iZafe Group Q2 Interim Report, April-June 20234

Financial Performance in Summary

• Net sales for the quarter amounted to SEK 168 thousand (SEK 403 thousand). The decrease in sales during the quarter is primarily attributable to an adjustment of previously invoiced amounts from Q1. Approximately 5% of the units produced did not meet quality standards and have therefore been adjusted in this quarter, with invoicing planned for a later date. The quarter’s sales reflect revenue from the sale of the digital medication robot Dosell and the medical device Pilloxa.
• The operating result (EBIT) for the quarter amounted to SEK -4,011 thousand (SEK -5,097 thousand).
• The operating profit before depreciation (EBITDA) for the quarter amounted to -3,027 (-3,135) TSEK.
• The result after financial items for the quarter amounted to -4,037 (-5,136) TSEK.
• The period’s cash flow from operating activities amounted to -4,155 (-2,253) TSEK.
• Earnings per share for the quarter before / after dilution amounted to -0.02 (-0.02) SEK.
• Equity per share at the end of the period amounted to 0.1 (0.2) SEK.
• The solidity at the end of the period amounted to 73.3 (82.4) percent.

Significant events during the quarter

• The Board of Directors of iZafe Group has resolved on a directed issue of 25 million B shares, raising SEK 5 million for the company before transaction costs. Simultaneously, 25,053,288 warrants of series TO14B are being issued, which could raise an additional SEK 7.5 million upon full subscription. The funds will be used to expand the workforce, increase production volumes, and intensify sales and marketing efforts in existing and new markets.
• iZafe Group’s partner, Zafe Care Systems AB, has won a contract with Kristianstad Municipality for the delivery of 150-190 Dosell units, with a total order value of approximately SEK 3.7-4.3 million. The agreement spans four years, from 2024 to 2028.

Significant events after the end of the quarter

• iZafe Group AB has received a confirmed order for 500 Dosell units from its partner Ti medi, with planned delivery to Spain in August 2024. The Dosell units will be integrated into Ti medi’s new concept, which combines their pouch packaging machines with the Dosell medication robot to enhance patient medication adherence through pharmacies in Spain.
• iZafe Group AB has decided to enter into a loan agreement of SEK 5.5 million with Exelity AB instead of proceeding with the previously planned warrant exercise, TO14B, due to high costs and financial uncertainty. The issued warrants will therefore be canceled. The loan will be used to increase production volumes and strengthen sales and marketing activities to drive sales in both existing and new markets.

Comments from CEO
Dear shareholders, customers, and employees,

Our journey to revolutionize healthcare through innovation and digitalization continues to yield concrete progress and positive results. During the second quarter, we have experienced the most accelerated demand for our products to date, further strengthening our market position.

We have recently produced 500 Dosell units, which have been invoiced to our partner in Spain. The delivery will take place at the end of August, and the revenue from this order will be recognized upon delivery. Our partner, Ti-Medi, plans to launch Dosell in Spain according to the previously communicated customer journey at the end of the third quarter, which means that we expect to see the first active Dosell units in the Spanish market and the associated revenues starting from the fourth quarter.

In the Swedish market, we are now witnessing a clear upswing during Q2. The demand for our solutions is increasing significantly, and we have already won a tender for 150 units in Kristianstad. Together with our existing projects with the Västra Götaland Region and other municipalities, we plan to begin the implementation of Dosell in 25 municipalities across Sweden in the coming quarter. This means that more organizations will benefit from our solution to ensure the right medication is administered at the right time.

Our expansion in the Netherlands continues to progress despite previous challenges. We experienced disruptions in our supplier’s network connectivity during the quarter, which affected the operation of the Dosell units. Our network provider has now resolved these issues, but we are working in parallel to switch to a new provider to ensure maximum operational reliability going forward. TCCN, our new dedicated partner in the Netherlands, has taken over the market’s previous contracts and is making a significant investment in Dosell by opening a dedicated office and developing a platform that integrates with Dosell for a unique packaging solution that has been very well received by customers. We have so far delivered over 1,000 units to the Netherlands and look forward to increasing our presence with more units this fall.

The new Dosell 3.0, which has now been produced and delivered in collaboration with our new production partner, marks an important milestone for us and future-proofs the market. During Q2, we secured the production of an additional 1,500 units, of which 500 are destined for Spain and 150 for Kristianstad. This enables us to quickly meet the growing demand in both the Dutch and Nordic markets.

To ensure that we can meet the increasing demand and continue our growth journey, we have also secured a loan of SEK 5.5 million. The decision to replace a planned warrant exercise with this loan ensures that we can focus on scaling up production and strengthening our recurring revenue, which is central to our long-term success.

We also look forward to launching the markets in Norway and Finland this fall, in collaboration with our partners there, who have now further dedicated their commitment to Dosell. This, together with our strong position in Sweden and the Netherlands, positions us for an exciting period with many new opportunities and expansions.

On October 1st, we welcome our new CFO, who will be a key player in our swift pursuit of profitability. With the increased sales we are now seeing, our goal is to achieve cash flow positivity as soon as possible.

I would like to conclude by thanking all our employees, partners, and shareholders for your continued support and commitment. Together, we are heading towards a bright future with continued strong growth and innovation in sight.

Thank you for being part of our journey.

Anders Segerström
Chief Executive Officer, iZafe Group