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2021-02-22

Year-end Report 2020 Redsense Medical AB (publ)

FULL YEAR, 1 JANUARY - 31 DECEMBER 2020

The Redsense Group

  • Total operating income for the financial year amounted to KSEK 18,159 (14,828).

  • Net sales for the financial year amounted to KSEK 13,902 (13,265).

  • Operating result (EBIT) amounted to KSEK -8,024 (-4,594).

  • Total equity amounted to KSEK 73,166 at the end of the period (14,947).

  • Cash and cash equivalents amounted to KSEK 29,007 at the end of the period (3,439).

The Swedish Parent Company

  • Total operating income for the financial year amounted to KSEK 12,383 (11,192).

  • Operating result (EBIT) amounted to KSEK -7,457 (-6,678).

  • Total equity amounted to KSEK 118,820 at the end of the period.

  • Cash and cash equivalents amounted to KSEK 24,691 at the end of the period.

FOURTH QUARTER, 1 OCTOBER - 31 DECEMBER 2020

The Redsense Group

  • Net sales for the fourth quarter amounted to KSEK 1,945 (3,967).

  • Operating result (EBIT) amounted to KSEK -3,927 (-973).

The Swedish Parent Company

  • Net sales for the fourth quarter amounted to KSEK 1,341 (2,907).

  • Operating result (EBIT) amounted to KSEK -3,676 (-1,100).

About the share

The Group's result for the financial year 2020 amounted to KSEK -8,796 before taxes, or SEK -0.63 per share. The number of shares outstanding was 14,040,810 as of 31 December 2020. Cash and cash equivalents at the end of the period amounted to KSEK 29,007.

Proposed appropriations of profit or loss

The Board of Directors and the Chief Executive Officer proposethat no dividend shall be paid for the financial year 1 January to 31 December 2020.

SIGNIFICANT EVENTS 1 JANUARY-31 MARCH 2020

  • An influx of more than MSEK 1.5 in new orders in early January brought the total order book value up to approximately MSEK 2.

  • Redsense Medical AB presented the company and its operations at Life Science-dagen in Gothenburg and at the Bolagsdagen investor meet in Stockholm.

  • In early March, a positive Final Notice was received from The Swedish Patent and Registration Office regarding the Company's patent application for a second smart woundcare related invention; patent approval will be obtained provided that minor corrections are submitted.

  • Announced that the COVID-19 outbreak is not expected to have a direct impact neither on Redsense's operations nor its demand, and that the Company's US organization and supply chain remain intact and without disruptions.

  • Announced the postponement of the 2020 Annual General Meeting to June 22, 2020, in an effort to contribute to social distancing and reduce the impact of the COVID-19outbreak.

SIGNIFICANT EVENTS 1 APRIL-30 JUNE 2020

  • Announced that order intake across the European markets continued without significant impact from the coronacrisis.

  • NHS Oxford University Hospitals in the UK included Redsense as a precautionary measure against VenousNeedle Dislodgement in their patient safety guidelines and patient information.

  • Redsense obtained MDR registration on the new legislation's original date of application. (Application of the EU's revised legal framework for medical devices will be mandatory from May 26, 2021, following a one-year postponement due to COVID-19.)

  • Growing US dialysis provider Sanderling Renal Services, headquartered in Tennessee, announced that it had selected the Redsense system.

  • Munson Healthcare, serving more than 500,000 residents in northern Michigan, adopted the Redsense system in its home dialysis services.

  • In early June, the Company announced its largest single order in company history, from one of its US distributors.

  • In cooperation with the distributor Dirinco, an evaluation programme launched in the Netherlands to test a new version of the Redsense Alarm that enables a direct connection into the nurse call system of a clinicapproved, and a favorable first international patent opinion has been received.

SIGNIFICANT EVENTS 1 JULY-30 SEPTEMBER 2020

  • Two members of Redsense Medical's senior sales management acquired shares in the Company under a personal incentive programme adopted in 2016 through an agreement between them and the CEO.

  • Redsense Medical commented that a new proposed CMS rule, which would expand the financial incentives to use innovations related to dialysis equipment, was a "very positive prospect".

  • The University Health Network in Toronto, Canada, approved Redsense's application to conduct a follow-up study of the Redsense Clamp prototype.

  • Redsense received an order for Redsense Alarms from a new U.S. customer, the CHRISTUS St. Michael HealthSystem.

  • The development project related to AI-driven wound monitoring software, initiated in November 2019, was concluded; while the project failed to finalize a proof of-concept software, valuable experience was gained and the method was deemed feasible and promising.

  • Redsense presented on the investor meet Aktiedagen Digitalt.

  • It was announced that all of the five largest dialysis care providers in the U.S. as well as three of the top five hospitals in nephrology now use the Redsense Alarm.

  • Redsense presented on the investor meet Erik Penser Banks Bolagsdag.

SIGNIFICANT EVENTS 1 OCTOBER-31 DECEMBER 2020

  • Redsense presented on the investor meet Aktiespararnas Kvinnokvällen.

  • Redsense Medical completed a directed new share issue of 1,500,000 shares to selected Swedish and international institutional investors, raising approximately MSEK 73 before issuance costs. The Company's largest shareholder, Susanne Olausson, sold shares in connection with the issue.

  • The U.S. dialysis provider Somatus Kidney Care partnered with Redsense to use the Redsense Alarm in five acute programs in Northern Virginia.

  • The Board of Directors resolved to create a business unit around the wound care project for subsequent distribution to shareholders, and convened an extraordinary general meeting to consider the proposal.

  • On December 18, 2020, the extraordinary general meeting resolved in accordance with the Board's proposal.

SIGNIFICANT EVENTS AFTER THE PERIOD

  • The United States Patent and Trademark Office (USPTO) issued a Notice of Allowance for Redsense's patent application "A device for monitoring hose connectors and body fluid leakage".
  • Member of the board Klas Arildsson was appointed CEO for the new wound care subsidiary.

COMMENTS FROM OUR CEO

The year-end can best be summarized as a time of preparation and a longing for normalcy. The clench of COVID-19 has been holding back normal health care operations and slowing training, even more so than in Q3, and it will continue to do so during Q1.

Nevertheless, while we all wait for the multiple vaccine approvals and ongoing rollout to turn things around for the better, Redsense has been accelerating the third quarter's successful transition to virtual sessions through Q4, finding a string of efficiencies along the way. Furthermore, as the project is now well underway, and we are confident it will lay the best possible foundation for the further product development of the revolutionary smart wound care solution, with funding ensured through the directed share issue carried out during the quarter.

In addition, the more and more pronounced need for distancing during the pandemic has acted as a highly effectivecatalyst for home therapy acceptance. Our interests in that regard now align with both the political reality and the majorproviders in the industry, and we are positioning to harvest the fruits of that breakthrough for a long time to come.

The absence on the other side of the table continues, sales remain under pressure

Overall, Q4 has developed much in line with what we predicted and expected in the third quarter report. Under the mounting pressure of the pandemic, most of health care remains in disarray, and the emergency measures to cope with the COVID-19 burden continue to occupy the time, assets and attention of our counterparties and clinics. As such, they are left with little or no room to engage in the very things that otherwise would drive our sales growth, such as business negotiations, finding and implementing new innovations and partaking of product demonstrations and training. The result of this business void and lack of normalcy is that our sales remain at roughly the same level as the previous quarter, an underperformance compared with the previous year, and, naturally, a frustrating temporary delay on our journey of growth.

The impact of COVID-19 has escalated throughout the quarter. Since September, the United States is in its thus far largest wave of the epidemic with unprecedented numbers of hospitalized patients. In Europe, the surge has prompted the return of lockdowns and border closures to contain mutated variants. In its recent 2021 outlook, Fresenius Medical Care's assessment was that the industry will see the COVID-19-related impact on revenue continue to accumulate over the first half of the year; driven by the high mortality of dialysis patient in the pandemic. Fortunately, a growing array of vaccines are being authorized and rolled out and dialysis patients are a prioritized group.

We continue to nurture our success factors

Our effort to prepare sales digitally, connect virtually with customers and perform online training of nurses continues,with many virtual meetings conducted as well as trouble shooting with nurses and patients over Teams and Zoom. As this transition evolves, we are uncovering a range of benefits: Not having to travel to customer locations to present livetraining saves time, cuts travel expenses and has also allowed us to increase our direct availability.

Furthermore, the effectiveness of troubleshooting customer and patient issues has been improved, as the customers caneasily schedule a video conference at a time when the nurse is in the patient's home to show how the Redsense unit hasbeen set up, how it is used and what problems they may be experiencing. In the end, both we, the carers and the patientsexperience less hassle and better time management. We are currently assessing the possibility to draw on these experiences to develop an online training center with instructional videos and other materials as a comprehensive resource hub for customers and patients.

Industry-wide focus on home treatment accelerates adoption

As the clinical reality restricts more patients to staying home, the many advantages of telehealth are becoming morebroadly apparent, and the actual practices refine over time. Restrictions thus build a strong demand for home treatmentthat will remain once the restrictions are lifted. The new U.S. reimbursement models that entered into force on January 1are also making home dialysis much more financially attractive, and major providers such as Fresenius Medical Care andDaVita are well motivated to reach the home patient goals, as they see dire challenges to their revenue lines in early 2021and are eager to develop the modalities that are more robust against virus spread.

What we now see is therefore a situation where the new U.S.administration, the industry giants and the patients all sharethe same goal and work in the same direction, wanting to boost the proportion of ...

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