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 2024 For the year ended 30 June 2023 2. Results for announcement to the market 2024 $ 2023 $ Change $ 8,589,490 4,404,360 4,185,130 95% Profit/(Loss) from ordinary activities after tax attributable to the owners of Resonance Health Limited 169,303 (780,361) 949,664 n/a Profit/(Loss) for the year attributable to the owners of Resonance Health Limited 169,303 (780,361) 949,664 n/a Revenues from ordinary activities 2024 Cents Basic profit/(loss) per share Diluted profit/(loss) per share 0.04 0.04 Change % 2023 Cents (0.17) (0.17) Dividends There were no dividends paid, recommended or declared during the current financial period. Comments The profit for the Group after providing for income tax amounted to $169,303 (30 June 2023: $780,361 loss). 3. Net tangible assets Reporting period Cents Net tangible assets per ordinary security 0.13 Previous period Cents 1.57 4. Control gained over entities On 31 May 2024 the Company completed the acquisition of TrialsWest Pty Ltd. The contribution of TrialsWest to the Group’s profit from ordinary activities from 1 June 2024 was $97,869. 5. Loss of control over entities Not applicable. Resonance Health Limited Appendix 4E Preliminary final report 6. Dividends Current period There were no dividends paid, recommended or declared during the current financial period. 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 2024 is attached. 12. Signed ______________________________ Signed Dr Martin Blake Chairman Perth, Western Australia Date: 29 August 2024 Resonance Health Limited ABN 96 006 762 492 Annual Report - 30 June 2024 Resonance Health Limited Chairmans letter to shareholders 30 June 2024 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 2024 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 2024 financial year was one of significant change for the Company, it saw record analysis volumes for our medical device products, a significant clinical trial contract awarded to our Resonance Clinical business, and the acquisition of TrialsWest, all with a renewed focus on making inroads into the clinical trial ecosystem. These changes along with a strong focus on growth and returns resulted in a record financial result for the Company with revenues up 95% to $8.6M, and generating net positive operating cashflow of $1.39M. The Company also continued its extended proof of concept (EPoC) trial for the flagship new product development of noninvasive MRI Liver Fibrosis assessment. The global market for a granular, standardized, non-invasive MRI Liver Fibrosis measurement is significant, particularly in light of the growth in drug development in the metabolic disease space. I believe our strategy of investing in the 3 businesses that make up Resonance, being the Software as a Medical Device (SaMD) business, Resonance Clinical, and Clinical Trial Site Management (TrialsWest), has built a strong platform for both organic and acquisitive growth in future 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 2024 Dear Fellow Shareholders, In last year’s letter I outlined a strategy and course of action to deliver shareholder value and a platform for growth in earnings through existing products and customers, expansion of services to clinical trial customers, and sensible accretive acquisitions that add to scale. We set out to reorganize senior management of the Company, listen to the voice of our customers, and re-focus our efforts on the clinical trials market. During the period we made a number of strides in this endeavor: • • • • • • • We appointed a new CFO and VP of Business Development, several engineers, data scientists and scientists to our R&D team, and a number of people left the business Our Clinical Research Organisation (CRO) business won a $6.33M 18-month clinical trial management agreement with a major global pharma company We made progress on our Extended Proof of Concept to develop a non-invasive MRI liver fibrosis measurement tool We generated record revenues of $8.6M up 95% or $4.2M from FY23 The business generated positive operating cash flow of $1.39M during the period up 985% from FY23 of ($157k) We completed the successful acquisition of the TrialsWest business and opened a new trial site in Aug 2024 We generated statutory EBIDTA of ($0.1M) and normalized operating EBITDA* of $0.7M On the shoulders of these wonderful results, we expect an even more successful year in FY25 with a full year contribution from TrialsWest, continuing growth in demand for our medical software devices, and the opportunity to bid for further clinical trial management projects. With a focus on expanding further into the clinical trials ecosystem, and the strong growth opportunities of our 3 business streams we have laid the foundation for shareholder returns in future periods. I continue to 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 in FY24. I would also like to thank our shareholders for their faith in the Company. Yours Sincerely Andrew Harrison CEO Note: calculated as statutory EBITDA adjusted for share based payments. 2 Resonance Health Limited Contents 30 June 2024 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 Consolidated entity disclosure statement Directors' declaration Independent auditor's report to the members of Resonance Health Limited Shareholder information 3 4 5 21 22 23 24 25 26 58 59 60 65 Resonance Health Limited Corporate directory 30 June 2024 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 Chief Executive Officer Mr Andrew Harrison Company Secretary Mr Mitchell Wells Registered office Level 1 141-143 Burswood Road BURSWOOD WA 6100 T: +61 8 9286 5300 F: +61 8 9286 5399 Principal place of business Level 1 141-143 Burswood Road BURSWOOD WA 6100 T: +61 8 9286 5300 F: +61 8 9286 5399 Share register Automic Group Level 5 191 St Georges Terrace Perth WA 6000 Telephone: 1300 288 664 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) Websites www.resonancehealth.com www.trialswest.com.au email: info@resonancehealth.com 4 Resonance Health Limited Directors' report 30 June 2024 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 2024. 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 Principal activities The Group’s core business includes the development and commercialisation of software-as-medical-device (SaMD) technologies and services for the quantitative analysis of radiological images in a regulated and quality-controlled environment. The Group’s core SaMD product is FerriScan®, a non-invasive liver analysis technology used for the assessment of iron in the liver. Other Company SaMDs include Cardiac T2*, for the assessment of iron in the heart, and HepaFat-Scan® for the assessment of fat in and around the liver. The Company also has several AI-assisted SaMDs including FerriSmart®, HepaFat-AI, and LiverSmart®. In addition to its core business, the Group operates as the Clinical Trial Research Organisation (CRO) and local sponsor for a major global pharma company’s clinical trial in Australia of a new drug compound. The Group is overseeing aspects of the conduct and delivery of this trial in Australia. The Group further expanded into the clinical trial ecosystem during the financial year with the acquisition of TrialsWest Pty Ltd (TrialsWest). TrialsWest is a clinical research centre that partners with some of the world’s leading pharmaceutical and biotechnology companies to help bring new medicines and vaccines to the global community. Specifically, TrialsWest offers site management services to the clinical trial market specializing in the delivery of clinical trials in the community. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Review of operations The profit for the Group after providing for income tax amounted to $169,303 (30 June 2023 $780,361 loss). Contributing to this result the Group received a $796k R&D tax incentive refund related to FY23 R&D, in June 2024. 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 2024 totalled $6.85 million, in comparison to the 30 June 2023 cash balance of $6.36 million. The Group has $3.17m debt in the form of a secured financing facility, which was used to finance the acquisition of TrialsWest. 5 Resonance Health Limited Directors' report 30 June 2024 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: ● ● ● ● ● ● 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. CardiacT2*, 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 alongside the commencement of the clinical trial agreement with a major global pharma company resulted in sales revenue for the year of $8.59 million, a 95% increase on FY2023 of $4.40 million. This was also reflected in cashflow with total customer receipts for FY24 of $8.11M, versus total customer receipts for FY23 of $4.33M, an 87% increase. The major global pharma company agreement contributed approximately $3.84 million in revenue in the period Geographically, North America, Asia Pacific 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 33% of revenues, while clinical trial customers accounted for almost 67% 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. 6 Resonance Health Limited Directors' report 30 June 2024 Summary of Activities 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 having entered into agreements with two parties during the year to provide critical data for the Group’s next phase of testing and research. The results of the EPoC study, if successful, will allow the Group’s 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. Further, where it is successful, the EPoC study is expected to result in the development of a Liver MRI Fibrosis tool which can start to be used in clinical trials (for investigative use only) whilst the product navigates regulatory clearance in domestic and foreign markets. 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. Other Product Innovations In addition to Liver MRI Fibrosis, Resonance Health continued to invest in the enhancement of its existing products and the development of new products through its broader research and development program during the financial year. Key product enhancements which continued to be progressed included the validation of a materially shortened MRI imaging protocol for FerriScan® and FerriSmart® with a targeted 75% reduction in patient MRI scanning time, thereby improving patient experience and increasing scanner throughput. In addition, significant focus was placed on the ongoing refinement of the machine learning methodology underpinning FerriSmart® which is expected to offer benefits to customers using this product as well as potentially opening new markets for the product. It is expected that certain elements of this workstream will also offer potential productivity and cost efficiencies in undertaking FerriScan® analysis. Following the development of HepaFatSmart® over recent years, HepaFatScan® reporting was enhanced in the financial year to mirror that of HepaFatSmart®, and provide a comprehensive, all-in-one multi-metric report that includes; PDFF (Proton Density Fat Fraction), VLFF (Volumetric Liver Fat Fraction), Steatosis Grade and Liver Fat Distribution Map. Continuing on from the technical and market success of FerriScan ®’s extension to newer 3 Tesla field strength MRI machines (3T) in August 2022, work continued on the development of a 3T version of the Group's Cardiac-T2* cardiaciron assessment device with Cardiac 3T now complete and available for use in clinical trials. Validation and documentation work continues to allow this technical development to be ready for regulatory submission in the coming financial year. 7 Resonance Health Limited Directors' report 30 June 2024 Resonance Clinical & Clinical Trials The Group continued developing and enhancing its clinical trial capability and revenue expansion strategy during the year, with the Group contracting with a major global pharma company to act as CRO and local Australian sponsor for a clinical trial in Australia of a new drug compound. Under the contract the Group is overseeing aspects of the conduct and delivery of this trial in Australia. This clinical trial agreement is worth an estimated $6.33 million in revenue to be derived over an ~18-month period and represents a major step forward in the Group’s strategy to expand its services in the clinical trial ecosystem. The Group is currently looking at new opportunities to undertake additional clinical trials in Australia. TrialsWest & Clinical Trials Site Management Services The Group further expanded into the clinical trial ecosystem during the financial year with the acquisition of TrialsWest. TrialsWest is a clinical research centre which partners with some of the world’s leading pharmaceutical and biotechnology companies to help bring new medicines and vaccines to the global community. Specifically, TrialsWest offers site management services to the clinical trial market specialising in the delivery of clinical trials in the community. TrialsWest has operated for 12 years, and its founders Dr Helen Pavitt, Michelle Davies, and Prof Peter Bremner are all well respected in the global clinical trials industry. Under the terms of the sale agreement, they will remain in key leadership roles at TrialsWest for at least the next three years. It is expected that TrialsWest will be a source of organic and acquisitive growth going forward as the business looks to expand its presence and actively pursue value accretive acquisitions in this space. In this regard, TrialsWest expanded its geographic footprint shortly after the end of the financial year through opening a new trial site in the north of Perth. 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. A number of mouse-based trials have been undertaken with key research partners. The Group is currently planning the next phase of trials focussed on the efficacy of its molecules in both liver and neurological diseases. Significant changes in the state of affairs On 31 May 2024 the Company completed the acquisition of TrialsWest Pty Ltd. Under the terms of the agreement the Company paid $4 million upfront cash consideration. A further $4 million may be payable to the TrialsWest vendors pursuant to an earnout arrangement – subject to EBITDA performance targets being achieved during FY24 – FY26. The TrialsWest acquisition was in part funded through a secured debt facility taken out in the period totalling $3.2 million. In August 2024, the Group announced the expansion of its TrialsWest business with the upcoming opening of a new trial site in Osborne Park, Western Australia. The addition of this site doubles TrialsWest’s physical site and patient capacity and is expected to provide TrialsWest with access to Perth’s northern suburbs’ patient catchment area. The Controlled Placement Agreement (CPA) with Acuity Capital expired during the period, with share buy-back of 20,000,000 shares completing on 17 January 2024. Other than the above, there were no significant changes in the state of affairs of the Group during the financial year. Matters subsequent to the end of the financial year No other matter or circumstance has arisen since 30 June 2024 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. 8 Resonance Health Limited Directors' report 30 June 2024 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 clinical trial services agreement entered into with a major global pharma company. This one agreement entered accounted for $3.8 million in revenue during the year. Clinical trials are complex and resource intensive. Even if the Group's products and/or services 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 clinical trials 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 been initiated into 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. 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. The Group has certain products whose patents will lapse in the coming years which will expose these products to a higher level of potential competition. 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 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. 9 Resonance Health Limited Directors' report 30 June 2024 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. Reliance on Customers Due to the nature of the Company’s business, we are dependent on a limited number of key customers for a significant portion of our revenues. A cancellation of a significant order by any of these customers, the loss of any such customers for any reason or the insolvency of any such customers could significantly reduce the Company’s ongoing revenue and/or profitability and could materially and adversely affect the Company’s financial condition. To manage credit risk and exposure for these key customers, we monitor the level of accounts receivable outstanding to any individual customer at a point in time, as well as performing credit checks on new customers where it is deemed appropriate. Ongoing financing facility The group has a significant debt financing facility that is subject to various terms and conditions. There is the risk that this financing facility may not be available in the future or the terms of these facilities could be breached. Any adverse event would have a detrimental impact on the Group’s long-term growth and ability to achieve is cashflow forecasts. The group aims to manages its cashflows and finances to comply with the terms of the financing facility and covenants and aims to maintain sufficient liquidity for the business to continue as a going concern. Moreover, the Group regularly engages with its financiers to maintain good relationships. 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 & Nomination Committee Member of the Audit & Risk Committee Interests in shares: 6,464,677 ordinary shares Interests in options: None 10 Resonance Health Limited Directors' report 30 June 2024 Name: Title: Mr Mitchell Wells Director - Non-executiv