Current Report No: 32/2023
Date of Preparation: October 22, 2023
Legal Basis: Art. 17 para. 1 of the MAR Regulation – confidential information.
The Board of Medicalgorithmics S.A., headquartered in Warsaw (the “Company”; the “Issuer”), announces that on October 21, 2023, the Company received a letter notifying the termination of agreements regarding cooperation with entities from the React Group, effective from December 31, 2023. The termination pertains to the following agreements: (i) The Additional Services Agreement that came into effect on June 24, 2022, entered between Cinco Reals, LLC (now known as React Health Holdings, LLC) (“React”) and the Company; (ii) The Support Agreement effective from July 28, 2022, between React, Medi-Lynx Cardiac Monitoring, LLC (“MediLynx”) and the Company, amended by an annex to the Support and License Agreement dated February 2, 2023, and the related Business Support Agreement; (iii) The Intellectual Property Licensing Agreement effective from July 28, 2022, entered between React, Medi-Lynx, and the Company, amended by an annex; (iv) The Support Agreement effective from February 2, 2023, between Medicomp, Inc. (“Medicomp”), React, and the Company, and the related Business Support Agreement; (v) The Intellectual Property Licensing Agreement effective from February 2, 2023, between React, Medicomp, and the Company (collectively referred to as “Agreements with React”). The termination of Agreements with React, according to the notice, will take effect on December 31, 2023. Until the end of Q2 2023, the React Group was the Company’s sole client in the USA generating revenue in this market. The geographical revenue structure, detailing US revenue, was published in the consolidated semi-annual financial report for the first half of 2023. Moreover, this revenue has been decreasing progressively but remains above the minimum levels set in the Agreements with React (refer to Current Report No. 52/2022 from July 28, 2022). Additionally, the Company is in discussions about the potential continuation of cooperation with React from 2024.
The Board evaluates the above situation in the context of the Company’s adopted and implemented development strategy for 2023 – 2026 and informs that the strategy and action plan adopted by the Issuer considered and prepared the Company for the risk of termination of the Agreements with React in the American market associated with the termination of exclusivity for the use of the Company’s technology and a change in strategy in this market. As a result, the Board believes that the Issuer is prepared for the termination of cooperation with React.
Since the second quarter of this year, the Company has been acquiring new partners (as reported in several press releases and current reports) in a non-exclusive territorial model, alternatively offering the use of the Company’s software and AI algorithms for integration with the contractor’s infrastructure or a complete solution, i.e., the PocketECG system, which includes the PocketECG device and PC Client software for EKG data analysis, offering one of the highest diagnostic effectiveness available on the market. As a result, the Company has already signed two contracts with new IDTF clients in the USA to use the software and AI algorithms after integration and an agreement with another IDTF client organization to provide a complete PocketECG system consisting of devices and EKG analysis software. The client has already ordered 200 devices (refer to RB 28/2023 from October 5, 2023).
Moreover, as part of implementing the new strategy, the Company has entered into two significant agreements with prominent partners. According to the Issuer’s published Current Report No. 30/2023 dated October 10, the Company entered into an agreement with a NASDAQ-listed tech company, which is one of the three largest entities in the non-invasive cardiology monitoring diagnostics industry in the American market. The agreement envisages the integration and assessment of the Company’s technology to evaluate the possibility of entering into a partnership agreement, and provided the integration evaluation is positive, the Company will ensure certification of the integration with the partner’s device.
Furthermore, on October 20, the Company entered into an agreement with a publicly traded global supplier of some of the best-rated arrhythmia diagnostic devices, proposing the integration of the Company’s software with the partner’s devices to conduct pilot tests to assess the efficiency and benefits of using the Company’s software in terms of potential long-term cooperation between the parties for joint commercialization of cloud solutions for arrhythmia diagnostics, as informed by the Issuer in the Current Report No. 31/2023 dated October 20, 2023.
The Board estimates that each of the aforementioned agreements, if they lead to the conclusion of a long-term cooperation agreement, could be significantly more beneficial, in terms of eventually generating higher revenues than the Agreement with React.