Q-Linea

Developing innovative solutions for improved infection diagnostics Annual Report January–December 2021 CONTENTS Contents 03 Board of Directors’ Report 2021 in brief and ﬁnancial statements 04 04 05 06 Om Q-linea: 36 46 56 58 61 62 64 65 66 83 84 Q-linea, sepsis and ASTar in brief Board of Directors’ Report Corporate Governance Report Directors In brief: Vision, mission, business concept and strategy In brief: ASTar – rapid and comprehensive Senior executives Comments by the CEO: Income statement Balance sheet ASTar affected outcomes for healthcare patients for the ﬁrst time 08 About sepsis: Changes in equity Cash flow statement Accounting policies and notes Certiﬁcation Innovative solutions for improved infection diagnostics 11 12 History About ASTar: Q-linea’s AST technology was developed with the future in mind Auditor’s Report 15 ASTar provides rapid results when it counts 16 20 ASTar provides rapid results and is extremely easy to use 88 89 89 References Market: Glossary The market for ASTar and portable blood cultures 22 24 27 28 Upcoming reporting dates Romain Lecomte, Thermo Fisher Scientific: We share the same goal Innovation: Continuous innovation Clinical studies: The clinical studies Tiziana Di Martino, medical officer at Q-linea: Health economics is an important parameter when commercialising a product 30 34 Sustainability: Sustainability is an integral part of Q-linea’s vision Shareholder information: The Q-linea share Q-LINEA | ANNUAL REPORT 2021 02 2021 in brief In 2021, ASTar® affected outcomes for healthcare patients for the ﬁrst time, which is exactly what the system is designed to do. Other important milestones were receiving CE-IVD marking for ASTar in Europe, the beginning of the US clinical study and the launch of ASTar in Europe by Q-linea’s partner Thermo Fisher Scientiﬁc. Q-linea’s partner Thermo Fisher Scientiﬁc places ﬁrst order for ASTar No signiﬁcant events to report totalling over SEK 8 million Q3 Q4 Thermo Fisher Scientiﬁc contracted as the ﬁrst site to participate in the US clinical study Q1 ASTar is launched in the European market by Q-linea’s partner Thermo Fisher Scientiﬁc Very good interim results from the European study presented The Company signs the ﬁrst commercial evaluation contract for ASTar with a Swedish regional hospital ASTar receives CE-IVD approval The US regulatory study of ASTar begins A directed issue raises SEK 301 million for the Company before issue costs Q2 The ﬁrst patients are enrolled in the US clinical study Employees Q-linea is made up of a highly motivated team with experience and expertise from multiple disciplines and scientiﬁc ﬁelds. The Company had 136 (107) employees at year-end, 59 (43) of whom were women and 77 (64) were men. The number of consultants at year-end was 37 (33). Q-linea has a very broad knowledge base and also invests in strategic collaborations with partners to, for example, evaluate technical solutions clinically, add further technical know-how, achieve more economically advantageous solutions and/or reach a larger market uptake in an early phase. 77 59 µ Q-LINEA | ANNUAL REPORT 2021 03 IN BRIEF Q-linea, sepsis and ASTar in brief Q-linea in brief position in the next few years. Q-linea aims to become the most successful company in the sector in the long term by offering rapid and innovative diagnostic solutions. Q-linea develops innovative solutions for improved infection diagnostics based on instruments and consumables that beneﬁt patients, healthcare providers and society. Q-linea’s solutions enable healthcare providers to diagnose and treat infectious diseases in the shortest possible time. Sepsis in brief Sepsis, formerly known as blood poisoning, is a life-threaten- ing disease that occurs when the immune system overreacts to an infection in the body. When bacteria from a local infection leak into the bloodstream, sepsis is a rapid process and can lead to multiple organ failure and death. Rapid diagnosis of sepsis is critical for physicians to be able to provide the correct antibiotic treatment in time. The Company’s ﬁrst product, ASTar, enables rapid diagnosis of sepsis. Q-linea’s AST technology makes it possible to determine within six hours which antibiotic preparation will be effective against the bacteria from positive blood cultures. ASTar is a fully automated instrument for rapid antibiotic susceptibility determination, or antibiotic susceptibility testing (AST), that produces a sensitivity proﬁle from a positive blood culture within about six hours and has substantial potential to save lives. This is up to 48 hours faster than current diagnostics. ASTar’s antibiotic susceptibility testing identiﬁes the MIC value (the minimum antibiotic concentration that inhibits the growth of bacteria or kills them) via physical properties that are measured using proprietary optics and image algorithms. ASTar in brief ASTar is much faster than today’s methods at determining which antibiotics are effective against an infection. The method has substantial potential to save lives, reduce hospital costs, avoid unnecessary antibiotic treatment and slow the development of resistant bacteria. ASTar Instrument and ASTar BC G-kit deliver the broadest result, with respect to the combination of the number of antibiotics and the number of two-fold dilution steps for each antibiotic, in a single test for gram-negative bacteria. The test makes it possible to analyse gram-negative bacteria including those that are difﬁcult to culture, known as fastidious bacteria, meeting the need for rapid complete results for the best possible treatment prescription. Q-linea was founded in 2008 by scientists from the Rudbeck Laboratory at Uppsala University, together with Olink AB and Uppsala University’s holding company, UUAB. Today, Q-linea is made up of a highly motivated team of 173 employees and consultants who operate out of state-of-the- art, customised facilities at three locations in Uppsala. Q-linea targets an enormous market where there is a major clinical need, and it has the opportunity to establish a leading Vision Business concept Partnership Q-linea helps to save lives by ensuring antibiotics continue to be an effective treatment for future generations. Q-linea’s business concept is to develop and deliver solutions for healthcare providers, enabling them to accurately diagnose and treat infectious diseases in the shortest possible time. Q-linea has entered into an agreement with Thermo Fisher Scientiﬁc, a world- wide, already established sales partner that has local sales teams in the markets where Q-linea’s products are to be sold. The aim of this is to achieve broad and speedy market penetration. Unique with the partnership is that Q-linea has access to all aspects of the sales process and participates with applications specialists. Q-linea sells ASTar directly in Sweden. Mission Q-linea develops and delivers innova- tive solutions for healthcare providers, enabling them to diagnose and treat infectious diseases in the shortest possible time. The Company’s solutions help healthcare providers worldwide to reduce the use of antibiotics by provid- ing optimal treatment information for each patient. Strategy Q-linea has continuously built up and reinforced both competence and infrastructure in all areas needed to develop and supply integrated diagnostics systems. Sales are carried out by our partners, and the majority of income is expected to come from sales of consumables. Q-LINEA | ANNUAL REPORT 2021 04 ASTar – rapid and comprehensive – when time saves lives. The details make the difference. Advantages for Advantages for patients – laboratory staffand physicians with the potential to save lives ⚫ꢀ Anyone on staff can start a test in ASTar, regardless of their level of training and even under time pressure (such as at night). ⚫ꢀ Results are available in the fastest possible time, since ASTar can be loaded whenever there is available capacity. Fully automated ASTar offers a fully automated solution with the capacity to load 12 samples at a time with random-access loading, requiring less than two minutes’ manual preparation time ⚫ꢀ Perfectly integrated into the workflow: you only need to interact with ASTar once and then turn to other tasks. ⚫ꢀ ASTar is suited for managing peaks in sample flow in daytime laboratories. It also has a high capacity for large hospitals. ⚫ꢀ MIC values make it possible to customise treatment, since a bacterium’s level of resistance/sensitivity to various preparations can be taken into account. ⚫ꢀ Greater likelihood of correct treatment, since the dosage can also be taken into account. Even highly resistant bacteria can be managed correctly during treatment. Accurate MIC results Accurate MIC results are delivered in about six hours thanks to a controlled inoculum and between six and 14 two-fold dilution steps for each antibiotic in the panel. ⚫ꢀ Long dilution series provide a more accurate MIC value, making it possible to provide the correct dosage if the bacterium is not completely sensitive. This is not possible if there are limits to the area in which the MIC value lies. ⚫ꢀ A test run in ASTar is more likely to provide results that can be used as a basis for treatment if the panel is comprehensive. ⚫ꢀ There is a higher likelihood of rapid and correct treatment, since the laboratory does not need to perform follow-up tests in cases where the patient has a bacterium that is highly resistant or multi-drug resistant. These are the patients for whom the time it takes to obtain accurate results is the most important. A comprehensive AST panel The AST disc has over 330 wells available for antibiotics in varying concentrations against both fastidious and non-fastidious pathogens, making it possible to obtain clinically applicable results after only one analysis ⚫ꢀ Since the panel contains numerous different preparations, this reduces the need for parallel tests or follow-up tests. ⚫ꢀ Even patients with fastidious bacteria infections (up to 10% of all sepsis patients) can receive the correct treatment rapidly1). ⚫ꢀ Saves time and money since only one test needs to be performed on the sample. ⚫ꢀ It is possible to track the development of resistance and switch treatment strategies when needed to reduce further development of resistance ⚫ꢀ ASTar has already demonstrated that a comprehensive panel has affected the time it takes to treat patients with serious infections. The aim is to save lives. ⚫ꢀ It is important for daytime laboratories to be able to include samples that signalled positive the night before. ⚫ꢀ Fastest possible time for results, regardless of whether patients are treated at a hospital with a laboratory open daytime or 24/7. Samples can be included later ASTar is approved to include positive blood cultures up to 16 hours after proven bacterial growth ⚫ꢀ Simple workflow, since it is often not necessary to consider whether the sample can be included in ASTar. ⚫ꢀ The most frequently used culture bottles from leading suppliers can be used in ASTar. ⚫ꢀ There is a higher likelihood of rapid and correct treatment regardless of the hospital where the patient is treated, since ASTar supports most types of blood culture bottles. ASTar is approved for many different blood culture bottles ⚫ꢀ This enables many hospitals to begin using ASTar. ASTar is approved for nine different types of culture bottles ⚫ꢀ ASTar’s architecture has the ability to handle numerous sample types in the future as well as the ability to analyse samples at different price levels, presenting opportunities for the lab to include and expand the use of ASTar cost effectively. ⚫ꢀ More patients with other infections will be able to receive rapid, comprehensive results in the future as ASTar’s product offering grows. ASTar is future-proofed for new tests and sample types ASTar’s consumables are prepared to handle new sample types such as urine, and they also make it possible to analyse samples such as isolate samples at a lower price, because the AST disc can be run separately semi-automatically. ASTar makes it possible to save lives while reducing the risk of increased antibiotic resistance. Footnotes – see References on page 88. Q-LINEA | ANNUAL REPORT 2021 05 COMMENTS BY THE CEO ASTar affected outcomes for healthcare patients for the ﬁrst time 2021 was a year of successes for Q-linea. The clinical study provided extremely strong results, our global partner Thermo Fisher Scientiﬁc launched our product in Europe and we had our ﬁrst commercial evaluation customer in Sweden. Yet the single most important thing we accomplished in 2021 was that ASTar affected outcomes for healthcare patients for the ﬁrst time, and we look forward to continuing to deliver solutions that beneﬁt patients and society. Thanks to extremely good study results that exceeded the requirements for European approval, we received CE-IVD marking for ASTar in May. This means that we have been able to commercialise the system in Europe together with our partner Thermo Fisher Scientiﬁc. It has been gratifying to see Thermo Fisher Scientiﬁc’s launch. Despite Covid-related restrictions, they were able to participate in several confer- ences, both virtually and in person, where they received positive feedback. These conferences are an important form of marketing where there is an opportunity to reach a wide audience and present ASTar to potential customers. In 2021, Thermo Fisher Scientiﬁc placed orders for a total of SEK 13.9 million to ensure their ability to provide systems and consum- ables to their end customers. demonstrates the importance of the panel’s breadth. The study is also important because it was conducted at various types of labs with extended hours as well as labs open 24/7, demonstrating ASTar’s immense practical value. We sell ASTar in Sweden ourselves, and during the autumn our ﬁrst potential customer performed an evaluation with extremely good results. Since Sweden has a relatively low occurrence of antibiotic-resistant bacteria and no 24/7 laboratories, it is a market with lower demand for our products in relative terms. Nevertheless, during the evaluation we could see that ASTar affected healthcare so that patients received care faster, which is exactly what we want the system to accomplish. We expect ASTar to be able to provide critical decisions in every hospital that chooses to include it in their routine diagnostics. In 2021, we initiated the clinical study to receive 510(k) clearance to market ASTar in the US. The majority of the US study was conducted at Q-linea, while parts of the repro- ducibility study were conducted at Swedish hospitals. The ﬁnal prospective part of the study began in December, with approximately 450 patient samples at three US hospitals where ASTar was installed. We made great progress during the year in the develop- ment of our portable blood culture technology, Podler®. We are working to be able to initiate patient studies in the US in late 2022. All future studies, such as for isolates and gram-positive bacteria, will be initiated in the US before being transferred to Europe, and we expect that on the whole this will open up a wider market more rapidly. While we have been developing our technology, we have also been speaking with several potential commercial partners in order to ﬁnd one or more partners with the best prospects of commercialising our technology on favourable terms. Interest in the technology has proven to be strong, since a diagnosis immediately after sampling would be incredibly valuable compared with today’s We made great progress during the year in the development of our portable blood “ culture technology. We are working to be able to initiate patient studies in the US in late 2022. During the summer, Thermo Fisher Scientiﬁc conducted a study that included approximately 500 samples at multiple hospitals in Europe. This study demonstrated even better results than the previous European study. The panel contains powerful and important antibiotics such as Colistin as well as the analysis of fastidious bacteria, which means that our technology is well equipped for the future: the wider the panel’s coverage, the higher the number of patients that can be treated correctly. In addition, everyone at the lab can load a sample regardless of the time of day thanks to the easy han- dling of ASTar. ASTar was able to provide results for 98.7% of all procedure where a potentially signiﬁcant amount of time patient samples in the study, an outstanding performance that is lost in transport. The hours saved in the workflow would Q-LINEA | ANNUAL REPORT 2021 06 ASTar was able to provide results for 98.7% of all “ patient samples in the study, which is an outstanding performance. enable improved and equivalent care regardless of when and where a sample is taken, and would do so for all sepsis patients. to take this opportunity to thank our owners – both old and new – for the conﬁdence you have shown in us. Q-linea targets an enormous market where there is a major need, and it has the opportunity to establish a leading position in the next few years. We are investing in order to become the most successful company in the sector in the long term. I would like to express my thanks for a job well done, and I look forward to the road ahead. During the year, the Company grew by some 30 employees and was able to keep morale high despite challenges posed by the pandemic. On the whole, things worked very smoothly, and our staff met these challenges with aplomb. During the summer, we completed a directed issue in an amount of SEK 301 million before transaction costs in order to scale up and achieve the objectives we established with Thermo Fisher Scientiﬁc. We are building up our capacity to produce systems and consumables on a commercial scale, and I would like Uppsala, April 2022 Jonas Jarvius, President Q-LINEA | ANNUAL REPORT 2021 07 ABOUT Q-LINEA | ABOUT SEPSIS Q-LINEA | ANNUAL REPORT 2021 08 Innovative solutions for improved infection diagnostics Q-linea is a company that develops innovative solutions for improved infection diagnostics that beneﬁt patients, healthcare providers and society. Sepsis used to be called blood poisoning, and frequently but not always, patients with sepsis have bacteria in their blood which may have come from a local infection or infected the bloodstream directly. However, the presence of bacteria in the blood is not synonymous with sepsis. This is bacteraemia, which may occur temporarily and with no symptoms after mouth or throat surgery. The need for rapid and reliable diagnostics to enable proper treatment for severe conditions such as sepsis is crucial for patient survival. Sepsis is an overreaction by the immune system Sepsis is the term for a life-threatening condition that occurs when the immune system overreacts to an infection in the body. The importance of swift treatment Mortality from sepsis can be reduced by providing correct and powerful treatment. Every hour that effective treatment is delayed can be disastrous. Mortality for patients who develop septic shock increases by 7.6% for each hour without correct antibiotic treatment4). Anyone can develop sepsis as a consequence of a common bacterial infection, such as tonsillitis, infected wounds, pneumonia or a urinary tract infection. Sepsis is a global health problem, afflicting as many as 50 million people every year2). Sepsis afflicts more people in Sweden than our three most common types of cancer combined. At least ten people die every minute from sepsis worldwide. In several studies, mortality from sepsis has proven to be between 15 and 50%3). Sepsis can be treated with antibiotics, fluids and oxygen, but this requires that the physicians have realised a patient has sepsis, and this can be difﬁcult. Sepsis has no speciﬁc characteristics; instead, its symptoms – hypotension, fever, a Sepsis is a syndrome involving life-threatening organ failure rapid pulse, vomiting and diarrhoea, pain, confusion, etc. – caused by a dysfunctional systemic immune response. Sepsis occurs when the infection has spread to the entire body, and it affects vital organs such as the heart, lungs and kidneys. In the past, the deﬁnition of sepsis has varied. Sepsis currently has two levels of severity: sepsis and septic shock. Septic shock is severe sepsis where blood pressure cannot be normalised quickly despite fluid resuscitation. also occur in the case of other less dangerous conditions. For a person who is ill, it can be even more difﬁcult to know when to seek care. Today, it takes upp to 72 hours hours to identify bacteria and obtain information about which antibiotics the bacteria are sensitive to. In the most severe cases, the patient may have already died by the time the test results are complete. As a result, patients must be treated empirically with broad- spectrum antibiotics until results have been obtained from the microbiology lab. But excessively broad antibiotic treatment creates resistance. Moreover, current diagnostics are extremely labour-intensive for microbiology laboratory staff and ASTar would be able to help dramatically reduce the time spent on susceptibility determination. Footnotes – see References on page 88. Q-LINEA | ANNUAL REPORT 2021 09 ABOUT Q-LINEA | ABOUT SEPSIS About Q-linea Q-linea develops and delivers diagnostics solutions that enable accurate diagnosis and treatment of infectious diseases in the shortest possible time. minimum concentration of antibiotic needed to inhibit the growth, known as the Minimum Inhibitory Concentration (MIC), using proprietary optics and image algorithms. The advantage of a phenotypical test is that no information on the bacteria’s resistance mechanism is needed prior to testing. The test simply measures how the bacteria react to the antibiotic. This makes Q-linea’s test future-proof in the event that new resistance mechanisms develop. The Company’s unique technology enables ASTar to provide a patient-speciﬁc treatment prescription for the choice of antibiotics up to 48 hours faster than traditional technologies. It has been demonstrated that 24-hour sepsis diagnostics can reduce mortality by 40%5), lower the number of opportunistic infections6) and drastically reduce costs in the healthcare sector7). For bacterial infections, a correct treatment needs to be preceded by a diagnostic procedure in order to determine the type of bacteria causing the infection (ID) as well as the antibiotics that can kill the bacteria that made the patient ill, known as susceptibility determination or AST. Both answers are needed, but susceptibility determination is what ultimately leads to the optimal treatment prescription. Today, susceptibility determination is a process that consumes time and labour, and physicians in Europe and the US must often wait two to three days for results from microbiology laboratories as to which antibiotics are effective against a particular infection. Q-linea’s susceptibility determination is based on phenotypical identiﬁcation (via physical properties) of the Footnotes – see References on page 88. The Company’s unique technology enables ASTar to provide a patient-specific “ treatment prescription for the choice of antibiotics up to 48 hours faster than traditional technologies. Q-LINEA | ANNUAL REPORT 2021 10 History At the beginning of its history, Q-linea focused on bioprotection applications based on proprietary technologies for the molecular (non-PCR) identiﬁcation of bacteria and viruses. 2000 2012 Entry into the diagnostics ﬁeld To take advantage of Q-linea’s innovative technologies for rapid and sensitive analyses of nucleic acids and proteins, the Company made a strategic decision in 2012 to enter the in vitro infection diagnostics business. A partnership with risk capital ﬁrm Nexttobe made long-term ﬁnancing and uninterrupted technological progress possible. Clinical partnerships were also initiated to verify performance. In 2016, Q-linea’s molecular identiﬁcation technology (ID) and phenotypical antibiotic susceptibility testing (AST) were successfully tested directly from the blood of septic patients in partnership with Örebro University Hospital. 2016 2018 ASTar The following years saw a revolution in the ﬁeld of rapid analysis of bacterial ID from positive blood cultures through technologies including mass spectrometry. This opened up a market for dedicated AST systems that could deliver results at a speed similar to the new ID methods. To meet this new market demand for rapid results and minimal handling time, product development for Q-linea’s ﬁrst diagnostic product focused on a pure AST system for positive blood cultures, the fully automated ASTar. Q-linea was listed on the stock exchange to ﬁnance its development. In the ﬁrst quarter of 2020, Q-linea signed a global partnership agreement with Thermo Fisher Scientiﬁc for the commercial- isation of ASTar. In addition, Q-linea announced in 2020 that it had begun the development of an additional future product line that will further expand the potential to improve and accelerate diagnostics for patients with serious infections. 2020 2021 Through its background, expertise and history, Q-linea has acquired an extensive knowledge base that makes it well suited for delivering in vitro diagnostic (IVD) systems for infectious diseases, not just for sepsis. Q-linea has also recruited and acquired resources that span various relevant technical and business areas. In 2021, ASTar receives CE-IVD approval and the product is launched in Europe. Q-LINEA | ANNUAL REPORT 2021 11 ABOUT ASTar Q-linea’s AST technology was developed with the future in mind Q-linea focuses on supplying the market with automated systems for rapid susceptibility determination, or AST, of bacteria that cause infectious diseases. Q-linea’s ﬁrst application for ASTar is the analysis of gram-negative bacteria from patients with suspected sepsis who have positive blood cultures. Q-linea’s AST technology was developed in consultation with hospital laboratories in order to best meet their needs. determine an effective antibiotic. Q-linea’s ASTar provides a rapid, detailed result combined with easy handling. ASTar also has the capacity to analyse especially demand- ing bacteria known as fastidious bacteria, which require a richer growth medium. Fastidious bacteria are extremely common in cases of pneumonia, and bacteria such as Pneumococci are present in up to 10% of sepsis patients. ASTar is a rapid and complete system ASTar Instrument The fully automated ASTar Instrument provides accurate and reproducible sample preparation for AST as well as MIC identiﬁcation through a high-quality optical detection system. ASTar can be combined with a rapid identiﬁcation system, and reinforces current laboratory capacity in order to meet the clinical need for faster results. The fully automated ASTar instrument provides accurate and reproducible sample preparation for accurate MIC identiﬁcation through a high-quality optical detection system. ASTar can be combined with a rapid identiﬁcation system, thus meeting the clinical need for early and correct antibiotic treatment. ASTar is intended for clinical microbiology laboratories at larger hospitals. It is a fully automated instrument for measur- ing bacteria’s antibiotic susceptibility using the consumables developed by Q-linea. ASTar provides patient-speciﬁc treatment prescriptions for the choice of antibiotics up to 48 hours faster than today’s traditional technologies. When diagnosing patients with blood infections, the time it takes to get a correct antibiotic result is decisive, and can provide major beneﬁts to patients, hospitals and society. In recent years, the time it takes to receive a result as to which bacteria caused an infection has been radically reduced. As bacteria show increasing antibiotic resistance, the need increases for a corresponding change in the diagnostics to ➜ꢀFully automated ASTar offers a fully automated solution with the capacity to load 12 samples at a time with random-access loading, requiring less than two minutes’ manual preparation time ➜ꢀDelivers accurate MIC results Accurate MIC results are delivered in about six hours thanks to a controlled inoculum and between six and 14 two-fold dilution steps for each antibiotic in the panel. ➜ꢀComprehensive AST panel The AST disc has over 330 wells available for antibiotics in varying concentrations against both fastidious and non-fastidious pathogens, making it possible to obtain clinically applicable results after only one test Q-LINEA | ANNUAL REPORT 2021 12 ASTar Kit The ASTar Kit has two parts: a sample preparation cartridge and an AST disc. A frozen insert is added to the cartridge before use. Cartridge AST disc The cartridge contains all reagents and disposable articles needed for sample preparation, concentration determination, dilution and growth medium adaptation. The cassette measures 12 cm x 11 cm x 6 cm. The AST disc is used to determine susceptibility and concentration. ✔ Contains more than 330 wells with pre-ﬁlled antibiotics in various concentrations used for susceptibility deter- mination, cabinets without antibiotics used for controls, and chambers used to determine the concentration in the added sample ✔ Contains a combination of freeze-dried and room-temperature reagents ✔ A frozen insert is added into the cartridge before use ✔ Contains a unique barcode for identiﬁcation and linking ✔ Contains a function that ﬁlters millimetre-sized resin composites that are in many types of blood culture bottles and otherwise risk interfering with the analysis to each respective sample preparation cartridge and patient ✔ Stored at room temperature ✔ Has barcodes for identifying and linking the cartridge and The AST disc contains more than 330 wells, allowing for an extremely broad antibiotic panel with many two-fold dilution steps for each antibiotic. Susceptibility determination from a broader panel gives a more complete result and reduces the need for further time-consuming tests. For rapid direct testing from clinical samples, a broad panel also makes it possible to start the analysis before the bacteria is identiﬁed, cutting the time to correct antibiotic treatment. patient sample ✔ Stored at room temperature Q-LINEA | ANNUAL REPORT 2021 13 ABOUT ASTar Q-LINEA | ANNUAL REPORT 2021 14 ASTar provides rapid results when it counts In 2021, a laboratory in southern Sweden conducted a commercial evaluation of ASTar. The chief microbiologist shares her experience with ASTar here. What sort of needs do you see for rapid/faster susceptibility determination? Rapid susceptibility determination of blood cultures is important in order to detect resistance mechanisms against The clinical microbiology ward that conducted the evaluation the antibiotics used in our region in cases of suspected sepsis, especially ESBL. ESBL stands for Extended Spectrum Betalactamases, and ESBL-producing bacteria have acquired resistance to the most common preferred preparations in cases of sepsis infections caused by gram-negative bacteria. The laboratory analyses samples for healthcare providers in a Swedish region with about 350,000 inhabitants, two hospitals and about 30 community health centres. The laboratory has around 40 employees and is staffed for about ten hours in the daytime. There are three blood culturing cabinets, which means that blood cultures are incubated around the clock. How does ASTar differ from your existing equipment? ASTar doesn’t require advance preparation of the blood culture, and it requires less handling time. Who used ASTar? Two biomedical analysts had this task in our study. Under ordinary conditions, this would be all of the biomedical analysts who work with the blood cultures. Your evaluation included 30 patients. Sweden still has a low level of bacterial resistance, but did you still see ASTar leading to changed outcomes for some patients? Did you need to adapt your work procedure Yes, for a patient with a strain that was resistant to the treatment using piperacillin/tazobactam that they were receiving. Once we had this information, the treatment was changed to meropenem in the afternoon. to incorporate ASTar? No. How much would you use ASTar if it was implemented in your procedure? The panel was recently expanded. How important is a broad panel to you? It’s good to have a broad panel. In Sweden, we’ve been spared from multi-resistant strains and blood cultures in relative terms, but this is needed in several European countries. It would be possible to test all of the blood cultures where gram-negative bacteria are detected in ASTar continually during working hours. Q-LINEA | ANNUAL REPORT 2021 15 ABOUT ASTar ASTar provides rapid results and is extremely easy to use ASTar meets a vast need for rapid treatment recommendation in cases of infectious diseases, a need that is not being met in the market today. ASTar has been developed in close consultation with clinics and microbiology laboratory staff in various countries in order to best respond to expectations of a system that must function in the current workflow. Aspects that have proven important, and that ASTar satisﬁes, are that the system is easy to use and fully automated, with an intuitive and user-friendly interface, that it starts quickly and easily, and that results are obtained quickly. A large microbiology laboratory currently performs a substantial number of susceptibility determinations, some of which are considered critical, such as those from positive blood cultures. To meet the daily sample throughput at a large laboratory, a system should handle 10-30 positive blood cultures per day. Daytime laboratories also need to be able to analyse a large number of blood cultures that signalled positive during the night, which means that a system needs high peak capacity. 24/7-hour laboratories have a need for random access in order to be able to quickly start and run a sample any time it signals positive. ASTar was developed for high sample throughput, and it offers the ability to handle peaks in the sample flow. ASTar can analyse up to 12 samples simultaneously as well as making it possible to load a new sample at any time provided that spare capacity is available. AST technology ASTar’s AST technology underwent extensive testing with clinically relevant pathogens in various sample matrices even before the clinical studies ✔More than 380 different strains, including several multidrug-resistant bacteria » 25 different species » Gram-positive and gram-negative bacteria » Difﬁcult-to-culture bacteria that only grow in fastidious media ✔30 different antibiotics ✔A total of more than 5,900 bac- teria/antibiotic combinations thus far, which is continually increasing Q-LINEA | ANNUAL REPORT 2021 16 2021 patient cases In autumn 2021, a severely ill 64 year-old man is being cared for in the surgical ward of a small hospital in southern Sweden. Due to the man’s poor health and high infection values, he is given broad- spectrum antibiotics while awaiting test results. in the patient’s blood are resistant to the initial antibiotic treatment. The antibiotic is changed immediately, meaning at least 18 hours earlier than would have been possible if they had waited for the results from the routine diagnostics. The initial empirical treatment that was employed was not effective against the bacteria in the patient’s blood, and according to the specialist in infectious diseases the reduction in time to a susceptibility determination may have saved the man’s life. The patient’s blood bottles are sent to the closest central hospital, where it signals bacteria growth during the night. After gram staining the following morning, an analysis is started in ASTar at the same time as the lab’s ordinary equipment for susceptibility determination, followed by identiﬁcation of the type of bacteria using a rapid method through MALDI-ToF analysis. The analysis in ASTar is ﬁnished just before 3:00 p.m., and it shows that the bacteria If the laboratory had been open around the clock and if the transport time had been shorter, the time to reach the susceptibility determination could have been cut by about seven more hours. Day 1        00:04 Culture cabinet alarm 08:29 08:37 09:19 14:56 15:46 16:00 Gram stain –> GN rod Loaded Rapid ID using MAL- DI-ToF –> ASTar Infection Escala- into ASTar and provides consult- tion from complete result ant pip/tazo to mero- penem notified Vitek 2 E. coli <24 hours ASTar workflow Traditional workflow ASTar delivers AST results directly from clinical samples in about six hours from a positive blood culture, a time savings of up to 48 hours. Today, it takes up to 72 hours to obtain information about which antibiotics the bacteria are sensitive to. 0 hours 0 hours Patient blood draw Blood bottle incubation Culture cabinet alarm Gram stain           Patient blood draw Blood bottle incubation Culture cabinet alarm Gram stain       Rapid ID & AST with ASTar Optimised treatment Rapid ID Cultivation on agar plates Overnight incubation 0.5 McFarland prepared Susceptibility determination Optimised treatment <24 hours 48–72 hours Q-LINEA | ANNUAL REPORT 2021 17 ABOUT ASTar ASTar is easy to use Add positive blood culture and load consumables The process begins with the user transferring the sample to a speciﬁc position in the sample preparation cartridge. Next, the user selects a suitable AST disc/panel, which is loaded into the instrument; the disc’s barcode is automatically scanned while it is loaded. The next step is to scan the cartridge’s patient barcode with a reader located on the instrument panel, after which the cartridge is loaded in the instrument. These are the only manual steps that the user needs to perform; all of the subsequent steps take place completely automati- cally inside the instrument. Fully automated sample preparation The instrument automatically isolates intact and viable bacteria from the sample and adds a growth medium for the subsequent suscepti- bility determination. The next step is measuring the concentration of the isolated bacte- ria, which is done automatically in the system. Based on the measured concentration, bacteria are diluted in the growth medium to produce an accurate inoculum. This is an important prerequisite for obtaining stable data. The risk otherwise is that the MIC value could be affected by the bacteria concentration, producing incorrect results. A subset of the sample is also diluted in a separately enriched growth medium to facilitate susceptibility determination of organisms that require special growth conditions (fastidious organisms). The capacity to simultaneously handle both types of organisms means that the analysis can begin without knowing the bacterial ID, which saves time. The two bacterial growth media are loaded in the AST disc by the instrument’s pipetting robot, at which point culture cabinets contain- ing pre-ﬁlled antibiotics are ﬁlled through integrated microchannels. Susceptibility determination The AST disc is automatically incubated in a temperature-controlled part of the instrument and the culture cabinets are read at regular intervals by a rapid high-resolution optical detection system. For each reading, the system moves the disc from an incubation hotel, where all the discs for analyses in progress are stored at a controlled tempera- ture, to a read position. An image analysis algorithm continuously evaluates the collected images to quantify the accumulated amount of bacterial biomass in the culture cabinets. When the incubation is completed, the curves showing biomass development for each type and concentration of antibiotic are compiled. The analysis can continue without knowing the bacterial ID up until this point. When the ID is available, MIC is decided for each antibiotic by a separate algorithm that also weighs in information about the bacterial ID. Using this value as the basis, bacteria can also be classiﬁed as susceptible (S), susceptible, increased exposure (I) or resistant (R) in terms of the current antibiotics. The AST disc allows for several two-fold dilution steps of each antibiotic, which ensures sufﬁcient coverage around the breakpoints, even if they change. Q-LINEA | ANNUAL REPORT 2021 18 ASTar shortens the time to the correct antibiotic treatment of patients with sepsis by up to 48 hours. ASTar can help save lives. Q-LINEA | ANNUAL REPORT 2021 19 MARKET The market for ASTar and portable blood cultures Investing in rapid diagnostics is the most beneﬁcial and cost-effective treatment strategy, for both the individual patient and for society, in order to slow the development of antibiotic resistance. The market for portable blood cultures Rapid diagnostics shortens the time to optimal patient treatment, resulting in reduced use of broad-spectrum antibi- otics. This has several advantages, including curbing the trend of resistant bacteria, reducing patient suffering and reducing the number of treatment days. All in all, rapid diagnostics signiﬁcantly cuts costs for hospitals, the healthcare sector and society in general. In many cases, the time it takes to transport blood culture bottles from satellite hospitals to central hospitals with micro- biology laboratories lengthens the important time it takes to get a result. It can take more than ten hours for a sample to get to the laboratory, depending on when and where the sample is taken, and it is only once the sample has arrived that diagnos- The market for conventional microbial infection diagnostics tics can start. The ability to start diagnostics immediately after was estimated at SEK 32 billion in 2018 and is expected to grow the sample is taken and to use the transport time for analysis by an average rate of 4% to SEK 39 billion in 20228). The primary markets for ASTar are hospital and clinical microbiology laboratories that perform susceptibility determination. There are a total of about 9,000 hospitals constituting the addressable market within the Company’s planned geographic areas. Of the global sample volume estimated at just over 17 million samples from patients with positive blood cultures that are currently analysed using traditional methods, Q-linea estimates that approximately one third of them constitute the initial market for ASTar, which is equivalent to about 5.7 million tests on an annual basis. Growth in the Company’s target geographic areas is estimated at about 5% annually, with potentially higher growth in the Asia-Paciﬁc region. could save several hours in the workflow and enable improved and equivalent care regardless of when and where a sample is taken. In November 2020, Q-linea announced that the Company had started the development of a portable culture container with the goal of shortening the time from sampling to correct antibiotic result. In 2021, Q-linea took important steps in its development, launching plans to put this product into production. Provided that development proceeds according to plan, Q-linea will be able to initiate pivotal studies in 2022. Blood culturing chambers in the market have a capacity to handle between 40 and 1,280 blood culture bottles in order to match the sample throughput handled at laboratories. Q-linea estimates that Becton Dickinson in the US and bioMérieux in France jointly account for approximately 90% of the total market for automated blood culture systems. Together, ASTar and the portable blood culture technology could enable a major improvement in diagnostics. According to Q-linea’s estimates, the total addressable market in Europe and the US is equivalent to about SEK 15 billion, offering a large potential market for Q-linea’s portable blood culture technology. Footnotes – see References on page 88. Q-LINEA | ANNUAL REPORT 2021 20 Addressable market for Q-linea’s ASTar 2,000 laboratories 2,500 laboratories in the US in Europe 4,500 laboratories US in Asia-Pacific The US has about 6,000 hospitals that jointly Europe The number of accredited handle 34.5 million patients admitted every year. Of this ﬁgure, approximately 1,100 hospitals accept slightly more than 23 million medical laboratories in Europe, in hospitals or independent, is approximately 5,000. Q-linea estimates that approximately half of the laboratories in Europe conduct blood cultures and subsequent susceptibility determination, corresponding to an addressable market of about 2,500 laboratories in Europe. Asia-Paciﬁc (APAC) The size of the APAC market for susceptibility determination from positive blood cultures is difﬁcult to assess, but Q-linea estimates (67%) of all patients. Of all the hospitals in the US, approximately 2,000 are large hospitals equipped with laboratories that have one or more blood culture systems, which are deemed to be the addressable market for Q-linea. the addressable market to be about 4,500 labora- tories in total. Q-LINEA | ANNUAL REPORT 2021 21 INTERVIEW: ROMAIN LECOMTE THERMO FISHER SCIENTIFIC We share the same goal Why did you choose Q-linea as a partner? As the pressure of the pandemic on the hospital looks to be decreasing, we expect our customers to accelerate their plans with regard to rapid AST and look forward to placing our ﬁrst system soon. The basis for our choice is not only Q-linea’s fantastic tech- nology for rapid AST but also our common vision and philo- sophy about antimicrobial susceptibility testing (AST). We share the same goal of being able to supply what we call true MIC results (minimum inhibitory concentration) to micro- biology laboratories. That is the lowest concentration of an antibiotic at which bacterial growth is completely inhibited – which are as accurate as possible. At Thermo Fisher Scientiﬁc, we have this same philosophy for all of our AST product lines – we look for accuracy. Something we share with Q-linea, is we Has anything in the launch surprised you? AST has always been a critical piece of the microbiological results, but through the emergence of rapid AST, the AST result itself has come under more scrutiny and we have realized that the strong interest for rapid AST has led to a renewed interest in AST in general and in what an accurate both want to deliver the best possible results to our customers. AST is. So, from a general point of view, interest in how we can all do better has increased. But their products also ﬁt your product line? What is the feedback you get from customers? Yes, perfectly. Q-linea’s ASTar System addresses exactly what our customers need when it comes to rapid AST. As two companies that are committed to fostering innovation for our customers, partnerships like the one we have with Q-linea are very rewarding for all parties involved. With Q-linea, we can help customers get access to innovation and we can support expedited treatment intervention. The feedback we get is very good. Customers and evaluation centers really value the performance of the technology, the ease of use and the limited footprint in the lab. The system is easily set up in the lab and ﬁts seamlessly in the workflow. However, rapid AST could be a game changer as healthcare organizations are set up for much longer answering times than ASTar provides. One of their main questions is about driving change to materialize the advantage of rapid AST. What can you tell us about your partnership so far? It is a very constructive partnership. We have a lot of inter- actions, not only between our commercial teams, but also on the scientiﬁc level. The partnership is very valuable and leads to a lot of cross fertilization. How can customers adjust? We need to help them by practically reviewing the workflow of results. There must be good communication between stake- holders such as clinical doctors and microbiological labs. The clinical doctors of course want results as soon as possible, so they can de-escalate patients from the cocktail of antibiotics that are used. The earlier doctors can de-escalate, the better it is for the full community and for the patient. So, it is not only the lab, but the full medical community that must adapt to faster response times. We can be a catalyst link between these stakeholders. In this task, health economic studies will also be very useful. Innovation in the healthcare sector is seen in the lens of health economics and there always needs to be a cost beneﬁt of new treatments and procedures being introduced. Thermo Fisher Scientiﬁc has many partnerships around the world. Is there anything that makes this special? This partnership strongly resonates with our mission at Thermo Fisher Scientiﬁc, to enable our customers to make the world healthier, cleaner and safer. As the partnership centers around rapid AST it is in the forefront of the battle against antibiotic resistance. Rapid AST may help diminish patients exposure to broad spectrum antibiotic therapy, by providing results that can be used to guide more targeted treatment. At Thermo Fisher Scientiﬁc, we are strongly involved in the ﬁght against antibiotic resistance and are engaged in anti- biotic stewardship. How do you see the partnership with Q-linea developing? We would love to get even closer in our partnership and to expand it, as we see so much opportunity. We are currently launching in Europe, with plans for launch in other regions to follow pending relevant regulatory approvals. How would you describe the launch? The launch has generated a lot of interest and many custom- ers are expressing interest. However, most microbiology labs have been highly involved in ﬁghting the COVID-19 pandemic. Q-LINEA | ANNUAL REPORT 2021 22 Romain Lecomte Senior Director Global Clinical Product Marketing at Thermo Fisher Scientiﬁc Our partnership with Thermo Fisher Scientiﬁc Q-linea entered into an exclusive worldwide partnership with Thermo Fisher Scientiﬁc for the commerciali- Thermo Fisher Scientiﬁc’s complete, connection with more complex issues. automated Sensititre™ AST system is the prevailing industry standard In March 2021, Q-linea announced that Thermo Fisher Scientiﬁc had placed its ﬁrst binding prepaid order for ASTar and consumables at a value exceeding SEK 8 million. The order, which was placed even before the European clinical study was com- pleted in order to be commercially ready, demonstrates Thermo Fisher Scientiﬁc’s conﬁdence in Q-linea. Both Thermo Fisher Scientiﬁc and Q-linea anticipate healthy growth for ASTar and are aiming for a long- term, successful and strong expansion after the initial controlled launch phase. sation of ASTar in 2020. The agreement for traditional MIC identiﬁcation. By is an extremely important commercial milestone for both companies, since Q-linea’s ASTar can make the workflow of Thermo Fisher Scientiﬁc’s customers signiﬁcantly more efﬁcient. combining Thermo Fisher Scientiﬁc’s long-standing experience and strength in the ﬁeld with Q-linea’s unique system for rapid, fully automated susceptibility determination, there is great potential to improve and expedite the diagnosis of patients with serious infectious diseases. Thermo Fisher Scientiﬁc has the exclu- sive right to offer ASTar to the market in all geographies, with the exception that Q-linea can co-market ASTar in the Swedish market. The partner- ship is exclusive for both companies when it comes to rapid susceptibility determination, and they are working together to offer customers an exten- sive portfolio of AST equipment. According to the agreement, Q-linea receives feedback from customers so that it can continue to develop customer-driven products in the best possible manner. The service partner- ship means that Thermo Fisher Scientiﬁc manages all ﬁrst-level service, and Q-linea is responsible for expertise in In June 2021, less than a month after ASTar received CE marking, the commercial evalu- ation of ASTar in Europe began with the ﬁrst system installation by one of Thermo Fisher Scientiﬁc's customers. Q-LINEA | ANNUAL REPORT 2021 23 INNOVATION Continuous innovation Q-linea’s objective is for its technology and innovations to improve diagnostics for infectious diseases in the future, helping both patients and society. ASTar CE-IVD is the first diagnostics product to reach the market, but there is more under way at Q-linea. ASTar enables rapid and optimal antibiotic treatment for septic patients, and Q-linea is continuously working to improve and develop new functionality in the system as well as supplying the market with innovative new solutions for faster infection diagnostics. The flexible design of the sample preparation cartridge combined with the AST disc make it possible to adapt the system to other types of samples such as isolates, urine, lower respiratory tract samples and sterile aspirates. ASTar is a platform that in the future will be able to handle sample types other than positive blood cultures thanks to its adaptable consumables. Laboratories currently analyse samples from many different sites, such as the urinary tract, respiratory tract, cerebrospinal fluid, wounds and intra-ab- dominal fluid (ascites). Q-linea is working on several other revolutionary technologies. The Company’s bacterial ID and AST technology for diagnosing sepsis can be combined into a fully automated system, ASTrID®, that provides both ID and susceptibility determi- nation directly from whole blood, meaning a positive blood culture is not necessary. The ASTrID concept has been clinically proven in partnership with Örebro University Hospital. Blood cultures Isolates Urine samples Lower respiratory tract samples Q-linea’s AST technology enables ✔ Susceptibility determination in three hours – ESBL screening in three hours with a positive predictive value of 100 percent ✔ High sample throughput – able to analyse up to 50 samples in a 24 hour period ✔ Expanded menu – new applications including gram-positive bacteria and urine samples ✔ Semi-automated mode – run in both fully automated and semi-automated modes, directly from clinical samples or isolates Q-LINEA | ANNUAL REPORT 2021 24 The world's ﬁrst portable blood culture unit Q-linea’s portable blood culture technology has been trade- marked under the trademark Podler. While its Podler technol- ogy was under development, Q-linea had several extremely positive discussions with a number of major commercial ﬁrms that would be able to launch the product successfully. Q-linea’s objective is to sign an agreement with one or more partners with the best prospects of commercialising the tech- nology on favourable terms. Ultimately, Q-linea also expects that Podler will make it possible to offer advanced diagnostics in areas where microbiology analyses cannot currently be carried out by utilising the transport time for blood cultures, thereby enabling a result with a treatment recommendation within a clinically relevant time frame through services at central microbiology laboratories. Shortening lead times for blood cultures is vitally important when it comes to culture sensitivity and patient outcomes. Transportation of blood culture bottles is the main factor that delays the detection of bacterial pathogens in blood cultures9). Q-linea determined early on that the next major step to accelerate the time to treatment-supporting result is to shorten the time it takes for a blood culture to signal positive. Utilising transport time increases the likelihood that the patient will receive a diagnostic result that supports the choice of treatment as soon as possible, thereby preventing their condition from deteriorating. Later studies have veriﬁed this problem and shown that even in cases where transport times are drastically improved, a signiﬁcant share of patients treated at a central hospital with a laboratory experience a delay of more than three hours. For nearly all patients whose sample needs to be transported to the nearest central hospital, the delay is longer than six hours10). In other words, the greatest beneﬁt for the patient can be achieved by shortening the transport time, rather than by further reducing the time for susceptibility determination. Q-linea’s technology makes use of time it takes to transport blood cultures by using its portable blood culture unit. This device makes it possible to provide results and treatment for all patients with blood infections in the fastest possible time, regardless of whether they live close to a large hospital or in a rural area and regardless of what time of the day and week they fall ill. The portable blood culture unit combines the transport of the blood culture with pathogen determination. Cultivation and detection of pathogens can begin immediately after sampling, thus considerably reducing the total time until optimal antibiotic treatment is administered, which can save many patients suffering from bacteraemia (the presence of bacteria in the blood) from a potentially fatal case of sepsis. Footnotes – see References on page 88. Q-LINEA | ANNUAL REPORT 2021 25 CLINICAL STUDIES Q-LINEA | ANNUAL REPORT 2021 26 The clinical studies ASTar has undergone clinical studies in both Europe and the US to demonstrate that its safety and efﬁcacy. The results of the studies form part of the documentation for IVD approval for ASTar in each of these markets. US Europe The pivotal study for Europe initiated in December 2020 comprised of approx 75 prospective patients samples and approximately 600 samples that were analysed internally. The majority of the samples that Q-linea will analyse itself are “spike-in analyses” where bacteria collected from around the world with various resistance patterns are analysed along with blood from healthy donors. The study samples comprise gathered authentic blood cultures (part of residual positive blood cultures from patients with suspected sepsis) and positive blood cultures from isolates where bacterial isolates have been added to blood from healthy individuals. The clinical bacterial isolates were obtained from isolate banks belonging to the Company’s clinical partners. Q-linea’s US clinical study of ASTar for 510(k) clearance began during the second quarter of 2021. The structure of the study follows the design of the European clinical study, and it focuses on susceptibility determination, known as AST, for gram-negative bacteria including fastidious bacteria directly from positive blood cultures. The size of the US study is slightly larger than the European study, with an expanded analytical study according to the guidelines of the US Food and Drug Administration (FDA). Meanwhile, the FDA gave Q-linea the go-ahead to conduct the majority of the US study at Q-linea and parts of the reproducibility study at Swedish hospitals, which is naturally a very positive development. The study at Q-linea was initiated with analytical and retrospective spike-in samples during the second quarter. In October 2021, Q-linea announced that the reproducibility phase of the study was beginning at two Swedish hospitals and at Q-linea. The study entered the ﬁnal phase in December 2021 when the ﬁrst patient samples were included in the ﬁnal prospective part of the study, which includes up to 150 prospective patient samples from each of the three hospitals in the study where ASTar is installed. EU and US regulations stipulate that performance for each antibiotic combined with the intended types of bacteria are to be evaluated separately. If any combination of a type of bacteria and antibiotic in the clinical studies does not meet regulatory requirements, it can be included in the next version of the product instead. This does not affect the combinations that have met the limit values for approval, which reduces the regulatory risk before launch. Q-linea’s inclusion of powerful and important antibiotics such as colistin in the panel as well as the analysis of fastidious bacteria show that the technology is well equipped for the future. In May 2021, Q-linea announced that the Company had received CE-IVD marking for ASTar thanks to very good study results. Essential Agreement (EA) was 94.9%, Categorical Agreement (CA) 97.6% and overall reproducibility 99.6%. To achieve CE-IVD approval in Europe, EA and CA must exceed 90%. EA means giving the same result as the reference method on the concentration of antibiotics that kill or inhibit bacterial growth. CA means giving the same classiﬁcation of the bacterium within one of three groups (S.I.R) with respect to susceptibility to antibiotics. In addition, the study results exceeded the previously announced interim results. Q-LINEA | ANNUAL REPORT 2021 27 INTERVIEW: TIZIANA DI MARTINO, Q-LINEA CHIEF MEDICAL OFFICER Health economics is an important parameter when commercialising a product Tiziana Di Martino is Q-linea’s Chief Medical Ofﬁcer. She developed the Company’s clinical strategy, You head up the health economics studies. including health economics studies Why are they important? (HEOR). Health economics studies are important for demonstrating ASTar’s advantages for patients, the microbiology laboratory and the entire hospital. The healthcare sector often faces resource allocation challenges, and in order to formalise the decision-making process they perform economic evaluations where they look at the costs and advantages that come with each option. Decision-makers use evidence from health economics studies to provide speciﬁc recommendations for reimbursement and pricing, and to deﬁne best clinical practices. All in all, health economics is an extremely import- ant parameter when commercialising a product. Tiziana Di Martino looks forward to the launch of the interesting new products Q-linea is working on. Can you describe the studies? We are conducting two health economics studies in 2022. The ﬁrst study is a multi-centre project involving four Italian hospitals, including a paediatric hospital. The study population is made up of intensive care patients with bacteria in their bloodstreams. This study investigates the effect of using ASTar: how the system affects the time it takes to reach the ﬁnal antibiotic treatment as well as the length of the hospital stay in both the ward and the intensive-care unit. The second health economics evaluation will involve three central European hospitals. It will focus on the advantages of using results from ASTar for emergency ward patients. We are still deﬁning the study protocol with the investigators, and we plan to begin in the end of 2022. What do you hope to demonstrate? We hope we will be able to demonstrate that ASTar enables physicians to administer optimal antibiotic treatment at least one day earlier when compared with traditional laboratory methods. This will be advantageous for patients, since nar- row-spectrum treatment can begin earlier while avoiding the long-term use of broad-spectrum antibiotics. Moreover, results from ASTar can enable physicians to control the infection more rapidly. In these cases, patients can be moved earlier from the intensive care unit to a less expensive ward, and/or be discharged from the hospital earlier. Where there is a high bed occupancy rate, reducing the hospital stay can make a signiﬁcant difference in keeping a clinic running smoothly and allocating resources wisely. Q-LINEA | ANNUAL REPORT 2021 28 Health economics effects of AST results that are 24 hours faster $ 2,500-20,000 ~ 40% 25% Estimated cost savings per patient due to lower mortality Up to 40% Up to 25% reduction in C. difﬁcile infections caused by broad-spectrum antibiotic treatment13) lower mortality12) and shorter hospitalisation11) When will the studies be completed? What else attracted you to Q-linea? Health economics evaluations are time-consuming, since they consist of two phases. The ﬁrst phase is purely clinical, where patient samples are analysed in ASTar and data is collected. The second phase is the health economics analysis. The duration of the phases can vary depending on the project’s complexity and the number of centres involved. For example, the Italian study is expected to take about a year in total. In addition to the enormous value that I saw in ASTar, I was attracted by the team spirit that I noticed even at my very ﬁrst meetings with my future colleagues. Everyone at Q-linea is enthusiastic about what they’re doing, we enjoy working together and we enjoy collaborating with customers to create the best possible solutions for patients. Everyone feels that they are doing something important to preserve antibiotics for future generations. You can really see the energy and pride at Q-linea. You’ve been with Q-linea for about three years now, but you’ve had a long career as a clinician. What attracted you to the Company? Aside from developing the clinical study strategy, what else have you been working on during your three years at Q-linea? Above all, I developed the Clinical Value department from the ground up. Today, the department consists of four teams responsible for regulatory studies, health economics studies, medical communication and clinical issues. In addition, I’ve ASTar was an important factor in my decision. It combines several strengths that make it stand out from other rapid AST systems. As a clinician, I value two of these strengths in partic- ular. The ﬁrst is the accuracy of results, which ASTar achieves by providing MIC results through broth dilution with a controlled inoculum. ASTar’s second asset is its comprehensive worked with my marketing and research colleagues to provide panel. The ﬁrst commercially available consumable, the ASTar BC G- Kit, has a panel containing a large number of antibiotics in many different concentrations to use for the most clinically relevant gram-negative bacteria, including fastidious bacteria, which can cause bacteraemia and sepsis. The panel consists of both new and old antibiotics, such as colistin, at broad con- centration intervals. The panel’s layout enables the physician to initiate optimal antibiotic treatment early on, even when treatment alternatives are limited. input on the panel design and help prioritise which additional antibiotics will be included. What do you look forward to in the years to come? Thanks to our commercial partnership with Thermo Fisher Scientiﬁc, I look forward to many hospitals in multiple geographic regions being able to beneﬁt from ASTar. Clinical usage of ASTar has the potential to improve patient outcomes and reduce the unnecessary or suboptimal use of antibiotics, keeping them effective for future generations. In addition, I look forward to the launch of the interesting new products we are working on. Footnotes – see References on page 88. Q-LINEA | ANNUAL REPORT 2021 29 SUSTAINABILITY Sustainability is an integral part of Q-linea’s vision The more antibiotics we use, the faster the increase in antibiotic resistance and its consequences – ASTar can reduce unnecessary antibiotic use. Environment Q-linea’s overall sustainability goals are part of the Company’s vision, combined with important programmes and measures for the Company’s environmental and social responsibility. The environment is one of three areas where Q-linea concen- trated its sustainability efforts in 2021. Q-linea is adamant about preserving and protecting the environment in all parts of its business. The Company seeks to minimise its direct and indirect negative environmental impact and to continuously lessen its environmental impact by maintaining sound work procedures and using environmentally friendly technology. VISION – Q-linea helps to save lives by ensuring antibiotics continue to be an effective treatment for future generations The Company’s environmental responsibility can be described in the following four areas: Production In its own production operations, Q-linea recycles via Ragn- Developing tools for improved diagnosis of bacterial infectious Sells, which is ISO 14001 certiﬁed. It also purchases packaging diseases, particularly serious illnesses such as sepsis where incorrect treatment or treatment with effective antibiotics that comes too late can have fatal consequences, means working for a sustainable world. Q-linea’s vision is to help ensure that antibiotics continue to be an effective treatment for future generations. This gives sustainability an even broader signiﬁcance. Speciﬁcally, in 2021 Q-linea reviewed the Company in the three areas of environment, social responsibility and gover- nance. The review was conducted by an interdepartmental group led by Vice President Mats Gullberg. First, the project’s procedures and level of ambition were deﬁned, and during the summer a gap analysis was performed that resulted in several objectives for 2022–2024. Some objectives require investments, while others can be fulﬁlled within the existing organisation. One important objective is for the Company to pursue ISO 14001 certiﬁcation, which is a time-consuming process. Certiﬁcation itself is not expected until 2024. Another objective for Q-linea’s governance is better documentation of the Company’s sub-suppliers. Accordingly, a project to expand the Company’s documentation and inspection of sub-suppliers from addi- tional perspectives beyond pure quality aspects was initiated in 2021. This project will be ramped up in 2022. from manufacturers that are ISO 14001 certiﬁed. Q-linea shall: ✔ Engage in safe, resource-efﬁcient and environmentally friendly production and development. ✔ Use natural resources effectively. Q-linea currently pur- chases green electricity, meaning electricity that comes from renewable energy sources. The Company is also investigating whether it can purchase green electricity that is also eco-labelled, and take the next step to green electricity that is eco-labelled and has carbon offsets. ✔ Lower energy consumption and emission of greenhouse gases in every part of the organisation, both during devel- opment and manufacturing of components and during future use of the systems. ✔ Consider environmental criteria when selecting suppliers. The product ✔ Q-linea seeks to ensure that all of the components in its products are recyclable. However, consumables on users’ premises must be regarded as infectious waste, and are cur- rently destroyed for the purposes of infectious disease control, primarily through incineration. This also applies to items that have come into contact with antibiotics, which are incinerated Q-LINEA | ANNUAL REPORT 2021 30 Fighting antibiotic resistance promotes sustainability The more antibiotics we use, the faster the increase in antibiotic resistance. When antibiotic resistance increases, infections become more difﬁcult or impossible to cure, which in turn causes great suffering and high healthcare A shorter result time to the optimal resistance. ReAct has linked its efforts to minimise the development of antibiotic resistance to ﬁve of the UN SDGs. treatment would enable a considerable reduction in the use of broad-spectrum antibiotics and allow the development of antibiotic resistance to be slowed. According to ReAct, increased Thanks to ASTar’s innovative technology, antibiotic resistance interferes with costs. Healthcare is currently dependent Q-linea’s products have substantial efforts to: ✔ end poverty (Goal 1) on the use of effective antibiotics, for example in surgical procedures, transplants and cancer treatments, which entail a greater risk of infection. Therefore, it is important that antibi- otics be used rationally – correctly and only when needed. If the development of antibiotic resis- Agency (SIDA) in 2005. It was initiated tance is not stopped, it will pose one of the biggest threats to human health. potential to save lives, reduce hospital costs, avoid unnecessary antibiotic treatment and slow the development of resistant bacteria. ✔ end hunger (Goal 2) ✔ ensure good health and promote well-being (Goal 3) The international independent net- work ReAct was created by the Swedish International Development Cooperation ✔ promote decent work and economic growth (Goal 8) ✔ reduce inequality (Goal 10) with the objective of serving as a cata- lyst for global commitment to antibiotic to prevent the release of the antibiotics into the environment. However, Q-linea is evaluating alternatives. ment of digital channels and communication. In 2022, Q-linea will provide company bicycles at the production facility on Palmbladsgatan and at the head ofﬁce on Dag Hammarsk- jölds väg in Uppsala. Transports Q-linea shall consider environmental criteria when selecting suppliers, and utilize electric transports where possible. Electric trucks have not yet been implemented widely, and Q-linea has chosen carriers that are ISO 14001 certiﬁed as its preferred alternative. Social responsibility Social responsibility is one of three areas where Q-linea concentrated its sustainability efforts in 2021. Q-linea’s philosophy is that all employees are equally valuable and should have the same opportunities regardless of individual differences. In fact, Q-linea believes that these differences improve its capacity to develop and change and are an asset to the organisation. The Company’s diversity efforts focus on eliminating discrimination and instead valuing and cultivating diversity. Q-linea continually reviews its processes to ensure that they function properly in terms of taking diversity into consideration when hiring employees and consultants. Travel Q-linea shall consider environmental criteria when selecting suppliers, and seek to communicate digitally while continu- ously evaluating various environmentally friendly travel alternatives. Digital communication became a necessity in 2021, and internal training was provided to all employees during the year in order to facilitate more effective manage- Q-LINEA | ANNUAL REPORT 2021 31 SUSTAINABILITY Some important objectives are to: operations in order to strengthen their market position. Uppsala University and Almi are among the organisers of Uppsala:2030. Q-linea has linked its work to UN SDGs 3 (Good health and well-being) and 9 (Industry, innovation and infrastructure). ✔ Achieve a high level of dedication to the Company’s operations and vision. ✔ Have low staff turnover and be an attractive employer for current and future employees. Q-linea continued hiring at a rapid pace in 2021 and was able to ﬁll its vacant positions satisfactorily. Average staff turnover (people who left their positions) has been 4% in recent years. Eight people chose to leave their positions in 2021, corresponding to 6.7% of the average number of employees during the year. Using Uppsala:2030 as a starting point, Q-linea intends to increase the depth and structure of its sustainability agenda and is eager to get the entire Company involved, which will increase its impact. Therefore, Q-linea has initiated an employee-driven sustainability agenda where all departments at the Company identify goals that they can pursue in their part of the operation. These goals pertain to such areas as reduced environmental impact, work environment, procure- ment, production, development and internal approaches to work. By December 2021, 45 goals had been identiﬁed, such as separating infection protection grade 2 rubbish in the microbiology lab, charging options for electric cars at the production facility and joining REPA, an industry partnership for the recycling of packaging materials. 22 of these initiatives have begun and 11 have been completed. ✔ Support diversity. ✔ Offer environmental training courses when relevant. Antibiotic resistance – one of the biggest threats to human health Resistant bacteria species are a major health problem. Otherwise trivial infections can be deadly if causal bacteria are resistant to the medication given. If the development of antibiotic resistance is not slowed, it will pose one of the biggest threats to human health. It has been shown that the more antibiotics we use, the faster the increase in antibiotic resistance. Furthermore, there are few new antibiotics under clinical development. Most antibiotics under development are modiﬁcations of older types of antibiotics, which is why resistance to these antibiotics will develop rapidly according to WHO. The Clean Cooking Alliance – a multidimensional carbon offset WHO estimates that about three billion people worldwide use wood or coal indoors in order to cook and to illuminate and heat their homes. The smoke and soot from stoves, ﬁres and simple lamps and heaters create major environmental and health problems, and in many cases lead to life-threatening illnesses, particularly among children and the elderly. In India, this is one of the most common causes of pneumonia in children. The lack of sufﬁciently rapid and effective diagnostics leads to greater mortality, a high risk of superinfections and high healthcare costs. It also poses a challenge for healthcare, where physicians are currently forced to choose between a broad antibiotic treatment that contributes to higher antibi- otic resistance in society and a narrow-spectrum treatment that risks being ineffective for the patient. The Clean Cooking Alliance is a non-proﬁt organisation supported by the United Nations Foundation. The organisa- tion partners with UNICEF and WHO in India to improve living conditions by installing newer and more efﬁcient stoves and heaters, facilitating the transition to gas and other sources of energy, and educating people on the risks of traditional indoor heating and how to reduce these risks. Q-linea provides ﬁnancial support to the Clean Cooking Alliance and considers the organisation’s work extremely important, covering several dimensions. In addition to the goal of reducing child mortality, in Q-linea’s view, reducing the rate of pneumonia can also reduce usage of antibiotics, thereby helping to stop the development of antibiotic resistance. The Uppsala:2030 network The Uppsala:2030 network is a three-year programme initiated in 2020 with the aim of helping companies deﬁne their sustainability goals and then make them actionable. The network is made up of several companies in Uppsala that work through the network to jointly take the UN Sustainable Development Goals (SDGs) from Agenda 2030 and bring them to the local level and to their member companies’ core Q-LINEA | ANNUAL REPORT 2021 32 Social responsibility is one of three areas where Q-linea concentrated its sustainability efforts in 2021. Q-linea’s philosophy is that all employees are equally valuable and should have the same opportunities regardless of their background and individual differences. Q-LINEA | ANNUAL REPORT 2021 33 SHAREHOLDER INFORMATION The Q-linea share Q-linea AB (publ) is a Swedish public limited liability company whose shares have been listed on Nasdaq Stockholm since 7 December 2018. Market capitalisation and trading Share turnover The Q-linea share has been listed on Nasdaq Stockholm since 7 December 2018. The Company’s market capitalisation at year-end amounted to SEK 3,338 million (4,647). The share is listed in the Mid Cap segment and the Company is classiﬁed as a healthcare company. The listing enables the Company to execute its long-term strategy by broadening its ownership base, thereby contributing to increased awareness of the Company and its operations and creating access to the Swedish and international capital markets. In 2021, a total of 4.6 million (8.3) shares were traded at a value of SEK 652 million (889). An average of 18,193 (32,924) Q-linea shares were traded each day. Share price trend and turnover 250 200 150 100 50 900 800 700 600 500 400 300 200 100 0 Share capital and number of shares The Company’s share capital at year-end amounted to SEK 1,476,897.35 (1,366,897.35), distributed between 29,537,947 (27,337,947) shares. Of the total of 29,537,847 outstanding shares at year-end, 328,472 were treasury shares. Each share carries one vote per share and the quotient value per share is SEK 0.05. 0 Share capital trend Jan Feb Mar Apr Maj Jun Jul Aug Sep Oct Nov Dec Number of shares traded in 1000's per week Q-linea OMX Stockholm_PI Number of shares, thousand Share capital, SEK thousand OMX Stockholm Pharmaceuticals & Biotechnology PI Source: Holdings Opening balance at 1 January 2020 New share issue New share issue Closing balance at 31 December 2020 New share issue Closing balance at 31 December 2021 23,235 103 4,000 27,338 2,200 29,538 1,162 5 200 1,367 110 Shareholder information Q-linea communicates with its shareholders and the public through several channels. Information disclosed through press releases, interim reports and annual reports is published on the Company’s website: www.qlinea.com. Material from presentations of interim reports can also be downloaded from the website by journalists, investors, analysts and other stakeholders. Q-linea’s website is the primary channel for the annual report and copies will not be sent to shareholders unless expressly requested. 1,477 Q-LINEA | ANNUAL REPORT 2021 34 Shareholders at 31 December 20211) Q-linea will also allocate resources for expanding its project portfolio, primarily through development of the Company’s Podler portable blood culture technology. Number of shares Number of shares and votes Dividends and dividend policy Nexttobe AB 9,894,957 2,821,960 2,391,536 2,234,000 986,662 957,051 33.50% 9.55% 8.10% 7.56% 3.34% 3.24% 3.11% Swedbank Robur Fonder Fourth Swedish National Pension Fund Investment AB Öresund Handelsbanken Fonder Avanza Pension Third Swedish National Pension Fund Futur Pension Available ﬁnancial resources are reinvested in the operations to ﬁnance the Company’s short-term and long-term strategies. The Board’s intention is thus not to propose the payment of any dividends to shareholders before Q-linea generates long-term sustainable proﬁtability. Any future dividends and their amount will be determined based on the Company’s long-term growth, earnings trend and capital requirements, taking into account targets and strategies applicable at any time. Any dividends proposed are to be carefully considered against the targets, scope and risk of the operations. 919,500 622,841 2.11% The Confederation of Swedish Enterprise 600,000 497,320 461,580 328,926 328,472 322,000 308,743 308,270 300,000 300,000 290,000 281,857 2.03% 1.68% 1.56% 1.11% Mats Nilsson Ulf Landegren Skandia Fonder Q-linea AB Share-based incentive programmes 1.11% At the end of 2021, Q-linea has three share-based incentive programs, one of the type Performance share-based incen- tive program (LTIP 2019) and two Employee stock option programs. One performance-based incentive programme (LTIP 2018) ended during the year and the performance share rights expired. These programmes are described in detail in the Corporate Governance Report, in the section “Share-based incentive programmes” on pages 53-54 as well as in Note 9. SEB-Stiftelsen 1.09% 1.05% 1.04% 1.02% 1.02% 0.98% 0.95% 85.16% 14.84% 100% Second Swedish National Pension Fund Delphi Fondsforvaltning AS Aktie-Ansvar Fonder Lancelot Asset Management AB AXA Jonas Jarvius Holdings, 20 largest shareholders Other shareholders 25,155,675 4,382,272 29,537,947 Analysts Total number of shares 1) Ownership may refer to personal ownership or ownership through a company. These analysts regularly follow Q-linea’s performance: ABG Sundal Collier Source: Monitor ⚫ Adam Karlsson: [email protected] Financial objectives Carnegie Investment Bank AB During the launch period in the European market and until the launch of ASTar in the US market, Q-linea’s objective will be for the Company to be in a strong ﬁnancial position in order to ensure that the launch, product development programme and expansion of production can proceed according to plan. Q-linea’s sales ﬁgures are currently attributable primarily to income from sales of ASTar and consumables in Europe. Q-linea will continue to focus on further developing ASTar and related applications as well as supporting the launch of ASTar. ⚫ Ulrik Trattner: [email protected] ⚫ Erik Hultgård: [email protected] ⚫ Kristofer Liljeberg: [email protected] Kempen & Co ⚫ Alex Cogut: [email protected] Redeye ⚫ Johan Unnerus: [email protected] Q-LINEA | ANNUAL REPORT 2021 35 BOARD OF DIRECTORS’ REPORT Board of Directors’ Report The Board of Directors and President of Q-linea AB, corporate registration number 556729-0217, with its registered ofﬁce in Uppsala, Sweden, hereby submit the annual report for 2021 ﬁnancial year. All ﬁgures pertain to 2021 and are compared with the 2020 ﬁnancial year, unless otherwise stated. Operations ofﬁcially launching ASTar for the European market. Q-linea, Q-linea develops innovative solutions for improved infectious which according to the partnership agreement has the right to disease diagnostics through the manufacturing of instruments co-market ASTar in the Swedish market, also announced that it and consumables that beneﬁt patients, healthcare providers and society. Q-linea’s solutions enable healthcare providers to diagnose and treat infectious diseases in the shortest possible time. had signed the ﬁrst commercial evaluation contract for ASTar with a Swedish regional hospital. The Company announced that it had started a clinical study with ASTar for US 510(k) market approval. As part of its preparations for the study, the Company contracted Thermo Fisher Scientiﬁc as the ﬁrst site to participate in the US clinical study. The Company commenced the reproducibility phase of the clinical study for ASTar market approval in the US, which focuses on evaluating the ability to report the same response each time a sample is analysed. In December, the Company announced that the ﬁrst patients had been enrolled in the US clinical study for ASTar. After the end of the ﬁnancial year, the Company announced that it had begun preparing for FDA regulatory submission in the form of a 510(k) application. At the Annual General Meeting in May 2021, in addition to the customary matters addressed, the Meeting resolved to re-elect directors Erika Kjellberg Eriksson, Mats Nilsson Bernitz, Ulf Landegren, Marcus Storch, Marianne Hansson, Per-Olof Wallström, Hans Johansson and Mario Gualano. Erika Kjellberg Eriksson was re-elected Chairperson of the Board. The Board of Directors was authorised to introduce an employee share option programme (“Employee share option programme 2021/2024”) for the Company’s employees who were not encompassed by previous incentive programmes in the Company. The Board was also authorised to decide to increase the Company’s share capital by a maximum of SEK 273,379.45 on one or more occasions during the period until the next Annual General Meeting. The Board may decide to issue shares, warrants and/or convertibles by disapplying the preferential rights of the shareholders and/or with payment through contribution in kind, by offset or on terms in accor- dance with Chapter 2, Section 5, Paragraph 2 of the Swedish Companies Act. Issues in accordance with this authorisation are to be on market terms. The registered accounting ﬁrm Öhrlings PricewaterhouseCoopers AB was appointed as auditor. Authorised Public Accountant Lars Kylberg is Auditor- in-Charge. The Company’s leading product, ASTar, is a fully automated instrument for rapid susceptibility determination of positive blood cultures that provides results in about six hours. ASTar is expected to shorten the time it takes to identify a suitable antibiotic treatment for patients with sepsis by up to 40 hours. The method has substantial potential to save lives, reduce hospital costs, avoid unnecessary antibiotic treatment and slow the development of resistant bacteria. In 2021, Q-linea strengthened its commercial organisation by adding resources in sales, marketing, customer service and support. The Company also began preparing for an expansion of its operations to other geographic areas. Q-linea was founded in 2008 by scientists from the Rudbeck Laboratory at Uppsala University, together with Olink AB and Uppsala University’s holding company, UUAB. Today, Q-linea is an interdisciplinary, highly motivated team that operates out of state-of-the-art, customised facilities in Uppsala Science Park. Signiﬁcant events during the ﬁnancial year In February, Q-linea AB announced that the Company had received the ﬁrst order for ASTar, valued at over SEK 8 million, from the Company’s global sales partner Thermo Fisher Scientiﬁc. The order included a pre-payment for a binding order for the next six months. Q-linea presented very good interim results from the pivotal European trial for the antibiotic susceptibility system ASTar. In the second quarter, the Company announced that it had achieved CE-IVD approval for ASTar with very good study results. This approval will enable the Company to commercial- ise ASTar in Europe together with its partner Thermo Fisher Scientiﬁc. The commercial evaluation of the fully automated ASTar instrument and related consumables began in June, about a month after approval. In the fourth quarter, the Com- pany announced that its partner Thermo Fisher Scientiﬁc was In early June, Q-linea’s Board of Directors decided, based on the issue authorisation from the Annual General Meeting Q-LINEA | ANNUAL REPORT 2021 36 Signiﬁcant events on 25 May 2021, to carry out a directed issue of 2,200,000 shares at a subscription price of SEK 137 per share, thereby raising gross proceeds of SEK 301 million for the Company. The subscription price of SEK 137 per share corresponded to a discount of approximately 5.8% in relation to the closing price on Nasdaq Stockholm on 10 June 2021. The investors in the directed issue included numerous Swedish and international institutional investors and industry specialists. The net proceeds from the directed issue were intended to be used for the following: ● funding of the ﬁnal stages of the commercial launch of ASTar together with the Company’s global sales partner; including a ramp-up and increased preparedness to meet higher than initially expected sales volumes, as its global sales partner increases the number of internal applications and sales personnel for their joint conceptual launch; after the end of the ﬁnancial year After the end of the ﬁnancial year, the Company announced that the antibiotic panel in ASTar was being expanded to offer even broader results. The panel now covers 222 combinations of antibiotics and bacteria in order to offer even broader results, increasing the beneﬁt to patients and reducing the need for resources. In April 2022, the Company announced that ASTar has received a breakthrough device designation by the U.S. Food and Drug Administration (FDA). This categorization can be assigned to products that are considered to provide a more effective treatment of severe disease states, where there is no comparable equivalent on the market. The categorization is intended to expedite the regulatory review of medical devices so that patients receive faster access to new treatment options. ● acceleration of the development of ASTar additional assays, including urine and isolates, as well as acceleration of the development of the Company’s portable blood culture technology product, in preparation for the start of clinical studies in 2022; ● enhancement of the Company’s ﬁnancial flexibility to pursue additional commercialisation activities and geo- graphical expansion; and Research and development The Company’s development of its core product, ASTar, a fully integrated and automated system for rapid susceptibility determination of bacteria in clinical samples, continued successfully during the year. The Company develops both con- sumables and instruments as well as related software. ASTar’s ﬁrst application targets sepsis (previously known as blood poisoning). Sepsis is a critical condition that occurs when the immune system overreacts to an infection. This reaction can be extremely serious, impacting most of the body’s organs, ● the Company’s operating activities. The directed issue resulted in a dilutive effect of approximately potentially resulting in permanent organ damage or death. 7% of the total number of shares and votes in the Company. As a result of the directed issue, the number of shares The most important sub-target achieved in the Company’s product development was the receipt of regulatory approval outstanding and votes increased by 2,200,000 from 27,337,947 for the Company’s ﬁrst product in May. CE-IVD approval of till 29,537,947. The share capital increased by SEK 110,000.00 from SEK 1,366,897.35 to SEK 1,476,897.35. In conjunction with the issue, Jonas Jarvius, President of Q-linea, sold 95,000 shares in the Company to the Company’s largest shareholder Nexttobe AB. Jonas Jarvius retained approximately 75% of his existing fully diluted holding. ASTar and the Company’s related consumables means that AST of positive blood cultures for gram-negative bacteria can now be used to diagnose patients in all countries that recognise CE-IVD approval. At the time of its launch, ASTar’s panel featured the most comprehensive AST in the market in terms of the number of antibiotics and concentration intervals, ABG Sundal Collier, Carnegie Investment Bank and Kempen allowing numerous patients to receive informative results & Co were Joint Bookrunners in connection with the directed issue. Advokatﬁrman Lindahl was legal adviser to the Com- pany and White & Case Advokatbyrå was legal advisor to the Joint Bookrunners in connection with the directed issue. that can be used as a basis for treatment. The development of the panel continued during the year and, after the end of the period, the Company announced that 18 additional combi- nations of bacteria/antibiotics had been added to the panel, Q-LINEA | ANNUAL REPORT 2021 37 BOARD OF DIRECTORS’ REPORT which subsequently covers a total of 222 combinations. During year, and the Company was able to demonstrate the results in the summer, the Company’s commercial partner Thermo Fisher Scientiﬁc initiated a comprehensive evaluation of several hospitals in Europe. The evaluation was supported by Q-linea and delivered excellent results. Of the approximately fully functioning prototypes successfully tested against a large number of bacteria. Negotiations with potential manufactur- ing partners were initiated towards the end of the year. At the end of 2021, Q-linea’s IP portfolio comprised 17 500 samples analysed, ASTar could provide results for 98.7% of different patent families and ﬁve registered design families, all gram-negative bacteria included. This exceeded the target established by the Company of providing results for over 95%. The clinical results were also higher than the results from the CE-IVD study and showed essential agreement (EA) of 96.6%. The Company also presented the possibility of ASTar being able to deliver results for a large share of the antibiotics included in the panel in order to show whether a bacterium is resistant to initial treatment. Market studies were initiated to assess the value for the laboratory and patient, which will form the basis for determining whether this functionality will be included in ASTar in the future. with a total of 154 patent applications and registered designs in various geographies. In total, at the end of 2021, Q-linea had 66 patents granted in various geographies, of which 26 were granted in 2021. The patents granted comprise those that describe aspects of ASTar as well as patents that relate to potential future products such as a portable blood culture system. Production and supply chain The Company has established production, inventories, logis- tics and quality control of its consumables at its production premises on Palmbladsgatan in Uppsala. Production largely takes place in ISO 8-compliant clean rooms. Deployment and The Company also made major progress in the develop- ment of its next intended product, a portable blood culture system that was trademarked under the trademark Podler. The quality control of the Company’s ASTar diagnostic instruments aim of Podler is to be able to offer faster results for all patients with positive blood cultures. Podler makes it possible to begin testing for the presence of bacteria in the blood immediately after a sample is taken from the patient. Today, most of these samples have to be transported to a central laboratory, result- ing in long lead times – often more than ten hours. Podler can use the entire transport time for analysis, thereby signiﬁcantly shortening the time it takes to show the presence of bacteria in the blood and thus the time to correct patient treatment. The technology underwent rapid development during the also takes place at the production premises. The following signiﬁcant events and sub-targets were achieved in 2021: ● The production process and other processes for consum- ables and instruments were veriﬁed. ● Production capacity was increased signiﬁcantly to meet anticipated demand. Multi-year overview Amounts in SEK thousand 2021 2020 2019 2018 2017 Earnings Net sales Operating result (EBIT) EBITDA 9,335 -233,550 -226,238 243 -221,543 -215,442 1,005 -179,115 -174,988 1,066 -127,366 -124,329 1,500 -67,869 -66,149 31 Dec 2021 31 Dec 2020 31 Dec 2019 31 Dec 2018 31 Dec 2017 Financial position Total assets 466,633 412,233 374,407 539,068 18,397 Cash and cash equivalents, short-term and long-term investments 347,801 430,788 92 331,256 380,197 92 327,456 340,994 91 504,438 513,458 95 6,588 1,511 8 Equity Equity/assets ratio, % Debt/equity ratio, % -81 -87 -96 -98 -237 The information has been prepared in accordance with the Swedish Annual Accounts Act (1995:1554) and International Financial Reporting Standards (IFRS) in accordance with the Swedish Financial Reporting Board’s recommendation RFR 2 Accounting for Legal Entities. Q-LINEA | ANNUAL REPORT 2021 38 ● Shelf-life studies for the consumables exceeded 12 months of shelf life in 2021. The Company expanded the studies to evaluate whether the shelf life could be further extended in 2022. the manufacturing division will also contribute to improved margins. Other external costs totalled SEK 90,765 thousand (89,409), up SEK 1,356 thousand. This change was largely attributable to higher costs for software and external consultancy services compared with the preceding year. ● The Company’s activities were reviewed both internally and externally through Tüv Süd in relation to ISO 13485, with positive results and few deviations. Personnel costs totalled SEK 110,512 thousand (94,576), an increase of SEK 15,936 thousand compared with the pre- ceding year, mainly attributable to an increase in the average number of employees in product development, clinical development, production and customer service. Toward the end of the year, the performance share-based programme LTIP 2018 expired, since it was decided that the performance targets had not been met. Personnel costs that had been reserved in earlier years since the programme began and were reversed amounted to SEK 10,823 thousand including social security contributions. Depreciation, amortisation and impairment of tangible and intangible assets amounted to SEK 7,311 thousand (6,101) for the full year. This increase is mainly attributable to amortisation of investments in production equipment and other equipment in the building. Other operating expenses amounted to SEK 383 thousand (349) for the year and largely pertained to exchange-rate losses and scrapping of non-current assets. The operating result totalled SEK -233,550 thousand (-221,543) for the full year compared with the preceding ﬁnan- cial year. The larger operating loss was mainly attributable to the planned increase in operating expenses in accordance with the adopted business plan. Commercialisation The most important step in 2021 was the achievement of CE-IVD certiﬁcation of ASTar and the Company’s related consumables for the analysis of gram-negative pathogens in positive blood cultures in May 2021. The ﬁrst customer evaluations were carried out in the summer together with Thermo Fisher Scientiﬁc. After a highly positive response from users, Thermo Fisher Scientiﬁc ofﬁcially launched ASTar and the ASTar Kit in Europe in October. In Sweden, where Q-linea sells ASTar directly, the Company was in contact with several interested hospitals and conducted its ﬁrst commercial evaluations. During the second half of 2021, Q-linea initiated the clinical trials for 510(k) approval, which will allow the Company to make the product available in the US. In 2021, the Company had limited opportunities to meet with customers at hospitals and conferences due to the COVID-19 pandemic. One of the few meetings that took place was RICAI in Paris in December, where visitors showed considerable interest. Income, expenses and earnings Net ﬁnancial items amounted to SEK 2,307 thousand (2,887) for the full year and were mainly attributable to coupon rates received, accrued interest on listed corporate bonds and capital gains and losses in conjunction with the divestment of short-term ﬁxed-income funds. No tax was recognised for 2021 or 2020. The result for the year totalled SEK -231,242 thousand (-218,655). Net sales for the full year totalled SEK 9,335 thousand (243), up SEK 9,092 thousand. The increase in sales was mainly attributable to the Company’s sales of ASTar instruments and associated consumables. Other operating income for the full year amounted to SEK 450 thousand (911), down SEK 461 thousand primarily due to the Company’s sale of raw materials to a sub-supplier in the comparative year. Changes in inventories of products in progress, semi-ﬁn- ished goods and ﬁnished goods amounted to SEK 2,165 thousand (5,330) during the year, mainly due to the gradual accumulation of inventory prior to the launch of the Compa- ny’s products in Europe. Costs for raw materials and consumables as well as goods for resale for the year totalled SEK 36,529 thousand (37,592). The Company recognised an impairment of goods for resale and ﬁnished goods that amounted to SEK -4,734 thousand (0) during the year. During the launch period for ASTar, the Company’s margins will be negative. As volumes increase and the production mix shifts toward a higher share of consumables, the margins will improve. The efﬁciency-enhancement projects under way in Financial position Cash and cash equivalents at the end of the ﬁnancial year totalled SEK 15,089 thousand (10,144). Cash and cash equivalents that will not be used in the daily operations over the coming 12 months are invested in ﬁxed-income funds and listed corporate bonds. The Company follows an investment policy approved by the Board of Directors. It contains, for example, rules on the management and investment of cash and cash equivalents. The average maximum ﬁxed-interest period permitted is ﬁve years for the long-term bonds and investments are made in securities with an investment grade rating or equivalent. The capital in listed bonds is placed in several sectors with a diversiﬁed maturity at both variable and ﬁxed interest rates. Toward the end of the Q-LINEA | ANNUAL REPORT 2021 39 BOARD OF DIRECTORS’ REPORT year, the credit rating of the bonds deteriorated somewhat, resulting in a higher credit reserve. Changes in working capital amounted to SEK -29,833 thousand (-28,922) for the full year. At the end of the year, the Company’s short-term invest- ments amounted to SEK 150,945 thousand (296,748), con- sisting of ﬁxed-income funds and the short-term component of listed corporate bonds. The ﬁxed-income funds consist of low-risk securities and other interest-rate instruments that were recognised at cost in an amount of SEK 91,245 thousand (165,749) at the end of the year. The fair value of the ﬁxed-in- come funds totalled SEK 91,295 thousand (166,745) on the balance sheet date (level 1 in the fair value hierarchy). The Company’s short-term component of the listed corpo- rate bonds was recognised at cost in an amount of SEK 59,700 thousand (130,999) on the balance sheet date. The value includes accrued coupon rates of SEK 150 thousand (324). The fair value of the bonds amounted to SEK 59,427 thousand. Financial assets totalled SEK 184,815 thousand (27,411) on the balance sheet date, an increase of SEK 157,404 thousand. The change is attributable to the Company having invested issue proceeds from the second quarter in listed corporate bonds and having sold bonds amounting to SEK 5,150 thousand (16,013). The remaining amount is attributable to changes in accrued interest and credit reserve. Cash flow from investing activities totalled SEK -23,819 thousand (-32,295) for the year. Investing activities refers to investments in tangible assets, primarily service facilities and production equipment, which amounted to SEK -11,971 thou- sand (-13,228). The decrease in investments in tangible assets of SEK -1,257 thousand during the year was mainly due to purchases for the new production premises, which were largely completed in 2020 and charged to the comparative year. During the year, the Company invested SEK 176,134 thousand (185,000) in short-term investments, of which SEK 160,000 thousand (185,000) was invested in interest-bearing funds and SEK 16,135 thousand (0) in short-term listed bonds. The Company also divested short-term investments total- ling SEK 363,231 thousand (200,046). Sales of ﬁxed-income funds are continuously carried out on a monthly basis to cover overhead expenses since the Company does not generate a positive cash flow. The Company invested SEK 204,095 thousand (50,127) in ﬁnancial assets during the year. The Company only invests in listed bonds that have the highest rating from S&P and Moody’s. In addition, the Company divested ﬁnancial assets valued at SEK 5,150 thousand (16,013). Cash flow from ﬁnancing activities totalled SEK 283,814 thousand (253,777) for the full year. The positive cash flow from ﬁnancing activities in 2021 is attributable to the directed issue that was completed in June, raising gross proceeds for the Company of SEK 301,400 thousand (270,000). Issue costs totalled SEK -17,335 thousand (-15,845). The Company’s ﬁnancial assets primarily comprise listed corporate bonds in several sectors with a diversiﬁed maturity structure with high credit ratings. The Company’s total value of listed corporate bonds amounted to SEK 181,768 thousand (24,364). These are recognised at amortised cost and include a credit reserve of SEK 215 thousand (63). During the year, the credit rating of the bonds deteriorated somewhat, resulting in a higher credit reserve. The Company tests for impairment on each recogni- tion date using data from S&P and Moody’s. Repayments to credit institutions amounted to SEK -252 thousand (-378) during the year. The remaining loan has a repayment plan that is shorter than 12 months. Other long-term ﬁnancial assets also comprise participa- tions in EMPE Diagnostics AB amounting to SEK 2,997 thousand (2,997) at the end of the year. Financing To provide the Company with sufﬁcient liquidity to continue At the end of the year, equity amounted to SEK 430,788 operating and developing according to its strategic plan, thousand (380,197), the equity/assets ratio to 92% (92) and the the Company carried out a directed issue during the second debt/equity ratio to -81% (-87). quarter of 2021. This issue raised gross proceeds for the Company of SEK 301,400 thousand. As of 31 December 2021, the Company had access to cash and cash equivalents of SEK 15,089 thousand (10,144), short-term investments including short-term components of other securities held as non-current assets of SEK 150,945 thousand (296,748) and long-term listed corporate bonds of SEK 181,768 thousand (24,364), totalling SEK 347,802 thousand (331,256). As of 31 December 2021, the Company had access to cash and cash equivalents, short-term investments including short-term components of other securities held as non-cur- rent assets and long-term listed corporate bonds totalling SEK 347,802 thousand (331,256). The Board’s assessment is that the existing working capital, as of 31 December 2021, is sufﬁcient to cover the Company’s needs for at least the next 12 months. Employees Cash flow and investments Q-linea believes that all employees and job applicants should be treated equally. All individuals are equally valuable and should have the same opportunities regardless of individual differences. In fact, Q-linea believes that these differences improve its capacity to develop and change and are an asset Cash flow from operating activities amounted to SEK -255,050 thousand (-237,305) for the full year. The increased cash outflow during the year is primarily attributable to the change in operating result and a certain increase in working capital. Q-LINEA | ANNUAL REPORT 2021 40 to the organisation. The Company’s diversity efforts focus on eliminating discrimination and instead valuing and cultivating diversity. Q-linea has processes to ensure that they function properly in terms of taking diversity into consideration when hiring employees and consultants. Q-linea had 136 (107) employees at year-end, 59 (43) of whom are women. The number of consultants at year-end was 37 (33), 12 (8) of whom are women. The average number of employees during the ﬁnancial year was 120 (89). strategic and everyday activities is Q-linea’s Code of Conduct. The Code is based on the principles of the UN Global Compact, to which Q-linea became a signatory in 2018. Consequently, the Company supports the fundamental principles on human rights, labour, environment and anti-corruption. As part of its sustainability efforts, Q-linea participates, for example, in the Uppsala:2030 network, a local programme that helps companies deﬁne their sustainability goals and then make them actionable. Total salaries, remuneration and social security contribu- tions amounted to SEK 110,512 thousand (76,057). Reversed personnel costs for LTIP 2018, which expired during the year and had been reserved in previous years, amounted to SEK 10,823 thousand including social security contributions. For information concerning remuneration to the Board of Directors, President and other senior executives, refer to Note 9 and Note 24. In 2021, Q-linea reviewed the Company in the three areas of environment, social responsibility and governance. The review was conducted by an interdepartmental group. First, the project’s procedures and level of ambition were deﬁned, and during the summer a gap analysis was performed that resulted in several objectives for 2022–2024. For information on the Company’s sustainability agenda, see pages 30–33. The share and shareholders Signiﬁcant risk factors The Company’s three largest owners at year-end were Nexttobe AB, Swedbank Robur Fonder and Investment AB Öresund. A list of the 20 largest owners and a diagram with more information concerning the share are presented in the section “The Q-linea share” on pages 34–35. Risk management is carried out by company management in consultation with the President and Board of Directors in accordance with the guidelines established by the Board. The risk function includes the identiﬁcation, evaluation and hedging of ﬁnancial risks. Effective risk assessments help to align Q-linea’s business opportunities and earnings with the requirements of the shareholders and other stakeholders with respect to stable, long-term value growth and control. The Company’s ﬁnancial risks and risk management are described in Note 3. As of 31 December 2021, the Company had 29,537,947 shares, of which 328,472 were treasury shares. For more information, refer to the section “Corporate Governance Report” and pages 46–55. Future development Research and development risks Q-linea now has the ﬁrst ASTar product approved for sales in Europe. During the year, the Company registered the ﬁrst customer order from, and sale to, its sales partner Thermo Fisher Scientiﬁc. However, the Company is yet to generate any positive cash flow. During the second quarter, the Company carried out a directed issue amounting to SEK 301.4 million (270) before issue costs. Based on the proceeds generated for Q-linea’s future growth depends on its ability to develop new products and to further develop and commercialise its existing products. Research and development of diagnostic instruments through to approval is a highly risky, complicated, time-consuming and capital-intensive process. The vast number of circumstances and rules involved means that there the Company, the Board deems the existing working capital, as is a risk of delays and failure. Q-linea’s future success rests on of 31 December 2021, to be sufﬁcient to cover the Company’s its ability to develop new products, enter into partnerships and successfully develop its own projects through to market launch and sale. Research and development is a time-consuming and resource-intensive process and, like many other research and development companies, Q-linea may become dependent needs over at least the next 12 months. Legal considerations Q-linea is not, and has not during the past 12 months, been a party to any legal proceedings or arbitration proceedings that have had or could have a material impact on Q-linea’s ﬁnancial on external ﬁnancing of its projects in the core area of in vitro position or proﬁtability. Nor has Q-linea been informed of any claims that could result in the Company becoming a party to such proceedings. diagnostics. Q-linea now has the ﬁrst ASTar product approved for sales in Europe. However, the Company is yet to generate any positive cash flow. The Board’s assessment is that the existing working capital, as of 31 December 2021, is sufﬁcient to cover the Company’s needs for at least the next 12 months. Sustainability and environment Q-linea’s vision is to help ensure that antibiotics continue to be an effective treatment for future generations. This gives sustainability an even broader signiﬁcance. The basis of Intellectual property protection and patent risks Although Q-linea has patent protection for its technology, Q-LINEA | ANNUAL REPORT 2021 41 BOARD OF DIRECTORS’ REPORT the area of medical technology is nevertheless associated with a number of risks related to intellectual property rights and patents. partners, delays in receiving ethics approval and difﬁculties in adding new clinical partners when this is deemed necessary or a clinical partner chooses to discontinue participation in the study. Delays may also arise as a result of the ongoing COVID-19 pandemic, since clinical partners may have limited availability as a result of national guidelines. If delays arise due to circumstances that are difﬁcult or impossible for the Company to control, or if the actions required to continue the studies are considered too expensive or complicated in relation to the scope or objectives of the studies, there is a risk that the studies will be delayed or discontinued. If the desired results of the clinical study are not achieved, this may result in not receiving market approval, which may in turn delay or obstruct the Company’s ability to develop, market and sell the product in question; or it may lead to limited approval, which means that further studies are required in the parts of the study that were not approved. At all stages of development, the Company may discontinue development of its planned products based on its review of available clinical data, estimated costs for continued development, market considerations or other factors. If any of these risks should materialise, this could adversely impact the Company’s operations, ﬁnancial position and earnings. There is a risk that: • the Company’s product development could result in a product that is impossible to patent • the Company’s current and future patent applications may not result in patents being approved • approved patents may not provide sufﬁcient protection • other patents could supersede the Company’s own patents • the substances, methods or procedures used by the Com- pany could be patented or patent pending by another party There is also a risk that the Company’s competitors could infringe upon Q-linea’s patent rights. To date, Q-linea has not been involved in any disputes pertaining to patents or trademarks. Production risks Instruments are produced by an international contract manufacturer with a subsidiary in Sweden as well as global production capacity. This global contract manufacturer has the ability to move production to other regions if this should prove to be desirable. Consumables are produced primarily in-house in rented production premises in Uppsala, while some produc- tion steps are handled by contract manufacturers, primarily in Germany. The production facilities have the capacity to increase production capacity on relatively short notice. Dependence on external production capacity may increase the risk that deliveries are delayed or do not occur, but this risk is considered limited. Q-linea has staff dedicated to moni- toring how well suppliers are meeting their commitments in terms of both quality and delivery times. Bottlenecks in in-house production processes are regularly monitored in order to ensure long-term production quantity and quality. Q-linea’s production planning is based on binding forecasts from its cooperation and distribution partners. Risks associated with product approval The Company is obligated to fulﬁl regulatory requirements, including receiving regulatory approval according to applica- ble legislation and regulations, before it can market and sell its products in each market. The process for receiving regulatory approval for medical devices can be long, extensive and uncertain. CE marking is required within the EU to market and sell medical devices (including in vitro diagnostics products), while FDA approval is required in the US market. The new In Vitro Diagnostics Regulation (IVDR) will take effect in Europe in 2022 and will introduce signiﬁcantly expanded regulatory requirements for diagnostic medical devices. IVDR will take effect on 26 May 2022 for the ASTar instrument and in 2026 for the Company’s consumables. Since IVDR is also new for the regulatory authorities, there is some uncertainty regarding the ﬁnal interpretation and application of the data requirements, and the Company’s assessment may prove incompatible with the interpretation and application ultimately deployed by the relevant notiﬁed body, with the effect that the Company may be forced to implement various adaptations to meet the demands, experiencing delays and higher costs as a result. There is a risk that the Company will not be able to bear the higher costs and will thus be unable to maintain any CE marking it has previously received. Clinical study risks Before a medical device can be launched in the market, clinical studies must be conducted. Demands on such studies vary among different geographic markets. Clinical studies are costly and time-consuming, and they are associated with risks such as difﬁculties in ﬁnding clinical partners and in collecting sufﬁcient quantities of patient samples, study costs that exceed the budget and shortcomings by clinical partners as they conduct the study. The Company has chosen the notiﬁed body Tüv Süd in Germany for ISO 13485 certiﬁcation of its quality management system. ISO 13485 certiﬁcation was successfully carried out during the year, and the Company was deemed to meet the ISO 13485 standard. There is also a risk of delays in clinical studies. Such delays may arise for a number of reasons, including difﬁculties in reaching agreements at acceptable terms with clinical Q-LINEA | ANNUAL REPORT 2021 42 The Company also intends to use Tüv Süd to certify products according to the new IVD Regulation for its ﬁrst product candidate, ASTar. Decisions made by a notiﬁed body are valid for a maximum of ﬁve years at a time, and the renewal process can be time-consuming, particularly if signiﬁcant changes are made to the original product application. may be negatively affected by changes to government policies or legislation. Strict or amended government policies or legis- lation in relevant markets may delay, reduce or prevent sales or lead to higher costs. Possible changes to regulations run the risk of not being implemented time or correctly, which may expose the Company to regulatory actions and sanctions or other legal liability. If any of these risks should materialise, this To receive market approval in the US, a regulatory applica- tion containing information including the results of completed could adversely impact the Company’s operations, ﬁnancial clinical studies is required. The US Food and Drug Administra- tion (FDA) examines both the study protocol and the results of the study. Which requirements apply for the clinical study depends primarily on the required type of classiﬁcation and position and earnings. Market risks The Company operates in a global and competitive market regulatory application. After a dialogue with the Company, the that is subject to rapid changes and technological develop- FDA conﬁrmed the Company’s interpretation that it should use the 510(k) regulatory application mechanism. In a 510(k), the applicant company shows that the new product is of “substantial equivalence” with a comparable predicate device in terms of use, technical properties and performance testing. This means the Company’s product will be compared with a product already cleared by the FDA. ment. A large number of companies are active in the research and development of products that could compete with the Company’s products. Some of the Company’s competitors have substantial ﬁnancial resources and these competitors may also have a higher manufacturing and distribution capacity as well as better prospects for selling and marketing their products than the Company does. In addition, the Company’s competitors may develop products that are more effective, safer and less expensive than the Company’s products. Research and development in other companies – alongside changes in complementary technology – could lead to the Company’s products becoming outdated. Competitors, some of whom have considerable ﬁnancial and other resources, could overtake the Company in terms of developing products and obtaining ofﬁcial approval, or succeed in developing a product that is more effective and more ﬁnancially viable. Moreover, the development of products must satisfy clinical praxis and meet patient expectations. There is thus a risk that the Company will be unable to sustain its position in the face of competition. If competing products were to gain market shares or reach the market faster than Q-linea’s products, the future value of Q-linea’s product and project portfolio could be lower than originally expected. The Company is furthermore obligated to meet local regulatory requirements and other relevant markets. The approval process for medical devices varies between different countries and healthcare systems, which means that it can be difﬁcult for the Company to predict the amount of resources that may be required in terms of time and cost to receive product approvals, particularly for the potential launch of products outside Europe and the US (which are the Company’s intended main markets for ASTar). If the Company fails to receive approval for ASTar or future products in relevant markets (in time or at all), or fails to maintain such approvals, marketing and sales of ASTar and potential future products may be delayed or may not take place in certain markets, which could have a signiﬁcant adverse impact on the Compa- ny’s operations, ﬁnancial position and results. Even after market approval has been obtained, the approved medical devices are continuously evaluated by the Company and the relevant authorities and there is a risk that an approved product may be recalled from the market by regulatory authorities or upon the Company’s initiative, for example, for safety reasons, defects in the design or manu- facture or defective components. Recalls or other follow-up actions (such as repair of instruments or communications to relevant healthcare personnel) may result in additional costs for the Company, demand ﬁnancial resources and senior management’s time, result in lower income from sales and damage to relationships with regulatory authorities and result in loss of market shares to competitors. The regulations to which the Company is subject are complex and have become increasingly demanding over time. In addition to regulations that are speciﬁc to in vitro diagnostics products, the Company may also be subject to other applicable regulations in relevant markets, such as environmental regulations. The Company Lack of market acceptance There is a risk that a product that has been approved for marketing and sales may not achieve the desired level of market acceptance from physicians, hospitals, laboratories, healthcare payers and the medical profession in general, which could prevent the Company from generating income or achieving proﬁtability. Market acceptance of the Company’s current and future products by physicians, hospitals, laboratories, healthcare payers and patients will depend on a number of factors that in many cases are beyond the Company’s control, including: the clinical indications for which each product is approved, accep- tance by physicians, hospitals, laboratories and healthcare payers that the product comprises a safe and effective analysis method, relative user-friendliness, simple administration and other perceived beneﬁts compared with competing analysis Q-LINEA | ANNUAL REPORT 2021 43 BOARD OF DIRECTORS’ REPORT methods, the cost of the product and its use in relation to alternative products, the extent to which the product has been approved for procurement by hospital laboratories, whether the product, in accordance with guidelines, has been named as a preferred method for the establishment of treatment preparations for the relevant diagnosis, and restrictions and warnings that are found on the product’s approved labelling. Market acceptance is also dependent on the possibility of adequate reimbursement for the product and related con- sumables from third parties, such as insurance companies and other healthcare payers. In many countries, reimbursement for ASTar, related consumables and/or any future products is dependent on obtaining a reimbursement code for the procedure and product or on the existence of reimbursement codes for similar products that may be applied. The Company believes that there are reimbursement codes that can be applied to ASTar in both Europe and the US. If this assessment proves to be incorrect or if existing reimbursement codes are not considered to provide adequate reimbursement, new reimbursement codes may be required to achieve the desired market acceptance for ASTar. Obtaining a reimbursement code can be a lengthy process (months to years) and there is a risk that it may not be possible to obtain a satisfactory code. After a new reimbursement code has been obtained, healthcare payers (meaning national healthcare systems or health insurance companies) have to agree to provide coverage for the procedures that use the product related to the code. If laboratories, hospitals and other healthcare facilities do not receive sufﬁcient reimbursement for treatments that are carried out using the Company’s products, this could result in which may lead to restrictions in market acceptance. The Company cannot predict what healthcare programmes and regulations will ultimately be implemented in the EU and its member states, in the US (at federal and/or state level) and other target markets or the effect of any future legislation or regulations. However, these types of provisions could mate- rially change the way healthcare is delivered and ﬁnanced, and may have a material impact on numerous aspects of the Company’s business. In Sweden, like other markets, the Company’s products will also be subject to public procurement whereby the Company will compete on the basis of a combination of price and function. Depending on how the calls for tenders in the pro- curement processes are formulated and which requirements are speciﬁed, this could impact the prices of Q-linea’s products and thus the Company’s earnings. Such procurements often take place once a year or every second year, which could entail changes to price levels on speciﬁc occasions. Furthermore, the Company’s efforts to train and make healthcare providers aware of the beneﬁts of the products in comparison with other technologies and processes could fail. Insufﬁcient measures in this regard could lead to the incorrect use of the products, which in turn, could result in unsatisfactory results for patients, injury to patients, incorrect treatment (which could impact price and reimbursement levels), negative publicity and/or legal action. Negative media reporting may prevent broad acceptance of the products, which increases the risk of unexpected results in the market. A lack of market acceptance from laboratories and other relevant healthcare players could impact the Company’s reputation declining interest in the Company’s products and a loss of sales. and general demand for the Company’s products and hinder Securing adequate or attractive reimbursement often requires a successful outcome from health economics studies, which are clinical studies designed to demonstrate the cost effectiveness of a product or procedure. There is no assurance that such studies will demonstrate the cost effectiveness of ASTar or other products from the Company, which could adversely impact the Company’s operations, ﬁnancial position and earnings. the commercial success of the current and future products. If any of these risks should materialise, this could adversely impact the Company’s operations, ﬁnancial position and earnings. Key employees and recruitment Q-linea’s success is largely dependent upon its key employees and qualiﬁed staff and the extensive expertise and experience held by these individuals in the Company’s area of operation. If Q-linea were to lose key employees and/or was unable to recruit additional qualiﬁed staff at the necessary pace in order to meet its future needs, this could delay or interrupt the Many countries, including a number of EU countries, are increasingly relying on health technology assessment (HTA) to make policy decisions on pricing and reimbursement and to establish best practice on the basis of evidence-based guide- lines. HTA refers to the systematic evaluation of the properties, development of the operations. There is a risk that it may be effects and/or impact of health technology. It is a multidis- ciplinary process to evaluate the social, economic, organisa- tional and ethical issues associated with a health project or health technology. The application of HTA to medical devices is challenging. HTA is a data-driven process and many HTA agencies adopt a strict adherence to the hierarchy of evidence, demanding that technologies are supported by evidence from robust, controlled studies. For many medical devices, such evidence is often limited or unavailable at the time of launch, impossible to conduct recruitment on satisfactory terms as a result of the competition for labour with other companies in the industry, universities and other institutions. The Company aims to reduce the risk of losing key employ- ees by creating and maintaining a positive work environment with good working conditions. Q-linea is located in Uppsala, a town that is home to a wealth of people with the skills needed in the industry, which provides the Company with ample recruitment possibilities. Q-LINEA | ANNUAL REPORT 2021 44 The novel coronavirus The situation in Ukraine Q-linea has taken action to protect its employees, assume its responsibility in society and at the same time minimise the negative impact of the ongoing pandemic on the Company’s operations. We have now begun to see light in the tunnel in the wake of the pandemic, and many of Q-linea’s employees began to return to working at the ofﬁce towards the end of the year. At the same time, we are analysing which positive aspects of working from home we can take with us as we create a new way of working in the future. It is not currently possible to estimate the extent to which Q-linea’s operations could be affected given that certain areas are under constant change. We have noted positive effects, but also have a certain degree of uncertainty in the following signiﬁcant areas, which could be subject to the effects of any outbreak: The devastating war in Ukraine is a tragedy. At Q-linea, we are deeply concerned about the situation and our thoughts are with all of the people affected. The war’s impact on the Company is very difﬁcult to predict since the situation is extremely serious and could change rapidly. At present, the assessment of management and the Board of Directors is that: ● The Company’s operations are not dependent on Russian or Belarusian suppliers or customers. ● The Company has no operations or employees in these countries. ● Costs for fuel, energy and certain insurance will increase further, which will impact the Company’s expense levels, although only to a limited extent. ● The timeframe of planned clinical studies, if hospitals are tied up with activities related to SARS-CoV-2 and COVID-19. The possibility to visit hospitals during the study, given that this could be limited during certain periods and in certain regions. Q-linea is following the events closely. Proposed appropriation of unrestricted equity ● Delays in commercialisation if customers are less available as a result of the pandemic. The following unrestricted equity is at the disposal of the Annual General Meeting: ● Expense levels and ﬁnancing strategy. SEK ● Shortage of components that are necessary for the ASTar instrument, which could also apply for consumables. Share premium reserve Retained earnings Result for the year Total 1,234,971,886 -574,418,763 -231,242,337 429,310,786 Q-linea is monitoring the ongoing situation very closely and will implement further measures as required and keep the markets informed if the assessment of the potential impact changes signiﬁcantly. It is currently impossible to estimate the ultimate impact on the Company. The Board proposes that proﬁt be appropriated as follows: SEK 429,310,786 to be carried forward. The Board proposes to the Annual General Meeting that no dividend be paid for 2021. For more information concerning the Company’s earnings and ﬁnancial position, refer to the following income statement and balance sheet as well as the statement of comprehensive income and related notes. Unless otherwise stated, all amounts in the ﬁnancial state- ments and accompanying notes are presented in thousands of kronor (SEK thousand). Q-LINEA | ANNUAL REPORT 2021 45 CORPORATE GOVERNANCE REPORT Corporate Governance Report Q-linea AB (publ) (“Q-linea” or “the Company”) is a Swedish public limited liability company whose shares have been listed on Nasdaq Stockholm’s Main Market since December 2018. Q-linea’s corporate governance is guided by the Swedish Companies Act, the Company’s Articles of Association, Nasdaq’s Issuer Rules, the Swedish Corporate Governance Code (“the Code”), the Rules of Fair Practice for the stock exchange and other applicable provisions and recommen- dations and internal governing documents. These internal governing documents mainly consist of the Board’s rules of procedure, instructions for the President and instructions for ﬁnancial reporting. In addition, Q-linea also has several policy documents and manuals containing rules, recommendations and principles, which provide guidance for the Company’s operations and its employees. shares, 328,472 are treasury shares held by the Company. As of 31 December 2021, Nexttobe AB was the only shareholder whose holding in Q-linea represented at least one tenth of the voting rights for all shares in the Company. Nexttobe AB accounted for 33.50% (35.85) of the shares and votes in the Company at year-end and the Company’s 20 largest owners are presented in the section “The Q-linea share” on pages 34–35. General meeting of shareholders Shareholders exercise their influence in the Company at the Annual General Meeting, or at an extraordinary general meeting where appropriate. Every shareholder who is entered in the shareholder register kept by Euroclear and recorded in a CSD register or CSD account on the record date of the general meeting is entitled to participate personally or vote by proxy. The general meeting may resolve on any issues related The diagram below provides an overview of Q-linea’s corporate to the Company that do not fall expressly under another governance structure. corporate body’s exclusive competence according to the Swedish Companies Act or Articles of Association. The Annual General Meeting is held annually within six months of the end of the ﬁnancial year. The Chairperson of the Annual General Meeting is to be nominated by the Nomination Committee and elected by the Meeting. The business of the Annual General Meeting includes election of the Company’s directors and auditors, adoption of the Company’s balance sheet and income statement, resolving on allocations of the Company’s proﬁt or loss in accordance with the adopted balance sheet, and resolving on whether the directors and the President should be discharged from liability. The Annual General Meeting also resolves on the fees payable to the Board, committee members and the Company’s auditors. During the Annual General Meeting, shareholders are also given the opportunity to pose questions to the Board of Directors, management and auditors. Each ordinary share carries one vote, and each C Class share carries one-tenth of one vote. Q-linea’s Articles of Association include no restric- tions on the number of votes each shareholder may cast at a general meeting. Shareholders Nomination Committee External audit General meeting Remuneration Committee Audit Committee Board of Directors President Company management Compliance with the Swedish Corporate Governance Code (“the Code”) Q-linea has applied the Code since 7 December 2018, and has undertaken to follow corporate governance best practices wherever possible. The Company did not deviate from any of the rules stipulated in the Code in 2021. In addition, Q-linea was not subject to a ruling by Nasdaq Stockholm’s Disciplinary Committee or statement from the Securities Council. The Board may also decide to convene an extraordinary general meeting should it determine that a general meeting is required before the next Annual General Meeting. The Board may also convene an extraordinary general meeting should an auditor or shareholder holding more than 10% of the Company’s shares submit a written request that a meeting be convened to address a speciﬁc matter. Shareholders Q-linea’s shares are listed on Nasdaq Stockholm. The Com- pany’s share capital at 31 December 2021 amounted to SEK 1,476,897.35, distributed between 29,537,947 ordinary shares. The shares’ quotient value is SEK 0.05. Of these 29,537,947 Notice of a meeting should also be published in Post- och Inrikes Tidningar (Ofﬁcial Swedish Gazette) and on the Q-LINEA | ANNUAL REPORT 2021 46 Company’s website. Information that notice has been given will be announced in Svenska Dagbladet on the date of issuing the notice. Notice of an ordinary or extraordinary general meeting at which amendments to the Articles of Association will be addressed must be issued no earlier than six weeks and no later than four weeks prior to the general meeting. Notice of other extraordinary general meetings must be issued no earlier than six weeks and no later than three weeks prior to the general meeting. The minutes of the meeting are to be available on the Company’s website within two weeks of the general meeting. Sweden or by e-mail at: [email protected]. For more informa- tion, see Q-linea’s website at www.qlinea.com. Nomination Committee The Nomination Committee’s duties include the preparation and drafting of proposals for the election of directors, the Board’s Chairperson, the general meeting’s Chairperson and auditors. The Nomination Committee is also to recommend the fees payable to directors and auditors. On 25 May 2021, the Annual General Meeting adopted instructions and rules of procedure for the Nomination Committee, whereby the Nomination Committee would consist of three members. The Nomination Committee is appointed, on behalf of the general meeting, by the Board’s Chairperson contacting the three largest shareholders according to Euroclear’s transcript of the shareholder register 2021 Annual General Meeting In addition to standard matters, the following resolutions were passed at the Annual General Meeting on 25 May 2021: • To re-elect directors Erika Kjellberg Eriksson, Mats Nilsson, Marianne Hansson, Marcus Storch, Per-Olof Wallström, Hans Johansson and Mario Gualano. Erika Kjellberg Eriksson was re-elected as Board Chairperson. • To appoint the registered accounting ﬁrm Öhrling PricewaterhouseCoopers AB as auditor. on 1 September 2021, each of whom has the right to appoint one member of the Nomination Committee. Should any of the three largest shareholders not wish to appoint a member of the Nomination Committee, the fourth-largest shareholder will be approached, and so forth, until the Nomination Committee consists of three members. The members of the Nomination Committee must be announced on the Company’s website no later than six months prior to the Annual General Meeting. The term of ofﬁce for members appointed to the Nomination Committee continues until a new Nomination Committee is appointed. No fees shall be paid to the members for their work on the Nomination Committee. The Nomination Committee shall appoint one of its own members to chair the committee. Neither the Chairperson of the Board nor any other director may chair the Nomination Committee. • To introduce an employee share option programme (“Employee share option programme 2021/2024”) for the Company’s employees. • To authorise the Board of Directors, on one or more occasions during the period until the next Annual General Meeting, to decide to increase the Company’s share capital by a maximum of SEK 273,379.45. In accordance with this authorisation, the Board may decide to issue shares, warrants and/or convertibles by disapplying the preferential rights of the shareholders and/or with payment through contribution in kind, by offset or on terms in accordance with Chapter 2, Section 5, Paragraph 2, Subsections 1-3 and 5 of the Swedish Companies Act. Issues in accordance with this authorisation are to be on market terms. The Nomination Committee must submit proposals for decisions on the following issues for the 2021 Annual General Meeting: a) Election of Chairperson for the Meeting, b) Determination of the number of directors, c) Determination of fees and other remuneration payable to the Board and its committees, divided between the Chairpersons and other members, 2022 Annual General Meeting Q-linea’s 2022 Annual General Meeting will be held at 4:00 p.m. on 24 May 2022. The meeting is currently planned to be held at Hubben Konferens (Uppsala Science Park Room 3+4), Dag Hammarskjölds väg 38 in Uppsala, Sweden, while taking into consideration applicable restrictions due to COVID-19. The general meeting may be held through postal voting instead if the pandemic continues and permission to hold general meetings through postal voting is consequently extended, and if doing so is considered appropriate. Share- holders who wish to have a matter addressed by the Annual General Meeting must submit a request to the Board in writing not later than 5 April 2022. d) Determination of audit fees, e) Election of directors and Chairperson of the Board, f) Election of auditors, and g) Principles for the Nomination Committee’s composition and work prior to the 2023 Annual General Meeting. Ahead of the 2022 Annual General Meeting and until a new Nomination Committee is appointed, the Company’s Nomina- tion Committee consists of Erika Kjellberg Eriksson (Nexttobe AB), Ulrik Grönvall (Swedbank Robur Fonder) and Öystein Engebretsen (Investment AB Öresund). Öystein Engebretsen is Chairperson of the Nomination Committee. The Board may be reached by mail at: Board of Directors, Q-linea AB, Dag Hammarskjölds väg 52A, SE-752 37 Uppsala, Q-LINEA | ANNUAL REPORT 2021 47 CORPORATE GOVERNANCE REPORT Shareholders who wish to contact the Nomination Committee may do so in writing at: Nomination Committee, Q-linea AB, Dag Hammarskjölds väg 52A, SE-752 37 Uppsala, Sweden or by e-mail at: [email protected]. and that the Board fulﬁls its obligations and commitments. Through contact with the President, the Chairperson shall receive regular updates of the information required to follow the Company’s position, ﬁnancial planning and development. In addition, the Chairperson is to consult with the President in regard to strategic issues and ensure that the Board’s decisions are implemented effectively. The Chairperson is responsible for contact with the shareholders in regard to ownership matters and for conveying the views of the shareholders to the Board. Board of Directors Duties of the Board of Directors The Board is ultimately accountable for the Company’s organisation and management of the Company’s operations, which should be carried out in the best interests of the Company and all of its shareholders. The Board’s main duties include the management of strategic issues related to the business, ﬁnancing, establishments, growth, results and ﬁnancial position, and continuously assessing the Company’s ﬁnancial situation. The Board is also to ensure that effective systems are in place for monitoring and controlling the Company’s operations and that the information disclosed by the Company is characterised by openness, and is accurate, relevant and reliable. The Annual General Meeting elects the Chairperson of the Board. Board procedures The Board follows written rules of procedure that are revised annually and adopted by the statutory Board meeting after the Annual General Meeting. The rules of procedure regulate the Board’s procedures and duties, the Company’s decision-mak- ing process, the Board’s meeting procedure, the Chairperson’s duties and the division of duties between the Board and the President. The instructions for ﬁnancial reporting and for the President are also adopted at the statutory Board meeting. Composition of the Board According to Q-linea’s Articles of Association, the Board is to consist of not less than three and not more than ten directors, with no deputy directors. The Articles of Association do not contain any provisions on appointing or dismissing directors. The directors are normally elected annually at the Annual General Meeting for the period until the end of the next Annual General Meeting, but additional directors may also be elected during the year at an extraordinary general meeting. The Board considers Marianne Hansson, Hans Johansson, Marcus Storch and Mario Gualano to be independent from the Company, its management and major shareholders. Board committees Audit Committee The Board’s Audit Committee is to consist of at least three members, of whom one is the Chairperson. The committee’s work is conducted in accordance with instructions adopted by the Board. The Audit Committee is primarily responsible for monitoring the Company’s ﬁnancial position, the effectiveness of the Company’s internal control, the internal audit function and risk management, remaining informed about the audit of the annual report, and reviewing and monitoring the objectiv- ity and independence of the auditor. The Audit Committee is also to present recommendations to the Nomination Commit- tee regarding the election and remuneration of the Company’s Board Chairperson The Chairperson of the Board is responsible for leading the Board’s work and for ensuring that it is carried out efﬁciently Work of the Board Independent in relation to Attendance (total number of meetings) The Company and management Major Board Audit Remuneration Committee Name Position Director since shareholders meetings Committee Erika Kjellberg Eriksson Chairperson Director since 2012, Chairperson since 2018 Yes Yes No Yes 10(10) 9(10) 5(5) 7(7) Mario Gualano Mats Nilsson Director Director Director since 2020 Director since 2008, Chairperson 2008–2013 No Yes Yes Yes Yes Yes Yes Yes No Yes 10(10) 10(10) 10(10) 10(10) 10(10) 10 Marcus Storch Director Director Director Director Director since 2018 Director since 2018 Director since 2018 Director since 2018 Marianne Hansson Per Olof Wallström Hans Johansson 5(5) 5(5) 7(7) Total number of Board and Committee meetings 5 7 Q-LINEA | ANNUAL REPORT 2021 48 auditor, and keep in touch with the Company’s auditor on a continuing basis. All meetings of the Audit Committee are to be recorded in minutes, which are presented to the Board together with a verbal debrieﬁng to support the Board’s decision-making processes. Scheduled Board meetings normally last for half a day in order to provide time for presentations and discussion. A designated lawyer served as the secretary at the majority of the Board meetings. The President and CFO participate in Board meetings. Matters including the current business situation, earnings and ﬁnancial position and the outlook for the rest of the year are reviewed at each scheduled Board meeting. Members of the Company’s management team may be co-opted to the Board and may perform a review of a current strategic matter. Reports on the work of the commit- tees are also typically addressed at each Board meeting via the Chairperson of each committee. The Audit Committee comprises Erika Kjellberg Eriksson (Chairperson), Marianne Hansson and Per-Olof Wallström. Remuneration Committee The Board’s Remuneration Committee is to consist of at least two members, of whom one is the Chairperson. The committee’s work is conducted in accordance with the rules of procedure adopted by the Board. The Remuneration Committee is primarily responsible for preparing matters related to remuneration and other terms of employment for the President and other senior executives. The Remuneration Committee is also to monitor and evaluate variable pay plans for company management (both ongoing and those completed during the year), and monitor and evaluate the application of the remuneration guidelines for senior execu- tives approved by the Annual General Meeting. All meetings of the Remuneration Committee are to be recorded in minutes, which are presented to the Board together with a verbal debrieﬁng to support the Board’s decision-making processes. The Remuneration Committee comprises During 2021, the Board’s work largely focused on: • Development of the project portfolio. • Preparations for the commercialisation of ASTar and consumables. • Strategy and analysis of the operating environment. • Financial performance, optimisation of the Company’s capital structure. • Financial reporting and internal control. • Collaborations and partnerships. Evaluation of Board work Marianne Hansson (Chairperson) and Erika Kjellberg Eriksson. The Board continuously evaluates its work, in accordance with the rules of procedure for the Board, through open discussions within the Board and through an annual Board evaluation. The annual evaluation for 2021 was carried out in the autumn through individual discussions with the Nomina- tion Committee and a questionnaire sent to all directors with questions and space for comments. The results were generally positive and included suggestions of areas for further strategic Remuneration of the Board of Directors The remuneration of the directors elected by the Annual General Meeting is determined by the Annual General Meeting. The Annual General Meeting on 25 May 2021 resolved that an annual fee of SEK 420,000 should be paid to the Board’s Chairperson and an annual fee of SEK 210,000 to each of the other directors. The meeting further resolved that an annual fee of SEK 40,000 should be paid to the Chairperson focus. The results of the 2021 annual evaluation were submit- of the Remuneration Committee and an annual fee of SEK 20,000 to each member of the Remuneration Committee as well as an annual fee of SEK 80,000 to the Chairperson of the Audit Committee and an annual fee of SEK 40,000 to each member of the Audit Committee. The Annual General Meeting also resolved that a fee would not be paid to Erika Kjellberg Eriksson if she is elected in accordance with the Nomination Committee's recommendation. For the 2020 and 2021 ﬁnancial years, remuneration was paid according to the table in Note 9 and Note 24. ted to the Nomination Committee. President and other senior executives Duties of the President and other members of company management The President is appointed by the Board and is responsible for the Company’s day-to-day management in accordance with the Board’s guidelines and instructions. The President is responsible for keeping the Board informed about the Company’s performance and reporting signiﬁcant deviations from established business plans and about events with a major impact on the Company’s performance and operations, and for providing the Board with relevant decision support in regard to, for example, establishments, investments and other strategic issues. Company management, headed by the Company’s President Jonas Jarvius, consists of people in charge Work of the Board in 2021 In 2021, the Board of Directors held ten meetings at which minutes were taken. The participation of individual directors at these meetings is shown in the table on page 48. All meetings held during the year followed an approved agenda, which was provided to the directors before the Board meetings of Q-linea’s key business areas. together with documentation for each agenda item. Q-LINEA | ANNUAL REPORT 2021 49 CORPORATE GOVERNANCE REPORT Remuneration of the President and senior executives The guidelines’ promotion of the Company’s business strategy, long-term interests and sustainability Remuneration paid is to motivate company management to implement the Company’s business strategy and thus safeguard the Company’s long-term interests in a sustainable manner. The criteria for variable pay are to be structured so that they can be linked to this end. The remuneration paid to senior executives is composed of basic salary, variable pay, share-based remuneration, pension provisions and other beneﬁts. The remuneration paid to the President and senior executives for the 2021 ﬁnancial year is speciﬁed in the table below. All amounts are in SEK thousand. Remuneration of the President and senior executives The Company’s business strategies are: President Other senior executives SEK thousand Fixed salary Variable pay Beneﬁts Jonas Jarvius Total 13,106 1,031 - Regulatory strategy: carry out necessary regulatory activities for launch of the ASTar instrument and the consumables, including performing clinical studies in Europe and the US. The ﬁrst product focuses on sepsis diagnostics. 2,848 282 - 10,258 749 - Other remuner- ation Commercial strategy: Q-linea has entered into an agreement with Thermo Fisher Scientiﬁc, a worldwide, already estab- lished sales partner that has local sales teams in the markets where Q-linea’s products are to be launched. The aim of this is to achieve broad and speedy market penetration. Sales are to comprise instruments and consumables, the latter of which are expected to account for the majority of the potential income. The companies will work very closely together and Q-linea will have access to all aspects of the sales process and participate with applications specialists. The aim of the col- laboration is to enable Q-linea to continuously be part of the development process and to receive feedback from customers, so that it can continue to develop customer-driven products in the best possible manner. The service partnership means that Thermo Fisher Scientiﬁc will manage all ﬁrst-hand service and Q-linea will be responsible for expertise in connection with more complex issues. 40 187 228 Share-based remuneration1) -955 2,215 635 -1,889 9,305 2,669 11,973 - 2,844 11,520 3,303 Subtotal Pension Total 2,850 14,823 1) Costs that had been reserved in previous periods since the start of the share-based remuneration programme LTIP 2018 were reversed in 2021 when the Board determined that the performance targets had not been met and the programme therefore expired. The Board of Directors’ proposed guidelines for executive remuneration Under the Swedish Companies Act, the Annual General Meet- ing is to resolve on remuneration guidelines for the President and other senior executives. The Annual General Meeting on 26 May 2020 adopted guidelines with essentially the following content: The guidelines for executive remuneration shall apply until the 2024 Annual General Meeting, unless circumstances arise that entail that the guidelines need to be revised at an earlier point in time. Operational strategy: continue to build up Q-linea’s infra- structure to ensure its development and production capacity. Product development strategy: continue to develop new applications and products. Intellectual property rights strategy: continue to develop and maintain a broad and relevant intellectual property portfolio. Scope and application of the guidelines These guidelines encompass Q-linea’s President and the member of Q-linea’s management team at any time. If a direc- tor of the Company performs work for the Company alongside their Board assignment, these guidelines shall be applied to any remuneration paid to the director for such work. The guidelines are forward-looking, i.e. they are applicable to remuneration agreed, and amendments to remuneration already agreed, after adoption of the guidelines by the 2020 Annual General Meeting. Remuneration equates to the transfer of securities and awarding rights to acquire securities from the Company in the future. Service and support strategy: continue to build a free-stand- ing service organisation with a focus on expert service, and continue to develop the Company’s applications specialists to participate in and follow up on customer visits. For further information about the Company’s business strategy, visit: www.qlinea.com/sv/om-oss/business-con- cept-and-strategy The aim of the remuneration package to company man- agement is to motivate, retain and reward qualiﬁed personnel for their contributions to achieving the Company’s business strategy, long-term interests and sustainability. The remuneration resolved by the general meeting, for example, share and share-price incentive programmes, is not encompassed by these guidelines. Q-LINEA | ANNUAL REPORT 2021 50 The following pension levels apply for the 2021 Incentive programmes comprising share and share-price- based remuneration are resolved by the general meeting and are not included in these guidelines. However, existing incentive programmes are described below in order to provide a complete picture of the Company’s total remuneration package for company management. The existing long-term share-based incentive programmes (LTIP 2019, employee share option programme 2020/2023 and employee share option programme 2021/2024) contain performance require- ments linked to the business strategy. ﬁnancial year: Age and category Provision No provision 6.5% Up to age 25 Between the age of 25 and 35 Above age 35 Member of OMG/SDG1) 12.5% +2.5% Manager with more than ten employees +5% President and management team maximum of 25% Various forms of remuneration 1) OMG – Operational Management Group, SDG – Strategic Development Group The remuneration offered is to be on market terms and consist of ﬁxed salary, variable cash remuneration, pension beneﬁts and other beneﬁts. Fixed salary is to be individual for each senior executive and based on the executive’s areas of responsibility and experience, and is to be reviewed every year. The division between ﬁxed salary and any variable cash remuneration is to be proportionate to the executive’s responsibilities and authorities. Variable cash remuneration requires that the executive meet criteria that can be measured during the period of one year. The ceiling for variable cash salary is a maximum of 40% for the President and a maximum of 30% for other senior executives of the total ﬁxed cash salary during the target fulﬁlment period measured. Variable cash remuneration shall not qualify for pension beneﬁts unless required by mandatory collective agreement provisions. The Board is able to limit or refrain from making a variable payment should such payment be deemed unreasonable and inconsistent with the Company’s responsibilities in general towards its shareholders, if particularly difﬁcult economic circumstances were to prevail. The Board shall also have the possibility, under applicable law or contractual provisions, subject to the restrictions that may apply under law or contract, to in whole or in part reclaim variable pay paid on incorrect grounds (claw-back). Other beneﬁts may include occupational health services, occupational group life assurance, health and medical insur- ance and other similar beneﬁts. Other beneﬁts may amount to not more than 3% of the senior executive’s annual ﬁxed salary. In the commercial organisation (with the main focus on sales), a remuneration structure will be applied with a ﬁxed salary and a commission-based component. It is up to the President to determine the speciﬁc form of the model/ terms, which must however comply with industry standards and be optimised to create attractive incentives for relevant employees. Consultancy fees are to be on market terms. If consultancy services are performed by one of the Company’s directors, this director is not entitled to participate in the Board’s (or the Remuneration Committee’s) discussions regarding remunera- tion of such consultancy services. Information on criteria and conditions for payment of variable pay Short-term incentive (STI) programmes The choice of criteria (STI targets) for future years’ STI that form the basis of payment of variable pay is to be adopted every year by the Board to ensure that the criteria are aligned with the Company’s business plan. These STI targets can be set both individually and collectively and are to be structured in such a manner that they promote the Company’s business plan. These criteria may be linked to, for example, the Company achieving certain targets under the framework of its commercialisation plans, the Company initiating or conclud- Pension beneﬁts are to be post-employment deﬁned- contribution pension plans. For deﬁned-contribution pension plans, Q-linea shall pay contributions to publicly or privately administered pension insurance plans on a compulsory, contractual or voluntary basis. The Company has different pension levels for various categories of employees and ages. Pension premiums for premium deﬁned pension shall amount ing certain steps or the Company signing certain agreements. to not more than 25% of the senior executive’s annual ﬁxed salary. The outcome is to be compared with the established targets after the end of the measurement period. The outcome of the current year’s STI programme is to be discussed at the end of the year by the Board and the President (after being prepared by the Remuneration Committee). The Board then makes a decision on the outcome without the presence of the President or CFO. Q-LINEA | ANNUAL REPORT 2021 51 CORPORATE GOVERNANCE REPORT Long-term incentive (LTI) programmes vious long-term incentive programmes in the Company. The programme measures the fulﬁlment of certain strategic and operational targets established by the Board, and employees may acquire one ordinary share in the Company after a vesting period of three years. The targets include such areas as product development, product approval and commercialisation, which are aligned with the Company’s business strategies. LTIP 2018 An extraordinary general meeting on 12 November 2018 resolved that a long-term incentive programme (LTIP 2018) in the form of a performance share-based programme would be implemented. The rights to receive performance shares were allotted free of charge in March 2019. The programme measures performance over a three-year period starting in March 2019 and the performance targets are linked to various operational sub-targets during the same period. The targets include such areas as product development, product approval and commercialisation, which are aligned with the Company’s business strategies. The performance share rights are earned as the performance targets are met. In December 2021, the Board of Directors made the assessment that the performance targets for LTIP 2018 will not be met when the programme ends on 28 February 2022. The Board decided that all 142,720 performance share rights in the programme consequently will therefore expire. Termination of employment and severance pay The notice period for the President and other senior executives may not exceed six months if notice of termination of employ- ment is made by the Company. Fixed cash salary during the period of notice and any severance pay may together not exceed an amount equivalent to the President’s or the senior executives’ ﬁxed cash salary for one year. The period of notice may not exceed six months without any right to severance pay when termination is made by the executive. Additionally, remuneration may be paid for non-compete undertakings. Such remuneration shall compensate for loss of income. The remuneration paid by the Company shall amount to not more than 80% of the previous monthly income at the time of termination of employment, and is paid for a maxi- mum of six (6) months after the end of employment. LTIP 2019 The Annual General Meeting on 22 May 2019 resolved that a long-term incentive programme (LTIP 2019) would be implemented in the form of a performance share-based programme. The rights to receive performance shares were allotted free of charge in December 2019. The programme measures performance over a three-year period starting in December 2019 and the performance targets are linked to various operational sub-targets during the same period. The targets include such areas as product development, product approval and commercialisation, which are aligned with the Company’s business strategies. The performance share rights are earned as the performance targets are met. Salaries and employment conditions for employees not members of company management In the preparation of these remuneration guidelines, salary and employment conditions for employees of the Company have been taken into account by including information on the employees’ total income, the components of the remuneration and increase and growth rate over time, in the Remuneration Committee’s and the Board’s basis of decision when evaluating whether the guidelines and the limitations set out herein are reasonable. The development of the gap between the remuneration to executives and remuneration to other employees will be disclosed in the remuneration report that will be prepared for paid and current remunerations encompassed by these guidelines. Employee share option programme 2020/2023 The Annual General Meeting on 26 May 2020 resolved to introduce an employee share option programme (Employee share option programme 2020/2023) for the Company’s employees. The employee share options were allotted free of charge in June 2020. The programme measures the fulﬁlment of certain strategic and operational targets established by the Board, and employees may acquire one ordinary share in the Company after a vesting period of three years. The targets include such areas as product development, product approval and commercialisation, which are aligned with the Company’s business strategies. The decision-making process to determine, review and implement the guidelines The Board has established a Remuneration Committee, whose tasks include preparing the Board’s decision to propose remuneration principles, remuneration and other employ- ment conditions for company management. The Remunera- tion Committee is also to monitor and evaluate variable pay plans for company management both ongoing and those completed during the year. The Committee shall also monitor and evaluate the application of the guidelines for executive remuneration that the general meeting is to resolve on accord- ing to law, as well as the current remuneration structures and compensation levels in the Company. Employee share option programme 2021/2024 The Annual General Meeting on 25 May 2021 resolved to introduce an employee share option programme (Employee share option programme 2021/2024) for the Company’s employees. The employee share options were allotted free of charge in June 2021 to employees not encompassed by pre- The Board shall prepare a proposal for new guidelines at Q-LINEA | ANNUAL REPORT 2021 52 least every fourth year and submit it to the general meeting. The guidelines shall be in force until new guidelines are adopted by the general meeting. The President and other members of company manage- ment do not participate in the Board’s processing of and resolutions regarding remuneration-related matters in so far as they are affected by such matters. accordance with IFRS 2 and UFR7, only the shares that are earned and thus allotted will be expensed. If the performance conditions are not met, and performance shares are thus not allotted, no costs will be incurred over the performance period as a whole. In December 2021, the Board of Directors made the assessment that the performance targets for LTIP 2018 will not be met when the programme ends on 28 February 2022. The Board decided that all 142,720 performance share rights in the programme consequently expired. Refer to Note 9. Derogation from the guidelines The Board may temporarily resolve to derogate from the guidelines if in a speciﬁc case there is special cause for the derogation and a derogation is necessary to serve the Company’s long-term interests, including its sustainability, or to ensure the Company’s ﬁnancial viability. Performance share incentive programme 2019 (LTIP 2019) The Annual General Meeting on 22 May 2019 resolved that a long-term incentive programme would be implemented in the form of a performance share-based programme. The programme measures performance over a three-year period starting in December 2019 and the performance targets are linked to various operational sub-targets during the same period. The targets include such areas as product development, product approval and commercialisation. The performance share rights are earned as the performance targets are met. Description of material changes to the guidelines The guidelines that the Annual General Meeting adopted in 2020 apply until the 2024 Annual General Meeting. No changes have been made to the guidelines. Share-based remuneration programmes Performance share incentive programme 2018 (LTIP 2018) An extraordinary general meeting on 12 November 2018 decided that a long-term incentive programme in the form of a performance share-based programme would be imple- mented. The programme measures performance over a three-year period starting in March 2019 and the performance targets are linked to various operational sub-targets during the same period. The targets include such areas as product development, product approval and commercialisation. The performance share rights are earned as the performance targets are met. As of 31 December 2019, when the programme was closed to new participants, 40,990 performance share rights had been allotted free of charge to participants in the programme. The costs for the performance share-based programme are recognised continuously in accordance with IFRS 2. In accordance with IFRS 2 and UFR7, only the shares that are earned and thus allotted will be expensed. If the performance conditions are not met, and performance shares are thus not allotted, no costs will be incurred over the performance period as a whole. Actual number of performance share rights allotted As of the Annual General Meeting on 22 May 2019, when the programme was closed to new participants, 142,720 performance share rights had been allotted free of charge to participants of the programme. No. of perfor- mance share Maximum no. of performance shares per No. of partici- rights allotted per Category pants participant 12,620 5,250 – category Management team Other key employees Total 2 3 5 25,240 15,750 40,990 Actual number of performance share rights allotted No. of perfor- mance share No. of perfor- mance share No. of partici- rights allotted per rights allotted per The value of each performance share right is SEK 56.00 and is based on the closing price on the allotment date (20 Decem- ber 2019). The costs for the performance share-based programme are recognised continuously in accordance with IFRS 2. In accordance with IFRS 2 and UFR7, only the shares that are earned and thus allotted will be expensed. If the performance conditions are not met, and performance shares are thus not allotted, no costs will be incurred over the performance period as a whole. Refer to Note 9. Category pants participant 30,250 12,620 5,250 – category 30,250 75,720 36,750 142,720 President 1 6 7 Management team Other key employees Total 14 The value of each performance share right is SEK 55.54 and is based on the closing price on the allotment date (1 March 2019). The costs for the performance share-based programme are recognised continuously in accordance with IFRS 2. In Q-LINEA | ANNUAL REPORT 2021 53 CORPORATE GOVERNANCE REPORT Employee share option programme 2020 to 26 May 2020, was SEK 79.19, and the exercise price was thus set at SEK 98.98 per ordinary share. The option value on the allotment date of 30 June 2020 was based on the average price on the allotment date and was calculated at SEK 11.38 per option. Refer to Note 9. (Employee share option programme 2020/2023) The Company’s Annual General Meeting on 26 May 2020 resolved to introduce an employee share option programme for the Company’s employees. Employee share option programme 2020/2023 comprises a maximum of 350,000 employee share options. Employee share options are to be offered free of charge to individuals employed by the Com- pany as of 15 June 2020. Each employee share option entitles the holder, upon the fulﬁlment of certain strategic and operational targets estab- lished by the Board and after a vesting period of three years, to acquire one (1) new ordinary share in the Company at an exercise price corresponding to 125% of the volume-weighted average price for the Company’s share according to Nasdaq Stockholm’s price list during the ten (10) trading days prior to 26 May 2020. However, the subscription price may not under any circumstances be less than the quotient value. Employee share option programme 2021 (Employee share option programme 2021/2024) The Company’s Annual General Meeting on 25 May 2021 resolved to introduce an employee share option programme for the Company’s employees. Employee share option programme 2021/2024 comprises a maximum of 160,650 employee share options. The employee share options are to be offered free of charge to individuals employed by the Company as of 15 June 2021 who are not covered by any of the previous share-based incentive programmes in the Company. Each employee share option entitles the holder, upon the fulﬁlment of certain strategic and operational targets estab- lished by the Board and after a vesting period of three years, to acquire one (1) new ordinary share in the Company at an exercise price corresponding to 125% of the volume-weighted average price for the Company’s share according to Nasdaq Stockholm’s price list during the ten (10) trading days prior to 25 May 2021. However, the subscription price may not under any circumstances be less than the quotient value. Employees who have the right to participate in the employee share option programme 2021/2024 may be allotted 3,570 employee share options each at the most. To enable the Company’s delivery of shares under the programme and to cover the cash flow effects as a result of any social security contributions arising under the programme, the Annual General Meeting resolved to carry out a directed issue of a maximum of 211,126 warrants to the Company, of which a maximum of 50,476 warrants were issued to cover any cash flow effects as a result of social security contributions arising under the programme. The employees are divided into three categories and, according to the resolution, employee share options may be allotted to employees in these categories: • President: The President may be allotted a maximum of 16,200 employee share options. • Management team: participants in this category may be jointly allotted a maximum of 69,600 employee share options. However, each participant may be allotted a maximum of 8,700 employee share options. • Other employees: participants in this category may be allotted a maximum of 3,700 employee share options. To enable the Company’s delivery of shares under the programme and to cover the cash flow effects as a result of any social security contributions arising under the programme, the Annual General Meeting resolved to carry out a directed issue of a maximum of 459,970 warrants to the Company, of which a maximum of 109,970 warrants were issued to cover any cash flow effects as a result of social security contributions arising under the programme. Actual number of performance share rights allotted No. of allotted employee share options per No. of allotted employee share options per No. of partici- pants Actual number of performance share rights allotted Category participant category No. of allotted employee share options per No. of allotted employee share options per Other employees Total 36 36 3,570 128,520 128,520 No. of partici- pants – Category participant category President Management team Other employees Total 1 7 76 15,660 8,410 3,570 15,660 58,870 271,320 The volume-weighted average price for the Company’s share according to Nasdaq Stockholm’s price list during the period from 10-24 May 2021, meaning the ten (10) trading days prior to 25 May 2021, was SEK 153.45, and the exercise price was thus set at SEK 191.81 per ordinary share. The option value on the allotment date of 30 June 2021 was based on the average price on the allotment date and was calculated at SEK 23.71 per option. Refer to Note 9. 84 – 345,850 The volume-weighted average price for the Company’s share according to Nasdaq Stockholm’s price list during the period from 11–25 May 2020, meaning the ten (10) trading days prior Q-LINEA | ANNUAL REPORT 2021 54 Audit and control Other than this, there are no authorisations granted by the general meeting for the Board to resolve on share issues, warrants and/or convertibles or acquisitions of shares. External auditor The Nomination Committee’s duties include presenting the Annual General Meeting with a proposed resolution on the choice of auditor. Öhrlings PricewaterhouseCoopers AB (PwC) was appointed as the Company’s external auditor until the 2022 Annual General Meeting. Authorised Public Accountant Lars Kylberg is Auditor in Charge of the Q-linea audit. The auditor’s duties are to review a company’s annual ﬁnancial statements and accounts as well as the management of the Board and the President. This normally takes place at least twice per year, since at least one interim report, in addition to the annual report, must be reviewed by the auditor. Remuner- ation of the auditor Internal audit and control The overall purpose of internal control is to obtain reasonable assurance that the Company’s operational strategies and objectives are followed up and that shareholders’ investments are protected. Internal control should also determine, with reasonable assurance, that the external ﬁnancial reporting is reliable and prepared in accordance with generally accepted accounting practices, in compliance with applicable laws and regulations, and in compliance with the rules applicable to listed companies. The Board is ultimately responsible for internal control. The Swedish Companies Act and Annual Accounts Act require Q-linea to provide information about the key elements of its internal control system and risk management in the Company’s Corporate Governance Report. Remuneration of the auditor The Annual General Meeting resolves on remuneration of the auditor, based on the Nomination Committee’s recommen- dation. The Annual General Meeting on 25 May 2021 resolved that audit fees are to be approved and paid on an ongoing basis. In order to maintain good internal control, the Board has prepared several governing documents, including rules of procedure for the Board, instructions for the President, instructions for ﬁnancial reporting, a ﬁnancial policy and a communication policy. Fees paid in 2021 and 2020 are shown in the table below. 2021 2020 The Board evaluates the need to establish a separate inter- nal audit function on an annual basis. The Board has made the assessment that, given the Company’s size and the scope of its transactions, as well as the skills in the ﬁeld possessed by the Board and the Board’s meeting with its auditors, there is no reason to establish a formal internal audit function. The Board has established an Audit Committee that is primarily responsible for monitoring and quality-assuring the Company’s ﬁnancial statements, keeping in touch with the Company’s external auditor on a continuous basis, monitoring the effectiveness of the Company’s internal control over ﬁnancial reporting, and reviewing and monitoring the objectivity and independence of the auditor. Within the Board, the Audit Committee is also responsible for monitoring and managing risks that could have a material adverse effect on the Company’s business. PwC, Öhrlings PricewaterhouseCoopers AB Audit assignment Audits other than audit assignment Tax advisory services Other advisory services Total 455 - 30 65 709 107 62 466 1,343 550 All of the fees above pertain to remuneration to the audit ﬁrm Öhrlings PricewaterhouseCoopers AB and no portion pertains to its network. No remuneration was paid for valuation services. Authorisations The Annual General Meeting held on 25 May 2021 resolved to authorise the Board of Directors, on one or more occasions during the period until the next Annual General Meeting, to decide to increase the Company’s share capital by a maximum of SEK 273,379.45. According to the issue authorisation, the The ongoing responsibility for internal control and risk management has been delegated to the Company’s President who is to report back to the Board on a regular basis in Board may decide to issue shares, warrants and/or convertibles accordance with the prescribed instructions. by disapplying the preferential rights of the shareholders and/ or with payment through contribution in kind, by offset or otherwise on terms in accordance with Chapter 2, Section 5, Paragraph 2, Subsections 1-3 and 5 of the Swedish Companies Act. On 10 June 2021, the Board resolved, with the support of the authorisation by the Annual General Meeting, on a directed issue of SEK 2,200,000 ordinary shares which means that the Company’s share capital increased by SEK 110,000. Internal control and risk management are continuously monitored and evaluated through internal and external con- trols and evaluations of the Company’s governing documents. In addition to the internal control system described above, there is also an internal activity-speciﬁc control of R&D- related data, and quality management comprising systematic monitoring and evaluation of the Company’s development and manufacturing processes and products. Q-LINEA | ANNUAL REPORT 2021 55 BOARD OF DIRECTORS Directors Q-linea’s Board comprises a combination of entrepreneurs, inventors and people with industrial experience who represent the Company’s largest shareholders and provide active support to management. The Board of Directors consists of seven ordinary members: Erika Kjellberg Eriksson (Chairperson), Marianne Hansson, Hans Johansson, Mario Gualano, Mats Nilsson, Marcus Storch and Per-Olof Wallström. The assignment for all directors applies for the period up until the end of the next Annual General Meeting, which will be held on 24 May 2022. However, any director may withdraw from their assignment before then. A description of the directors, their position, the year in which they were initially elected and whether they are considered independent from the Company and its management, and from major shareholders, is also presented in the table on page 48. 2. Marianne Hansson Director since 2018 3. Hans Johansson Director since 2018 1. Erika Kjellberg Eriksson Chairperson since 2018, Director since 2012 Marianne Hansson has 20 years’ experience in life sciences. She most recently served as CEO of Atlas Antibodies AB and prior to that as Business Development Manager at Afﬁbody Medical AB. She is a co-founder of Afﬁbody AB, Atlas Antibodies AB, ScandiBio Therapeutics AB, ScandiEdge Therapeutics AB, Amylonix AB, ProteomEdge AB and A05 Diagnostics AB. Hans Johansson has extensive experience and a broad contact network from his previ- ous roles in the life sciences and diagnostics industry. His previous positions include Vice President Companion Diagnostics at Thermo Fisher’s Speciality Diagnostics Group, Vice President Global Marketing and Business Development at Thermo Fisher’s Immuno Diagnostics Division, CEO of Pyrosequencing/Personal Chemistry (now Biotage), and Head of Laboratories at Pharmacia Biotechnology AB. Born: 1954 Education: MSc in chemical engineering. Other ongoing assignments: Hans Johansson is Chairperson of Myrtila AB and Doloradix AB and a Director of Immunovia AB (publ) and Swelife. Erika Kjellberg Eriksson has held Board assignments and senior positions in pharmaceutical, biotech and med tech companies for more than 20 years. She has long experience from working in both listed and unlisted companies and extensive board experience. Born: 1962 Education: MSc in economics, Uppsala University (1985). Other ongoing assignments: Erika Kjellberg Eriksson is CEO and Chairperson of Next- tobe AB, Chairperson of Linum AB, Brixton Medical AB, Aros Biotech, Lumina Adhesives AB, AllgoHolding AB, Lokon Pharma AB and Tanea Medical AB, and Director of Vivolux AB and Findolon AB. Holdings in the Company: Erika Kjellberg Eriksson owns 32,000 shares in the Company. Born: 1963 Education: Doctor of technology in biochemistry, Royal Institute of Technology (1998); MSc in chemical engineering, Royal Institute of Technology (1989). Other ongoing assignments: Marianne Hansson is a Director of Intervacc AB (publ) and Mariham Consulting AB, CEO of Mariham Consulting AB and external CEO of ScandiBio Therapeutics AB, ScandiEdge Therapeutics AB, Amylonix AB, Holdings in the Company: Hans Johansson owns 5,882 shares in Q-linea. He is independent from the Company and its management as well as from major shareholders. ProteomEdge AB and A05 Diagnostics AB. Holdings in the Company: Marianne Hansson owns an additional 3,088 shares in Q-linea through her wholly owned company Mariham Consulting AB. She is independent from the Company and its management, but not from major shareholders. She is independent from the Company and its management as well as from major shareholders. Q-LINEA | ANNUAL REPORT 2021 56 1. 2. 6. 3. 7. 4. 5. He has extensive board experience and has served on the Board of Elos MedTech AB, which is listed on Nasdaq Stockholm. Other ongoing assignments: Marcus Storch is Chairperson of Kebris AB and a Director of Investment AB Öresund. Member of the Royal Swedish Academy of Sciences and the Royal Swedish Academy of Engineering Sciences. Holdings in the Company: Marcus Storch does not own any shares in the Company. He is independent from the Company and its management as well as from major shareholders. 4. Mario Gualano Director since 2021 Mario Gualano is currently CEO of BBI Group Ltd and has more than 25 years of commer- cial, technical and operational experience in the microbiology and diagnostics industries, including 15 years in interna- tional leadership roles with Thermo Fisher Scientiﬁc. During his time with Thermo Fisher Scientiﬁc, he led Thermo Fisher Scientiﬁc’s Specialty Diagnostics Group in APAC and, most recently, was the President of the Microbiology division responsible for 14 manufacturing sites and 30 commercial ofﬁces worldwide. Born: 1969 Education: Associate professor of molecular medicine, Uppsala University (2003); PhD in medical genetics, Uppsala University (1998); MSc in biology, Uppsala University (1998). Other ongoing assignments: Mats Nilsson is a professor of biochemistry at the Science for Life Laboratory at Stockholm University. He also serves as a Director of EMPE Diagnostics AB and Biocyclica Holding AB. 7. Per-Olof Wallström Director since 2018 Holdings in the Company: Mats Nilsson owns 444,000 shares in the Company. He owns an additional 53,320 shares in the Company through the related company Biocyclica Holding AB. He is independent from major shareholders, but not from the Company and its manage- ment. Per-Olof Wallström has 50 years’ experi- ence in the pharmaceutical and biotech industries and has held senior positions in the Nordic region and Europe at companies including Merck AB, Astra AB, Pharmacia AB and Bristol-Myers Squibb AB. He has also served as CEO of Karo Bio AB, Melacure Therapeutics AB and Q-Med AB. Born: 1949 Education: MSc Pharm, Uppsala University (1972). Other ongoing assignments: Per-Olof Wall- ström is Chairperson of Camurus AB and Camurus Development AB and a Director of Nexttobe AB and Arosia Communication AB. Holdings in the Company: Per-Olof Wall- ström owns 5,147 shares in the Company. He is independent from the Company and its management, but not from major shareholders. Born: 1969 Education: PhD in Microbiology and Immuno-diagnostics and an MBA from Henley Management College. Other ongoing assignments: CEO of BBI Solutions Ltd. Holdings in the Company: Mario Gualano does not own any shares in Q-linea. He is independent from the Company and its management as well as from major shareholders. 6. Marcus Storch Director since 2018 Marcus Storch has extensive board expe- rience. He also has leadership experience, including senior positions such as President of AGA AB and Chairperson of the Nobel Foundation. He also founded the Tobias Foundation. 5. Mats Nilsson Director since 2008 (Chairperson 2008–2013) Mats Nilsson is a professor of molecular diagnostics and has founded several companies in the biotech industry. He is one of Q-linea’s founders. Born: 1942 Education: MSc in electrical engineering, KTH Royal Institute of Technology (1967); honorary doctor at Karolinska Institute (1996). Q-LINEA | ANNUAL REPORT 2021 57 MANAGEMENT TEAM Senior executives The Company’s management team comprises 11 individuals. Jonas Jarvius is Chief Executive Ofﬁcer (CEO). Other senior executives in the Company are Mats Gullberg (Vice President, Research Director), Thomas Fritz (Chief Commercial Ofﬁcer/CCO), Anders Lundin (Chief Financial Ofﬁcer, CFO, Investor Relations), Nils Kristensen (Chief Operating Ofﬁcer, COO), Charlotta Göransson (Marketing Director), Tiziana Di Martino (Chief Medical Ofﬁcer/CMO), Jonas Melin (Director Product Development) and Karl Sköld (Director Contract Development), Victoria Lerneryd (Manager QA/RA) and Ulrika Stolpe (HR Manager). 1. 2. 6. 3. 7. 4. 8. 5. 9. 10. 11. Q-LINEA | ANNUAL REPORT 2021 58 1. Jonas Jarvius Employed by the Company as CEO since 2008 2. Mats Gullberg Employed by the Company since 2013, Vice President since 2016 and Research Director since 2017 4. Anders Lundin Employed by the Company as CFO and Investor Relations since 2018 Anders Lundin has more than 20 years’ experience in ﬁnancial work and leadership Jonas Jarvius has extensive R&D experience in the ﬁeld of molecular medicine and molec- ular biological detection and has published articles in various prominent scientiﬁc jour- nals, such as Nature Biotechnology, Nature Methods, PNAS and Analytical Chemistry. He in biotech companies. He has previously has co-founded several companies and is one worked with methods of microbiology and of the founders of Q-linea. For many years, he molecular biology at Uppsala University. He Mats Gullberg has extensive experience in product development and commercialisation in international organisations operating in and works with intellectual property issues the medical technology and pharmaceutical industries. He has previously served as the CFO of a company listed on Nasdaq Stock- holm and was also responsible for a listing on the Nasdaq Stock Market in the US and the associated raising of new equity capital. Born: 1964 Education: MSc in economics, Uppsala University (1992). Other ongoing assignments: Anders Lundin is a founder and Director of CFO Akuten AB. Holdings in the Company: He owns 14,705 shares in the Company through his wholly owned company CFO Akuten AB. has held senior positions in various biotech companies and in these roles, has success- fully managed projects related to molecular detection for safety applications and the manufacture, development and production has vast experience in R&D projects and in running projects to identify potential future products. Over the past ten years, he has been responsible for patent and intellectual property issues, previously at the Olink AB of medical devices in a range of areas. He has biotech company and since 2013 at Q-linea. experience with the certiﬁcation of medical devices for the European and US markets. In addition, he has been involved in several biotech start-ups that have evolved into large organisations. He has more than 15 patents and patent applications. As of 2017, he is also responsible for the Company’s research department. Born: 1971 Education: PhD in medical sciences, Uppsala University (2003); MSc in pharmaceutical bioscience (microbiology), Uppsala University (1995). Other ongoing assignments: Mats Gullberg is a Director of EMPE Diagnostics AB. Born: 1971 5. Nils Kristensen Employed by the Company since 2014, COO since 2017 Education: PhD in molecular medicine, Uppsala University (2006); MSc in medical science, Uppsala University (1999). Other ongoing assignments: Jonas Jarvius is Chairperson of Umbrella Science AB. Holdings in the Company: Jonas Jarvius owns 267,152 shares and 15,660 employee share options in the Company. He owns an addi- tional 14,705 shares in the Company through his wholly owned company Umbrella Science AB. Holdings in the Company: Mats Gullberg owns 9,601 shares and 8,410 employee share options in the Company. Nils Kristensen has extensive experience in R&D and the commercialisation of products in the life sciences and telecom industries. He has vast experience in leadership and project management, and has been running businesses and R&D projects for over 30 years. His main focus area has been manufac- turing projects, in which he has worked with optimisation, lean management and quality management systems. 3. Thomas Fritz Employed by the Company as CCO since 2020 Thomas Fritz has more than 20 years’ commercial experience in the microbiology ﬁeld. He has also worked in clinical, pharmaceutical and industrial markets. He has led marketing, sales, customer service and support organisations in various regions. He was also CEO of a large manufacturing facility. In his previous role, he served as Senior Director, Commercial EMEA for the microbiology division of Thermo Fisher Scientiﬁc. Born: 1963 Education: MSc in engineering physics, Uppsala University (1998); licentiate of engineering in materials science, Uppsala University (1991). Other ongoing assignments: Nils Kristensen is a Director and CEO of Kristensen Consulting AB. Holdings in the Company: Nils Kristensen owns 441 shares and 8,410 employee share options in the Company. Born: 1964 Education: MSc in microbiology, University of Tübingen, Germany (1993). Other ongoing assignments: Thomas Fritz is part-owner and CEO of ATC GmbH. Holdings in the Company: Thomas Fritz owns 4,500 shares, 12,620 performance share rights and 8,410 employee share options in the Company. ➜ Q-LINEA | ANNUAL REPORT 2021 59 MANAGEMENT TEAM 6. Charlotta Göransson Employed by the Company since 2016, Sales and Marketing Director since 2021 Charlotta Göransson is a former researcher and has worked in sales and marketing in the biotech industry since 2003. She has experience in international sales as well as project management. 8. Jonas Melin Director Product Development since 2017 10. Victoria Lerneryd Employed by the Company as Manager QA/RA since 2020 Victoria Lerneryd has over ten years’ expe- rience in quality assurance and regulatory affairs for medical devices. She has managed quality management systems, QA, regulatory audits and applications. She previously held positions as Quality Manager at St. Jude Med- ical at Quality & Regulatory Affairs Manager Jonas Melin has extensive R&D experience and a deep understanding of technical and regulatory issues. He has experience in project management and has successfully led projects from development to regulatory approval. His previous positions include Project Manager for Meritas D-Dimer test, Troponin test and BNP test and Head of Technical Development of Meritas troponin I. at Cavidi. These roles included responsibility Born: 1976 Education: PhD in engineering science, Uppsala University (2006); MSc in technical biology, Linköping University (2002). Born: 1972 Education: PhD in molecular medicine, Uppsala University (2001); MSc in molecular biology, Uppsala University (1998). Other ongoing assignments: Charlotta Göransson has no other current assignments. Holdings in the Company: Charlotta Göransson owns 441 shares and 8,410 employee share options in the Company. for compliance, from product development to production and post-market activities. Born: 1984 Education: MSc in chemical engineering, Uppsala University (2009). Other ongoing assignments: Victoria Lerneryd has no other current assignments. Other ongoing assignments: Jonas Melin is a Director of Melin Science AB. Holdings in the Company: Jonas Melin owns 441 shares and 8,410 employee share options Holdings in the Company: Victoria Lerneryd 7. Tiziana Di Martino Employed by the Company as CMO since 2020 in the Company. owns 3,570 employee share options in the Company. Tiziana Di Martino has more than 18 years’ experience in clinical practice, research and medical businesses in the microbial diag- nostics industry. She has previously served as Regional Medical Affairs Manager at Abbott Molecular, Clinical and Scientiﬁc Affairs Manager EMEA at Abbott Point of Care and Head of Clinical Development EMEA at 9. Karl Sköld Employed by the Company as Director Contract Development since 2018 11. Ulrika Stolpe Employed by the Company since 2012, HR Manager since 2019 Karl Sköld has a background as a researcher in molecular biology and pharmaceutical life Before joining Q-linea, Ulrika Stolpe worked sciences at Uppsala University. From 2007 to in accounting, HR and ofﬁce management at small and large national and international life sciences companies since the 1990s. She joined Q-linea as the Head of Accounting and Ofﬁce Manager in 2012. She drove the development of the Company’s accounting and HR administrative processes as well as contributing to work environment issues until 2016, he was active as the founder, Director Accelerate Diagnostics. In these roles, she has and Research Director of Denator AB, a successfully driven clinical projects related to company that develops and sells systems for new product launches. Born: 1976 Education: MD, Università Cattolica del Sacro Cuore in Rome (2003); MSc in toxicology, University of Surrey (2011); MBA, London Business School (2014). Other ongoing assignments: Tiziana Di Martino has no other current assignments. Holdings in the Company: Tiziana Di Martino owns 12,620 performance share rights and 8,410 employee share options in the Company. the heat stabilisation of clinical samples. He is also a co-founder of Maurten AB, a com- pany that develops energy and nutritional products for athletes and the healthcare industry. In 2017, he became CEO of Umbrella 2019. Since the listing of the Company on the Science AB, whose operations were acquired stock exchange, her work has concentrated on HR where we can see rapid growth in the number of employees compared with 2012. by Q-linea in the summer of 2018. Born: 1974 Education: PhD in pharmaceutical biosci- ence, Uppsala University (2006). Other ongoing assignments: Karl Sköld is a Director of Hardcover AB and a Deputy Director of Laminaria Group AB and Maurten AB. Born: 1967 Other ongoing assignments: Ulrika Stolpe has no other current assignments. Holdings in the Company: Ulrika Stolpe owns 3,441 shares and 3,570 employee share options in the Company. Holdings in the Company: Karl Sköld owns 8,410 employee share options in the Company. He owns an additional 1,029 shares in the Company through his wholly owned company Hardcover AB. Q-LINEA | ANNUAL REPORT 2021 60 Income statement Amounts in SEK thousand Note 2021 2020 Net sales Other operating income 5 6 9,335 450 243 911 Changes in inventories of products in progress, semi-ﬁnished goods and ﬁnished goods1) 2,165 -36,529 -90,765 -110,512 -7,311 5,330 -37,592 -89,409 -94,576 -6,101 Raw materials and consumables, and goods for resale Other external costs Personnel costs Depreciation/amortisation of tangible and intangible assets Other operating expenses 7, 8 9, 24 11, 12 6 -383 -349 Operating result -233,550 -221,543 Revenue from holdings of listed corporate bonds that are non-current assets2) Other interest income and similar proﬁt items Interest expenses and similar loss items 1,668 2,580 -1,941 2,307 933 3,490 -1,536 2,887 Result from ﬁnancial items Result before tax -231,242 -218,655 Tax on result for the year Result for the year 10 19 – – -231,242 -218,655 Earnings per share before and after dilution, SEK -8.19 -8.64 Average number of shares 28,239,064 25,309,041 Statement of comprehensive income Amounts in SEK thousand Note 2021 2020 Result for the year -231,242 -218,655 Total comprehensive income -231,242 -218,655 1) This item was previously included in the line “Raw materials and consumables, and goods for resale” 2) Thisitemwaspreviouslyincludedintheline“Otherinterestincomeandsimilarproﬁtitems” Q-LINEA | ANNUAL REPORT 2021 61 FINANCIAL STATEMENTS Balance sheet Amounts in SEK thousand Note 31 Dec 2021 31 Dec 2020 ASSETS Non-current assets Intangible assets Licences Technology and customer relationships Goodwill 11 11 11 95 295 3,802 4,193 167 420 4,889 5,475 Total intangible assets Tangible assets Equipment, tools, ﬁxtures and ﬁttings Total tangible assets 12 13 27,669 27,669 21,821 21,821 Financial assets Other securities held as non-current assets Other long-term receivables Total ﬁnancial assets 184,765 50 184,815 27,361 50 27,411 Total non-current assets 216,676 54,707 Current assets Inventories 14 28,646 12,433 Current receivables Accounts receivable Other receivables Prepaid expenses and accrued income Total current receivables 3,481 48,440 3,355 43 35,198 2,958 15 16 55,276 38,200 Short-term investments Short-term investments Total short-term investments 17 150,945 150,945 296,748 296,748 Cash and bank balances Total current assets TOTAL ASSETS 15,089 249,957 466,633 10,144 357,525 412,233 Q-LINEA | ANNUAL REPORT 2021 62 Balance sheet Amounts in SEK thousand Note 31 Dec 2021 31 Dec 2020 EQUITY AND LIABILITIES Equity Restricted equity Share capital Unregistered share capital Total restricted equity 18 1,477 - 1,477 1,367 - 1,367 Unrestricted equity Share premium reserve Retained earnings Result for the year Total unrestricted equity 1,234,972 -574,419 -231,242 429,311 951,017 -353,531 -218,655 378,830 26 Total equity 430,788 380,197 Liabilities Long-term liabilities Loans from credit institutions Total long-term liabilities 20 20 - - 79 79 Current liabilities Loans from credit institutions Accounts payable 79 8,103 2,238 252 8,068 1,932 Current tax liabilities Other liabilities Accrued expenses and deferred income Total current liabilities 21 22 10,969 14,456 35,845 3,463 18,241 31,956 TOTAL LIABILITIES AND EQUITY 466,633 412,233 Q-LINEA | ANNUAL REPORT 2021 63 FINANCIAL STATEMENTS Changes in equity Restricted equity Unrestricted equity Retained Unregistered Share premium share capital reserve Result for the year Amounts in SEK thousand Note Share capital earnings Total equity Equity at 1 January 2020 1,162 5 697,062 -179,930 -177,354 340,944 Comprehensive income Result for the year - - - - -218,655 -218,655 Appropriation of proﬁts in accordance with AGM decision – Carried forward to unrestricted equity Total comprehensive income - - - - - - -177,354 -177,354 177,354 -41,301 0 -218,655 Transactions with shareholders New share issue Issue costs Share-based remuneration programmes Total transactions with shareholders 18 9 205 - - -5 - - 269,800 -15,845 - - - - - - - 270,000 -15,845 3,754 3,754 3,754 205 -5 253,955 257,909 Closing balance, 31 December 2020 1,367 0 951,017 -353,531 -218,655 380,197 Unregistered Share premium Retained earnings Result Amounts in SEK thousand Note Share capital share capital reserve for the year Total equity Equity at 1 January 2021 1,367 0 951,017 -353,531 -218,655 380,197 Comprehensive income Result for the year - - - - -231,242 -231,242 Appropriation of proﬁts in accordance with AGM decision – Carried forward to unrestricted equity Total comprehensive income - - - - - - -218,655 -218,655 218,655 -12,587 - -231,242 Transactions with shareholders New share issue Issue costs Share-based remuneration programmes Total transactions with shareholders 18 9 110 - - - - - - 301,290 -17,335 - - - - - - - 301,400 -17,335 -2,233 -2,233 -2,233 110 283,955 281,833 Closing balance, 31 December 2021 1,477 0 1,234,972 -574,419 -231,242 430,788 Q-LINEA | ANNUAL REPORT 2021 64 Cash flow statement Amounts in SEK thousand Note 2021 2020 Cash flow from operating activities Operating result -233,550 -221,543 Adjustments for non-cash items – Depreciation reversal – Scrapping of inventory – Change in guarantee reserve – Share-based remuneration programmes Interest received 7,311 94 350 -2,233 3,735 -1,180 306 6,101 201 12 9 - 3,754 2,764 -434 Interest paid Tax paid 774 Cash flow from operating activities before changes in working capital -225,167 -208,383 Changes in working capital Increase/decrease in inventories 14 -16,213 -3,438 -13,639 3,371 36 -29,883 -12,433 -27 -14,638 -711 -1,113 -28,922 Increase/decrease in accounts receivable Increase/decrease in other current receivables Increase/decrease in other current liabilities Increase/decrease in accounts payable Changes in working capital Cash flow from operating activities -255,050 -237,305 Cash flow from investing activities Investments in tangible assets Short-term investments Divestment of short-term investments Investments in ﬁnancial assets Divestment of ﬁnancial assets Cash flow from investing activities -11,971 -176,134 363,231 -204,095 5,150 -13,228 -185,000 200,046 -50,127 16,013 -23,819 -32,295 Cash flow from ﬁnancing activities New share issue Issue costs 301,400 -17,335 -252 270,000 -15,845 -378 Repayment of loans 20 Cash flow from ﬁnancing activities 283,814 253,777 Cash flow for the year 4,945 -15,823 Cash and cash equivalents at the beginning of the year 10,144 25,968 Cash and cash equivalents at the end of the year 15,089 10,144 Q-LINEA | ANNUAL REPORT 2021 65 FINANCIAL STATEMENTS Accounting policies and notes Note 2 Summary of signiﬁcant Note 1 General information accounting policies Q-linea AB (publ) has been listed on Nasdaq Stockholm since 7 December 2018. The Company is an innovative infection diagnostics company focusing on the development of instruments and consum- ables for rapid and reliable infection diagnostics. Q-linea’s vision is to help to save lives by ensuring antibiotics continue to be an effective treatment for future generations. Q-linea develops and delivers solutions for healthcare providers, enabling them to diagnose and treat infectious diseases in the shortest possible time. The Company’s leading product, ASTar®, is a fully automated instrument for testing antibiotic resistance (AST), which produces a sensitivity proﬁle from a positive blood culture within six hours. For more information, visit www.qlinea.com. The address of the head ofﬁce is Dag Hammarsk- jölds väg 52 A, Uppsala, Sweden. Q-linea’s shares are listed on Nasdaq Stockholm. Basis ofpreparation ofﬁnancial statements Q-linea AB has prepared its annual report in accordance with the Swedish Annual Accounts Act (1995:1554) and International Financial Reporting Standards (IFRS) in accordance with the Swedish Financial Reporting Board’s recommendation RFR 2 Accounting for Legal Entities. RFR 2 entails that Q-linea applies all of the EU-endorsed International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the EU and statements, with the limitations that follow the Swedish Financial Reporting Board’s recommendation RFR 2 Accounting for Legal Entities. The annual report has been prepared according to the cost method. The Board of Directors approved this annual report for publication on 13 April 2022. The Company applies the presentation methods speciﬁed in the Swedish Annual Accounts Act, which means that equity is presented differently compared with IFRS. The most signiﬁcant accounting policies applied when this annual report was prepared are set out below. The most signiﬁcant accounting policies applied when this annual report was prepared are set out below. Preparing ﬁnancial statements according to RFR 2 requires the use of some signiﬁcant accounting estimates. All amounts are presented in thousands of Swedish kronor (SEK thousand) unless otherwise stated. All amounts presented have been rounded correctly, which may mean that certain totals do not tally. Furthermore, management is required make certain assessments in the application of accounting policies. The areas that involve a high degree of assessments, that are complex, or areas where assumptions and estimates are of major importance for the annual report are described in Note 4 “Signiﬁcant estimates and judgements.” Accounting policies Translation of foreign currency Q-linea’s functional currency is the Swedish krona (SEK) which is also the reporting currency. This means that the ﬁnancial statements are presented in SEK. Transactions in foreign currency are translated to the functional currency at the rates of exchange on the transaction date, or the date on which the items are remeasured. Exchange-rate gains and losses arising from the payment of such transactions and the translation of monetary assets and liabilities in foreign currency at the rates of exchange on the balance sheet date are recognised in proﬁt or loss. Exchange-rate gains and losses attributable to loans and cash and cash equivalents are recognised in proﬁt or loss under ﬁnancial items. All other exchange-rate gains and losses are recognised in operating result. Segment reporting An operating segment is a part of a company that conducts business activities from which revenue can be generated and costs are incurred and for which independent ﬁnancial information is available. The segment’s operating result is assessed on a regular basis by the Company’s chief operating decision maker as a basis for decisions regarding the allocation of resources to the segment. At Q-linea, company management has been identiﬁed as the chief operating decision maker. Company management assesses the operations in their entirety, meaning as a single segment, and the Company therefore does not present information by segment. Q-LINEA | ANNUAL REPORT 2021 66 Revenue recognition Pension obligations Revenue includes the value that Q-linea has the right to receive for goods and services sold in the Company’s operating activities, excluding VAT and volume discounts. Contracted volume discounts reduce revenue and are recognised at expected fair value. Q-linea has only post-employment deﬁned-contribution pension plans. For deﬁned-contribution pension plans, Q-linea pays contributions to publicly or privately administered pen- sion insurance plans on a compulsory, contractual or voluntary basis. Q-linea has no other payment obligations once these contributions have been paid. The contributions are recognised as personnel costs when they fall due for payment. Sales of goods The Company develops, manufactures and sells instruments, con- sumables and spare parts on a global basis to both a global retailer and directly to Swedish end users. Revenue from sales to retailers and end users is recognised when control of the goods has passed from Q-linea to the customer. Prepaid contributions are recognised as an asset insofar as a cash repayment or a decrease in future payments could accrue to Q-linea. Past-service costs are recognised directly in proﬁt or loss. The time at which control passes from Q-linea to the customer is typically upon delivery. The delivery time to the retailer is when the goods are transported from Q-linea’s production premises. The delivery time to the end user is normally when the goods have been transported to the speciﬁc location designated by the end user and the installation has been carried out. In these cases, revenue from sales is recognised at a point in time. Freight is normally paid by the customer. Share-based remuneration The Company had two types of share-based remuneration pro- grammes at the end of 2021. Employee share option programme The cost for the remuneration recognised in a period depends on the original valuation made on the contract date with the participants of the employee share option programme, the number of months’ service required from an employee to gain entitlement to receive options (allocation takes place over this period), the number of options expected to be earned by the participants according to the conditions of the programmes and the continuous revaluation of the taxable beneﬁt for the participants of the programme (as a basis for provisions for social security costs). The estimates that impact the costs in a period and the corresponding increase in equity are primarily all inputs in the valuations of the options. Earned options are settled with shares. Payments received, less any directly associated transaction costs, are credited to share capital and other paid-in equity. Sales of services The Company offers services, mainly in the form of maintenance of instruments. Service agreements can be signed directly between Q-linea and the end user and are typically invoiced one year in advance. Q-linea’s efforts to meet its performance obligation in service agreements is assessed to be evenly distributed during the contract period. This is because the customer can take advantage of the service at any time during the entire contract period and the degree of usage is unknown. Revenue is thus recognised in a linear manner across the entire contract period. Services can also be offered to retailers, in which a suborder is made according to a contracted price list. The contract is typically on current account based on a price per hour. The Company’s efforts to meet its performance obligation to the retailer take place upon completion, and revenue is recognised during the period in which the service is carried out. Performance share-based programme The fair value of the performance share rights was determined on the allotment date and corresponded to the closing price of the share on that date. The value has been recognised as a personnel cost in proﬁt or loss, distributed over the vesting period, with a corresponding increase in equity. The amount recognised corresponds to the fair value of the performance shares expected to be vested. In subsequent periods, this cost will be adjusted to reflect the actual number of vested performance shares. Q-linea applies an average credit period of 30–60 days for the sale of instruments and 30–45 days for the sale of consumables and spare parts. Q-linea receives partial payments for instruments in advance and recognises the advance received as a contract liability until the time of delivery. Social security contributions Employee beneﬁts The social security contributions arising on the allotment of share options and performance share rights are considered to be an inte- grated part of the allotment and the cost is treated as a cash-settled share-based remuneration, which means that a liability is recognised in the balance sheet. This liability is continuously remeasured and the value of the liability and the cost in proﬁt or loss depend on the change in value and on the allocation based on the vesting of the options. Employee beneﬁts in the form of salaries, bonuses, paid holidays, performance share rights, employee share options, etc. as well as pensions are recognised as they are earned. Severance pay is paid when employment is terminated by the Company before the normal retirement date or when an employee accepts a voluntary redun- dancy in exchange for such remuneration. The Company recognises severance pay when it is unquestionably obligated either to terminate an individual’s employment in accordance with a detailed formal plan without any possibility of cancellation or to pay severance pay as a result of an offer made to encourage voluntary redundancy. Beneﬁts that arise more than 12 months after the balance sheet date are discounted to their present value. ➜ Q-LINEA | ANNUAL REPORT 2021 67 NOTES Interest income, interest expenses and similar proﬁt/loss items Interest income on receivables and interest expenses on liabilities are calculated using the effective interest method. Effective interest is the exact rate used to discount estimated future receipts and disburse- ments during the ﬁnancial instrument’s expected term to recognised gross value in the case of a ﬁnancial asset or to amortised cost in the case of a ﬁnancial liability. Interest income and interest expenses include allocated amounts of transaction costs and any discounts or premiums. Dividend income is recognised when the right to receive payment has been established. The result from the sale of ﬁnancial investments is recognised on the transaction date. Intangible assets Capitalised development expenses Research expenses that aim to obtain new scientiﬁc or technolog- ical expertise are recognised as costs as they arise. Expenses for development projects attributable to the development and testing of new or improved products are carried forward to the extent that these expenses are expected to generate future ﬁnancial beneﬁts. Q-linea capitalises development expenses when all of the following conditions are met: a) It is technically possible to complete the development object so that it can be used or sold. Interest expenses are charged to the result for the period to which they are attributable, except insofar as they are included in the cost of the asset. However, no interest expenses are currently recognised in the cost of assets. b) Management has decided to complete the development object. c) Q-linea has the conditions to use or sell the development object. d) It is possible to demonstrate how the development object will generate future probable ﬁnancial beneﬁts. Income tax e) Q-linea has adequate technical, ﬁnancial and other resources to complete the development. Income tax-related income and expenses comprise current and deferred tax. Current tax is the tax calculated on the Company’s taxable result for the current period or prior periods. Deferred tax is tax on temporary differences between carrying amounts and tax bases of assets and liabilities. f) Q-linea can reliably calculate the expenses associated with the development of the development object. At the end of the year, management determined that all of the requirements for capitalisation of development expenses had not been fulﬁlled. Deferred tax revenue also arises insofar as the tax effect of a tax loss carryforward is recognised as a deferred tax asset. However, a deferred tax asset is recognised only insofar as it is clearly probable that the Group, in future, will generate a sufﬁcient taxable surplus against which the deferred tax asset can be deducted. Since it is not yet possible to reliably estimate when Q-linea will generate such a surplus, no deferred tax assets have been recognised. Other development expenses are expensed as they arise. Devel- opment expenses that were previously expensed are not capitalised as an asset in later periods. Amortisation of capitalised development expenses takes place on a straight-line basis over the period in which the anticipated beneﬁts are expected to accrue to the Company, starting when the product has either obtained all approval required for sale in a market or has otherwise started to generate revenue for Q-linea, whichever occurs ﬁrst. Tangible assets Tangible assets are recognised at cost with deductions for accu- mulated depreciation and any accumulated impairment. The cost includes expenses that can be directly attributed to the acquisition of the asset. Additional expenses are added to the asset’s carrying amount or recognised as a separate asset, depending on what is most appropriate, only if it is probable that the future ﬁnancial beneﬁts associated with the asset will accrue to Q-linea and the asset’s cost can be measured reliably. The carrying amount for the replaced por- tion is eliminated from the balance sheet. All other forms of repairs and maintenance are recognised as costs in proﬁt or loss during the period in which they arise. Licences Licences acquired separately are recognised at cost. Licences have a determinable useful life and are recognised at cost less accumulated amortisation and any impairment. Q-linea amortises licences with determinable useful lives on a straight-line basis over the following periods: – Licenses 7 years Assets are depreciated on a straight-line basis to allocate their cost reduced to the estimated residual value over the estimated useful life. The useful lives are as follows: Goodwill Goodwill arises in business combinations and is recognised on the acquisition date as the total of the fair value of the assets transferred as consideration to the seller less the net value of the identiﬁed assets and liabilities measured at fair value that were transferred in conjunction with the acquisition. Equipment, tools, ﬁxtures and ﬁttings The residual values and useful lives of the assets are tested at the end of each reporting period and adjusted if necessary. Gains and losses from divestments are established by comparing the sales proceeds with the carrying amount of the asset and are recognised net in proﬁt or loss. Q-linea depreciates assets on a straight-line basis over ﬁve to ten years. Goodwill is recognised in the Parent Company at cost less accumu- lated amortisation. Amortisation takes place on a straight-line basis in order to distribute the cost of goodwill over the estimated useful life: – Goodwill 7 years Leases All leases are classiﬁed as operating leases. Lease payments are expensed on a straight-line basis over the lease term. Acquired intangible assets Technology (software protocol) and customer relationships acquired through a business combination are measured at fair value on the acquisition date. Technology (software protocol) and customer relationships have a determinable useful life and are recognised at cost less accumulated amortisation. Amortisation takes place on a straight-line basis in order to distribute the cost of technology (software protocol) and customer relationships over their estimated useful lives: – Technology (software protocol) 7 years – Customer relationships 3 years Q-LINEA | ANNUAL REPORT 2021 68 Impairment of non-ﬁnancial assets Impairment of ﬁnancial assets Intangible assets with an indeﬁnite useful life and intangible assets that are not yet available for use are not subject to amortisation; instead they are impairment tested annually. Expected credit losses on ﬁnancial assets measured at amortised cost are assessed on initial recognition and then on a continuous basis. A loss allowance for credit losses is initially calculated and recognised based on expected credit losses for 12 months. On each reporting date, the Company assesses whether the expected credit losses for a ﬁnancial instrument have increased signiﬁcantly since the initial recognition date and, if this is the case, a loss allowance is recognised based on expected credit losses for the asset’s entire remaining term. The loss allowance for accounts receivable that do not include a material ﬁnancing components is measured at an amount corre- sponding to the expected credit losses during the remaining term of the receivable. Changes in credit reserves are recognised in proﬁt or loss. The gross value of a ﬁnancial assets is written off when the Group has no reasonable expectations that the ﬁnancial asset will be recovered in its entirety or in part. Tangible assets and intangible assets that are depreciated/ amortised are impairment tested for when there is an indication of a decline in value. When testing for impairment, the recoverable amount of the assets is calculated and, if it is lower than the asset’s carrying amount, the asset is impaired. The recoverable amount is the higher of an asset’s fair value less selling expenses and its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). For previously impaired assets, an assessment is made on each balance sheet date as to whether a reversal should take place. Inventories Offsetting Inventories are recognised at the lower of cost and net realisable value. Cost is determined using the ﬁrst-in, ﬁrst-out (FIFO) method. Goods for resale are goods that are purchased in order to be sold without Q-linea processing them further. They are valued at the purchase price invoiced by the supplier plus costs for quality control. Goods for resale were included in the item “Finished goods” in the 2020 Annual Report. Financial assets and ﬁnancial liabilities are offset and the net amount recognised in the balance sheet only when the Company has a legally enforceable right to offset the recognised amounts and intends to settle them on a net basis or to realise the asset and settle the liability simultaneously. Equity The cost of raw materials and consumables comprises the pur- chase price invoiced by the supplier. The cost of products in progress, semi-ﬁnished goods and ﬁnished goods comprises the costs for raw materials plus manufacturing costs and costs for quality control. Net realisable value is the estimated selling price in the operating activities less applicable variable selling expenses. Transaction costs that are directly attributable to issues or new shares or options are recognised in net amounts after tax in equity as a deduction from the issue proceeds. At the end of 2021, Q-linea had a holding of treasury shares. On the repurchase of treasury shares, the total purchase consideration paid reduces equity (retained earnings). The holding of treasury shares is recognised in retained earnings at the quotient value of the shares. The holding of treasury shares has been excluded from the calculation of per-share performance measures. Financial instruments Financial instruments are agreements that give rise to a ﬁnancial asset or liability. Financial assets include cash, equity instruments in other companies and agreements that carry entitlement to cash and other ﬁnancial assets. Financial liabilities are agreements under which the Company is obligated to pay cash or other ﬁnancial assets to another company. The aim of these shares is to ensure the delivery of performance shares under long-term incentive programmes. Earnings per share Earnings per share before dilution are calculated by dividing the result for the year by the weighted average number of shares outstanding during the year, less holdings of the average number of treasury shares. This means that there are several receivables and liabilities that are not ﬁnancial instruments. For example, receivables or liabilities that can be expected to be settled in a manner other than cash or other ﬁnancial assets are not handled according to the accounting policies for ﬁnancial instruments. The same applies for receivables and liabilities that are not based on agreements. Earnings per share after dilution are calculated by dividing the result for the year by the total weighted average number of ordinary shares and dilutive potential ordinary shares. The dilutive effect of potential ordinary shares is only recognised if a conversion to ordinary shares would lead to a reduction of earnings per share after dilution, and since the Company recognises losses for the recognised years, no dilutive effect is recognised. In accordance with exception in RFR 2, Q-linea has chosen not to apply IFRS 9 for ﬁnancial instruments. Some of the policies in IFRS 9 are still applicable, however, such as those pertaining to impairment, recognition/derecognition, criteria for the application of hedge accounting and the effective interest method for interest income and interest expenses. For ﬁnancial assets recognised at amortised cost, the impairment rules of IFRS 9 are applied. Impairment of unlisted shareholdings that are not holdings in subsidiaries, associated companies or joint arrangements are recognised if the present value of the expected future cash flows is lower than the carrying amount. Q-linea’s ﬁnancial non-current assets are recognised at cost less any impairment and ﬁnancial current assets at the lower of cost and net realisable value. Financial assets that are non-current assets are recognised at cost less any impairment. Financial liabilities are measured at amortised cost using the effective interest method. Financial instruments are recognised in the balance sheet when Q-linea becomes a party to the instrument’s contractual terms and conditions. Accounts receivable are recognised when they are issued. A ﬁnancial asset is derecognised from the balance sheet when the rights in the contract cease because they have been realised, expire or Q-linea loses control of them. A ﬁnancial liability is derecognised from the balance sheet when the contractual obligation is discharged or otherwise ceases to apply. Provisions Guarantees The Company sells instruments with guarantees in accordance with industry practice. The guarantee period is normally 12 months from the date of the approved installation. The right of return is only valid upon technical errors. Provisions for these guarantee commitments are calculated for each individual instrument based on applicable guarantee conditions and assessed product quality and are recognised as a liability until the guarantee period is complete or the guarantee has been utilised. Signiﬁcant estimates and judgements of the size of the guarantee reserve. Assumptions about the size of the guarantee reserve are based on estimates and judgements since data on actual historic guarantee costs is not available. ➜ Q-LINEA | ANNUAL REPORT 2021 69 NOTES Cash flow Reconciliation of alternative performance measures The cash flow statement has been prepared according to the indirect method. The recognised cash flow includes only transactions that involve receipts or payments. The following is a reconciliation of certain alternative performance measures showing the various performance measure components that make up the alternative performance measures. Treasury shares refer to the Company’s own holding to ensure the delivery of performance shares under LTIP 2018 and LTIP 2019. The Company’s holding of treasury shares has been excluded from the calculation of per-share performance measures. The Company classiﬁes available balances at banks and other credit institutions as cash and cash equivalents. Performance measures Deﬁnition Reason for use EBITDA 2021 2020 EBITDA Operating result before deprecia- This performance measure Operating result -233,550 -221,543 tion/amortisation and impairment. provides an overall view Depreciation, amortisation and of proﬁt for the operating activities. impairment 7,311 6,101 EBITDA -226,238 -215,442 Operating result (EBIT) Equity/assets ratio Result before ﬁnancial items This earnings measure- according to the income statement. ment is used for external comparisons. 31 Dec 2021 466,633 430,788 92% 31 Dec 2020 412,233 380,197 92% Total assets Equity Equity/assets ratio (%) Equity/assets ratio, % Equity in relation to total assets. This performance measure shows the amount of the balance sheet that has been ﬁnanced by equity and is used to measure the Company’s ﬁnancial position. Equity per share 31 Dec 2021 31 Dec 2020 Equity (a) 430,788 29,537,947 27,337,947 -328,472 380,197 Total number of shares outstanding (b) - Less holding of treasury shares (c) Equity per share (a/(b-c)), SEK Debt/equity ratio, % -328,472 14.08 Net debt divided by recognised equity according to the balance sheet. Net debt is deﬁned as total borrowing (comprising the items short-term borrowing and This performance measure is a measure of capital 14.75 strength and is used to For a reconciliation of the alternative performance measure of debt/equity ratio, refer to Note 3 below and the section “Management of capital.” determine the relationship between adjusted liabilities long-term borrowing in the balance and equity. In the case of sheet, including borrowing from related parties/Group companies and provisions, less cash and cash equivalents and short and long- term investments). positive equity, a negative debt/equity ratio means that available cash and cash equivalents and short-term investments exceed total borrowing. Equity per share before and after dilution Equity attributable to the Com- pany’s shareholders in relation to the number of shares outstanding, excluding treasury holdings, at the end of the year. This performance measure shows the amount of the Company’s equity that can be attributed to a share. Q-LINEA | ANNUAL REPORT 2021 70 The tables below show the most commonly occurring currencies in the operations and the theoretical effect on the operating result that would arise if the average exchange rate of each currency were to change by 5%. Note 3 Financial risk management Q-linea’s operations are, like all business activities, exposed to a large number of risks. These risks can be generally divided into risks that directly impact the Company’s ﬁnancial situation (ﬁnancial risks) and risks that only indirectly impact the ﬁnancial situation (operating risks). The operating risks that Q-linea is exposed to and how they are managed are described in the Board of Directors’ Report. Financial risks can be divided into risks that affect the Company’s ﬁnancial instruments and other ﬁnancial risks that affect other assets and liabilities and equity. Result for the year Change +/- 5% SEK thousand 2021 Sales Expenses EUR USD GBP DKK CHF SEK Total - - - - - -5,356 -5,865 -3,918 -226 -208 -225,454 -5,356 -5,865 -3,918 -226 -208 +/-268 +/-296 +/-196 +/-11 +/-10 +/-0 Risk management is undertaken by management following guidelines adopted by the Board for both overall risk management and for special areas, such as currency risk, interest rate risk, credit risk and investment of surplus liquidity. Management identiﬁes, evaluates and hedges ﬁnancial risks. 9,785 9,785 -241,027 -215,669 -231,242 Risks comprise two components: • The risk of a negative event occurring • The risk of major consequences if a negative event occurs. +/-778 Result for the year Change +/- 5% SEK thousand 2020 EUR USD GBP Sales Expenses A correct risk assessment and thus a decision on appropriate risk-management measures is based on an accurate appraisal of both of these components. Obviously there are situations in which it is not proﬁtable to actively take measures to prevent a negative event even though there is the risk of such an event occurring, if all of the consequences of this negative event are small. In such cases, the best course of action is probably to accept the risk. In other cases when the consequences of a negative event may be more extensive, risk management may take the form of attempting to minimise both components by taking appropriate action. Such action could be directed to either of the components depending on the nature of the risk. In certain cases, primarily regarding market risk, an individual company is often unable to exercise any influence over the risk parameters at all. Risk management in these cases is concentrated entirely on reducing the consequences of the negative events. Credit and liquidity risks are largely governed by events that can be managed by taking active pre-emptive measures. The dominating ﬁnancial risks for Q-linea are ﬁnancing and associated liquidity risks as described above. - - - - -3,674 -4,717 -4,542 -21 -3,674 -4,717 -4,542 -21 +/-184 +/-236 +/-227 +/-1 DKK AUD - -125 -125 +/-6 SEK Total 1,155 1,155 -206,731 -219,810 -205,576 -218,655 +/-0 +/-654 Currency risk attributable to the balance sheet Currency risk attributable to the Company’s balance-sheet items is insigniﬁcant. Interest rate risk attributable to cash flows and fair values Q-linea had interest-bearing assets with a current variable rate amounting to SEK 311,362 thousand at year-end. The theoretical earnings effect that would arise if the Company’s interest rate were to change by +/- 1% amounts to +/- SEK 3,114 thousand annually. As a result, most ﬁnancial risk management activities focus on these two risks. This means in practice that company management continuously works to identify and develop various ﬁnancing opportunities through both lenders and owners. b) Liquidity risk and ﬁnancing risk The primary ﬁnancial risks to which Q-linea’s ﬁnancial instruments are exposed to varying extents are: Financing risk entails that risk that Q-linea will not be successful in persuading existing owners or ﬁnding new owners who are willing to contribute capital and lenders who are prepared to grant loans to a sufﬁcient extent until such time as the Company’s own sales have reached a sufﬁcient scope. If ﬁnancing is not secured to a sufﬁcient extent, there is the risk that the Company will not have the prerequi- sites for being a going concern. • Market risk, entailing the risk that variables dependent on trends in the ﬁnancial markets have a negative impact on the value of Q-linea’s ﬁnancial instruments. • Liquidity and ﬁnancing risk, entailing the risk that Q-linea will have insufﬁcient cash and cash equivalents to pay a debt when it falls due or that a lack of liquidity will signiﬁcantly limit Q-linea in its operations. Liquidity risk is the risk that Q-linea lacks cash and cash equiva- lents for the payment of its undertakings. Liquidity is impacted by such factors as payment terms of customer credit and credit from suppliers. • Credit risk, entailing the risk that a debtor does not pay its debts to Q-linea. a) Market risk The Company follows an investment policy that stipulates the reg- ulations for managing Q-linea’s cash funds based on the guidelines approved by the Board. The investment policy stipulates regulations in the following areas: Transaction exposure Q-linea is exposed to a certain level of currency risk since a signiﬁcant amount of its costs are in foreign currency and the Company has SEK as its functional currency and presentation currency. Consequently, the Company is exposed to currency risk since fluctuations in exchange rates may impact the operating result. • Permitted classes of assets and limitations for the various classes of assets • Restrictions on one-handed commitments • Periodic monitoring of holdings ➜ • Ethical requirements Q-LINEA | ANNUAL REPORT 2021 71 NOTES Cash and cash equivalents that will not be used in the daily opera- tions but are planned to be used within the coming 12 months have been placed in ﬁxed-income funds. Since most of the securities in these funds have a remaining term of more than three months, the securities have been recognised and measured at the lower of cost and fair value in the balance sheet. At the end of the year, the Compa- ny’s short-term investments totalled SEK 150,945 thousand (296,748), of which SEK 59,700 thousand (130,999) represents the short-term component of the Company’s listed corporate bonds. The fair value of the ﬁxed-income funds amounted to SEK 91,295 thousand (166,745) and the fair value of the bonds amounted to SEK 59,427 thousand (130,659). Accrued interest on the listed bonds amounted to SEK 150 thousand (324). c) Credit risk Credit risk arises in the context of cash and cash equivalents, balances with banks and ﬁnancial institutions and credit exposure through Q-linea’s customers, including receivables outstanding and contracted transactions. Credit risk regarding bonds The Company invests in corporate bond with high credit ratings, which means that all bonds have a rating higher than BBB-. The Company has decided to invest in several sectors and diversify the maturity structure over various periods for the next four years. Interest rate risk has also been considered and divided evenly between variable ﬁxed interest. Cash and cash equivalents that will not be used within the next 12 months have been invested in listed corporate bonds. The value of the Company’s long-term bonds including accrued interest amounted to SEK 181,768 thousand (24,364) at the end of the year. The capital in listed bonds is placed in several sectors and a diversiﬁed maturity structure with both variable and ﬁxed interest rates. Although these are recognised as long-term because of their maturity structure, they can – like short-term bonds – be converted to cash and cash equiva- lents within three to ﬁve days. The average maximum ﬁxed-interest period permitted is ﬁve years and investments are made in securities with an investment grade rating or equivalent. Credit risk regarding accounts receivable Customer credit risk entails that customers do not meet their undertakings to Q-linea. The Company had only a limited number of accounts receivable during the year. Customer credit risk is primarily managed by monitoring customer credit ratings assigned by inde- pendent rating agencies. If no independent credit rating is available, a risk assessment of the customer’s credit rating is performed taking into account the customers’ ﬁnancial positions, previous experience and other factors. No credit risk is deemed to exist. In 2021, the Company carried out a directed issue that generated proceeds of SEK 301,400 thousand (270,000) for the Company, less issue costs, which amounted to SEK 17,335 thousand (15,845). The Board’s assessment is that the existing working capital, as of 31 December 2021, is sufﬁcient to cover the Company’s needs for at least the next 12 months. Price risk from shareholdings The holding of shares in EMPE is recognised at cost and a value adjustment is carried out if the fair value is lower than the cost. The holding has been deemed not to constitute a material ﬁnancial risk. Management of capital The table below presents the undiscounted cash flows derived from Q-linea’s liabilities in the form of ﬁnancial instruments, based on the contracted remaining terms on the balance sheet date. The amounts falling due within 12 months correspond to the carrying amounts since the discount effect is insigniﬁcant. The Company’s objective concerning the capital structure is to safeguard its ability to continue its operations, so that the Company can maintain an optimal capital structure in order to minimise the cost of capital. Capital is assessed on the basis of the debt/equity ratio. This performance measure is calculated as net debt divided by total capital. Net debt is deﬁned as total borrowing (comprising the items short-term borrowing and long-term borrowing in the balance sheet, including borrowing from related parties/Group companies and provisions), less cash and cash equivalents and any short and long-term investments. Total capital is calculated as equity in the balance sheet plus net debt. The Company’s quantitative target for managing capital is for the net debt/equity ratio to be below 50%. Between 1 and 2 years Between 2 and 5 years More than Less than 1 year SEK thousand 5 years At 31 December 2021 Borrowing Interest to be paid to credit institutions 79 1 – – – – – – The debt/equity ratio at the end of the respective ﬁnancial years was as follows: SEK thousand (unless otherwise stated) Advance payments from customers Accounts payable 31 Dec 2021 31 Dec 2020 4,899 8,103 13,082 – – – – – – – – – Long-term liabilities to credit institutions (a) Current liabilities to credit institutions (b) Total borrowing (c=a+b) – Less cash and cash equivalents (d) – Less short-term investments (e) – Less long-term investments (f) Net debt (g=c+d+e+f) 0 79 79 79 252 331 Total At 31 December 2020 -15,089 -150,945 -181,768 -347,723 430,788 -81% -10,144 -296,748 -24,364 -330,925 380,197 -87% Borrowing 378 252 79 – Interest to be paid to credit institutions Accounts payable 19 9,240 9,637 7 – 259 1 – 80 – – – Equity (h) Total Debt/equity ratio (g/h) (%) Q-LINEA | ANNUAL REPORT 2021 72 Performance share-based programme LTIP 2019 Note 4 Signiﬁcant estimates and judgements The rights to receive performance shares were allotted free of charge in December 2019. As of 31 December 2019, when the programme was closed to new participants, 40,990 performance share rights had been allotted to participants of the programme. The performance targets are linked to product development, product approval and commercialisation. The performance share rights are earned as the performance targets are met. The value of each performance share right is SEK 56.00 and is based on the closing price on the allotment date (20 December 2019). The cost recognised, including social security contributions, amounted to SEK 934 thousand (1,410) for the year. The ﬁnal cost upon redemption in 2022 depends on several different factors that management cannot control and may differ from the estimated cost. The most signiﬁcant assumptions about the future, and other signiﬁcant sources of uncertainty in estimates on the balance sheet date, which entail a signiﬁcant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next ﬁnancial year are presented below. Research and development expenses The assets that arise by virtue of research or are in the research phase for internal projects are not recognised as assets in the ﬁnancial statements. Research expenses or expenses for internal projects in the research phase are expensed when they arise. The assets that arise by virtue of development or are in the development phase for internal projects are recognised as assets under certain conditions. Every year, or when indications arise, Q-linea assesses whether an internal project in the research phase meets the criteria for progress- ing to the development phase. None of the ongoing projects met the criteria for being recognised as an asset in the ﬁnancial statements as per 31 December 2021. Employee share option programme 2020/2023 Employee share options were allotted free of charge on 30 June 2020 following a resolution by the Annual General Meeting on 26 May 2020. The programme measures the fulﬁlment of certain strategic and operational targets established by the Board, and participants may acquire one ordinary share in the Company after a vesting period of three years if the targets are achieved. When the programme was closed to new participants, a total of 345,850 employee share options had been allotted. The volume-weighted average price for the Company’s share according to Nasdaq Stockholm’s price list during the period from 11–25 May, meaning the ten (10) trading days prior to 26 May 2020, was SEK 79.19, and the exercise price was thus set at SEK 98.98 per share. The option value on the allotment date was based on the average price on the allotment date and was calculated at SEK 11.38 per option. At the end of the year, there were 324,430 (345,850) employee share options outstanding and 21,420 (0) employee share options had expired. The option value at the end of the year amounted to SEK 27.36 (77.91) per option, according to the Black & Scholes model. The cost recognised for the year, including social security contributions, amounted to SEK 970 thousand (1,751). Deferred tax Deferred tax is calculated on temporary differences between carrying amounts and tax bases of assets and liabilities. Estimates and judgements impact the recognised deferred tax amounts through establishing the carrying amount of various assets and liabilities, and also through forecasts of future taxable proﬁts if future use of deferred tax assets is dependent on such proﬁts. Deferred tax assets are recognised to the extent that it is probable that future surpluses for tax purposes will be available to offset temporary differences. Q-linea does not recognise any deferred tax in the balance sheet due to the uncertainty of whether it will be possible to utilise losses in the foreseeable future. The accumulated, unrecognised loss carryforwards in the Company amounted to SEK 1,053,618 thousand (806,246) on 31 December 2021. Employee share option programme 2021/2024 Share-based remuneration programmes Employee share options were allotted free of charge on 30 June 2021 following a resolution by the Annual General Meeting on 25 May 2021. The programme measures the fulﬁlment of certain strategic and operational targets established by the Board, and participants may acquire one ordinary share in the Company after a vesting period of three years if the targets are achieved. Employee share option programme 2021/2024 encompasses a maximum of 160,650 employee share options and is to be offered free of charge to individuals employed by the Company as of 15 June 2021 who are not covered by any of the previous share-based incentive programmes in the Company. Performance share-based programme LTIP 2018 The rights to receive performance shares were allotted free of charge in March 2019. As of the Annual General Meeting on 22 May 2019, when the programme was closed to new participants, 142,720 performance share rights had been allotted to participants of the programme free of charge. The performance targets are linked to product development, product approval and commercialisation. The performance share rights are earned as the performance targets are met. The value of each performance share right is SEK 55.54 and is based on the closing price on the allotment date (1 March 2019). In December 2021, the Board of Directors made the assessment that the performance targets for LTIP 2018 will not be met when the programme ends on 28 February 2022. The Board decided that all 142,720 performance share rights in the programme consequently expired. The recognised reversal of costs in previous periods since the start of the programme, including social security contributions, amounted to SEK -8,950 thousand (6,201) for the year. As of 30 June 2021, when the programme was closed to new partic- ipants, a total of 128,520 employee share options had been allotted to the 36 participants who had registered for the programme. The volume-weighted average price for the Company’s share according to Nasdaq Stockholm’s price list during the period 10–24 May, meaning the ten (10) trading days prior to 25 May 2021, was SEK 153.45, and the exercise price was thus set at SEK 191.81 per share. The option value at the end of the year amounted to SEK 10.07 per option, according to the Black & Scholes model. At the end of the year, there were 124,950 (0) employee share options outstanding and 3,570 (0) options had expired. The cost recognised for the year, including social security contributions, amounted to SEK 697 thousand (0). Size of the guarantee reserve Assumptions about the size of the guarantee reserve are based on estimates and judgements since data on actual historic guarantee costs is not available. Q-LINEA | ANNUAL REPORT 2021 73 NOTES Note 7 Operating leases Note 5 Speciﬁcation ofnet sales Net sales are speciﬁed by geographic market as follows: Future minimum lease payments to be paid for non-cancellable leases: 2021 2020 - 243 31 Dec 2021 31 Dec 2020 UK 9,335 Due for payment within one year 6,451 5,933 Sweden - Due for payment later Total net sales 9,335 243 than one year but within ﬁve years 5,423 - 11,874 10,716 - 16,649 by geographic market Due for payment later than ﬁve years Total Expensed lease payments for the period – of which, variable index costs Net sales speciﬁed by type of revenue: 2021 9,335 - 2020 - 243 243 Instruments and consumables Prototype development 7,231 226 6,329 185 Total net sales by type of revenue 9,335 Operating leases comprise leases for company cars, rent for premises and rent for ofﬁce equipment. The lease with the longest term pertains to work machinery and expires on 28 February 2025 and can be terminated by the tenant on 30 August 2024 at the earliest. Otherwise, the lease will be extended by an additional three months. Instruments and consumables pertain to ASTar instruments with associated consumables. Prototype development pertains to the development of customer-speciﬁc prototypes for external customers. Prototype development is recognised as revenue on the date when the control is transferred to the customer. Refer also to the section on revenue recognition in Note 2. Note 8 Audit fees Audit assignment refers to the auditing of the annual report and accounting records as well as the administration of the Board and the President, other tasks required by the Company’s auditors, and advisory services and other assistance required as a result of observations arising from such audits or such other tasks. Everything else comes under other assignments. Note 6 Other operating income and other operating expenses Other operating income 2021 20 377 26 28 450 2020 610 94 98 109 911 All of the fees below pertain to remuneration to the audit ﬁrm Öhrlings PricewaterhouseCoopers AB and no portion pertains to its network. No remuneration was paid for valuation services. Sale of raw materials to suppliers Development services provided Exchange-rate differences Other 2021 2020 PwC, Öhrlings PricewaterhouseCoopers AB Audit assignment Audits other than audit assignment Tax advisory services Other advisory services Total Total other operating income 455 - 30 65 709 107 62 466 1,343 Other operating expenses 2021 289 94 2020 148 201 349 Exchange-rate differences Scrapping of inventory Total other operating expenses 550 383 Q-LINEA | ANNUAL REPORT 2021 74 Shared-based option programme Note 9 Employee beneﬁts and disclosures on employees At the end of the year, Q-linea had three ongoing share-based remu- neration programmes: LTIP 2019, Employee share option programme 2020/2023 and Employee share option programme 2021/2024. During the year, the share-based remuneration programme LTIP 2018 ended and the performance share rights expired. Employee beneﬁts 2021 77,825 18,701 2020 58,277 17,780 Salaries and remuneration Social security costs Employee share option programme 2021/2024 The Company’s Annual General Meeting on 25 May 2021 resolved to introduce an employee share option programme for the Company’s employees. Employee share option programme 2021/2024 is to comprise a maximum of 160,650 employee share options. Employee share options are to be offered free of charge to individuals employed by the Company as of 15 June 2021 who are not covered by any of the previous share-based incentive programmes in the Company. Each employee share option shall entitle the holder, on the achievement of certain strategic and operational goals set by the Board in advance and connected to signiﬁcant events in the Compa- ny’s development, such as advances in product development, product approval and commercialisation, And after a three-year vesting period, to acquire one (1) new common share in the Company at an exercise price corresponding to 125% of the volume-weighted average price of the Company’s share according to Nasdaq Stockholm’s price list during the period ten (10) trading days before 25 May 2021. However, the subscription price may not under any circumstances be less than the quotient value. Share options and performance share rights allotted to employees1) -2,233 3,754 Pension costs – deﬁned-contribution plans 10,575 7,980 87,791 Total 104,868 1) Costs that had been reserved in previous periods since the start of the share-based remuneration programme LTIP 2018 were reversed in 2021 when the Board determined that the performance targets had not been met and the programme therefore expired. 2021 2020 Salaries Salaries and other remunera- tion and other Pension remunera- Pension costs costs tion Directors, President and Employees who have the right to participate in the employee share option programme 2021/2024 may be allotted 3,570 employee share options each at the most. other senior executives 15,477 1,031 62,335 1,639 77,812 10,575 2,670 3,303 13,728 508 44,549 1,841 58,277 2,350 3,089 of which, variable pay Other employees of which, variable pay Total To enable the Company’s delivery of shares under the programme and to cover the cash flow effects as a result of any social security contributions arising under the programme, the Annual General Meeting resolved to carry out a directed issue of a maximum of 211,126 warrants to the Company, of which a maximum of 50,476 warrants were issued to cover any cash flow effects as a result of social security contributions arising under the employee share option programme 2021/2024. 7,272 4,891 - 7,980 of which, variable pay Average no. of employees As of 30 June 2021, when the programme was closed to new partic- ipants, a total of 128,520 employee share options had been allotted to the 36 participants who had registered for the programme. The volume-weighted average price for the Company’s share according to Nasdaq Stockholm’s price list during the period 10–24 May, meaning the ten (10) trading days prior to 25 May 2021, was SEK 153.45, and the exercise price was thus set at SEK 191.81 per share. The option value on the balance sheet date was SEK 10.07 per option, according to the Black & Scholes model. The allotment of employee share options per participant and category are presented in the table below. 2021 2020 Average no. of Of Average no. of Of whom, men whom, employees men employees Sweden Total 120 120 70 70 89 89 55 55 Other senior executives refers to the individuals who, together with the President, comprised the management team during the year. The Company’s management team was expanded to include an additional two executives in mid-December 2021. Their remuneration for parts of December are included in “Other employees” for full-year 2021. At the end of the year, the management team, excluding the President, comprised ten (eight) people, including four (two) women and six (six) men. Number of allotted employee share options No. of per Category participants participant per category 128,520 128,520 Other employees Total 36 36 3,570 – At the end of the 2021 ﬁnancial year, the Board comprised seven people (two women and ﬁve men). Number of allotted employee share options Number 31 Dec 2021 2020-12-311) Opening number - 128,520 - -3,570 124,950 - - - - - allotted during the period exercised during the period expired during the period Closing number of options ➜ Q-LINEA | ANNUAL REPORT 2021 75 NOTES At the end of the year, there were 124,950 (0) employee share options outstanding and 3,570 (0) options had expired during the year. The fair value of the options, calculated using the Black & Scholes valuation model, amounted to SEK 10.07 per option on the balance sheet date, and the cost recognised in the 2021 ﬁnancial year includ- ing social security contributions amounted to SEK 697 thousand (0). From the allotment date to the end of 2021, Q-linea’s share price decreased from SEK 141.85 to SEK 113.00, down approximately 20%. The fair value of the allotted options was calculated at SEK 1,258 thousand (0) with the following inputs: As of 30 June 2020, when the programme was closed to new partici- pants, a total of 345,850 employee share options had been allotted to participants who had registered for the programme. The allotment of employee share options per participant and category are presented in the table below. No. of performance share rights allotted No. of per Category participants participant per category 15,660 58,870 271,850 345,850 President 1 7 76 84 15,660 8,410 3,570 – Number 31 Dec 2021 SEK 113.00 SEK 191.81 0.39 Management team Other key employees Total Share price on the valuation date Exercise price, outstanding options Expected volatility1) Number of employee share options outstanding at year-end Term, options with three-year vesting period Risk-free rate, % Fair value per option, SEK 2.625 years – neg 0.136 10.07 Number 31 Dec 2021 345,850 - 31 Dec 2020 Opening number - allotted during the period exercised during the period expired during the period Closing number of options 345,850 1) Expected volatility was determined by analysing the share price trend for comparable companies. - - - Employee share option programme 2020/2023 -21,420 324,430 The Company’s Annual General Meeting on 26 May 2020 resolved to introduce an employee share option programme (“Employee share option programme 2020/2023”) for the Company’s employees. Q-linea’s performance-based employee share option programme encompasses the President, senior executives and other key individuals at the Company. Employee share options were offered free of charge to individuals employed by the Company as of 15 June 2020. In total, the programme encompassed a maximum of 350,000 employee share options and the employees were divided into three categories, which could be allotted the following maximum number of options: 345,850 The fair value of the options, calculated using the Black & Scholes valuation model, amounted to SEK 27.36 (77.91) per option on the balance sheet date, and the cost recognised in the 2021 ﬁnancial year including social security contributions amounted to SEK 970 thousand (1,751). From the allotment date to the end of 2021, Q-linea’s share price rose from SEK 73.54 to SEK 113.00, an increase of approximately 54% (131). The fair value of the outstanding options was calculated at SEK 8,876 thousand (26,945) with the following inputs: • President: the President could be allotted a maximum of 16,200 employee share options. Number 31 Dec 2021 2020-12-311) • Management team: participants in this category could be jointly allotted a maximum of 69,600 employee share options. However, each participant could be allotted a maximum of 8,700 employee share options. Share price on the valuation date, SEK Exercise price, outstanding options, SEK Expected volatility1) 113.00 98.98 0.37 170.00 98.98 0.37 • Other employees: participants in this category could be allotted a Term, options with three-year vesting period, years maximum of 3,700 employee share options. 1.625 2.625 Risk-free rate, % – neg 0.20 27.36 – neg 0.36 77.91 Each employee share option entitles the holder, upon the fulﬁlment of certain strategic and operational targets established by the Board and after a vesting period of three years, to acquire one (1) new ordinary share in the Company at an exercise price corresponding to 125% of the volume-weighted average price for the Company’s share according to Nasdaq Stockholm’s price list during the ten (10) trading days prior to 26 May 2020. The volume-weighted average price during this period was SEK 79.19, and the exercise price was thus set at SEK 98.98 per share. The option value on the allotment date of 30 June 2020 was based on the average price on the allotment date and was calculated at SEK 11.38 per option. Fair value per option, SEK 1) Expected volatility was determined by analysing the share price trend for comparable companies. Performance share-based programme LTIP 2019 The rights to receive performance shares were allotted free of charge in December 2019. As of 31 December 2019, when the programme was closed to new participants, 40,990 performance share rights had been allotted to participants of the programme. The performance targets are linked to product development, product approval and commercialisation. The performance share rights are earned as the performance targets are met. The value of each performance share right is SEK 56.00 and is based on the closing price on the allotment date (20 December 2019). The cost recognised for the year including social security contributions amounted to SEK 934 thousand (1,410). To enable the Company’s delivery of shares under the programme and to cover the cash flow effects as a result of any social security contributions arising under the programme, the Annual General Meeting resolved to carry out a directed issue of a maximum of 459,970 warrants to the Company, of which a maximum of 109,970 warrants were issued to cover any cash flow effects as a result of social security contributions arising under the programme. Q-LINEA | ANNUAL REPORT 2021 76 Outstanding performance share rights for LTIP 2019 Note 10 Tax on result for the year 31 Dec 2021 31 Dec 2020 Tax on result for the year Opening number of performance 2021 – – 2020 – – share rights 40,990 40,990 Current tax for the year Deferred tax Total tax on result for the year allotted during the period exercised during the period expired during the period - - - - - - – – Closing number of performance share rights The difference between recognised tax expense and the estimated tax expense based on prevailing tax rates was as follows: 40,990 40,990 2021 2020 Actual number of performance share rights allotted for LTIP 2019 per category at the start of the programme Result before tax - 231,242 -218,655 No. of performance share rights Income tax calculated according to prevailing tax rate in Sweden (20.6% in 2021 and 21.4% in 2020) Issue costs not included in result Non-taxable income Non-deductible costs Loss carryforwards for which no deferred tax asset has been recognised allotted No. of per 47,636 3,571 106 46,792 3,391 355 Category participants participant per category 25,240 15,750 Management team Other key employees Total 2 3 5 12,620 5,250 – -340 -249 40,990 - 50,972 - 50,290 Performance share-based programme LTIP 2018 The rights to receive performance shares were allotted free of charge in March 2019. As of the Annual General Meeting on 22 May 2019, when the programme was closed to new participants, 142,720 performance share rights had been allotted to participants of the programme. The performance targets are linked to product devel- opment, product approval and commercialisation. The performance share rights are earned as the performance targets are met. The value of each performance share right is SEK 55.54 and is based on the closing price on the allotment date (1 March 2019). Tax on result for the year 0 0 As of 31 December 2021, the Company’s accumulated loss carryfor- wards from prior years and from the current ﬁnancial year amounted to SEK 1,053,618 thousand (806,246). The amount for the comparative year has been updated from SEK 790,328 thousand since a decision on ﬁnal tax has been received and differs from the value recognised in the 2020 Annual Report. No deferred tax assets have been recognised in the balance sheet; refer to Note 4. In December 2021, the Board of Directors made the assessment that the performance targets for LTIP 2018 will not be met when the programme ends in February 2022. The Board decided that all 142,720 outstanding performance share rights in the programme had thus expired. The recognised reversal of costs in previous periods since the start of the programme, including social security contribu- tions, amounted to SEK -8,950 thousand (6,201) for the year. Performance share rights allotted for LTIP 2018 31 Dec 2021 31 Dec 2020 Opening number of performance share rights 142,720 142,720 allotted during the period exercised during the period expired during the period - - - - - - 142,720 Closing number of performance share rights 0 142,720 Actual number of performance share rights allotted for LTIP 2018 per category at the start of the programme No. of performance share rights allotted No. of per Category participants participant per category 30,250 75,720 36,750 142,720 President 1 6 7 30,250 12,620 5,250 – Management team Other key employees Total 14 Q-LINEA | ANNUAL REPORT 2021 77 NOTES Note 11 Intangible assets Note 13 Other securities held as non-current assets Total research and development expenses that have been expensed amounted to SEK 156,947 thousand (156,387), corresponding to 64% (70) of operating expenses. 2021 181,768 2,997 2020 24,364 2,997 Listed bonds 1) Unlisted shares in EMPE Diagnostics AB Total Technology and customer relation- 184,765 27,361 Licences ships Goodwill 31 Dec 2021 Opening cost Closing accumulated cost Opening amortisation Amortisation for the year Closing accumulated amortisation 1) includes an accrued coupon rate of SEK 275 thousand (170) and a credit reserve of SEK -215 thousand (-63). 5,500 5,500 -5,333 -71 835 835 -415 -125 7,605 7,605 -2,716 -1,086 Other securities held as non-current assets primarily comprise low-risk listed corporate bonds. The Company carries out impairment tests on a quarterly basis on each recognition date. The Company invests exclusively in bonds belonging to level 1 of the fair value hierarchy, and the impairment test is based on information from S&P and Moody’s. -5,405 -540 -3,802 Unlisted shares in EMPE Diagnostics AB were acquired at the end of 2017. As of 31 December 2021, the Company deemed that there was no impairment requirement for the participations in EMPE Diagnostics AB since the share price at the latest directed issue exceed the price paid by Q-linea. Q-linea’s holding comprises 23,400 shares, corresponding to 5.84% of the capital and votes. Closing carrying amount 95 295 3,802 31 Dec 2020 Opening cost 5,500 5,500 5,262 -71 835 835 7,605 7,605 -1,630 -1,086 Closing accumulated cost Opening amortisation Amortisation for the year Closing accumulated amortisation -249 -166 Note 14 Inventories At the end of the year, the Company had an inventory value of SEK 28,646 thousand (12,433). -5,333 -415 -2,716 31 Dec 2021 31 Dec 2020 Closing carrying amount 167 420 4,889 Raw materials and consumables Goods for resale 1) Products in progress Semi-ﬁnished goods Finished goods 2,781 18,370 2,019 3,226 2,250 713 6,390 1,051 1,164 3,115 Note 12 Tangible assets Equipment, tools, ﬁxtures and ﬁttings 31 Dec 2021 34,496 11,971 31 Dec 2020 21,643 13,228 -375 Total inventories 28,646 12,433 Opening cost Purchases Sales and scrapping 1) The line “Goods for resale” was previously included in the item “Finished goods”. -1,913 During the year, the Company impaired the inventory of goods for resale and ﬁnished goods by an amount of SEK 4,734 thousand (0), and goods in an amount of SEK 14,494 thousand (0) were expensed. Closing accumulated cost 44,554 34,496 Opening depreciation Sales and scrapping -12,676 1,819 -8,073 174 Note 15 Other receivables Depreciation for the year Closing accumulated depreciation Closing carrying amount -6,029 -16,886 27,669 -4,777 -12,676 21,821 31 Dec 2021 6,242 37,309 2,007 2,883 48,440 31 Dec 2020 7,369 21,809 - VAT receivable Advance payments to suppliers Receivables from suppliers Other 6,020 35,198 Total other receivables Q-LINEA | ANNUAL REPORT 2021 78 Note 16 Prepaid expenses and accrued income Note 18 Share capital trend The Company’s share capital at year-end amounted to SEK 1,476,897.35 (1,366,897.35), distributed between 29,537,947 (27,337,947) shares. The quotient value per share is SEK 0.05 (0.05). 31 Dec 2021 1,725 142 31 Dec 2020 1,528 103 Prepaid rent Holding of treasury shares Prepaid insurance costs Prepaid marketing costs Prepaid IR expenses Prepaid expenses for software Prepaid IT expenses Other items At the end of the year, Q-linea had a holding of 328,472 (328,472) treasury shares. Each share carries one vote per share and the quotient value per share is SEK 0.05 (0.05). The aim of these shares is to ensure the delivery of performance shares under LTIP 2019. The holding of treasury shares has been excluded from the calculation of per-share performance measures. 198 56 670 312 91 166 598 262 Share capital trend 253 210 Number of shares, thousand Share capital, SEK thousand Total prepaid expenses and accrued income 3,355 2,958 Opening balance, 1 January 2020 New share issue New share issue Closing balance, 31 December 2020 New share issue Closing balance, 31 December 2021 23,235 103 4,000 27,338 2,200 29,538 1,162 5 200 1,367 110 Note 17 Short-term investments Cash and cash equivalents not used in the daily operations have been placed in ﬁxed-income funds that invest in low-risk interest-bearing securities and other interest-rate instruments. Since most of the securities in these funds have a remaining term of more than three months, the securities have been recognised and measured at the lower of cost and fair value in the balance sheet. Short-term investments also include the short-term component of the Compa- ny’s listed corporate bonds with a maturity of less than 12 months. The short-term component of the Company’s ﬁnancial assets was recognised at amortised cost. 1,477 Note 19 Earnings per share Earnings per share are calculated by dividing the result for the year by a weighted average of the number of ordinary shares outstanding during the year. At the end of the year, the Company’s short-term investments totalled SEK 150,945 thousand (296,748), of which 59,700 (130,999) represents the short-term component of the Company’s listed corporate bonds. 2021 2020 The fair value of the ﬁxed-income funds amounted to SEK 91,295 thousand (166,745) and the fair value of the bonds amounted to SEK 59,427 thousand (130,659). Accrued interest on the listed bonds amounted to SEK 150 thousand (324). Coupon rates received from short-term bonds amounted to SEK 834 thousand (1,494) for the year. Result for the year, SEK thousand -231,242 -218,655 Weighted average number of shares outstanding 28,239,064 25,309,041 -8.19 -8.64 Earnings per share before and after dilution (SEK) 31 Dec 2021 91,245 31 Dec 2020 165,749 Fixed-income funds Listed corporate bonds 59,700 130,999 Total short-term investments in the balance sheet 150,945 296,748 Q-LINEA | ANNUAL REPORT 2021 79 NOTES Note 20 Borrowing Note 22 Accrued expenses and deferred income 31 Dec 2021 331 31 Dec 2020 709 31 Dec 2021 8,793 329 31 Dec 2020 14,159 539 Borrowing at the beginning of the year Repayment Accrued personnel costs -252 -378 Accrued audit fees Borrowing at the end of the year 79 331 Accrued expenses for consultants Accrued expenses for advisory services 3,263 135 3,164 18 The loans were assumed by Q-linea in 2018 in connection with the acquisition of Umbrella Science AB and pertain to external ﬁnancing of production equipment. Borrowing at the end of the year of SEK 79 thousand (331) is recognised in the balance sheet as a long-term liability of SEK 0 thousand (79) and a short-term liability of SEK 79 thousand (252). In 2021, two of three loans were repaid in full. At the end of the ﬁnancial year, the remaining loan had a remaining term of six months. Accrued expenses for modiﬁcations to premises 109 - Accrued expenses for external consultants 637 1,190 - 361 Other Total accrued expenses and deferred income Cash flow statement 14,456 18,241 Changes affecting cash flow SEK thousand 1 Jan 2021 Repayment 31 Dec 2021 Long-term loans Note 23 Pledged assets and contingent liabilities from credit institutions 79 -79 0 Short-term loans from credit institutions 252 331 -173 -252 79 79 The Company has pledged assets in an ownership reservation with Nordea Finans that amounted to SEK 79 thousand (331) at year-end. The Company had no contingent liabilities at year-end 2021 or 2020. Total Note 21 Other current liabilities 31 Dec 2021 6,070 4,899 10,969 31 Dec 2020 3,463 - Personnel-related liabilities Advance payments from customers Total other liabilities 3,463 Q-LINEA | ANNUAL REPORT 2021 80 Note 24 Related-party transactions Other related-party transactions Related parties are deﬁned as owners with a signiﬁcant or controlling influence, senior executives in the Company, meaning directors and members of the management team, and their close family members. Disclosures concerning transactions between the Company and other related parties are presented below. Related-party transactions are performed on an arm’s length basis. The Company also has a shareholder agreement with the other shareholders of EMPE Diagnostics AB. One of EMPE Diagnostics AB’s co-founders, shareholders and directors is Mats Nilsson, who is also a co-founder, shareholder and director of Q-linea AB. One of Q-linea’s senior executives, Mats Gullberg, is a director of EMPE Diagnostics AB. Fees in 2021 were paid to directors that were not employed in the Nexttobe Group. These fees amounted to SEK 1,340 thousand (1,180). If employment is terminated by the Company, the contractual period of notice for the President and other senior executives is six months. The same period of notice applies if employment is terminated by the President or senior executive. If employment is ter- minated by the Company, senior executives are entitled to severance pay amounting to three months’ salary. The President is not entitled to any particular severance pay if employment is terminated by the Company. In conjunction with the Company’s directed issue in June 2021, Jonas Jarvius, President of Q-linea, divested 95,000 shares in the Company to the Company’s largest shareholder Nexttobe AB. Jonas Jarvius remains highly committed to Q-linea, where he will retain approximately 75% of his existing fully diluted holding. Jonas Jarvius co-founded Q-linea in 2008 and has been President from the start. Jonas Jarvius has agreed to not sell any shares in Q-linea for a period of 365 days after the completion of the directed issue. Remuneration for senior executives Basic salary/ Board Pension costs Share-based Other Variable pay remuneration 6) remuneration 4) Total 2021 Board Chairperson Erika Kjellberg Eriksson 1) – 205 – – – – – – – 205 Director Mats Nilsson – – Director Marcus Storch Director Mario Gualano Director Marianne Hansson Director Per-Olof Wallström Director Hans Johansson President Jonas Jarvius Other senior executives (8 people)5) Total 205 – – – – – 205 205 – – – – 205 280 – – – 280 240 – – – – 240 205 – – – – 205 2,848 10,258 282 749 635 2,669 3,303 - 955 -1,889 -2,844 40 187 228 2,850 11,973 16,164 14,446 1,031 2020 Board Chairperson Erika Kjellberg Eriksson 1) – 180 – – – – – – – 180 Director Mats Nilsson – – Director Ulf Landegren 2) Director Marcus Storch Director Mario Gualano 3) Director Marianne Hansson Director Per-Olof Wallström Director Hans Johansson President Jonas Jarvius Other senior executives (8 people) Total 80 – – – – 80 180 – – – – – – 180 100 – – 100 250 – – – – 250 210 – – – – 210 180 – – – – 180 2,621 9,116 12,917 108 386 494 581 2,508 3,089 552 1,852 2,404 6 3,868 13,897 18,945 35 41 1) Chairperson from the Annual General Meeting in June 2018, employed by the Nexttobe Group. 2) Declined re-election and stepped down at the 2020 Annual General Meeting. 3) Elected at the 2020 Annual General Meeting. 4) Otherremunerationcompriseshealthinsuranceandﬁtnesssubsidies. 5) The Company’s management team was expanded to include two additional executives in mid-December 2021. Their remuneration for parts of December is not included. 6) Costs that had been reserved in previous period since the start of the share-based remuneration programme LTIP 2018 were reversed in 2021 when the Board determined that the performance targets had not been met and the programme therefore expired. Q-LINEA | ANNUAL REPORT 2021 81 NOTES Note 25 Signiﬁcant events Note 26 Proposed appropriation of unrestricted equity after the end of the ﬁnancial year The Board proposes that proﬁt be appropriated as follows: The antibiotic panel in ASTar was expanded to offer even broader results. The panel now covers 222 combinations of antibiotics and bacteria in order to offer even broader results, increasing the beneﬁt to patients and reducing the need for resources. The following unrestricted equity is at the disposal of the Annual General Meeting: Q-linea announced the results from the commercial evaluation performed by Thermo Fisher Scientiﬁc™ with the support of Q-linea in summer 2021. Overall essential agreement (EA, meaning reaching the same results as the reference method) was 96.6%, thus exceeding the results from Q-linea’s pivotal CE-IVD study. ASTar® could also provide results for 98.7% of all organisms analysed. SEK Share premium reserve Retained earnings Result for the year Total 1,234,971,886 -574,418,763 -231,242,337 429,310,786 In April 2022, the Company announced that ASTar has received a breakthrough device designation by the U.S. Food and Drug Administration (FDA). This categorization can be assigned to products that are considered to provide a more effective treatment of severe disease states, where there is no comparable equivalent on the market. The categorization is intended to expedite the regulatory review of medical devices so that patients receive faster access to new treatment options. The Board proposes that proﬁt be appropriated as follows: SEK 429,310,786 to be carried forward. The Board proposes to the Annual General Meeting that no dividend be paid for 2021. Q-LINEA | ANNUAL REPORT 2021 82 The Board of Directors and President hereby afﬁrm that the ﬁnancial statements have been prepared in accordance with the Swedish Annual Accounts Act and RFR 2. The annual report has been prepared in accordance with generally accepted accounting practices and provides a true and fair view of the Company’s ﬁnancial position and earnings. The Board of Directors’ Report for the Company provides a fair and true overview of the Company’s operations, ﬁnancial position and earnings, and describes the material risks and uncertainties facing the Company. Uppsala, 13 April 2022 Jonas Jarvius President Erika Kjellberg Eriksson Chairperson Mats Nilsson Mario Gualano Marcus Storch Director Director Director Marianne Hansson Per-Olof Wallström Hans Johansson Director Director Director Our Auditor’s Report was submitted on 13 April 2022 Öhrlings PricewaterhouseCoopers AB Lars Kylberg Authorised Public Accountant Q-LINEA | ANNUAL REPORT 2021 83 AUDITOR’S REPORT Auditor’s report To the general meeting of the shareholders of Q-linea AB, corporate identity number 556729-0217. Report on the annual accounts Opinions We believe that the audit evidence we have obtained is We have audited the annual accounts of Q-linea AB for the year 2021 except for the corporate governance statement on pages 46-55. The annual accounts of the company are included on pages 36-83 in this document. sufﬁcient and appropriate to provide a basis for our opinions. Audit scope Q-linea is a research, development and manufacturing company whose focus is the development of instruments and consumables for fast and reliable infection diagnosis. The most signiﬁcant balance sheet item is short-term investments. The largest cost item in the company consists of research and development costs, which is why we have judged that this is a particularly signiﬁcant area. In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the ﬁnancial position of Q-linea AB as of 31 December 2021 and its ﬁnancial performance and cash flow for the year then ended in accordance with the Annual Accounts Act. Our opinions do not cover the corporate governance statement on pages 46-55. The statutory adminis- tration report is consistent with the other parts of the annual accounts. We designed our audit by determining materiality and assessing the risks of material misstatement in the ﬁnancial statements. In particular, we considered where management made subjective judgements; for example, in respect of signif- icant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. We therefore recommend that the general meeting of shareholders adopts the income statement and balance sheet for Q-linea AB. Our opinions in this report on the annual accounts are consis- tent with the content of the additional report that has been submitted to the company's audit committee in accordance with the Audit Regulation (537/2014) Article 11. We tailored the scope of our audit in order to perform sufﬁ- cient work to enable us to provide an opinion on the ﬁnancial statements as a whole, taking into account the structure of the company, the accounting processes and controls, and the industry in which the company operates. Basis for Opinions We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsibili- ties section. We are independent of Q-linea AB in accordance with professional ethics for accountants in Sweden and have otherwise fulﬁlled our ethical responsibilities in accordance with these requirements. This includes that, based on the best of our knowledge and belief, no prohibited services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided to the audited company or, where applicable, its parent company or its controlled companies within the EU. Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the ﬁnancial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the ﬁnancial statements. Q-LINEA | ANNUAL REPORT 2021 84 Key audit matters Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the ﬁnancial statements as a whole as set out in the table below. These, together with qualitative consider- ations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the ﬁnancial statements as a whole. Key audit matters of the audit are those matters that, in our professional judgment, were of most signiﬁcance in our audit of the annual accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts as a whole, but we do not provide a separate opinion on these matters.et, men vi gör inga separata uttalanden om dessa områden. Key Audit Matter How our audit addressed the key audit matter Our audit of the costs of research and development has included, but is not limited to, the following measures: Research and development costs According to Note 11, the costs for the company's operations in research and development amounted to SEK 157 million during the ﬁnancial year 2021. This corresponds to 64 percent of the company's total operating costs. Most of the costs relate to the development of the company's leading product ASTar and consist mainly of expenses for hired and own staff. In our audit, we have focused on these costs as they together amount • Reconciled and performed detailed testing against invoice to a signiﬁcant amount and that there is a risk regarding the accuracy, completeness and accrual of these expenses. • Evaluated the company's routines, business follow-up and internal control. • Tested the company's controls for approval and payment of supplier invoices and personnel costs. documentation, agreements and other year-end documen- tation. • Performed detailed testing of salaries. • Analyzed costs based on our knowledge of the business and follow-up on internal reports. Based on our review, we have not reported any signiﬁcant observations to the Audit Committee Other Information than the annual accounts If we, based on the work performed concerning this informa- tion, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. This document also contains other information than the annual accounts and is found on pages 1-35 and 88-90. This other information also includes the Remuneration report which we received before the signing date of this Auditor’s report. The Board of Directors and the Managing Director are responsible for this other information. Responsibilities of the Board of Director's and the Managing Director The Board of Directors and the Managing Director are respon- sible for the preparation of the annual accounts and that they give a fair presentation in accordance with the Annual Accounts Act. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts that are free from material misstatement, whether due to fraud or error. Our opinion on the annual accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information. In connection with our audit of the annual accounts, our responsibility is to read the information identiﬁed above and consider whether the information is materially inconsistent with the annual accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated. In preparing the annual accounts, The Board of Directors and the Managing Director are responsible for the assessment of the company's ability to continue as a going concern. Q-LINEA | ANNUAL REPORT 2021 85 AUDITOR’S REPORT They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intend to liquidate the company, to cease operations, or has no realistic alternative but to do so. an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts. The Audit Committee shall, without prejudice to the Board of Director’s responsibilities and tasks in general, among other things oversee the company’s ﬁnancial reporting process. A further description of our responsibility for the audit of the annual accounts is available on Revisorsinspektionen’s website: www.revisorsinspektionen.se/revisornsansvar. This Auditor’s responsibility Our objectives are to obtain reasonable assurance about whether the annual accounts as a whole are free from material description is part of the auditor´s report. misstatement, whether due to fraud or error, and to issue Report on other legal and regulatory requirements Opinions Responsibilities of the Board of Director's and the Managing Director In addition to our audit of the annual accounts, we have also audited the administration of the Board of Director's and the Managing Director of Q-linea AB for the year 2021 and the proposed appropriations of the company’s proﬁt or loss. The Board of Directors is responsible for the proposal for appropriations of the company’s proﬁt or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justiﬁable considering the requirements which the company's type of operations, size and risks place on the size of the company's equity, consolidation requirements, liquidity and position in general. We recommend to the general meeting of shareholders that the proﬁt be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Director's and the Managing Director be discharged from liability for the ﬁnancial year. The Board of Directors is responsible for the company’s organization and the administration of the company’s affairs. This includes among other things continuous assessment of the company's ﬁnancial situation and ensuring that the company´s organization is designed so that the accounting, management of assets and the company’s ﬁnancial affairs oth- erwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors’ guidelines and instructions and among other matters take measures that are necessary to fulﬁll the company’s accounting in accordance with law and handle the management of assets in a reassuring manner. Basis for Opinions We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section. We are independent of Q-linea AB in accordance with professional ethics for accountants in Sweden and have otherwise fulﬁlled our ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufﬁcient and appropriate to provide a basis for our opinions. Q-LINEA | ANNUAL REPORT 2021 86 Auditor’s responsibility The auditor’s examination of the corporate governance statement The Board of Directors is responsible for that the corporate Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance governance statement on pages 46-55 has been prepared in whether any member of the Board of Directors or the Manag- accordance with the Annual Accounts Act. ing Director in any material respect: Our examination of the corporate governance statement is conducted in accordance with FAR’s auditing standard RevR 16 The auditor’s examination of the corporate governance statement. This means that our examination of the corporate governance statement is different and substantially less in scope than an audit conducted in accordance with Interna- tional Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufﬁcient basis for our opinions. • has undertaken any action or been guilty of any omission which can give rise to liability to the company, or • in any other way has acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. Our objective concerning the audit of the proposed appropri- ations of the company’s proﬁt or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act. A corporate governance statement has been prepared. Disclosures in accordance with chapter 6 section 6 the second Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company’s proﬁt or loss are not in accordance with the Companies Act. paragraph points 2-6 of the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the other parts of the annual accounts and are in accordance with the Annual Accounts Act Öhrlings PricewaterhouseCoopers AB, Torsgatan 21, 113 97 Stockholm, was appointed auditor of Q-linea AB by the general meeting of the shareholders on the 25 May 2021 and has been the company’s auditor since the April 2007. A further description of our responsibility for the audit of the administration is available on Revisorsinspektionen’s website: www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor’s report. Uppsala 13 April 2022 Öhrlings PricewaterhouseCoopers AB Lars Kylberg Authorized Public Accountant Q-LINEA | ANNUAL REPORT 2021 87 REFERENCES | GLOSSARY References Page Source: 05 09 1) Data collected by the Company based on prevalence data from four hospitals in Europe 2) Rudd et al, https://doi.org/10.1016/S0140-6736(19)32989-7 3) Kadri et al, Chest. Feb 2017; 151(2): 278-285 4) Kumar et al., Crit Care Med 34:1589-96, 2006 10 5) Patel et al, J Clin Microbiol. Jan 2017; 55(1): 60–67., ECCMID 2017, poster OS1033, Andreassen et al. Cost-effectiveness of MALDI-TOF and rapid antimicrobial susceptibility testing for high-risk patients, Huang et al. Clin Infect Dis. Nov 2013; 57(9): 1237-45. 6) Fridkin et al, MMWR, 2014;63(9), 194-200. 7) Perez et al, Arch Pathol Lan Med 137:1247-1254, 2013, Perez et al J Infect. Sep 2014;69(3):216-25, 2014, Bauer et al Clin Infect Dis 51:1074-1080, 2010) Patel et al, J Clin Microbiol. Jan 2017; 55(1): 60–67. 20 25 8) Becton Dickinson Investor Day, 17 November 2016. Further information is available on Becton Dickinson’s website under the tab for 2016. http://phx.corporate-ir.net/phoenix.zhtml?c=6410 6&p=quarterlyearnings. 9) J.J Kerremans et al. 2009. Journal of Clinical Microbiology. 10) Rönnberg et al, Diagnostic Microbiology and Infectious Disease 76 (2013) 286–290, Kerremans et al, JOURNAL OF CLINICAL MICROBIOLOGY, Mar. 2009, p. 819–822, Saito et al, J Infect Chemother (2009) 15:49–53) 11) Procop et al, Arch Pathol Lab Med (2020) 144 (5): 564–571, Venturelli et al, PLoS One 12(1):e0169466) (2017) 29 12) Perez et al, Arch Pathol Lan Med 137:1247-1254, 2013, Perez et al J Infect. Sep 2014;69(3):216-25, 2014, Bauer et al Clin Infect Dis 51:1074-1080, 2010) Patel et al, J Clin Microbiol. Jan 2017; 55(1): 60–67. 13) Patel et al, J Clin Microbiol. Jan 2017; 55(1): 60–67., ECCMID 2017, poster OS1033, Andreassen et al. Cost-effectiveness of MALDI-TOF and rapid antimicrobial susceptibility testing for high-risk patients, Huang et al. Clin Infect Dis. Nov 2013; 57(9): 1237-45. 14) Fridkin et al, MMWR, 2014;63(9), 194-200. Q-LINEA | ANNUAL REPORT 2021 88 Glossary AST EEA Clinical studies Antibiotic susceptibility testing. The European Economic Area. A clinical study for in vitro diagnostic products, a so-called performance evaluation study, which aims to validate performance and safety requirements based on the intended use of the product by examining samples taken from human participants. Antibiotic resistance When bacteria develop the ability to defeat antibiotics. FDA The US Food and Drug Administration, which is responsible for market approval of IVD products. Broad-spectrum antibiotics Antibiotics that act against a wide range of, but not all, bacteria. Gram-negative MIC values Minimum inhibitory concentration for the tested antibiotics. Bacteria that do not stain in a gram staining test. The opposite are gram-positive bacteria. What differentiates gram-negative and gram-positive bacteria are the properties of their cell walls. Gram-negative bacteria are often referred to as G-. CAGR Compound annual growth rate. Opportunistic infections Caused by bacteria that do not normally cause infections but that can – for example, in patients undergoing cancer treatment or broad-spectrum antibiotic treatment – cause severe infections, some of which can be fatal. CE marking Conformité Européenne (European Confor- mity), a certiﬁcation mark used primarily in the EU and EEA. Gram-positive Gram-positive bacteria are bacteria that stain in a gram staining test. The opposite are gram-negative bacteria. What differentiates gram-negative and gram-positive bacteria are the properties of their cell walls. Gram-posi- tive bacteria are often referred to as G+. CE-IVD Pathogen Marking of products and instruments used in laboratories for the purpose of providing guarantees that the product meets a number of requirements, including security, quality, validity and traceability, which means that the user can be sure that the product Something that causes illness, such as a virus or bacteria. Sepsis Inoculum A serious condition that arises when an infection causes injury to the entire body and vital organs, such as the heart, lungs, brain and kidneys do not function properly (previously known as blood poisoning). A set of methods for artiﬁcially inducing immunity against various infectious diseases. has the performance required for use so that the generated analysis results are reliable. In vitro diagnostics (IVD) The study of a living microorganism, cell or biomolecule outside its normal context. ECCMID European Congress of Clinical Microbiology and Infectious Diseases, a large trade fair for companies in the ﬁelds of microbiology and infectious diseases. Upcoming reporting dates About the Company Q-linea AB (publ) 5 May 2022 Interim report January to March 2022 Corporate Registration Number: 556729-0217 Registered ofﬁce: Uppsala 24 May 2022 14 July 2022 3 November 2022 2022 Annual General Meeting Interim report January to June 2022 Interim report January to September 2022 Dag Hammarskjölds väg 52 A, SE-752 37 Uppsala, Sweden Tel: +46 18 444 3610 E-mail: [email protected] www.qlinea.com Q-LINEA | ANNUAL REPORT 2021 89 Q-linea AB Dag Hammarskjölds väg 52 A SE-752 37 Uppsala, Sweden E-mail: [email protected] Tel: +46 18 444 36 10 www.qlinea.com

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