aXichem AB (publ), Interim Report, January – March 2024

aXichem’s development during the period 2024-01-01—2024-03-31

In this interim report, the aXichem group is presented, which consists of aXichem AB (publ), Incendia Pharma AB and aXichem AS (Norway). Amounts in brackets refer to the corresponding period of the previous year.

aXichem’s development 2024-01-01 – 2024-03-31

Turnover and results

The group's net sales amounted to SEK 808 thousand (SEK 554 thousand).

Operating profit amounted to SEK -4,500 thousand (SEK -3,810 thousand).

The group's profit after tax amounted to SEK -5,313 thousand (SEK -4,761 thousand).

Financial net SEK -813 thousand (SEK 951).

Cash flow and financial position

The group's cash and cash equivalents on March 31, 2024 amounted to SEK 467 thousand (SEK 2,712 thousand).

The equity ratio amounted to 88% (72%).

Investments

Investments in intangible, tangible or financial fixed assets have been made so far this year with SEK 683 thousand (SEK 653 thousand).

Depreciation

Depreciation of intangible and tangible fixed assets has been done so far this year with SEK 996 thousand (SEK 884 thousand).

Stock data

Profit as of March 31, 2024 corresponds after tax to a profit per share of SEK -0.25 (SEK -0.29).

Equity per share at the end of the period amounted to SEK 1.63 (SEK 3.88).

Significant events during the period

• On January 5, 2024, it was announced that aXichem’s distributor Chr. Olesen has prepared the first batch of aXiphen for shipment to Chr. Olesen’s facilities in Brazil from where it will be delivered to industrial scale production trials in the Brazilian market.
   
• On January 10, 2024, aXichem announced new orders for aXivite^® from Uriach related to the agreement announced in June 2023. The orders are related to the production of a new melatonin formula for Uriach’s brand Aquilea^® featuring aXivite^®. The first order was announced in November 2023, and with the additional orders placed, the total order value from Uriach, to date, amounts to about 60,000 Euro.

• On January 15, 2024, the company announced that a new product, GLP-Activate with aXivite, is launched by the U.S. based company Triquetra Health. The GLP-1 hormone (Glucagon-like peptide 1) is produced in the intestine and is considered to control appetite, cravings, blood sugar and most facets of metabolism. Triquetra Health’s product GLP-Activate can provide the body natural extracts and nutrients that can support the body's own GLP-1 production. The GLP-1 hormone has been identified as one of the keys to healthy weight management and metabolic health.

• On January 30, 2024, aXichem announced that the company has signed a Letter of Intent (LOI) with Silvaco A/S, a key player in the nutraceutical, pharmaceutical, food, feed, and cosmetics industries in Scandinavia. This LOI marks the beginning of a promising collaboration aimed at introducing aXivite, into the Scandinavian dietary supplement market.

• On February 1, 2024, it was announced that the Board, subject to subsequent approval by the General Meeting, had resolved on a new issue of shares and warrants (“Units”) with pre-emptive rights for existing shareholders of approximately SEK 40.3 million before issue costs (the "Rights Issue"). One unit consists of five shares of class A and five warrants of series TO1A. The subscription price per Unit is SEK 7.50, corresponding to SEK 1.50 per share. The warrants are issued free of charge. The Rights Issue is covered to 70 percent by subscription and guarantee commitments. The Rights Issue is subject to approval by an Extraordinary General Meeting, which is intended to be held on March 6, 2024. Following the approval of phenylcapsaicin in Brazil, aXichem updates its revenue target for aXiphen® in the Brazilian market to SEK 10 million for the current year and to SEK 40 million in 2025.

• On February 13, 2024, it was announced that the company has signed a Letter of Intent (LOI) with Silver Fern Brand, a provider of premium health supplements. This collaboration aims to integrate aXivite into a broader product range, meeting the demand for science-backed health supplements.

• On March 6, 2024, an extraordinary general meeting was held. The meeting decided in accordance with the board's proposal to amend the articles of association with regard to limits on the number of shares and share capital. The share capital must be a minimum of SEK 4,250,000 and a maximum of SEK 17,000,000. The housing company must have a minimum of 21,400,000 and a maximum of 85,600,000 shares. Furthermore, the meeting decided in accordance with the board's proposal to carry out a rights issue of Units.

• On March 13, 2024, it was announced that dietary supplement supplier OmneDiem® is launching two new products on the US market with aXichem's innovative ingredient aXivite®. These launches represent an expansion of aXivite's applications in the areas of exercise and health and are another step in the company's work to broaden its global market presence and customer base.

• On March 19, 2024, aXichem announced that the strategic launch of aXiphen in Brazil will take place at the two main industry events: Nucleovet, April 9-11, and the South American International Poultry and Swine Show (SIAVS), August 6-8. The launch is supported by a marketing campaign aimed at maximizing the product's introduction to the Brazilian market.

• On March 26, 2024, the company announced the outcome of the share issue, the "Rights Issue", whose subscription period ended on March 25, 2024. A total of 2,701,257 Units were subscribed, corresponding to approximately 50.3 percent of the Rights Issue, with the support of unit rights. In addition, 14,182 Units were subscribed without the support of unit rights, corresponding to approximately 0.3 percent of the Rights Issue. Finally, 1,046,419 Units were subscribed according to the guarantee commitments entered into, corresponding to approximately 19.5 percent of the Rights Issue. A total of 3,761,858 Units were thus subscribed and the Rights Issue was thus subscribed to 70 percent. Through the rights issue, approximately SEK 28.2 million will be injected to aXichem before issue costs. Through the Rights Issue, the number of shares in aXichem increases by 18,809,290, from 21,496,325 to 40,305,615, and the share capital increases by SEK 3,761,858, from SEK 4,299,265 to SEK 8,061,123. Upon full utilization of the subscription options of series TO1A issued in connection with the Rights Issue, the number of shares will increase by a further 18,809,290, from 40,305,615 to 59,114,905, and the share capital will increase by a further SEK 3,761,858, from 8,061 SEK 123 to SEK 11,822,981.

Significant events after the end of the reporting period

• On April 24, a new order for aXivite® was announced within the agreement with the pharmaceutical company Uriach. The order is linked to the production of a new melatonin formulation for Uriach's brand Aquilea® with aXivite®. This means that the total order value from Uriach, within the agreement the parties have, now amounts to approximately 150,000 Euro. aXichem also received an order for aXivite® from its Spanish distributor Pharmafoods worth 13,700 Euro for the development of a new consumer product to be launched later this year.

CEO’s statement

The operating profit for the first quarter of 2024 amounts to SEK -4,500 thousand. Net sales amount to SEK 808 thousand and come from sales of aXivite on the European market. Operating expenses for the quarter amount to SEK -5,308 thousand refer primarily to costs for regulatory work within the framework of aXichem's application for Feed Additive approval in the EU, and to cost related to marketing and sales.

aXiphen introduced at national feed conference in Brazil

After the approval of phenylcapsaicin in Brazil, last December, we worked together with Chr. Olesen to get the formalities around logistics for the product in place and to identify chicken breeders and feed producers with salmonella problems in their facilities and are suitable to test the product. On 9–11 April, Chr. Olesen's team participated in Nucleovet, a large symposium whose purpose is to promote veterinary medicine and animal production. According to feedback from Chr. Olesen's team became Nucleovet a very positive kick-off for the market introduction of aXiphen. We expect that the first tests with aXiphen can be carried out during June - July and we look forward to receiving feedback from the producers regarding results and practical experiences.

The next event in Brazil is SIAVS which will take place August 6-8, 2024 at Anhembi Parque, São Paulo and by then we and Chr. Olesen's team should have made good progress with both tests and customer relations. It is gratifying that we are now seriously engaged in commercial marketing activities within the Animal Feed Business Area.

Supplementary studies initiated to reach approval in the EU

As we announced in December last year, we need to produce new data to fill the gaps that EFSA believes are required in order for our Feed Additive application to be approved. The three areas that apply are environmental safety, consumer safety and effect. We were able to start studies in April as planned, and our previously announced assessment, regarding submission to EFSA/EU approximately six months after studies started, is unchanged. According to the regulations, the authority's processing time is up to six months until formal approval. Despite time indications from the EU, the processing time is not completely predictable, so saying exactly when we can have an announcement is unfortunately not possible. However, we consider it reasonable to allocate a time frame for processing of six to twelve months after completed studies. In the first half of 2025, we should have an answer.

Successive sales growth for aXivite

During the first months of the year, we have seen a positive sales trend for aXivite. We are now working to ensure that the trend continues in both Europe and the USA and gives us the conditions to achieve our communicated sales target. aXichem's agreement with Uriach, regarding exclusivity for a melatonin formulation with aXivite continues to deliver. So far, Uriach has placed orders for a total of approximately SEK 1.7 million. The agreement gives Uriach exclusivity for a melatonin formulation with aXivite in Spain, Portugal, Germany, Austria, and Romania. To maintain exclusivity, Uriach, which has a strong position in the field of Consumer Healthcare, undertakes to annually place orders for aXivite with a value of at least 400,000 Euros, that is approximately SEK 5 million.

During the quarter, we communicated three new collaborations, Triquetra Health, Silver Fern Brand and Silvaco. The collaborations with Silver Fern Brand and Triquetra Health are part of aXichem's strategy to increase presence in the US market through collaborations with small to medium-sized innovative, flexible players, where we see that the lead times and decision paths are often somewhat shorter.

Triquetra Health's product GLP-Activate is an exciting initiative in the area of ​​weight management, an area where capsaicin has proven efficacy. The GLP-1 hormone (Glucagon-like peptide 1) is produced in the intestine and is considered to control appetite, hunger, blood sugar and various aspects of metabolism. Triquetra Health's product GLP-Activate with aXivite, which is already on the market, provides the body with natural extracts and nutrients that can support the body's own GLP-1 production. Triquetra Health is an innovative actor and here we see the possibility of more product collaborations in weight control as well as exercise and health.

In February, we signed a Letter of Intent with Silver Fern Brand, a supplier of high-quality nutritional supplements. The focus here is on a product for intestinal health where aXivite's documented properties come into use.

Silvaco A/S, is a well-known player in food supplements, pharmaceuticals and feed in Scandinavia. Like Triquetra Health and Silver Fern Brand, Silvaco is an innovative company, specializing in the sourcing and marketing of quality ingredients. Currently, product design and testing of various products and product ideas are underway in the segments intestinal health and weight control as well as sports and training.

Issuance of units carried out during March

aXichem's board decided in February, subject to the approval of the general meeting, to carry out an issue of shares and warrants, so-called Units, with preferential rights for existing shareholders, for approximately SEK 40.3 million before issue costs. The rights issue covers 70 percent of subscription and guarantee commitments, and the subscription period ran during the period 11 – 25 March. The rights issue was subscribed to 70 percent and thus aXichem received approximately SEK 28.2 million before issue costs and partial repayment of the convertible loan we have with Formue Nord Fokus A/S.

I would like to express my warm thanks to all shareholders who, by subscribing to the issue, contribute to us being able to continue developing aXichem's business. The main part of the added capital will be used in production, storage and marketing of aXiphen and aXivite. A smaller part will go to regulatory work in the form of the supplementary studies required to achieve Feed Additive approval in the EU.

Annual General Meeting of aXichem on June 19 in Malmö

In conclusion, I would like to welcome all shareholders to the annual general meeting of aXichem, Wednesday 19 June 2024 at 10:00 a.m. at our office in Malmö. The notice and other information will be available together with the annual report on our website www.axichem.com in good time before the meeting.

Torsten Helsing, CEO

About aXichem AB (publ)

aXichem's business concept is to develop, patent and market nature-analog industrial compounds. aXichem's product is a natural analog substance called phenylcapsaicin, which is a synthetically produced and patented capsaicin. As phenylcapsaicin is synthetically produced and has several advantages compared to natural capsaicin, such as controllable quality and production process.

The product has benefits that makes it commercially interesting in several application areas, for example as ingredient in animal feed, as ingredient in dietary supplements, as a bio-enhancer and as a bio-repellent in marine applications. aXichem is currently marketing the product under different brands in two prioritized areas: aXivite^® for dietary supplements and aXiphen^® for poultry feed. aXiphen^® has shown properties as a growth promoter and anti-salmonella ingredient in studies made in commercial poultry production settings. In the market segment for sports nutrition products aXivite^® is today included in several products for weight control, improved metabolism, and gut health.

aXichem aims to become a global supplier of industrial natural analogue chemicals to players in the chemical industry who manufacture products containing aXichem's raw materials. The company’s share is listed on NASDAQ First North since 2013.

Future prospects

aXichem's commercialization of phenylcapsaicin under the brands aXiphen® in the animal feed market and aXivite® in the food supplement market continues. The production capacity and logistics through subcontractors are in place, as is a production process optimized for commercial volumes. The pace of development in the establishment of the products is determined by market approvals in the strategically important countries or regions, starting with the EU, USA, Brazil and India. aXichem cooperates with specialized distributors, who either have their own production or cooperate with innovative leading producers.

The company has market approval for aXivite in the EU and North America. The market’s interest in aXivite is significant, especially in North America. However, the lead times for product development and the launch of consumer products within the agreements entered into with Iovate and Uriach have been longer than expected, which has caused aXichem to revise the goal regarding sales, which was announced in February 2023, of revenues of approximately SEK 20-25 million until February 2024. The company assesses continued gradual increase in sales within dietary supplements, and that the goal should be achieved during the third quarter 2024.

aXiphen was approved in Brazil in December 2023 for sale as an ingredient in chickenfeed as well as feed for piglets. In production tests, aXiphen has shown a good effect in preventing salmonella in chicken meat production, and the company expects that sales in Brazil of approximately SEK 10 million are possible in 2024, with a goal of achieving sales of approximately SEK 40 million in 2025. An application for Feed Additive market approval in the EU is being processed by the regulatory authorities and a corresponding application for the US market is being prepared. The company's strategic focus is to prioritize Brazil and the EU, as these markets have the best conditions for an initial establishment of the product.

Financing

On February 1, 2024, it was announced that the company's board, subject to the approval of the general meeting, decided to carry out an issue of shares and warrants ("Units") with preferential rights for existing shareholders (“Rights Issue”) of approximately SEK 40.3 million before issue costs. A Unit consisted of five A shares and five warrants of series TO1A. The subscription price per Unit amounted to SEK 7.50, corresponding to SEK 1.50 per A share. The warrants were issued free of charge. The rights issue was covered to 70 percent by subscription and guarantee commitments. The rights issue requires the approval of an extraordinary general meeting, which is scheduled to be held on March 6, 2024.

The board also decided to take out a new convertible loan from Formue Nord Fokus A/S of approximately SEK 5.3 million, which partially replaces the existing convertible loan.

The outcome of the rights issue, which was to 70 percent subscribed, was announced on March 26, 2014. Through the rights issue, aXichem was injected with approximately SEK 28.2 million before issue costs. The number of shares in aXichem increased by 18,809,290, to 40,305,615, and the share capital increased by SEK 3,761,858, to SEK 8,061,123. Upon full exercise of the warrants of series TO1A issued in connection with the Rights Issue, the number of shares will increase by a further 18,809,290, from 40,305,615 to 59,114,905, and the share capital will increase by a further SEK 3,761,858, from SEK 8,061,123 to SEK 11,822,981.

Incentive program – Employee stock options

At the annual general meeting on May 31, 2022, it was decided on an option program of series 2022/2026 for employees and key persons in the company comprising 400,000 options with the right to subscribe for 400,000 A shares. As of the balance sheet date, 270,000 options were allocated to staff and key persons, of which 101,250 were vested.

The employee options are earned over 4 years, with a quarter each year, provided that the participant is employed by or otherwise engaged in the company on the grant date. The staff options are awarded free of charge. Earned employee options can be exercised during a three-year period, however no earlier than three years after the respective grant date. Each employee option gives the right to subscribe for 1 A share at a subscription price that corresponds to 140 percent of the volume-weighted average price for the company's A share during the five trading days immediately preceding the day on which the employee options are awarded. The subscription price and the number of A shares to which each employee option entitles may be subject to recalculation as a result of a bonus issue, split, issues or similar measures. In order to enable the delivery of shares according to the incentive program, it was also decided to issue a maximum of 400,000 warrants.

Certified Adviser

Västra Hamnen Corporate Finance is aXichem’s Certified Adviser.

Ownership structure

For information about the company's owners, see the company's website www.axichem.com. under Investor Relations/investor structrue. For information on insider trading, see the Financial Supervisory Authority's register.

Number of shares

The number of shares and votes in the company as of 31 March 2024 was 40,305,615 and the company’s share capital amounted to

8,061,123 SEK (including not registered share capital). The company has only one class of shares, shares of series A, with 1 vote per share. The quota value is 0.20 SEK per share.

Upon full exercise of the warrants of series TO1A issued in connection with the Rights Issue, the number of shares will increase by a further 18,809,290.

Accounting principles

The company applies the Annual Accounts Act and BFNAR 2012:1 Annual accounts and consolidated accounts (K3) when preparing its financial reports. The accounting principles are unchanged compared to the most recently submitted annual report.

Dilution per share

aXichem has outstanding employee options and convertible debt. There is no dilutive effect on earnings per share as long as the group's earnings are negative.

Convertible debt

Convertible liabilities are reported divided into a debt part and an equity part. The fair value of the debt part at the time of issue is calculated by discounting the future payment flows with the current market interest rate for a similar debt, without the right to conversion. The value of the part reported in equity is calculated as the difference between the issue proceeds and the fair value of the financial debt. The part reported in equity consists of the value of the built-in option to convert the debt instrument into shares. The interest expense is reported in the income statement and is calculated according to the effective interest method.

Loan expenses

Loan expenses are charged to the result for the year to which they relate.

Definition of key figures

Solidity

Adjusted equity as a percentage of total assets.

Earnings per share

Profit for the year divided by the average number of shares.

Equity per share

Equity divided by the number of shares in the market at the end of the year.

Related Party Transactions

The company defines senior executives, board members and close family members of these people as related parties. The following transactions have been carried out during the period in addition to transactions attributable to salaries and related payments.

The company had no related party transactions during the first quarter 2024.

Personnel

The group had as of 31 March 2024 seven employees.

Significant risks and uncertainties

Regulatory issues are considered to be the single largest risk for the company. The changed security situation in Europe and the tragic development in Ukraine do not currently affect aXichem’s operations, but we are following the development closely in order to be able to manage any possible effects.

Review

This interim report has not been reviewed by the company’s auditor.

Financial calendar

Q1 Report, Jan – March                       2024-05-23
Annual Report                                      2024-05-29
Annual General Meeting                      2024-06-19
Q2 Report, Jan – June, 2024               2024-08-27                                                                                                                                      
Q3 Report, Jan – Sept, 2024               2024-11-21
Year End Report 2024                          2025-02-27

The Board of Directors and the CEO assures that the interim report provides a fair overview of the company’s operations, position, and results, and describes the significant risks and uncertainties that the company faces.

Lund, 23 May 2024
The Board of Directors of aXichem AB (publ)

The information was submitted, by the contact person, for publication on May 23, 2024, at 08:30 AM CET. The report is published on the company's website under Investor Relations. Direct link to the report: https://www.axichem.com/investors-relations/#financial-reports

This is an unofficial translation of the original Swedish version. In case of discrepancies, the Swedish version shall prevail.

Company Contact

Torsten Helsing

CEO

T. +46 70 686 33 55, E. [email protected]