Episurf — Interim / Quarterly Report 2024

Jul 12, 2024

INTERIM REPORT 1 JANUARY – 30 JUNE 2024

• 45% sales growth despite transformation of sales organization
• Additional SEK 12m in annual cost savings identified
• Pause of EPIC-Knee trial to the advantage of other initiatives

"We have started considerably faster in the US than what we have seen in any other market. For example, during the second quarter, the US market represents approx. 45% of the turnover in Germany, which is by far our largest market to date. In other words, we follow our strategy. We also see good opportunities to continue the beaten track at an ever-increasing speed. We will continue with our commercial focus, especially with a focus on the US. During the second quarter, personnel expenses continued to decrease, while we had higher expenses for clinical studies. Against this background, we present several initiatives to make us more focused and cost-efficient", says Pål Ryfors, CEO Episurf Medical.

Second quarter 2024 compared to 2023, Group

• » Gross order intake amounted to SEK 3.5m (3.1)
• » Group net sales amounted to SEK 3.2m (2.2)
• » Loss for the period amounted to SEK -21.4m (-28.9)
• » Earnings per share amounted to SEK -0.06 (-0.09)

First six mothns 2024 compared to 2023, Group

• » Gross order intake amounted to SEK 6.2m (5.6)
• » Group net sales amounted to SEK 6.2m (4.8)
• » Loss for the period amounted to SEK -42.0m (-52.1)
• » Earnings per share amounted to SEK -0.13 (-0.17)

Significant events during the second quarter

• » Episurf Medical has carried out a rights issue which incl. issue guarantees were subscribed to 75.0% and the company received SEK 90m before issue costs
• » Episurf Medical has entered into four distribution agreement with exclusive distributors of DePuy Synthes, the orthopaedic arm of the Johnson & Johnson Group, for several US states

Significant events after the second quarter

» No material events have occurred after the end of the period

Dear shareholders,

During the quarter, our order intake increased to a new highest level of SEK 3.5m, which should be seen in the light of a significantly smaller sales force than the previous year. Every penny invested in the sales organization yields a higher return than before, which shows that we are on the right track. Our model works, and with additional products and a more significant presence in the US, the growth can continue and reach significantly higher levels. The revenue potential per customer in the US is substantially higher than in our other markets, and we already see clear signs of this. We have started considerably faster in the US

than what we have seen in any other market. For example, during the second quarter, the US market represents approx. 45% of the turnover in Germany, which is by far our largest market to date. In other words, we follow our strategy. We also see good opportunities to continue the beaten track at an ever-increasing speed. We continue with our commercial focus, especially with a focus on the US. During the second quarter, personnel expenses continued to decrease, while we had higher expenses for clinical studies. Against this background, we present several initiatives to make us more focused and cost-efficient.

We have decided to pause the EPIC Knee study, our registration-based study, for a future US PMA application for the Episealer® Knee. In saying this, it is important to remember that we already have one product approved for the US market and another in the 510(k) process with the FDA. Furthermore, we are continuously evaluating several initiatives for additional products for the US market, with the common denominator being that the regulatory path, other things being equal, is easier for us. Of course, the decision means a certain amount of disappointment as we spent a lot of time and resources on the study, but we are nevertheless convinced it is the right decision. Recruitment for the EPIC-Knee study began in connection with the pandemic outbreak, and patient recruitment has been highly challenging. We have twisted and turned everything. Among other things, we have changed study clinics, opened and closed different geographies, and changed the clinical protocol several times. It must be said that the study is now moving forward faster than before, but it is associated with high costs, and right now, we do not judge that it is the best use of our resources, neither financial nor personnel. We start with a break of at least 12 months. During 2023, we spent approx. SEK 7.8m on the study in external costs, and during the first half of 2024, the study costs amounted to SEK 5.9m. The decision will thus have a materially positive financial effect starting in Q3 2024. We have communicated that our expectations for the study in the short and medium term have been low for quite a long time, and even if our addressable market in the long term is decreasing with this decision, nothing changes our possibility of achieving a commercial breakthrough in the US. Further, a successful EPIC knee study does not form the basis of our financial goal of reaching an annual turnover of SEK 150-200m in the medium term. We also see, as indicated above, great opportunities to replenish our product pipeline with products with attractive opportunities and a relatively fast regulatory path to market.

Further initiatives to improve the financial result in the short and medium term mean we will leave certain markets where we have launched the Episealer® technology in recent years. First and foremost, this applies to the markets in India and Australia. Both of these markets represent attractive commercial opportunities for us. Still, we believe that the speed of commercialization is not good enough and that we currently do not have sufficient resources to invest in these markets. On the revenue side, this means a minimal loss of revenue, but on an annual basis, the savings from these initiatives are expected to result in lower costs of approx. 4m on a yearly basis.

The process for our 510(k) application for our big toe implant for the US market, where we submitted a 510(k) application to the FDA in October 2023, is ongoing. A couple of unexpected events caused us to go through a more intense phase with the FDA early in the process. Still, we are happy that their substantive review phase is now underway, and we are working with full force to get this product approved for the US market as soon as possible.

Our focus forward now is, if possible, even more clear;

• 1. We continue our commercialization at an even faster pace. In the US, we now see that things are moving forward in line with our expectations, and in our markets outside the US, we shall continue and complete our transition toward distributor sales.
• 1. We secure a market launch in the United States for our big-toe implant Episealer® MTP System, a product for which we see an extremely attractive commercial opportunity.
• 1. We ensure an optimal cost base and continue to work on initiatives that reduce our expenses..

We executed a rights issue during the quarter, raising about SEK 90m pre-costs. We are very grateful for the support from new and existing shareholders. Over time, we must continue to broaden the product range with products that have a fast path to market because the potential of our technology remains significant. However, there is no doubt points 1, 2 and 3 above must be at the top of the priority list right now. Our distributor network in the US continues to develop, and we are currently training distributors in many US states. All in all, the pieces are falling into place, and with an increased focus, a presence in the US, and a continued adjustment of the cost base, I am hopeful for the future.

Stockholm, July 2024

Pål Ryfors CEO

BUSINESS UPDATE AND FORWARD-LOOKING STATEMENTS

By the reporting date on July 12, 2024, Episurf Medical's implants had been used in 2,014 surgeries. Episurf Medical's patients are experiencing significant improvements in pain and mobility. Furthermore, they are also experiencing a short recovery time. Out of the total implant portfolio of 2,014 implants, several patients have now had their implants between 5 and 11 years since the surgery date. During the second quarter, 103 surgeries were performed with the Episealer® implant. 125 orders were approved for surgery during the second quarter.

Implant surgeries in quarter Approved orders in quarter

FINANCIAL INFORMATION

Group

Net sales and operating profit/loss

Group net sales amounted to SEK 3.2m (2.2) in the second quarter and SEK 6.2m (4.8) for the first six months. Loss before tax amounted to SEK -21.4m (-28.8) for the quarter and SEK -41.9m (-52.0) for the first six months. Other expenses, which for example includes expenses for clinical trials, marketing and product development, amounted to SEK -13.9m (-15.2) in the quarter and SEK -25.4m (-28.1) for the first six months.

Cash flow and financial position

Group cash and cash equivalents at end of period amounted to SEK 86.7m (107.0). The improved cash flow compared to the corresponding quarter last year is primarily due to the restructuring measures taken by the company. The equity ratio was 88.1% (82.0). Group investments in intangible assets amounted to SEK -2.5m (-2.4) for the quarter of which SEK -1.3m (-2.1) are related to capitalised development costs, and for the first six months investments in intangible assets amounted to SEK -3.4m (-5.0) of which SEK -1.9m (-4.2) are related to capitalised development costs, remaining investments relates to patents. No significant investments have been made in tangible assets during the quarter or for the year of 2024 or 2023.

Human resources

Number of employees in the Group at end of the period was 26 (35).

Transactions with closely related parties

Shareholder and Board member Leif Ryd has received consulting fees for ongoing work as well as work for the Clinical Advisory Board during the period of SEK 0.3m (0.3).

Rights Issue

Episurf Medical has carried out a rights issue, which was subscribed to approx. 58% with the support of unit rights. 17.2% was allocated to the parties who provided underwriting guarantees, whereby the preferential issue was subscribed to a total of approx. 75.0%. The company thus received approximately SEK 90m before issue costs. The rights issue meant that 375,662,430 new B shares were issued and 150,264,972 warrants of series TO13B. The subscription period for the TO13 B warrants is February 10–24, 2025; upon full utilization, the company will receive an additional SEK 36m.

In connection with the completed rights issue, guarantors had the opportunity to receive guarantee compensation in the form of units consisting of newly issued B shares and warrants of series TO13B instead of cash compensation. The guarantors were awarded shares and warrants that corresponded to a total value of approximately SEK 2.1m, which corresponds to 583,331 units consisting of 8,749,965 B shares and 3,499,986 warrants of series TO13 B. Upon full subscription of the warrants, the company will be provided with SEK 0.8m. The cash part of the guarantee compensation amounted to approximately SEK 7.0m.

Through the above transactions, the number of shares has increased from 267,065,447 to 652,424,556, divided into 473,357 A shares and 651,004,485 B shares. The total number of outstanding warrants of series TO13 B is 153,764,958. See more information about the transaction on the company's website.

Warrants and employee stock options

Warrants

In connection with a financing solution that Episurf had in 2018, 1,705,232 warrants were issued to shareholders. For a number of periods until 23 May 2023, shareholders had the opportunity to convert these warrants for an exercise price of SEK 1.40. During May 2023, 153,527 warrants were exercised and 888,680 warrants expired. As of this interim report, the company has no warrants outstanding.

For more information about staff option programs, see Episurfs Annual Report 2023 note 9 and note 4 below.

Sustainability-related risks

Episurf strives towards monitoring and continuous evaluation of sustainability-related risks and their impact on the Group's operations and earnings. Episurf 's opinion is that this work will increase in importance, and the work could include, among other things, materiality analyses, monitoring of targets and commitments and by auditing various units within the company. The Group works towards having an established governance structure that involves both company management and the Board, and aims at continuously improve the company's sustainability activities and minimizing associated risks.

Effects of the COVID-19 pandemic

The company currently does not foresee any effects on our operations. It can't be ruled out that new variants of COVID-19 may delay the company's development or affect delivery disruptions in the future.

Changes related to general economic and political conditions

The situation in Ukraine entails risks of impact on the world economy with increasing cost inflation and disruptions in supply chains. Episurf has no direct exposure to Ukraine or Russia and has assessed that the company is currently not affected.

Due to the escalated conflict in Israel and Gaza since October 2023, the company is also monitoring developments in the Middle East. Episurf has a presence in several countries in the Middle East with limited sales so far and has assessed that there is no material financial impact on the company.

Cyber security

Cyber security has become a significant threat in society and for Episurf, which is dependent on IT. The company has ongoing work to ensure that the company is well prepared to counter cyber-attacks and other types of intrusion.

Rounding

Due to rounding, the sum of numbers may differ.

Share information

There are two types of shares in the Company. Each Class A-share carries three votes and entitles the holder to three votes at the General Meeting, and each class B-share carries one vote and entitles the holder to one vote at the General Meeting. Class B shares have traded on Nasdaq Stockholm's Small Cap segment since 11 June 2014 with the ticker EPIS B.

6

30 June 2024
A-shares	473,357
B-shares	651,004,485
Total number of shares	651,477,842
Total number of votes	652,424,556

	No, Of	No. Of	Share capital	Voting rights
Name	A-shares	B-shares	in %	%
Health Runner AB (Ilija Batljan)	-	69 771 096	10,7	10,7
Sebastian Jahreskog	-	37 337 705	5,7	5,7
Fjärde AP-Fonden	-	36 044 386	5,5	5,5
Saeid Esmaeilzadeh	-	17 519 163	2,7	2,7
LMK Forward AB	-	17 250 000	2,6	2,6
Niles Noblitt	-	14 691 811	2,3	2,3
Nowo fund	-	13 302 615	2,0	2,0
Rhenman Partners	-	12 666 824	1,9	1,9
BNP PARIBAS ARBITRAGE SNC EQUITY	-	11 024 059	1,7	1,7
Ohlsson Philip	-	10 260 000	1,6	1,6
Total, 10 largest shareholders	-	239 867 659	36,8	36,8
Summary, other	473 357	411 136 826	63,2	63,2
Total	473 357	651 004 485	100,0	100,0

The following table notes the ten largest shareholders based on information available as of June 30, 2024

Episurf Medical's strategy rests on four key pillars:

OTHER INFORMATION

Significant risks and uncertainty factors

Episurf Medical's material business risks, for the Group as well as for the Parent Company, are to obtain regulatory approval and market acceptance, the outcome of clinical studies, the ability to protect intellectual property rights, the possibility to obtain the correct reimbursement for the Group's products and dependence on key personnel and partners. The Company does not see any new material risks for the upcoming three months. For a more detailed description of significant risks and uncertainties, refer to Episurf Medical's annual report.

7

The Board of Directors and the CEO hereby give their assurance that the interim report gives a true and fair view of the business activities, financial position and results of operations for the Group and Parent Company, and describes significant risks and uncertainty factors to which the Parent Company and the companies included in the Group are exposed.

Stockholm, July 11, 2024

Ulf Grunander Annette Brodin Rampe Board chairman Board member

Christian Krüeger Leif Ryd Board member Board member

Laura Shunk Jess Lonner

Board member Board member

Pål Ryfors CEO

The information in this interim report has not been reviewed by the company's auditors.

CONSOLIDATED INCOME STATEMENT

mSEK	Note	Apr-Jun 2024	Apr-Jun 2023	Jan-Jun 2024	Jan-Jun 2023	Jan-Dec 2023
Operating income
Net sales	2	3,2	2,2	6,2	4,8	10,3
Capitalised development expenditure		2,5	2,4	3,4	5,0	9,5
Other operating income		0,0	0,0	0,0	0,1	0,3
Total income		5,7	4,7	9,7	9,9	20,1
Operating expenses
Merchandise		-2,1	-1,5	-4,6	-3,2	-7,3
Other expenses	3	-13,9	-15,2	-25,4	-28,1	-54,3
Personnel costs	4	-8,8	-15,8	-17,3	-27,6	-46,6
Depreciation of equipment and
non-current assets		-2,1	-1,3	-4,3	-3,2	-8,7
Total operating expenses		-27,0	-33,7	-51,6	-62,0	-116,9
Operating loss		-21,3	-29,0	-41,9	-52,1	-96,7
Financial items
Financial income, other		0,2	0,3	0,6	0,3	3,1
Financial expenses, other		-0,3	-0,0	-0,5	-0,2	-0,9
Results from net financial items		-0,1	0,2	0,0	0,1	2,2
Loss before tax		-21,4	-28,8	-41,9	-52,0	-94,6
Tax on income for the period		-0,1	-0,1	-0,1	-0,1	-0,3
Loss for the period		-21,4	-28,9	-42,0	-52,1	-94,8
Net loss attributable to:
Parent company shareholders		-21,4	-28,9	-42,0	-52,1	-94,8
Earnings per share before and after
dilution, SEK		-0,06	-0,09	-0,13	-0,17	-0,30
Average number of shares Average number of shares after		354 931 325	314 122 613	334 710 776	314 103 857	314 185 370
dilution		354 931 325	314 122 613	334 710 776	314 103 857	314 185 370

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

mSEK	Note	Apr-Jun 2024	Apr-Jun 2023	Jan-Jun 2024	Jan-Jun 2023	Jan-Dec 2023
Net profit (loss)		-21,4	-28,9	-42,0	-52,1	-94,8
Other comprehensive income for the period:
Other comprehensive income that may be reclassified subsequently to
profit or loss for the period, net of tax		-0,0	0,0	0,1	0,0	-0,1
Total comprehensive income (loss) for the period		-21,5	-28,9	-41,9	-52,1	-94,9
The period's loss and comprehensive income attributable to
Owners of the parent		-21,5	-28,9	-41,9	-52,1	-94,9

CONDENSED CONSOLIDATED BALANCE SHEET

mSEK	Note	30 Jun 2024	30 Jun 2023	31 Dec 2023
ASSETS
Non-current assets
Intangible fixed assets
Capitalised development costs	5	21,8	19,0	21,5
Patents	5	12,5	13,1	12,2
Total intangible fixed assets		34,4	32,1	33,7
Equipment and right-of use asset
Right-of-use assets		4,3	8,5	5,6
Equipment		0,0	0,1	0,0
Total equipment and right-of-use asset		4,3	8,6	5,6
Total non-current assets		38,7	40,8	39,3
Current assets
Inventories		3,2	2,6	3,7
Trade receivables		2,2	1,7	1,4
Other receivables		0,9	0,9	0,5
Deferred expenses and accrued income		1,9	1,8	1,5
Cash		86,7	107,0	57,9
Total current assets		94,9	114,0	65,0
TOTAL ASSETS		133,6	154,8	104,3

CONDENSED CONSOLIDATED BALANCE SHEET

mSEK	Note	30 Jun 2024	30 Jun 2023	31 Dec 2023
EQUITY AND LIABILITIES
Equity		117,7	126,9	84,5
Liabilities
Non-current liabilities
Non-current liabilities		0,1	0,1	0,2
Non-current lease liability		0,9	4,8	2,3
Total long-term liabilities		1,0	4,9	2,4
Current liabilities
Trade payables		6,3	7,2	6,1
Current lease liability		3,0	3,1	2,9
Other liabilities		1,4	1,9	1,9
Accrued liabilities and deferred income		4,2	10,8	6,4
Total current liabilities		15,0	23,0	17,4
Total liabilities		15,9	27,9	19,8
TOTAL EQUITY AND LIABILITIES		133,6	154,8	104,3
Equity ratio		88,1%	82,0%	81,0%
Equity per share, SEK		0,18	0,48	0,32

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

mSEK	Share capital	Other contributed Reserves capital		Accumulated deficit incl. loss for the year	Total equity
Opening equity January 1, 2023	80,1	684,8	-0,2	-587,0	177,7
Total comprehensive income for the year				-94,8	-94,8
Other comprehensive income			-0,1		-0,1
Total comprehensive income			-0,1	-94,8	-94,9
Transactions with shareholders
Conversion warrants, net after issue expenses*	0,0			0,2	0,2
Expired warrants to staff				1,5	1,5
Total transactions with shareholders	0,0	0,0		1,7	1,7
Closing equity December 31, 2023	80,2	684,8	-0,3	-680,2	84,5
Opening equity January 1, 2024	80,2	684,8	-0,3	-680,2	84,5
Total comprehensive income for the period				-42,0	-42,0
Other comprehensive income			0,1		0,1
Total comprehensive income			0,1	-42,0	-41,9
Transactions with shareholders
Adjustment conversion warrants, net after issue
expenses		0,2		-0,2	-
New share issue, net after issue expenses **	5,4	69,0			74,3
Share-related compensation (stock option pro
gram) Total transactions with shareholders	5,4	69,1		0,7 0,6	0,7 75,1
Closing equity June 30, 2024	85,6	753,9	-0,3	-721,6	117,7

* Expenses amounts to SEK 0.0m.

** Issue expenses amounts to SEK 15.8m.

CONSOLIDATED CASH FLOW STATEMENT

mSEK	Note	Apr-Jun 2024	Apr-Jun 2023	Jan-Jun 2024	Jan-Jun 2023	Jan-Dec 2023
Operating activities
Operating loss		-21,3	-29,0	-41,9	-52,1	-96,7
Adjustments for items not included in cash flow
Depreciation		2,1	1,3	4,3	3,2	8,7
Employee stock option expenses		0,2	0,3	0,6	-0,1	0,7
Interest received		0,0	-	0,6	0,0	2,3
Interest paid		-0,1	-0,1	-0,5	-0,2	-0,6
Cash flow from current operations before change
in working capital		-19,0	-27,5	-37,0	-49,3	-85,6
Change in working capital
Decrease/increase in inventory		0,2	-0,6	0,5	-0,8	-1,8
Decrease/increase in trade receivables		-0,2	0,5	-0,8	0,1	0,4
Decrease/increase in current receivables		1,1	-0,7	-0,8	-0,1	-0,0
Decrease/increase in current liabilities		-1,0	8,1	-3,2	8,1	2,2
Change in working capital		0,1	7,3	-4,2	7,4	0,7
Cash flow from operating activities		-18,9	-20,3	-41,2	-41,9	-84,8
Investing activities
Investments of intangible fixed assets		-2,5	-2,4	-3,4	-5,0	-9,5
Investments of tangible fixed assets		-	0,0	-	0,0	-0,0
Cash flow from investing activities		-2,5	-2,4	-3,4	-5,0	-9,5
Financing activities
Amortisation of lease debt		-0,8	-0,8	-0,9	-1,6	-3,2
Issuance of share options		-	0,2	-	0,2	0,2
New share issue		74,3	-	74,3	-	-
Cash flow from financing activities		73,6	-0,6	73,5	-1,4	-3,0
Cash flow for the period		52,2	-23,3	28,8	-48,3	-97,4
Cash and cash equivalents at beginning of period		34,6	130,2	57,9	155,3	155,3
Cash and cash equivalents at end of period		86,7	107,0	86,7	107,0	57,9

INCOME STATEMENT, PARENT COMPANY

mSEK	Note	Apr-Jun 2024	Apr-Jun 2023	Jan-Jun 2024	Jan-Jun 2023	Jan-Dec 2023
Operating income
Net sales		0,4	0,3	0,6	0,6	1,1
Capitalised development expenditure		1,3	2,1	1,9	4,2	8,3
Total income		1,7	2,4	2,5	4,8	9,4
Operating costs
Other external expenses		-10,4	-9,5	-19,0	-19,1	-37,6
Personnel costs		-5,5	-5,8	-9,8	-10,8	-22,0
Amortisation of intangible assets and
depreciation of property, plant and equip
ment		-0,7	-0,6	-1,5	-1,1	-2,7
Total operating costs		-16,7	-15,9	-30,3	-30,9	-62,3
Operating loss		-15,0	-13,5	-27,8	-26,1	-52,9
Financial items
Write-downs of financial fixed assets and
short-term investments		-	-	-	-	-81,2
Financial income, other		0,0	0,0	0,0	0,0	2,3
Financial expenses, other		-0,0	-0,1	-0,1	-0,1	-0,0
Results from net financial items		-0,0	-0,1	-0,1	-0,1	-78,9
Loss before tax		-15,0	-13,6	-27,9	-26,2	-131,8
Tax on income for the period		-	-	-	-	-
Loss at end of the period		-15,0	-13,6	-27,9	-26,2	-131,8

PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME

mSEK	Note	Apr-Jun 2024	Apr-Jun 2023	Jan-Jun 2024	Jan-Jun 2023	Jan-Dec 2023
Net profit		-15,0	-13,6	-27,9	-26,2	-131,8
Other comprehensive income for the period:
Other comprehensive income for the peri
od, net of tax		-	-	-	-	-
Total comprehensive income for the
period		-15,0	-13,6	-27,9	-26,2	-131,8

CONDENSED BALANCE SHEET, PARENT COMPANY

mSEK	Note	30 Jun 2024	30 Jun 2023	31 Dec 2023
ASSETS
Fixed assets
Intangible fixed assets
Capitalised development costs	5	21,8	19,0	21,5
Total intangible fixed assets		21,8	19,0	21,5
Financial assets
Shares in group companies		210,0	281,2	202,0
Long-term receivables from group companies		34,3	-	22,7
Total financial assets		244,3	281,2	224,7
Total fixed assets		266,1	300,3	246,2
Current assets
Short term receivables
Trade receivables		-	0,3	-
Other receivables		0,4	0,4	0,2
Prepaid expenses and accrued income		1,1	1,0	0,9
Total short term receivables		1,5	1,7	1,1
Cash		71,7	91,2	42,3
Total current assets		73,2	92,9	43,5
TOTAL ASSETS		339,3	393,1	289,6

CONDENSED BALANCE SHEET, PARENT COMPANY

mSEK	Note	30 Jun 2024	30 Jun 2023	31 Dec 2023
EQUITY AND LIABILITIES
Equity		317,7	376,8	271,3
Liabilities
Non-current liabilities
Non-current liabilities to group companies		15,0	6,3	8,9
Total long-term liabilities		15,0	6,3	8,9
Current liabilities
Trade payables		2,6	4,2	3,3
Other liabilities		0,8	0,7	0,8
Accrued liabilities and deferred income		3,2	5,1	5,4
Total current liabilities		6,7	10,0	9,5
Total liabilities		21,6	16,3	18,4
TOTAL EQUITY AND LIABILITIES		339,3	393,1	289,6

STATEMENT OF CHANGES IN EQUITY, PARENT COMPANY

mSEK	Share capital Development	fund	Share premi um reserve	Loss brought forward	Loss for the period	Total equity
Opening equity January 1, 2023	80,1	15,9	683,9	-335,0	-42,0	402,9
Loss for the year					-131,8	-131,8
Disposition according to AGM
Loss brought forward				-42,0	42,0 -
Development fund		5,6		-5,6	-
Total comprehensive loss for the period		5,6		-47,6	-89,8	-131,8
Transactions with shareholders
Conversion warrants, net after issue
expenses*	0,0		0,2			0,2
Total transactions with shareholders	0,0		0,2			0,2
Closing equity December 31, 2023	80,2	21,5	684,1	-382,7	-131,8	271,3
Opening equity January 1, 2024	80,2	21,5	684,1	-382,7	-131,8	271,3
Loss for the period					-27,9	-27,9
Disposition according to AGM
Loss brought forward				-131,8	131,8	-
Development fund		0,4		-0,4		-
Total comprehensive loss for the period		0,4		-132,1	103,8	-27,9
Transactions with shareholders
New share issue, net after issue expenses
**	5,4		69,0			74,3
Total transactions with shareholders	5,4		69,0			74,3
Closing equity June 30, 2024	85,6	21,8	753,0	-514,8	-27,9	317,7

* Expenses amounts to SEK 0.0m.

** Issue expenses amounts to SEK 15.8m.

CASH FLOW STATEMENT, PARENT COMPANY

mSEK	Note	Apr-Jun 2024	Apr-Jun 2023	Jan-Jun 2024	Jan-Jun 2023	Jan-Dec 2023
Current operations
Operating loss		-15,0	-13,5	-27,8	-26,1	-52,9
Adjustments for items not included in cash
flow
Depreciation		0,7	0,6	1,5	1,1	2,7
Interest received		0,0	0,0	0,0	0,0	2,3
Interest paid		-0,0	-0,1	-0,1	-0,1	-0,0
Cash flow from current activities before
changes in working capital		-14,3	-13,0	-26,4	-25,2	-47,8
Changes in working capital
Decrease/increase in current receivables		1,2	0,2	-0,6	0,1	0,2
Decrease/increase in current liabilities		-2,3	2,6	-2,7	1,4	0,8
Total changes in working capital		-1,1	2,8	-3,3	1,5	1,0
Cash flow from operating activities		-15,4	-10,2	-29,7	-23,7	-46,8
Cash flow from investing activities
Acquisition of intangible assets		-1,3	-2,1	-1,9	-4,2	-8,3
Shareholder contribution		-2,0	-22,0	-8,0	-25,0	-27,0
Repaid group companies		0,5	25,8	7,0	31,4	7,6
Loan group companies		-4,4	-18,8	-12,4	-29,6	-7,0
Cash flow from investing activities		-7,2	-17,1	-15,3	-27,5	-34,7
Cash flow from financing activities
Raised loans group companies		-	-	-	-	2,0
Amortisation debt group companies		-	-	-	-	-20,5
New share issue		74,3	-	74,3	-	-
Conversion warrants		-	0,2	-	0,2	0,2
Cash flow from financing activities		74,3	0,2	74,3	0,2	-18,3
Cash flow for the period		51,7	-27,0	29,4	-51,0	-99,8
Cash and cash equivalents at beginning of
period		20,0	118,2	42,3	142,2	142,2
Cash and cash equivalents at end of period		71,7	91,2	71,7	91,2	42,3

NOTES

Note 1 Accounting policies

The interim report for the Group has been prepared in accordance with IAS 34 Interim Reports and the Annual Accounts Act. The year-end report for the Parent Company has been prepared in accordance with the Annual Accounts Act.

The Group's accounting policies are unchanged from previous year and these correspond with the accounting principles that were used in the preparation of the most recent Annual Report. Information according to IAS 34.16A is included in these financial statements and related notes as well in other parts of this interim report.

Note 2 Breakdown of net sales by country is as follows

mSEK	Apr-Jun 2024	Apr-Jun 2023	Jan-Jun 2024	Jan-Jun 2023	Jan-Dec 2023
Germany	1,3	1,5	2,9	3,5	6,1
US	0,6	-	1,1	-	0,4
Nordic	0,1	0,2	0,3	0,3	0,7
Other countries in Europe	1,1	0,5	1,7	0,9	2,8
Other countries outside of Europe	0,1	0,1	0,2	0,1	0,4
Total net sales	3,2	2,2	6,2	4,8	10,3

Note 3 Other expenses

mSEK	Apr-Jun	Apr-Jun	Jan-Jun	Jan-Jun	Jan-Dec
	2024	2023	2024	2023	2023
Product development	2,5	2,4	3,4	5,0	8,4
Patent costs	0,6	0,4	0,8	0,9	1,5
Costs for clinical studies	3,9	2,6	6,4	4,8	9,2
Sales and marketing costs	2,5	5,1	6,6	9,9	21,4
Other expenses	4,4	4,7	8,2	7,5	13,8
Total other expenses	13,9	15,2	25,4	28,1	54,3

Note 4 Changes in outstanding stock options

Changes in outstanding stock options of series 2023/2026		31 Dec
		2023
Opening balance	2 479 537	-
Granted	-	3 813 109
Expired	-	-1 333 572
Amount at end of period	2 479 537	2 479 537

Changes in outstanding stock options of series 2022/2025		31 Dec
		2023
Opening balance	1 456 340	1 817 887
Expired	-	-361 547
Amount at end of period	1 456 340	1 456 340

Changes in outstanding stock options of series 2021/2024	30 Jun 2024	31 Dec 2023
Opening balance	2 256 503	2 443 877
Expired	-	-187 374
Amount at end of period	2 256 503	2 256 503

Changes in outstanding stock options of series 2020/2023	30 Jun	31 Dec
	2024	2023
Opening balance	4 445 747	4 859 375
Expired	-4 445 747	-413 628
Amount at end of period	-	4 445 747

Note 5 Intangible assets

Patents, mSEK	30 Jun 2024	31 Dec 2023
Opening cost	38,9	37,7
Purchases	1,6	1,2
Sales and disposals	0,0	0,0
Closing accumulated cost	40,5	38,9
Opening depreciation	-26,7	-24,1
The year's depreciation	-1,3	-2,6
Sales and disposals	0,0	0,0
Closing accumulated depreciation	-28,0	-26,7
Closing carrying amount	12,5	12,2

Development expenses, mSEK	30 Jun 2024	31 Dec 2023
Closing cost	37,5	29,2
The year's capitalisation	1,9	8,3
Closing accumulated cost	39,4	37,5
Opening depreciation	-16,1	-13,4
The year's depreciation	-1,5	-2,7
Closing accumulated depreciation	-17,6	-16,1
Closing carrying amount	21,8	21,5
Closing carrying amount, patents and development expenses	34,4	33,7

DEFINITIONS

General:	All amounts in the tables are presented in mSEK unless otherwise stated. All amounts in brackets () represent comparative figures for the same period of the prior year, unless otherwise stated.
Net debt/equity ratio:	Net debt at the end of the period divided by equity at the end of the period.

GLOSSARY

Approved orders:	Orders which have been approved for surgery, are in production and will be invoiced.
Arthritis:	See Osteoarthritis.
Arthroscopy:	Inspection of the inside of a joint with the help of an arthroscope. An instrument is introduced through a small cut to investigate the inside of the joint and possibly correct any problems (a type of keyhole surgery).
Cartilage:	Shock absorbing and friction reducing tissue. This tissue that covers the end of bones and allows movement with low friction.
Cartilage defect of grade III (ICRS scale):	Lesion through the cartilage, exposing the bone.
Cartilage defect of grade IV (ICRS scale):	Defect extending down to >50% of the cartilage depth.
CE marking:	A CE mark means that the manufacturer or importer has the formal approvals necessary to market and sell the product in the European Economic Area.
Clinical results:	Outcome from clinical treatment of humans, where parameters such as efficacy and safety are evaluated.
Cobalt chrome:	A metal alloy mainly consisting of cobalt and chromium, commonly occurring in metal alloys used in knee prostheses.
Debridement:	Removal of damaged tissue.
Degenerative origin:	Conditions in which the cells, tissues or organs deteriorate and lose function. In degenerative joint disease, the deterioration is due to wear, tear or breakdown of cartilage.
ESSKA:	European Society of Sports Traumatology, Knee Surgery & Arthroscopy
FDA:	US Food and Drug Administration.
Focal cartilage defect:	A cartilage defect in a well-defined area.
Femoral condyles:	Two bony protuberances on the thighbone side of the knee joint that articulate with the shinbone. The name originates from the anatomical terms femur (thighbone) and condyle (articular head).
Gross order intake:	Gross order intake represents the aggregated value of Episealer® orders received and approved by responsible surgeon during the relevant period.

Hydroxyapatite:	A mineral that is the major component of human bone tissue and the main mineral of dental enamel and dentin.
Invasive treatment alternative:	Treatments that require a surgical procedure.
Micro fracturing:	A biological surgical technique that can be used in treatment of focal cartilage defects (not extensive osteoarthritis) in an attempt to stimulate the growth of new cartilage.
MRI:	Magnetic resonance imaging, a medical imaging technique where images acquired using a strong magnetic field allows the user to get three-dimensional image data of the patient.
MTP:	Short for metatarsophalangeal, refers to relations between the metatarsal bones and the proximal phalanges (toe bones) of the toes.
OA:	See osteoarthritis.
Order book:	Order book represents all orders that have been booked but where no revenue has been recognised.
Orthopaedics:	The medical specialty that focuses on injuries and diseases of the body's musculoskeletal system. This complex system includes bones, Joints, ligaments, tendons, muscles and nerves.
Osteoarthritis:	A type of joint disease that is characterised by loss of joint function with varying destruction of joint cartilage and the underlying bone.
Osteochondral defect:	Cartilage and underlying bone defect.
Patellofemoral:	Refers to relations between the patella (knee cap) and femur (thighbone) in the knee.
Prosthesis:	An artificial device that replaces a missing or injured body part, such as artificial arm or leg. The term prosthesis is also used for certain of the implants that are used to repair joints, such as hip and knee prostheses.
Reimbursement:	Reimbursement is a word that is used generally in the healthcare industry to describe the payment systems that apply to healthcare costs in various countries.
Talus:	A foot bone constituting a part of the ankle joint. Also referred to as astragalus and ankle bone.
TKA:	Total knee arthroplasty, total knee joint replacement, which is a surgical procedure primarily used to relieve arthritis in which the knee joint is replaced with artificial parts (prostheses).
Traumatic damage:	Damage caused by an outside force, such as fall injuries.
The trochlea area:	The part of the knee joint that is right under the knee-cap, part of the femur (thigh bone).
UKA:	Unicompartmental knee arthroplasty, partial knee joint replacement which is a surgical procedure primarily used to relieve arthritis in one of the knee compartments. Parts of the knee joint are replaced with artificial parts (prostheses).

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THIS IS EPISURF MEDICAL

– a unique solution for every patient

EPISURF WAS FOUNDED IN 2009 on a commitment to offer people with painful joint injuries a more active and healthy life through customised treatment alternatives. We put the patient in the centre of the design of implants and surgical instruments. By combining advanced 3D imaging technology with the latest manufacturing technologies, we are able to adapt not only each implant to the patient's injury and anatomy, but also the surgical instruments used. In this way, we can ensure that each patient receives treatment that is perfectly suited to his or her anatomy and, thus, ensure a faster, more secure, and better patient-specific treatment for a more active and healthy life.

A proprietary web-based IT platform for individualised design and surgical pre-planning Episurf Medical's scalable μiFidelity® system has been developed for damage assessment, surgical pre-planning and cost-effective patient customisation of implants and associated surgical instruments. In a first step, the company's main focus has been on early stage arthritic changes in the knee joint. This is now followed by lesions in the second joint, the ankle.

Individualised implants with a focus on early stages of arthritis

Episurf Medical has two types of knee implants on the market

» Episealer® Knee (comprising Episealer® Condyle Solo, Episealer® Trochlea Solo and Episealer® Femoral Twin) for the treatment of localised cartilage and underlying bone defects on the femoral condyles and in the trochlea area of the knee joint.

» Episealer® Patellofemoral System for the treatment of isolated osteoarthritis of the patellofemoral joint.

Episealer® Talus

Episurf Medical has one implant for the ankle on the market

» Episealer Talus® intended for osteochondral lesions of the talar dome of the ankle joint.

Patient-specific surgical instruments

Every product is delivered with our individualised surgical drill guide Epiguide® and a set of associated surgical instrument. Further, for the ankle Episurf Medical offers an individualised

25

sawguide, Talus Osteotomy Guide. It is intended to help the surgeon to find the correct position and depth when performing an osteotomy of the medial malleolus for access to the talar dome of the ankle joint.

Patents and patent applications

The generation of new intellectual property and the ongoing maintenance of current IP is of paramount importance for Episurf Medical to ensure that Episurf Medical's proprietary, existing technologies and future innovations are well protected. In total Episurf Medical has more than 200 patents and patent applications worldwide, distributed over 35 patent families.

» The first Episealer® surgery in a human was performed in December 2012. At the end of 2023, a total of 1,768 surgeries had been performed.

» Episurf Medical's head office is located in Stockholm and the company has sales representation in several countries in Europe, Asia and North America.

» The share (EPIS B) has been listed on Nasdaq Stockholm since June 2014.

FINANCIAL CALENDAR

Interim Report July-September 2024 25 October 2024

Year-end Report 2024 7 February 2025

This is a translation of the original Swedish interim report. In the event of a discrepancy between this translation and the Swedish original, the Swedish interim report takes precedence. The information was submitted for publication, through the agency of the contact person set out below, on July 12, 2024 at 08.30 (CEST).

A report presentation will be uploaded on Episurf 's website and on the platform Quartr on the reporting day.

The following analysts follow Episurf Medical's development DNB Analyst: Patrik Ling Redeye Analyst: Oscar Bergman

IR-contact

Pål Ryfors CEO Phone: +46 (0) 709 623 669 E-mail: pal.ryfors@episurf.com

Veronica Wallin CFO Phone: +46 (0) 700 374 895 E-mail: veronica.wallin@episurf.com

Episurf Medical AB (publ) org.no 556767-0541 Karlavägen 60, 114 49 Stockholm, Sverige www.episurf.com