AUDEARA LIMITED — Interim / Quarterly Report 2021

Oct 25, 2021

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26 October 2021
ASX ANNOUNCEMENT
September 2021 Quarterly Activity Report
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Audeara Ltd (ASX: AUA) (‘Audeara’ or ‘the Company’) is pleased to provide the following update on the Company’s performance in the September quarter.

AUSTRALIAN AUDIOLOGY CLINIC NUMBERS – LEAD INDICATOR

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Figure 1 – Australian audiology clinics stocking Audeara

At the end of the September quarter, Australian audiology clinic numbers increased to 746 due to growth in the number of independent clinics stocking the product.

Perfect sound, always.

ACN 604 368 443 Level 1 North Tower, 527 Gregory Terrace Bowen Hills, Qld 4006

Audeara is actively pursuing commercial relationships with a number of Australian clinic groups such as Connect Hearing, Audika and Bay Audio which, in aggregate, manage over 300 clinics and offer the potential to materially grow the number of Australian audiology clinics stocking Audeara.

SALES UPDATE

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Figure 2 – Sales by quarter, wholesale and retail.

PCP	Sep-’21	Sep-’20	Growth	%
Wholesale	$361,475	$243,039	$118,436	49%
Retail	$36,219	$26,713	$9,507	36%
	$397,695	$269,751	$127,943	47%
Sequential	Sep-’21	Jun-’21	Growth	%
Wholesale	$361,475	$301,376	$60,099	20%
Retail	$36,219	$29,557	$6,663	23%
	$397,695	$330,933	$66,762	20%

Table 1 - Wholesale and retail sales for the September ’21 quarter, compared to prior corresponding period September ’20 and prior quarter June ’21.

The September 2021 quarter yielded Audeara’s highest sales on record, underpinned by the strengthening of the commercial relationship with Amplifon Australia. Being the only headphone product stocked in Amplifon Australia clinics and having product held in stock for immediate sale provides a strong foundation for future growth and allows more people to be served by our technology.

Covid closures in New South Wales and Victoria impacted Audeara’s clinic partners differently. Some clinics saw markedly increased sales due to a focus on Assistive Listening Devices (ALDs) as a source of revenue in lower clinic attendance periods. Other clinics endured lower foot traffic due to Covid related lockdowns.

Perfect sound, always.

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Our focus remains on driving sales through our audiology clinic partners, by growing the number of clinics stocking Audeara and increasing the amount of sales per clinic. This dual approach of growing sales capacity while increasing sales output should yield continued growth in our core domestic market while providing a platform for development in other hearing health sectors, namely the North American Hearing Health segment and the non-clinical Australian market e.g. the NDIS.

Since the IPO we have increased attention on the NDIS, attending NDIS events and aligning with quality NDIS marketplaces to improve our access to this segment. The growth in revenue in the ‘retail’ sector is reflective of this and Audeara anticipates the NDIS continuing to provide a large sales base for their products.

HEARING HEALTH MARKET UPDATE

As previously reported, the changes to the Hearing Services Program (HSP) which commenced on 1 July 2021, have created strong opportunities for Audeara in the Assistive Listening Devices category. Changes to the Hearing Services Program have resulted in greater focus on ALDs for hearing health clinics. This includes an increase in the total amount of funding available for ALDs under the program, the continuation of telehealth servicing of clients and the introduction of an annual service review fee, not previously available for ALD clients. Other changes to the HSP can be found here: Hearing Services Program.

Amplifon Australia announced the finalisation of their acquisition of Bay Audio, after receipt of the clearances from the Australian antitrust authority and the Australian Foreign Investment Review Board. Bay Audio has over 100 points of sale across the east coast of Australia. Amplifon also announced that they would exit the Elite Hearing Network in North America by the end of 2021, focusing their attention on their Miracle Ear and Amplifon Hearing Health Care networks. The previously announced strengthening of the Amplifon relationship in Australia will assist in leveraging this relationship into other countries.

Hearing Technology Innovator Award Winner

Subsequent to the end of the quarter, Audeara was announced as the winner of the Hearing Technology Innovator Awards in the category of Personal Listening Devices for the A-01 Headphones. The annual awards facilitated by Hearing Health & Technology Matters (HHTM) recognises technology innovation and achievement in the hearing industry. Audeara will be recognised during the Academy of Doctors of Audiology (ADA), AuDacity 2021, which will take place in Portland, Oregon, on October 25-27, 2021. US National Sales Manager Finlay Robb will be in attendance at the conference with partners Westone and Oaktree.

Commenting on the award, Audeara’s CEO Dr James Fielding said “we’re thrilled and humbled to be receiving the Innovation Award. It’s been a great journey for Audeara, we’re proud to be recognised and couldn’t do what we do without the support of our incredible hearing health partners. This award is particularly exciting given that it’s being celebrated in the US and will serve as a foundation for industry recognition in the growing US market.”

“Hearing technologies being developed by companies like Audeara are helping set the standard for innovation in the industry,” said HHTM President and CEO, Kevin Liebe.

TECHNICAL UPDATE

The team has continued work on the next generation of headphones and TV listening devices, the Audeara A-02 Headphones and A-02 TV Bundle. Pre-production has been completed, with those units now undergoing rigorous internal and user testing. The products have been submitted to the relevant regulatory bodies for compliance and certification testing. Audeara expects the A-02 product line to be commercially available across all of our clinic partners in early 2022.

Development has also continued on the AudAssist desktop software. The AudAssist programming, utilising existing hearing profiles obtained in clinics, is a large value-add to the community of end users who are unable to perform their own hearing analysis, and allow the clinician to provide continued high quality of service.

Perfect sound, always.

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Chipset Purchasing and Securing Supply

The global chipset supply shortage that has impacted all electronics industries over the last 12 months has guided some necessary changes to Audeara’s supply management processes. During the quarter, the Company sought to procure a stockpile of relevant chipsets required for ongoing supply of the A-01 and forthcoming A-02 product lines to act as a production buffer. At this stage we have not had to draw down on this buffer, but retain it to ensure continuity of supply of headphones if required.

See further comments below on the September 2021 Quarterly Cashflow Report.

CORPORATE

Quarterly Cashflow Report

Cash receipts from customers of $322k in the quarter were slightly down by 8% from the previous quarter due to timing of sales and supplier terms. The strong September sales result will be realised in the cash receipts of the December 2021 quarter.

Product manufacturing and operating costs reflected payments for stock purchasing and buffer chipsets, as outlined above, as the Company prepared for growth in the coming quarters. Cash outflows of $791k was up 241% from the June quarter as a result of:

• restocking and increasing the availability of A-01 for sales in Australia;

• initial shipment of A-01 to the US;

• initial deposit on the production of A-02; and

• purchase of buffer stock of chipsets.

The Board considers accelerating working capital to secure chipsets for the production of A-01 and A-02 in the future a worthy investment and merely brings forward future cash flows that would have been required in coming quarters. Audeara purchased the chipsets at a price that is currently markedly lower than the market spot rate.

Payments for staff were $473k for the quarter, up on the June quarter of $410k as expected given the investment Audeara made during the quarter to grow the team, supporting the Company’s growth strategies. During the quarter five new staff members were added to the Audeara team.

Administration and corporate costs were $260k for the quarter, up slightly from the previous quarter reflecting an increase in the Company’s activities and public company costs.

At the end of the quarter, Audeara remained well-capitalised to continue its growth strategy with $4.5 million in cash on hand.

Payments to related parties for Directors’ fees was $110k for the quarter. There were no other related party payments in the quarter.

Perfect sound, always.

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Use of Funds Statement

Use of funds	Total use of funds included in AUA Prospectus $’000	Expenditure in Q1 FY22 $’000	Total expenditure $’000
Product development 850 8 68 Investment in resources to scale the business 3,700 764 959 Working capital 1,616 447 826 Cost of the Offer and Listing 834 26 878
Total	7,000 1,245 2,731

The quarter reflects the Company’s utilisation of funds to support its growth agenda. Expenditure in product development and growth is expected to continue over the coming quarters.

Shares on issue

As at 30 September 2021, there were 105,000,000 shares on issue, of which 40,800,678 are subject to escrow through to 10 May 2024.

Options on issue

During the quarter, Audeara cancelled 462,500 unlisted options due to staff turnover.

The options are exercisable at 30 cents, have a three-year life and vested equally over three years and at 30 September 2021, there were 3,487,500 options on issue.

This announcement was authorised by the Board of Audeara Limited

To learn more please visit: www.audeara.com

Media Enquiries M&C Partners Melissa Hamilton melissa.hamilton@mcpartners.com.au

Investor Enquiries M&C Partners Ben Henri ben.henri@mcpartners.com.au

Perfect sound, always.

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ABOUT AUDEARA

Audeara makes Perfect sound, always .

Audeara Ltd (ASX: AUA) is a hearing health technology company that uses a hearing profile algorithm to personalise sound output to the needs of the listener.

Audeara delivers high–quality personalised audio to users. Categorised as an assistive listening device (ALD), Audeara’s flagship A-01 headphones can be paired with Audeara’s mobile application (the Audeara App). The app uses a proprietary personalisation algorithm to calibrate the headphones for an individual’s unique hearing profile. The user experiences superior sound and quality, while using mainstream applications like watching movies and television, listening to music, video conferencing and gaming.

The company sells its products through distributors and resellers in Australia and the United States, and via e-commerce channels.

Perfect sound, always.

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Rule 4.7B

Appendix 4C

Quarterly cash flow report for entities subject to Listing Rule 4.7B

Name of entity

Audeara Limited

ABN

27 604 368 443

Quarter ended (“current quarter”) 30 September 2021

Consolidated statement of cash flows	Current quarter $A’000	Year to date (3 months) $A’000
1. Cash flows from operating activities 1.1 Receipts from customers 1.2 Payments for (a) research and development (b) product manufacturing and operating costs (c) advertising and marketing (d) leased assets (e) staff costs (f) administration and corporate costs 1.3 Dividends received (see note 3) 1.4 Interest received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Government grants and tax incentives 1.8 Other (provide details if material) 1.9 Net cash from / (used in) operating activities	322 (8) (791) (15) - (473) (260) - - - - - -	322 (8) (791) (15) - (473) (260) - - - - - -
	(1,225)	(1,225)
2. Cash flows from investing activities 2.1 Payments to acquire or for: (a) entities (b) businesses (c) property, plant and equipment (d) investments (e) intellectual property (f) other non-current assets	- - (6) - - -	- - (6) - - -

ASX Listing Rules Appendix 4C (17/07/20) + See chapter 19 of the ASX Listing Rules for defined terms.

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Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B

Consolidated statement of cash flows	Consolidated statement of cash flows	Current quarter $A’000	Year to date (3 months) $A’000
2.2 Proceeds from disposal of: (a) entities (b) businesses (c) property, plant and equipment (d) investments (e) intellectual property (f) other non-current assets 2.3 Cash flows from loans to other entities 2.4 Dividends received (see note 3) 2.5 Other (provide details if material) 2.6 Net cash from / (used in) investing activities		- - - - - - - - -	- - - - - - - - -
		(6)	(6)
3. Cash flows from financing activities 3.1 Proceeds from issues of equity securities (excluding convertible debt securities) 3.2 Proceeds from issue of convertible debt securities 3.3 Proceeds from exercise of options 3.4 Transaction costs related to issues of equity securities or convertible debt securities 3.5 Proceeds from borrowings 3.6 Repayment of borrowings 3.7 Transaction costs related to loans and borrowings 3.8 Dividends paid 3.9 Other (provide details if material) 3.10 Net cash from / (used in) financing activities		- - - - - (12) - - -	- - - - - (12) - - -
		(12)	(12)
4. 4.1 4.2 4.3	Net increase / (decrease) in cash and cash equivalents for the period Cash and cash equivalents at beginning of period Net cash from / (used in) operating activities (item 1.9 above) Net cash from / (used in) investing activities (item 2.6 above)	5,738 (1,225) (6)	5,738 (1,225) (6)

ASX Listing Rules Appendix 4C (17/07/20) + See chapter 19 of the ASX Listing Rules for defined terms.

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Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B

Consolidated statement of cash flows	Consolidated statement of cash flows	Current quarter $A’000	Year to date (3 months) $A’000
4.4 4.5 4.6	Net cash from / (used in) financing activities (item 3.10 above) Effect of movement in exchange rates on cash held Cash and cash equivalents at end of period	(12) -	(12) -
		4,495	4,495
5. Reconciliation of cash and cash equivalents at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts		Current quarter $A’000	Previous quarter $A’000
5.1 Bank balances 5.2 Call deposits 5.3 Bank overdrafts 5.4 Other (provide details) 5.5 Cash and cash equivalents at end of quarter (should equal item 4.6 above)		4,495 - - -	4,495 - - -
		4,495	4,495
6. Payments to related parties of the entity and their associates			Current quarter $A'000
6.1 Aggregate amount of payments to related parties and their associates included in item 1 110 6.2 Aggregate amount of payments to related parties and their associates included in item 2 - Note: if any amounts are shown in items 6.1 or 6.2, your quarterly activity report must include a description of, and an explanation for, such payments.			110
			-

ASX Listing Rules Appendix 4C (17/07/20) + See chapter 19 of the ASX Listing Rules for defined terms.

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Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B

7. 7.1 7.2 7.3 7.4 7.5 7.6	Financing facilities Note: the term “facility’ includes all forms of financing arrangements available to the entity. Add notes as necessary for an understanding of the sources of finance available to the entity. Total facility amount at quarter end $A’000 Amount drawn at quarter end $A’000 Loan facilities - - Credit standby arrangements - - Other (please specify) - - Total financing facilities - - Unused financing facilities available at quarter end - Include in the box below a description of each facility above, including the lender, interest rate, maturity date and whether it is secured or unsecured. If any additional financing facilities have been entered into or are proposed to be entered into after quarter end, include a note providing details of those facilities as well.	Total facility amount at quarter end $A’000	Amount drawn at quarter end $A’000
		-	-
		-	-
		-	-
		-	-

8.	Estimated cash available for future operating activities	$A’000
8.1 8.2 8.3 8.4 8.5 8.6	Net cash from / (used in) operating activities (item 1.9) (1,224) Cash and cash equivalents at quarter end (item 4.6) 4,495 Unused finance facilities available at quarter end (item 7.5) - Total available funding (item 8.2 + item 8.3) 4,495 Estimated quarters of funding available (item 8.4 divided by item 8.1) 3.7 Note: if the entity has reported positive net operating cash flows in item 1.9, answer item 8.5 as “N/A”. Otherwise, a figure for the estimated quarters of funding available must be included in item 8.5. If item 8.5 is less than 2 quarters, please provide answers to the following questions: 8.6.1 Does the entity expect that it will continue to have the current level of net operating cash flows for the time being and, if not, why not?	(1,224) 4,495 -
		4,495
	Answer: N/A
	8.6.2 Has the entity taken any steps, or does it propose to take any steps, to raise further cash to fund its operations and, if so, what are those steps and how likely does it believe that they will be successful?
	Answer: N/A
	8.6.3 Does the entity expect to be able to continue its operations and to meet its business objectives and, if so, on what basis?
	Answer: N/A
	Note: where item 8.5 is less than 2 quarters, all of questions 8.6.1, 8.6.2 and 8.6.3 above must be answered.

ASX Listing Rules Appendix 4C (17/07/20) + See chapter 19 of the ASX Listing Rules for defined terms.

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Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B

Compliance statement

• 1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

• 2 This statement gives a true and fair view of the matters disclosed.

Date: 26 October 2021

Authorised by the Board

Notes

1. This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the entity’s activities for the past quarter, how they have been financed and the effect this has had on its cash position. An entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is encouraged to do so.

2. If this quarterly cash flow report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 107: Statement of Cash Flows apply to this report. If this quarterly cash flow report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standard applies to this report.

3. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4. If this report has been authorised for release to the market by your board of directors, you can insert here: “By the board”. If it has been authorised for release to the market by a committee of your board of directors, you can insert here: “By the [ name of board committee – eg Audit and Risk Committee ]”. If it has been authorised for release to the market by a disclosure committee, you can insert here: “By the Disclosure Committee”.

5. If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out as complying with recommendation 4.2 of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations , the board should have received a declaration from its CEO and CFO that, in their opinion, the financial records of the entity have been properly maintained, that this report complies with the appropriate accounting standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

ASX Listing Rules Appendix 4C (17/07/20) + See chapter 19 of the ASX Listing Rules for defined terms.

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