of the current bridge-loan and in meeting the sales targets for the coming 12 months, the Board of Directors in Audientes have prepared the Annual Report 2022 as a going concern.

Deloitte, the auditor of Audientes A/S, find it unlikely, that Audientes will achieve the needed funding, refinancing/prolongation and meet the sales targets – and Deloitte have therefore stated an adverse opinion. Reference is made to the independent auditors report in the Annual Report 2022 page 20.

 
Steen Thygesen, CEO Audientes A/S, comments:

“2022 has been a very challenging year for Audientes, and it did not meet our expectations in terms of realised sales. However, it has also been a year of crucial learnings. We are fully aware that our previous and current investors and shareholders may rightly be disappointed with our performance so far in launching our initial product Ven™ by Audientes in in India and growing sales there but based on our upgraded software platform and product portfolio, our full focus is still on the Indian market. We have just begun a promising cooperation with Earkart, our new exclusive distribution partner in India, with whom we share a strong belief in the market potential of our self-fitting hearing aid Ven. We allow ourselves therefore to be optimistic in relation our future sales performance and to secure the needed funding for the year to come, including refinancing or prolongation of the current bridge-loan. “ says Steen Thygesen, CEO Audientes A/S

Performance highlights for 2022

Financial Highlights 2022

• Revenue: Revenue recorded amounts to DKK 0.1 million.
• Operating profit (EBITDA): Operating loss was realized at DKK -14.0 million in 2022 (DKK       -13.2 million in 2021).
• The loss after tax for 2022 hereafter amounts to DKK -24.4 million compared to DKK -12.9 million in 2021.
• Cash and cash equivalents: As of December 31, 2022, cash and cash equivalent assets amounted to DKK 6.9 million (end of 2021: DKK 10.6 million).
• Equity: as of December 31, 2022, was DKK 13.0 million (end of 2021: DKK 25.5 million), corresponding to an equity ratio of 49% (2021: 81%).
• Inventory and Trade Receivables:  Inventory and Trade Receivables end of December 2022 is DKK 4.6 million and DKK 0 million compared to DKK 1.4 million and DKK 0 million respectively end of 2021.
• Listing change to Spotlight: We made a listing venue change to the Spotlight Stock Market Denmark against the backdrop of an increasingly turbulent global crisis and a more pessimistic investor sentiment in the market. Combined with the low sales revenue for Ven, this made Audientes planned funding effort very challenging.
• Capitalization: Notwithstanding, in December 2022 we executed on the planned Rights Issue of Units with a highly discounted offer, securing DKK 14 million in funding with net proceeds however only at DKK 8 million, and in April 2023, we topped it up with net proceeds from the related warrants of DKK 0.6 million – however, taken together it was considerably lower than anticipated to strictly follow our strategic plans and objectives.
• Organization: By the close of 2022, Audientes had 10 full-time employees (some had been made redundant) in Denmark and 6 full-time employees in the Indian enterprise.
• Going concern: The Annual Report for 2022 has been prepared as going concern by the Board of Directors based on a belief in achieving the needed funding, refinancing or prolongation of the current bridge-loan and to meet the sales target for the coming 12 months. However, the company’s auditor finds it unlikely that Audientes will achieve the needed funding and meet the sales targets. The auditor, Deloitte, have therefore stated an adverse opinion in relation to the Annual Report 2022.
• New capitalization plan and initial step taken: Nonetheless, we have developed a new and focused plan for the Company’s future capitalization. As part of the capitalization plan, at the end of May 2023, we secured a short-term funding from our existing bridge-lenders of TDKK 750.

Operational Highlights 2022

• Disappointing initial ramp-up of Ven in India: We commenced the marketing of Ven in the Indian market from late Q1 2022, together with our numerous hearing clinic partners. Unfortunately, we did not generate the expected sales revenue from the initial Ven product, which we believe is due to an initial missing product-market fit.
• Acting on customer feedback to improve the capabilities of Ven: We worked with our sales channel partners, gaining feedback and insights into the reasons for the low sell through to end-users. Consequently, we took action to address feedback through several improvements to the product and developed a major software platform upgrade for Ven, v2.0. We have now introduced the upgrade in the market with an enhanced capability to support more severe hearing loss, amongst other requirements from our prioritized target group of customers.
• Extended credit period a challenge: Payments due for products that had been shipped to our customers in Q2 and Q3 remained as such way beyond our terms and conditions. Our sales in Q4 2022 were insignificant as we worked on improving the capabilities of Ven. Despite the lack of payments received, we decided at that time to continue the commercial collaboration with our direct customers in India and not require unpaid products taken back.
• Unpaid products taken back and upgraded: After entering a new exclusive distributor agreement with Earkart on the Indian market, we decided to take back all unpaid products from our former distributors and other sales partners to update them to the new and improved software platform release. These updated products will be then distributed to Earkart.
• A lean organisation: At this time, we also implemented cost savings in the Danish organization, reducing headcount to accommodate the lower than originally expected sales. Additional cost savings were also implemented to minimize the needed cost base for running the operation with lowered sales expectations.

Recently in 2023 and Outlook

• New exclusive distribution partner in India: We evaluated our own performance on the Indian market and decided to pursue an alternative distribution strategy, resulting in our exclusive distributor agreement with Earkart in India, commencing on May 1, 2023.
• Deep commitment to India: We are fully focused achieving the expected sales target of DKK 5 million in the coming 12 months with Earkart in India as focal point. India, with a population of 1.4 billion and a significantly high amount of underprivileged people with untreated hearing loss, is our priority market and, based on the utilization of our strong commercial insights and experience in India, we are confident of our future success there.
• Lean organization: In 2023, we have executed on the needed cost savings and are now a very lean organization with a minimum need for cost expenditures.
• Lowered need for funding: We have prepared an estimate for the need of cash the coming 12 months of DKK 5-6 million, including a refinancing or prolongation of the current bridge loan of DKK 5.5 million (to be repaid in June 2023) based on expected overall product sales in the coming 12 months of DKK 6 million.
• Break-even in operations in the coming 12 months: Audientes has started executing on a highly focused strategy, which translates to an opportunity to reach break-even in operations with total financing of less than DKK 5 million due to a cost-optimized operational approach.
• Updated products with v2.0 software platform: New versions of Ven and in parallel Companion were released in April 2023 and rolled out.
• Guidance: Due to the uncertainty around the size and timing of funding in the short-term as well in the medium term, Audientes do not at the present time announce any guidance for the financial outlook for 2023.
• Future capitalization: As previously announced, Audientes have a significant need for capital going forward to cover the needed investments in market development activities, new product development and medical device approvals etc. Therefore, Audientes is still evaluating different alternatives to bring in the required financing in the short-medium term as well as exploring more longer-term structures such as partnerships, merger, sale of business or its assets, or a strategic investment.

Financial calendar

Link to Annual report 2022

Audientes annual report for 2022 can be found here:

https://www.audientes.com/investor-relations/

Annual report presentation: June 14, 2023 2:00 PM (14:00 CEST)

Audientes CEO Steen Thygesen will present the annual report for 2022 and latest news at 2pm / 14:00 (CEST), followed by a Q&A session.

Link to registration at HC Andersen Capital.

For further information, please contact:

About Audientes A/S

Audientes A/S is a Danish hearing health company specializing in smart, self-fitting and affordable hearing aids and advanced hearables. Audientes’ mission is to make high-quality hearing aids and hearables for hearing improvement or hearing enhancement accessible to everyone who needs them globally.

Audientes’ unique hearing aid solution, Ven™ by Audientes, is available for purchase in the Indian market, online and in retail, and will be introduced to the USA over-the-counter market and other markets in the coming years. Companion by Audientes is an advanced hearable consumer electronics product that is commercially available in Europe.

Audientes is listed on Spotlight Stock Market Denmark (AUDNTS) and headquartered in Copenhagen, Denmark with a subsidiary in Hyderabad, India.

For additional information please refer to the company’s websites, audientes.com, audientes.eu or audientes.in.