Current reports

Update on current situation and plans of Medicalgorithmics Group, including status of strategic options review

Current Report no 6/2022

Date: 4.02.2022

Legal basis: Article 17(1) MAR – confidential information

The Management Board of Medicalgorithmics S.A. (“Company”, “Issuer”) in reference to current report no. 31/2021 and 35/2021 on the commencement of the Company’s review of strategic options, provides a summary of the current operational status and situation of the Issuer’s companies.

Ongoing efforts to increase sales in the U.S. market are resulting in visible growth in sales generated in the U.S. market – in 2021 Medi-Lynx increased the number of high value claims tests by 18% (see RB No. 1/2022). Sales in the global market (outside the U.S.) are maintaining the previously observed growth rate of up to 20% y/y (with up to 40% growth of income from services), and the number of patient ECG tests initiated in this market in 2021, which was 83.4k, exceeded the number of insurers‘ claims reported in the U.S., which was 70.7k.

However, as the previous assumptions concerning the planned volume of provided claims for 2022 turned out to be too optimistic, after the change of management in the Issuer’s subsidiary – Medi-Lynx (see RB No. 2/2022), these assumptions were revised. As a result, the planned cash inflows from the U.S. market were also revised.

Revised expectations regarding the rate of growth of revenues generated in the U.S., costs incurred for equipment manufacturing and technology development indicate the need to raise additional financing in the coming months. The Management Board estimates that the Group’s cash requirements to continue its current growth strategy and maintain the positive growth momentum in high value claims tests in 2022 are in the range of $3.0 – $5.0 million, depending on, among other things, how the number and type of ECG services provided, the level of operating costs and expenditures evolve. These needs exist despite raising funds from the issuance of H shares.

In view of the above, the Management Board is conducting intensive efforts to raise additional funds in order to ensure financing of the Company and possibility to continue the development strategy and secure liquidity of the Group.

As part of these actions, the Company’s Management Board will:

– explore the possibility of obtaining an investor for the Group, the sale of Medi-Lynx or significant assets of the Group

– continue the search for debt financing, including high-cost financing,

– convene an Extraordinary General Meeting and submit draft resolutions allowing for an increase in the Company’s share capital that will not require the publication of a prospectus,

The aforementioned activities are carried out with the support and participation of the Issuer’s Supervisory Board.

At the same time, the Management Board of the Issuer prepares the Group for the option of inability to obtain financing in the necessary amount. Consequently, in order to maintain financial liquidity, the Management Board will consider and propose other scenarios, including, among others, intensive cost restructuring, while continuing to seek the necessary financing for the Group.

In each of the analyzed scenarios, the Group assumes the maintenance and development of the currently operating devices and services, including the delivery of P4 PocketECG to the global market.

Revision of estimates is the basis for impairment testing of assets. These tests will be carried out taking into account different options, the final results and conclusions on the choice of the option and the amount of possible write-offs will be known after their completion, including the estimated results for February and March this year.