Announcement PDF Resonance Health Limited Appendix 4E Preliminary final report 1. Company details Name of entity: ABN: Reporting period: Previous period: Resonance Health Limited 96 006 762 492 For the year ended 30 June 2023 For the year ended 30 June 2022 2. Results for announcement to the market 2023 $ 2022 $ Change $ Revenues from ordinary activities 4,404,360 3,827,976 576,384 15% Loss from ordinary activities after tax attributable to the owners of Resonance Health Limited (780,361) (1,141,777) 361,416 (32%) Loss for the year attributable to the owners of Resonance Health Limited (780,361) (1,141,777) 361,416 (32%) 2023 Cents Basic loss per share Diluted loss per share (0.17) (0.17) Change % 2022 Cents (0.25) (0.25) Dividends There were no dividends paid, recommended or declared during the current financial period. Comments The loss for the Group after providing for income tax amounted to $780,361 (30 June 2022: $1,141,777). 3. Net tangible assets Reporting period Cents Net tangible assets per ordinary security 4. Control gained over entities Not applicable. 5. Loss of control over entities Not applicable. 6. Dividends Current period There were no dividends paid, recommended or declared during the current financial period. 1.57 Previous period Cents 1.70 Resonance Health Limited Appendix 4E Preliminary final report Previous period There were no dividends paid, recommended or declared during the previous financial period. 7. Dividend reinvestment plans Not applicable. 8. Details of associates and joint venture entities Not applicable. 9. Foreign entities Details of origin of accounting standards used in compiling the report: Not applicable. 10. Audit qualification or review Details of audit/review dispute or qualification (if any): The financial statements have been audited and an unmodified opinion has been issued. 11. Attachments Details of attachments (if any): The Annual Report of Resonance Health Limited for the year ended 30 June 2023 is attached. 12. Signed Signed ___________________________ Dr Martin Blake Chairman Perth, Western Australia Date: 29 August 2023 Resonance Health Limited ABN 96 006 762 492 Annual Report - 30 June 2023 Resonance Health Limited Chairmans letter to shareholders 30 June 2023 Dear Fellow Shareholders, On behalf of the Board of Directors of Resonance Health Limited (Resonance Health or Company), it is with great pleasure that I present to you our 2023 Annual Report. Resonance Health is a leading healthcare technology and services company. The Company’s services are used globally by clinicians in the management of human diseases and by pharmaceutical and therapeutic companies in their clinical trials. Our Company’s operational focus is on developing and delivering world class quantitative imaging assessments essential in managing diseases and drug development. The technical efforts of the Company during the period were focused around improving several of its products such HepaFatSmart® (formerly, HepaFat-AI®), shortened scanner acquisition times for FerriScan®, and the use of FerriScan® on the latest generation 3T MRI machines, along with an extended proof of concept (EPoC) trial for the flagship new product development for non-invasive MRI Liver Fibrosis assessment. The Company continued to focus on the sales of its new and existing products to diagnostic and clinical trial customers globally with a notable uptake in sales volumes driven by customers using FerriScan® on 3T scanners. Along with investing in the continued development of existing products, the Company progressed its exciting work on the ASO (antisense oligonucleotide) project which is aimed at the development and validation of a suite of ‘cyclophilin-type specific’ targeting drug molecules. Work continued on development of the Company’s clinical trial capability and revenue expansion strategy during the year in conjunction with the opening of a new laboratory aimed at providing a broader range of services to clinical trial customers. This year also saw a change in management of the Company with Mitchell Wells stepping down as Managing Director and returning to his previous role of Non-Executive Director. I would personally like to thank Mr Wells for his achievements during his tenure especially in relation to numerous internal, operational and technical continuous improvement projects. I would also like to extend a warm welcome to Andrew Harrison appointed to the role of CEO in July 2023. I believe Andrew and his management team will deliver significant value for shareholders and successfully deliver our growth strategy over coming periods. On behalf of the Board, I would like to thank our employees for their efforts and outstanding work during the year. I would also like to thank the patients who used our services and importantly the large group of clinicians and researchers who supported our business. Yours Sincerely Dr Martin Blake Chairman 1 Resonance Health Limited CEO's letter to shareholders 30 June 2023 Dear Shareholders, The 2023 financial year was one of transition for the Company, it saw progress on major new product developments, the launch of Resonance Clinical and renewed focus on clinical trial customers, and leadership changes. Since I was appointed as CEO of the Company in July, I have focused on taking stock of our products and technology, our people and customers, and developing a strategy and course of action to deliver shareholder value and a platform for growth in earnings. The core of the plan is to return the Company to profitability and significantly grow revenue and earnings through existing products and customers, expansion of services to clinical trial customers, and sensible accretive acquisitions that add to scale. The foundations of this strategy were to reorganise senior management positions and focus on hiring key competencies required to execute our growth plan. To this end we are in the process of hiring a new CFO, Head of Business Development and several new positions in product development and technology. The step change in scale resulting from this strategy is illustrated by the Company’s recent clinical trial contract win totalling $6.3m over 18 months. We will also redouble our efforts to hear the voice of the customer in everything we do, with a strategic focus on our relationships with clinicians using our products globally. Striving to make our products and services easier to use with improved clinical outcomes for patients. We often underestimate the great achievements of the Company having served some of the most recognisable hospital, diagnostic users, and pharmaceutical companies globally. Our R&D teams are making fundamental breakthroughs in product development and are at the leading edge of work in the field. There have been more than 70,000 patient FerriScan® analyses completed since its launch and for our imaging CRO services we have worked with over 250 sites in 53 countries. All from our humble home in Perth! I have great confidence in the future of our business and extend my thanks to each of our staff for their contributions to the success of the company and our performance fy23. I would also like to thank our shareholders for their faith in the Company. It certainly looks like there are better days ahead! Yours Sincerely Andrew Harrison CEO 2 Resonance Health Limited Contents 30 June 2023 Corporate directory Directors' report Auditor's independence declaration Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements Directors' declaration Independent auditor's report to the members of Resonance Health Limited Shareholder information 3 4 5 20 21 22 23 24 25 56 57 61 Resonance Health Limited Corporate directory 30 June 2023 Directors Dr Martin Blake - Non-executive Chairman Mr Simon Panton - Non-executive Director Dr Travis Baroni - Non-executive Director Mr Aaron Brinkworth - Non-executive Director Mr Mitchell Wells - Non-executive Director Joint Company Secretaries Mr Mitchell Wells Ms Liesl Ellies Registered office Level 1 141 Burswood Road BURSWOOD WA 6100 T: +61 8 9286 5300 F: +61 8 9286 5399 Principal place of business Level 1 141 Burswood Road BURSWOOD WA 6100 T: +61 8 9286 5300 F: +61 8 9286 5399 Share register Advanced Share Registry Ltd 110 Stirling Highway Nedlands WA 6009 Telephone: +61 8 9389 8033 Fax: +61 8 93897871 Auditor HLB Mann Judd Level 4 130 Stirling Street Perth WA 6000 Solicitors Steinepreis Paganin Level 4, The Reed Building 16 Milligan Street Perth WA 6000 Bankers National Australia Bank Limited Stock exchange listing Resonance Health Limited shares are listed on the Australian Securities Exchange (ASX) (ASX code: RHT) Website www.resonancehealth.com www.resonanceclinical.com email: info@resonancehealth.com 4 Resonance Health Limited Directors' report 30 June 2023 The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Group' or ‘Resonance Health’) consisting of Resonance Health Limited (referred to hereafter also as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2023. Directors The following persons were Directors of Resonance Health Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Dr Martin Blake Mr Mitchell Wells Mr Simon Panton Dr Travis Baroni Mr Aaron Brinkworth (appointed 27 March 2023) Principal activities The Company’s business is healthcare technology and includes the development and commercialisation of software medical device technologies (SaMD) and services for the quantitative analysis of radiological images in a regulated and quality-controlled environment, and the provision of clinical trial services. The Company’s core product is FerriScan®, a non-invasive liver assessment technology used for the analysis of iron in the liver. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Review of operations The loss for the Group after providing for income tax amounted to $780,361 (30 June 2022: $1,141,777). Contributing to this result the Group received a $484K R&D tax incentive refund related to FY22 R&D, in June 2023. The Group continues to invest in R&D, business development, regulatory and quality affairs, and customer service capabilities to both develop and monetise its technologies and other services globally. Cash at bank as at 30 June 2023 totalled $6.36 million, in comparison to the 30 June 2022 cash balance of $6.78 million. The Group has no debt. About Resonance Health Resonance Health Limited is an Australian healthcare technology and services company. The Group's services are used globally by clinicians in the management of human diseases and by pharmaceutical and therapeutic companies in their clinical trials. Resonance Health has gained endorsement by leading physicians worldwide for providing high quality quantitative assessments essential in managing diseases and drug development. Resonance Health’s dedication to scientific rigour and quality has enabled it to achieve regulatory clearances for a range of Software-as-Medical Devices (SaMDs) in the USA, Europe, UK, and Australia, and to proudly carry ISO 13485 certification for the design and manufacture of medical devices. Regulatory cleared SaMD products, some of which incorporate Artificial Intelligence (AI), include: 5 Resonance Health Limited Directors' report 30 June 2023 ● ● ● ● ● ● FerriScan®, a core-lab product that provides an accurate assessment of liver iron concentration (LIC) through noninvasive MRI-based technology, for use in the assessment of individuals with iron overload conditions. Internationally recognised as the gold standard in LIC assessment. FerriSmart®, an AI-trained, non-invasive MRI-based device for the automated real-time assessment of LIC in patients, calibrated against the global gold standard, FerriScan®. HepaFatScan®, an MRI-based solution which provides a reliable non-invasive assessment of liver-fat in liver tissue for use in the assessment of individuals with confirmed or suspected fatty-liver-disease. HepaFatSmart®, an AI-trained, non-invasive device for the automated real-time multi-metric assessment of liver-fat in patients, for the assessment of individuals with confirmed or suspected fatty liver disease. LiverSmart®, an AI-trained, non-invasive MRI-based multi-parametric device combining FerriSmart® and HepaFatSmart ® into a consolidated report providing accurate assessment of LIC and liver fat. CardiaT2*, the most widely accepted MRI method for assessing heart iron loading. Resonance Health offers a dual analysis of FerriScan® and CardiacT2*. CardiacT2* is TGA and CE Marking regulatory cleared. The Group has a development pipeline of additional medical imaging analysis products and services, including the MRI Liver Fibrosis Project, aimed at accurately assessing the presence and progression of liver fibrosis utilising non-invasive MRI analysis. Sales Revenue Strong demand in diagnostics and clinical trials resulted in sales revenue for the year of $4.40 million, a 15% increase on FY2022 of $3.83 million. This was also reflected in cashflow with total customer receipts for FY23 of $4.33M, versus total customer receipts for FY22 of $3.53M, a 23% increase. Geographically, North America and the UK were our biggest markets, with the balance of sales mostly spread across Europe, Asia, and Australia. Services The Group provides its products and services to customers in both diagnostic and clinical trial settings. During the year its products and services were used in over 150 hospitals and MRI centres around the world. Resonance Health’s analysis reports are an assessment tool used by clinicians when treating patients with chronic iron-overload and fatty-liver diseases. Customers in diagnostic settings accounted for less than 60% of revenues, while clinical trial customers accounted for almost 40% of revenues. Resonance Health continues to actively engage with the global clinical trial market to build on the successful use of its products and services. Due to the highly technical and regulated nature of clinical trial services, revenue from these customers is usually based on multiyear contracts and is higher margin compared to diagnostic customers. Summary of Activities Management Transition The Group announced the appointment of Mr Andrew Harrison as CEO, with a start date of 1 July 2023. Mr Harrison is an experienced CEO and director of publicly listed and private companies, across a range of industries, including radiology and medical artificial intelligence (AI). He founded and was Managing Director of Capitol Health Limited (ASX: CAJ) one of Australia’s largest radiology companies. Mr Harrison has extensive experience in capital market transactions, technology commercialisation, local and international mergers and acquisitions, and strategic restructuring and turnaround. He has substantial international experience including in European, US, and Chinese markets and he served on the Board of Directors of Enlitic, LLC a world leading US based medical AI company. Mitchell Wells remains as a non-executive director on the Board of the Company. 6 Resonance Health Limited Directors' report 30 June 2023 Liver MRI Fibrosis Extended Proof of Concept The Group continues to make progress on its extended proof of concept (EPoC) for a non-invasive MRI Liver Fibrosis assessment with agreements nearing completion to commence EPoC studies with 2 trial sites. The results of the EPoC studies, if successful, will allow the Group continued engagement with pharmaceutical companies developing treatments for chronic liver disease, particularly Non-Alcoholic Fatty Liver Disease (NAFLD), to further assess the commercial potential of the technology. The Company attended the European Association for the Study of the Liver (EASL) and European Hematology Association (EHA) conferences in Europe during the period and engaged with international key opinion leaders (KOLs) and pharma companies active in the fibrosis space. International advocacy associations and regulators, including the United States Food & Drug Administration (US FDA) and the LITMUS consortium (Liver Investigation: Testing Marker Utility in Steatohepatitis) in the EU, continue to highlight the urgent need for the development of new, validated, non-invasive biomarkers to assess liver fibrosis to accelerate drug development in NAFLD – the most common cause of chronic liver disease. HepaFatSmart® US FDA Clearance The Group received regulatory clearance from the US FDA to market its improved AI trained liver-fat assessment softwareas-a-medical device (SaMD) in the USA, HepaFatSmart®. HepaFatSmart® will replace HepaFat-AI® in the United States which received US FDA regulatory clearance in Dec 2020. HepaFatSmart® automatically analyses magnetic resonance imaging (MRI) for the quantitative assessment of a patient’s liver fat. Specifically, it provides clinicians with three liver fat biomarkers: volumetric liver fat fraction (VLFF), proton density fat fraction (PDFF), and a steatosis grade. Other Product Innovations Resonance Health announced during the period that its gold-standard FerriScan® liver iron concentration (LIC) analysis service is now available on newer-generation 3 tesla (3T) magnetic field strength MRI machines. Sales for this service grew during the period as the upgrade to 3T machines globally gathered pace. Work continued on the validation of a materially shortened MRI imaging protocol FerriScan® and FerriSmart® with a targeted 75% reduction in patient MRI scanning time, thereby improving patient experience and increasing scanner throughput. The datasets required for completion of this work were received during the year. Continuing on from the technical and market success of FerriScan®’s extension to newer 3 Tesla field strength MRI machines in August 2022, work continued on the development of a 3T version of the Group's Cardiac-T2* cardiac-iron assessment device with technical development now complete and validation nearing completion, and documentation being prepared for a regulatory submission in the coming months. Resonance Clinical & Clinical Trials The Group continued developing and enhancing its clinical trial capability and revenue expansion strategy during the year, with conversations progressing with international pharma companies engaged or looking to engage in clinical trials in Australia. Several business development leads were progressed during the period with a particular focus on a large potential clinical trial to be performed in Australia, utilising a range of the Group's services. Molecular Medicine The Group continues its exciting work on the ASO (antisense oligonucleotide) R&D project which is aimed at the development and validation of a suite of ‘cyclophilin-type specific’ targeting drug molecules. The Group is currently planning a number of trials to determine the efficacy of its molecules in both liver and neurological diseases. Significant changes in the state of affairs There were no significant changes in the state of affairs of the Group during the financial year. 7 Resonance Health Limited Directors' report 30 June 2023 Matters subsequent to the end of the financial year Mr Andrew Harrison was appointed as CEO of the Company effective 1 July 2023. Mr Nick Allan resigned as COO, CFO and joint Company Secretary of the Company effective 31 July 2023. The Controlled Placement Agreement executed by the Company and Acuity Capital on 18 April 2019 and then extended on 30 June 2021 ('CPA’), expired on 31 July 2023. The CPA established an at-the-market standby equity capital facility (’ATM Facility’) providing Resonance with standby equity capital. As security for the ATM Facility, the Company issued Acuity Capital with 20,000,000 collateral shares. Given the ATM Facility has now expired, the parties have agreed to the return and cancellation of the 20 million collateral shares for nil consideration in accordance with the terms of the CPA (’Buyback’). The Buyback will be implemented in accordance with Part 2J.1 of the Corporations Act 2001 (Cth) and will be subject to shareholder approval. The Group was awarded a significant clinical trial agreement with Sun Pharmaceutical Industries Limited on 18 August 2023. The agreement is for the provision of clinical trial services and is expected to be worth up to $6.33m over 18 months. No other matter or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years. Likely developments and expected results of operations Information on likely developments in the operations of the Group and the expected results of operations have not been included in this report because the Directors believe it would be likely to result in unreasonable prejudice to the Group. Business risks The Group is subject to risks of both a general nature and ones that are specific to its business activities including, but not limited to the following: Revenue risks associated with clinical trials A significant percentage of the Group's revenue is derived from its technology being used in clinical trials or directly from CRO services such as the recently announced Sun Pharmaceutical Industries Ltd clinical trial (signed 18th August 2023). Clinical trials are complex and resource intensive. Even if the Group's products are used successfully in clinical trials, these trials can be cancelled or cut short for any number of reasons. This is of particular importance to the significant revenue expected to be generated by Resonance Clinical as a CRO. The potential risks include: ● ● ● ● ● ● ● lack of effectiveness of any product candidate during clinical trials; discovery of serious or unexpected toxicities or side effects experienced by trial participants or other safety issues; slower than expected rates of subject recruitment and enrolment rates in clinical trials; difficulty in retaining subjects who have initiated a clinical trial but may withdraw at any time; delays in obtaining regulatory authorisation to commence a trial; suspension or termination of a trial by a regulatory agency before or after a trial is commenced; and delays or failure in reaching agreement on acceptable terms in clinical trial contracts or protocols with prospective clinical trial sites. Cyber security threat from data breach A cyber security breach has the potential to disrupt the Group's information technology platform which is integral to the efficient operation of its business. A serious data breach could expose the Group to statutory liability and reputational damage. 8 Resonance Health Limited Directors' report 30 June 2023 Protection of proprietary technology The Group's success depends upon it maintaining existing, and obtaining new patents along with the protection of its trade secrets. The Group relies upon a combination of patents, trade secret protection (i.e., know how), and confidentiality agreements to protect its intellectual property. The Group may also face competition from companies who develop a substantially similar product to one of its products or proposed products. Many companies have encountered significant problems in protecting and enforcing intellectual property rights in foreign jurisdictions. Operations in international jurisdictions The Group operates in a number of international jurisdictions. The majority of its revenues are generated in the USA, UK, and Europe. Wherever the Group sets up operations it is exposed to a range of multi-jurisdictional risks such as risks relating to labour practices, environmental matters, difficulty in enforcing contracts, changes to or uncertainty in the relevant legal and regulatory regime (including in relation to taxation and foreign investment and practices of government and regulatory authorities) and other issues in foreign jurisdictions in which the Group operates. Businesses that operate across multiple jurisdictions face additional complexities from the unique business requirements in each jurisdiction. Regulatory and compliance risk The Group operates in a complex regulatory environment and in jurisdictions that have varying degrees of enactment and implementation of regulations and are constantly evolving to meet challenges associated with new technology including in relation to privacy and protected health information. The Group's products are registered or have certain regulatory approvals in various jurisdictions including the US FDA, Australian TGA, and European CE. A failure to comply with, or adjust to variations of, regulatory requirements both in Australia and overseas may result in the Company facing regulatory investigation and/or significant claims, and/or being required to adapt or withdraw certain products, which may adversely affect the Group's revenues. Dependence upon key personnel The Group depends on the talent and experience of key personnel to deliver on its business strategy. If key personnel leave, it may be difficult to replace them, or to do so in a timely manner or at a comparable expense. Any key personnel who leave to work for a competitor may adversely impact the Group. Additionally, increases in recruitment, wages and contractor costs may adversely impact upon the financial performance of the Group. Environmental regulation The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law. Information on Directors Name: Title: Dr Martin Blake Chair - Non-executive and Independent Appointed 3 October 2007 Qualifications: MBBS, FRANZCR, FAANMS, MBA, FAICD Experience and expertise: Dr Blake is a Radiologist and Nuclear Physician who brings significant technical and industry experience to Resonance Health. He has been a Partner of Perth Radiological Clinic since 1997. Dr Blake has an MBA from Melbourne University, is a Fellow of the Australian Institute of Company Directors, and holds directorships on a number of private Company boards. Other current listed directorships: None Former listed directorships (last 3 None years): Special responsibilities: Chair of the Board of Directors Member of the Remuneration Committee Member of the Audit & Risk Committee Interests in shares: 6,464,677 ordinary shares Interests in options: None 9 Resonance Health Limited Directors' report 30 June 2023 Name: Title: Mr Mitchell Wells Director - Non-executive and not Independent Appointed 28 February 2018, Managing Director from 1 July 2021 to 1 July 2023 Qualifications: L.LB, B.Comm, Dip. Aviation Experience and expertise: Mr Wells is an experienced senior executive and a qualified lawyer with commercial and legal experience in Australia, the United States of America and the United Kingdom. He has served as a Director and worked as a senior executive of public and private companies including ASX and US Nasdaq listed public companies. He has served as Chair of two large non-profit organisations and has previously served as the Company Secretary of two ASX listed public companies and as the corporate secretary of a US Nasdaq listed public company. Other current listed directorships: None Former listed directorships (last 3 None years): Special responsibilities: None Interests in shares: 1,000,000 ordinary shares Interest in options: none Interests in performance rights: At the 2022 AGM the Company's shareholders approved the issuance of 1,830,000 performance rights to Mr Wells with service based vesting conditions. Name: Title: Mr Simon Panton Director - Non-executive and not Independent Appointed 5 October 2009 Experience and expertise: Mr Panton has been a strong supporter of the Company and its technologies over a number of years and is a major shareholder of Resonance Health. Mr Panton brings skills in business and marketing having run his own successful business. Other current listed directorships: None Former listed directorships (last 3 None years): Special responsibilities: Member of the Audit & Risk Committee Member of the Remuneration Committee Interests in shares: 74,346,350 ordinary shares Interests in options: None Name: Title: Dr Travis Baroni Director - Non-Executive and Independent Appointed 25 November 2016 Experience and expertise: Dr Baroni has broad experience across industrial research, commercialisation of technology, asset valuations and investment banking services. He has a bachelor's degree and PhD in applied physics from The University of Western Australia and managed innovation development and technology strategy in a large company setting as well as being an active investor in early stage investments. He has worked in investment banking, providing advisory services to equity capital market transactions, corporate research and valuations to clients. Other current listed directorships: None Former listed directorships (last 3 None years): Special responsibilities: Chair of the Audit & Risk Committee Member of the Remuneration Committee Interests in shares: 350,000 ordinary shares Interests in options: None 10 Resonance Health Limited Directors' report 30 June 2023 Name: Title: Mr Aaron Brinkworth Director - Non-executive and Independent Appointed 27 March 2023 Experience and expertise: Mr Brinkworth had a 22-year career with Gilead Sciences, Inc. (Nasdaq: GILD) (Gilead) during which time the company grew from a small biotech-pharma company to a multi-billion-dollar global company with annual sales of over USD $27 billion. He held several commercial, licensing, and