Episurf — Interim / Quarterly Report 2024

Oct 25, 2024

INTERIM REPORT 1 JANUARY – 30 SEPTEMBER 2024

• Improvement of financial result through lower cost base and increased revenues
• Focus towards expansion of US sales force
• Continued progress of 510(k)-process for great toe implant

"I am pleased to present a quarterly report in which we seriously demonstrate that our measures positively impact the income statement. In the third quarter, we improved our result by SEK 4.9m compared to the corresponding quarter last year, and we now see that our cost-saving initiatives are yielding results. With increased revenues, we have good opportunities to continue to step into the commercial phase, now also financially. Our US business is in its infancy, but we see the right tendencies in the US, and in recent weeks, we have trained more salespeople in the US than we have done in 10 years in Europe. All our key metrics, such as number of customers, revenue per customer, pricing, and number of implant systems sold improved during the quarter, and we now need to continue that path", says Pål Ryfors, CEO Episurf Medical.

Third quarter 2024 compared to 2023, Group

• » Gross order intake amounted to SEK 3.7m (2.5)
• » Group net sales amounted to SEK 3.4m (2.6)
• » Order book amounted to SEK 3.1m (2.3)
• » Loss for the period amounted to SEK -15.9m (-20.8)
• » Earnings per share amounted to SEK -0.02 (-0.07)

First nine months 2024 compared to 2023, Group

• » Gross order intake amounted to SEK 9.9m (8.2)
• » Group net sales amounted to SEK 9.6m (7.4)
• » Loss for the period amounted to SEK -57.9m (-72.9)
• » Earnings per share amounted to SEK -0.13 (-0.23)

2020 2022 LTM 5.5 7.4 13.0 2021 2023 6.5 11.1

Gross order intake (mSEK)

Significant events during the third quarter

• » Update on 510(k) application for big toe implant
• » Niles Noblitt, through Sacajo Investments LLC, made investment in Episurf through an arrangement with CEO Pål Ryfors
• » Episealer® technology was presented at international scientific congress

Significant events during previous quarters 2024

• » Results from up to 10 years follow-up of Episealer® patients were accepted for presentation
• » 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 agreements with exclusive distributors of DePuy Synthes, the orthopaedic arm of the Johnson & Johnson Group, for several US states

Significant events after the third quarter

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

Dear shareholders,

I am pleased to present a quarterly report in which we seriously demonstrate that our measures positively impact the income statement. In the third quarter, we improved our result by SEK 4.9m compared to the corresponding quarter last year, and we now see that our cost-saving initiatives are yielding results. It is noteworthy that costs of approx. SEK 1.4m related to our US clinical trial, which is paused, also burden the quarter. Although we will have some costs for the study for some time to come, these expenses should continue to decrease. In addition, we have a one-off write-down of patents of approx. SEK 0.3m, and in summary, we should be able to

continue to improve the cost base over time. With increased revenues, we have good opportunities to continue to step into the commercial phase, now also financially. Order intake increased by 50% to SEK 3.7m, which is pleasing. Our US business is in its infancy, but we see the right tendencies in the US, and in recent weeks, we have trained more salespeople in the US than we have done in 10 years in Europe. Our technology is very well received, and we are nearly through the vendor approval process at some of the world's most distinguished facilities including The Hospital of Special Surgery (HSS) in New York City, and The Steadman Clinic in Vail. Prominent surgeon support and advocacy is needed to even begin these vendor approval processes. It's uplifting to see how these world-leading institutions receive us.

To reach our medium-term goal of sales of SEK 150 – 200m, we need to double our gross order intake every year in the coming years, and the strategy is based on a combination of our non-American knee and ankle products, our American knee product and our upcoming American big toe product. After a significant restructuring of the non-US business, and with a US business in its infancy, we are already showing a growth rate of 50%. Expansion of our distributor network, growth in our customer base, and growth in usage makes me hopeful that we can achieve significantly higher growth once we have all the pieces in place. All our key metrics, such as number of customers, revenue per customer, pricing, and number of implant systems sold improved during the quarter, and we now need to continue that path.

During the quarter, we have received many questions about our process for achieving 510(k) clearance for our big toe product. We recently communicated that we hope that this will happen as early as possible in 2025. There are risks associated with any regulatory process, but we want to emphasize that our hope of obtaining clearance has recently strengthened. The fact that we need a bit more time than we initially had hoped for does not change anything for us, neither operationally nor strategically, and this is not driven by any apparent setback or the like. It is simply so that to deliver some of the information that the FDA requires from us, we must perform specific additional tests, and thereafter submit the test results. Such tests require detailed planning and a certain amount of time to perform, which somewhat delays our process. We are convinced of the clinical benefit of this product, and we will ensure that the remaining data requested by the FDA regarding the product are submitted. We look forward to offering American surgeons an excellent product for which we have high commercial hopes.

I look forward with confidence to the coming years when, with a broader product portfolio, we can target several markets, including the American market. We have systematically reduced the clinical and regulatory risks in our business. At the same time, we now direct all our focus toward getting through the commercial risks, and day by day, we also do this.

In conclusion, we are entirely focused on taking significant commercial steps with the products we have approved, and which are close to approval. That is our priority right now. However, it is exciting to think ahead regarding the potential of our technology, and the feedback we receive from our first American customers testifies that our customers in the USA see the same potential as we do ourselves. Or, to put it as a prominent North American orthopaedic surgeon said to me the other day, and I quote directly, "When I look at Episurf, I see an enormous potential that no other arthroplasty company can replicate."

Stockholm, October 2024

Pål Ryfors CEO

BUSINESS UPDATE AND FORWARD-LOOKING STATEMENTS

By the reporting date on October 25, 2024, Episurf Medical's implants had been used in 2,125 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 2,125 implants, several patients have now had their implants between 5 and 11 years since the surgery date. During the third quarter, 106 surgeries were performed with the Episealer® implant. 129 orders were approved for surgery during the third quarter.

FINANCIAL INFORMATION

Group

Net sales and operating profit/loss

Group net sales amounted to SEK 3.4m (2.6) in the third quarter and SEK 9.6m (7.4) for the first nine months. Loss before tax amounted to SEK -15.9m (-20.8) for the quarter and SEK -57.8m (-72.8) for the first nine months. Other expenses, which for example includes expenses for clinical trials, marketing and product development, amounted to SEK -8.1m (-11.5) in the quarter and SEK -33.5m (-39.6) for the first nine months.

Cash flow and financial position

Group cash and cash equivalents at end of period amounted to SEK 66.8m (80.7). The improved cash flow compared to the corresponding quarter last year is primarily due to the restructuring measures taken by the company. The management has assessed that the company has liquidity to ensure operations during the calendar year 2025. The board works continuously to evaluate various financing alternatives to ensure the continued operation of the business. The board assesses that the company has good conditions to secure future financing through, for example, a new issue of shares. The company also has the opportunity to adapt the overhead level to existing cash if required. The equity ratio was 89.5% (82.9). Group investments in intangible assets amounted to SEK -1.6m (-3.0) for the quarter of which SEK -1.1m (-2.8) are related to capitalised development costs, and for the first nine months investments in intangible assets amounted to SEK -5.0m (-8.0) of which SEK -3.0m (-7.1) 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.

Parent company

The parent company's loss before tax amounted to SEK -161.2m (-92.9) for the quarter and SEK -189.1m (-119.2) for the first nine months. During the quarter and the first nine months, the parent company has written-down the value of shares in group companies by SEK -150.0m (-81.2).

Human resources

Number of employees in the Group at end of the period was 26 (34).

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 0.4m (0.4).

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 651,477,842, 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

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.

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.

30 September 2024

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

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

	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	-	37 512 638	5,8	5,7
Fjärde AP-Fonden	-	36 044 386	5,5	5,5
Pål Ryfors (CEO)	-	17 533 095	2,7	2,7
LMK Forward AB	-	17 250 000	2,6	2,6
Niles Noblitt	-	14 691 811	2,3	2,3
Rhenman Partners	-	12 666 824	1,9	1,9
Nowo Fund	-	12 371 684	1,9	1,9
Ålandsbanken Abp (Finland)	-	12 014 670	1,8	1,8
Tredje AP-Fonden	-	9 980 000	1,5	1,5
Total, 10 largest shareholders	-	239 836 204	36,8	36,8
Summary, other	473 357	411 168 281	63,2	63,2
Total	473 357	651 004 485	100,0	100,0

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.

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, October 24, 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

AUDITOR'S REPORT

Episurf Medical AB corp. reg. no. 556767-0541

This is a translation of the Swedish language original. In the event of any differences between this translation and the Swedish language original, the latter shall prevail.

Introduction

We have reviewed the condensed interim financial information (interim report) of Episurf Medical AB as of 30 September 2024 and the nine-month period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of Review

We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.

Stockholm, 25 October 2024

Öhrlings PricewaterhouseCoopers AB

Tobias Stråhle Authorized Public Accountant

CONSOLIDATED INCOME STATEMENT

mSEK	Note	Jul-Sep 2024	Jul-Sep 2023	Jan-Sep 2024	Jan-Sep 2023	Jan-Dec 2023
Operating income
Net sales	2	3,4	2,6	9,6	7,4	10,3
Capitalised development expenditure		1,6	3,0	5,0	8,0	9,5
Other operating income		0,0	0,1	0,0	0,1	0,3
Total income		4,9	5,6	14,6	15,5	20,1
Operating expenses
Merchandise		-2,8	-1,7	-7,4	-4,9	-7,3
Other expenses	3	-8,1	-11,5	-33,5	-39,6	-54,3
Personnel costs	4	-8,1	-9,7	-25,4	-37,3	-46,6
Depreciation and write-down of
equipment and non-current assets		-2,3	-3,2	-6,6	-6,4	-8,7
Total operating expenses		-21,3	-26,2	-72,9	-88,2	-116,9
Operating loss		-16,3	-20,5	-58,2	-72,7	-96,7
Financial items
Financial income, other		0,7	0,2	1,3	0,5	3,1
Financial expenses, other		-0,2	-0,4	-0,8	-0,6	-0,9
Results from net financial items		0,4	-0,2	0,5	-0,1	2,2
Loss before tax		-15,9	-20,8	-57,8	-72,8	-94,6
Tax on income for the period		-0,0	-0,0	-0,2	-0,1	-0,3
Loss for the period		-15,9	-20,8	-57,9	-72,9	-94,8
Net loss attributable to:
Parent company shareholders		-15,9	-20,8	-57,9	-72,9	-94,8
Earnings per share before and after dilution, SEK		-0,02	-0,07	-0,13	-0,23	-0,30
Average number of shares		651 477 842	314 265 553	441 460 117	314 158 348	314 185 370
Average number of shares after
dilution		651 477 842	314 265 553	441 460 117	314 158 348	314 185 370

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

mSEK	Note	Jul-Sep 2024	Jul-Sep 2023	Jan-Sep 2024	Jan-Sep 2023	Jan-Dec 2023
Net profit (loss)		-15,9	-20,8	-57,9	-72,9	-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		-0,1	-0,0	-0,1	0,0	-0,1
Total comprehensive income (loss)
for the period		-16,1	-20,8	-58,0	-72,9	-94,9
The period's loss and comprehensive income attributable to
Owners of the parent		-16,1	-20,8	-58,0	-72,9	-94,9

CONDENSED CONSOLIDATED BALANCE SHEET

mSEK	Note	30 Sep 2024	30 Sep 2023	31 Dec 2023
ASSETS
Non-current assets
Intangible fixed assets
Capitalised development costs	5	22,2	21,0	21,5
Patents	5	12,1	12,6	12,2
Total intangible fixed assets		34,3	33,6	33,7
Equipment and right-of use asset
Right-of-use assets		3,5	7,1	5,6
Equipment		0,0	0,1	0,0
Total equipment and right-of-use asset		3,5	7,2	5,6
Total non-current assets		37,9	40,8	39,3
Current assets
Inventories		3,4	2,5	3,7
Trade receivables		2,7	1,9	1,4
Other receivables		0,5	0,7	0,5
Deferred expenses and accrued income		2,2	1,8	1,5
Cash		66,8	80,7	57,9
Total current assets		75,6	87,5	65,0
TOTAL ASSETS		113,5	128,3	104,3

CONDENSED CONSOLIDATED BALANCE SHEET

mSEK	Note	30 Sep 2024	30 Sep 2023	31 Dec 2023
EQUITY AND LIABILITIES
Equity		101,5	106,4	84,5
Liabilities
Non-current liabilities
Non-current liabilities		0,0	0,2	0,2
Non-current lease liability		0,2	3,4	2,3
Total long-term liabilities		0,3	3,6	2,4
Current liabilities Trade payables Current lease liability		3,6 2,9	5,4 3,2	6,1 2,9
Other liabilities Accrued liabilities and deferred income		1,4 3,8	1,6 8,0	1,9 6,4
Total current liabilities		11,7	18,3	17,4
Total liabilities		11,9	21,9	19,8
TOTAL EQUITY AND LIABILITIES		113,5	128,3	104,3
Equity ratio		89,5%	82,9%	81,0%
Equity per share, SEK		0,16	0,40	0,32

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to equity holders of the parent

mSEK	Share capital	Other contributed capital	Reserves	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				-57,9	-57,9
Other comprehensive income			-0,1		-0,1
Total comprehensive income			-0,1	-57,9	-58,0
Transactions with shareholders
Adjustment conversion warrants, net after issue
expenses		0,2		-0,2
New share issue, net after issue expenses **	5,4	68,7			74,0
Reduction of share capital	-79,1	79,1
Share-related compensation (stock option pro
gram)				1,0	1,0
Total transactions with shareholders	-73,7	147,9		0,8	75,0
Closing equity September 30, 2024	6,5	832,7	-0,4	-737,3	101,5

^* Expenses amounts to SEK 0.0m.

^** Issue expenses amounts to SEK 16.1m.

CONSOLIDATED CASH FLOW STATEMENT

mSEK	Note	Jul-Sep	Jul-Sep	Jan-Sep	Jan-Sep	Jan-Dec
		2024	2023	2024	2023	2023
Operating activities
Operating loss		-16,3	-20,5	-58,2	-72,7	-96,7
Adjustments for items not included in cash flow
Depreciation		2,3	3,2	6,6	6,4	8,7
Employee stock option expenses		0,2	0,4	0,8	0,5	0,7
Interest received		0,7	0,2	1,3	0,2	2,3
Interest paid		-0,2	-0,1	-0,8	-0,5	-0,6
Cash flow from current operations before change
in working capital		-13,4	-16,8	-50,4	-66,0	-85,6
Change in working capital
Decrease/increase in inventory		-0,2	0,1	0,3	-0,6	-1,8
Decrease/increase in trade receivables		-0,5	-0,2	-1,3	-0,0	0,4
Decrease/increase in current receivables		0,1	0,3	-0,7	-1,2	-0,0
Decrease/increase in current liabilities		-3,3	-5,9	-6,5	3,5	2,2
Change in working capital		-3,9	-5,7	-8,1	1,7	0,7
Cash flow from operating activities		-17,3	-22,5	-58,5	-64,4	-84,8
Investing activities
Investments of intangible fixed assets		-1,6	-3,0	-5,0	-8,0	-9,5
Investments of tangible fixed assets		-	-	-	-0,0	-0,0
Cash flow from investing activities		-1,6	-3,0	-5,0	-8,0	-9,5
Financing activities
Amortisation of lease debt		-0,8	-0,8	-1,6	-2,4	-3,2
Issuance of share options		-	-	-	0,2	0,2
New share issue		-0,3	-	74,0	-	-
Cash flow from financing activities		-1,1	-0,8	72,4	-2,2	-3,0
Cash flow for the period		-19,9	-26,3	8,9	-74,7	-97,4
Cash and cash equivalents at beginning of period		86,7	107,0	57,9	155,3	155,3
Cash and cash equivalents at end of period		66,8	80,7	66,8	80,7	57,9

INCOME STATEMENT, PARENT COMPANY

mSEK	Note	Jul-Sep 2024	Jul-Sep 2023	Jan-Sep 2024	Jan-Sep 2023	Jan-Dec 2023
Operating income
Net sales		0,3	0,3	0,9	0,8	1,1
Capitalised development expenditure		1,1	2,8	3,0	7,1	8,3
Total income		1,4	3,1	3,9	7,9	9,4
Operating costs
Other external expenses		-6,9	-8,5	-26,0	-27,6	-37,6
Personnel costs		-5,5	-5,6	-15,2	-16,4	-22,0
Amortisation of intangible assets and
depreciation of property, plant and equip
ment		-0,7	-0,9	-2,2	-1,9	-2,7
Total operating costs		-13,1	-15,0	-43,4	-46,0	-62,3
Operating loss		-11,7	-11,9	-39,5	-38,1	-52,9
Financial items
Write-downs of financial fixed assets and
short-term investments		-150,0	-81,2	-150,0	-81,2	-81,2
Financial income, other		0,5	0,2	0,5	0,2	2,3
Financial expenses, other		-	-0,0	-0,1	-0,1	-0,0
Results from net financial items		-149,5	-81,0	-149,6	-81,1	-78,9
Loss before tax		-161,2	-92,9	-189,1	-119,2	-131,8
Tax on income for the period		-	-	-	-	-
Loss at end of the period		-161,2	-92,9	-189,1	-119,2	-131,8

PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME

mSEK	Note	Jul-Sep 2024	Jul-Sep 2023	Jan-Sep 2024	Jan-Sep 2023	Jan-Dec 2023
Net profit		-161,2	-92,9	-189,1	-119,2	-131,8
Other comprehensive income for the period:
Other comprehensive income for the peri
od, net of tax		-	-	-	-	-
Total comprehensive income for the
period		-161,2	-92,9	-189,1	-119,2	-131,8

CONDENSED BALANCE SHEET, PARENT COMPANY

mSEK	Note	30 Sep 2024	30 Sep 2023	31 Dec 2023
ASSETS
Fixed assets
Intangible fixed assets
Capitalised development costs	5	22,2	21,0	21,5
Total intangible fixed assets		22,2	21,0	21,5
Financial assets
Shares in group companies		60,0	200,0	202,0
Long-term receivables from group companies		35,2	19,8	22,7
Total financial assets		95,2	219,8	224,7
Total fixed assets		117,4	240,8	246,2
Current assets
Short term receivables
Trade receivables		-	0,2	-
Other receivables		0,0	0,1	0,2
Prepaid expenses and accrued income		1,5	0,9	0,9
Total short term receivables		1,5	1,2	1,1
Cash		59,1	65,7	42,3
Total current assets		60,6	66,9	43,5
TOTAL ASSETS		178,0	307,7	289,6

CONDENSED BALANCE SHEET, PARENT COMPANY

mSEK	Note	30 Sep 2024	30 Sep 2023	31 Dec 2023
EQUITY AND LIABILITIES
Equity		156,2	283,9	271,3
Liabilities
Non-current liabilities
Non-current liabilities to group companies		16,2	15,5	8,9
Total long-term liabilities		16,2	15,5	8,9
Current liabilities
Trade payables		1,6	3,1	3,3
Other liabilities		0,9	0,8	0,8
Accrued liabilities and deferred income		3,0	4,4	5,4
Total current liabilities		5,5	8,3	9,5
Total liabilities		21,8	23,8	18,4
TOTAL EQUITY AND LIABILITIES		178,0	307,7	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					-189,1	-189,1
Disposition according to AGM
Loss brought forward				-131,8	131,8	-
Development fund		0,8		-0,8		-
Total comprehensive loss for the period		0,8		-132,5	-57,3	-189,1
Transactions with shareholders
New share issue, net after issue expenses
**	5,4		68,7			74,0
Reduction of share capital	-79,1		79,1			0,0
Total transactions with shareholders	-73,7		147,7			74,0
Closing equity September 30, 2024	6,5	22,2	831,8	-515,2	-189,1	156,2

^* Expenses amounts to SEK 0.0m.

^** Issue expenses amounts to SEK 16.1m.

CASH FLOW STATEMENT, PARENT COMPANY

mSEK	Note	Jul-Sep 2024	Jul-Sep 2023	Jan-Sep 2024	Jan-Sep 2023	Jan-Dec 2023
Current operations
Operating loss Adjustments for items not included in cash		-11,7	-11,9	-39,5	-38,1	-52,9
flow
Depreciation		0,7	0,9	2,2	1,9	2,7
Interest received		0,5	0,2	0,5	0,2	2,3
Interest paid		-	-0,0	-0,1	-0,1	-0,0
Cash flow from current activities before
changes in working capital		-10,4	-10,9	-36,9	-36,0	-47,8
Changes in working capital
Decrease/increase in current receivables		0,1	0,5	-0,5	0,6	0,2
Decrease/increase in current liabilities		-0,6	-1,7	-3,2	-0,3	0,8
Total changes in working capital		-0,5	-1,2	-3,8	0,3	1,0
Cash flow from operating activities		-10,9	-12,1	-40,6	-35,8	-46,8
Cash flow from investing activities
Acquisition of intangible assets		-1,1	-2,8	-3,0	-7,1	-8,3
Shareholder contribution		-	-	-8,0	-25,0	-27,0
Repaid group companies		4,7	2,9	11,7	34,2	7,6
Loan group companies		-5,0	-13,5	-17,3	-43,1	-7,0
Cash flow from investing activities		-1,4	-13,4	-16,7	-40,9	-34,7
Cash flow from financing activities
Raised loans group companies		-	-	-	-	2,0
Amortisation debt group companies		-	-	-	-	-20,5
New share issue		-0,3	-	74,0	-	-
Conversion warrants		-	-	-	0,2	0,2
Cash flow from financing activities		-0,3	0,0	74,0	0,2	-18,3
Cash flow for the period		-12,6	-25,5	16,7	-76,5	-99,8
Cash and cash equivalents at beginning of
period		71,7	91,2	42,3	142,2	142,2
Cash and cash equivalents at end of period		59,1	65,7	59,1	65,7	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 parent company has prepared its interim report in accordance with the Annual Accounts Act and the Swedish Financial Reporting Council's recommendation RFR 2 Accounting for legal entities.

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

Note 3 Other expenses

mSEK	Jul-Sep 2024	Jul-Sep 2023	Jan-Sep 2024	Jan-Sep 2023	Jan-Dec 2023
Product development	1,3	2,0	4,7	7,0	8,4
Patent costs	0,4	0,2	1,2	1,1	1,5
Costs for clinical studies	1,2	1,5	7,6	6,3	9,2
Sales and marketing costs	2,9	5,5	9,5	15,4	21,4
Other expenses	2,3	2,2	10,5	9,7	13,8
Total other expenses	8,1	11,5	33,5	39,6	54,3

Note 4 Changes in outstanding stock options

Changes in outstanding stock options of series 2023/2026	30 Sep 2024	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	30 Sep	31 Dec
	2024	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 Sep 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 Sep	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

	30 Sep	31 Dec
Patents, mSEK	2024	2023
Opening cost	38,9	37,7
Purchases	2,0	1,2
Sales and disposals	-0,3	0,0
Closing accumulated cost	40,7	38,9
Opening depreciation	-26,7	-24,1
The period's depreciation	-1,8	-2,6
Sales and disposals	-0,0	0,0
Closing accumulated depreciation	-28,6	-26,7
Closing carrying amount	12,1	12,2
	30 Sep	31 Dec
Development expenses, mSEK	2024	2023
Closing cost	37,5	29,2
The period's capitalisation	3,0	8,3
Closing accumulated cost	40,5	37,5
Opening depreciation	-16,1	-13,4
The period's depreciation	-2,2	-2,7
Closing accumulated depreciation	-18,3	-16,1
Closing carrying amount	22,2	21,5

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

Defect extending down to >50% of the cartilage depth.

IV (ICRS scale):

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).

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.

<-- PDF CHUNK SEPARATOR -->

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 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, and to date, more than 2,000 surgeries have 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

Year-end Report 2024 5 February 2025 AMG 2025 3 April 2025 Interim Report January-March 2025 25 April 2025 Interim Report April-June 2025 11 July 2025 Interim Report July-September 2025 24 October 2025 Year-end Report 2025 6 February 2026

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 October 25, 2024 at 08.30 (CEST).

2025 Annual General Meeting

Episurf Medicals Annual General Meeting will be held on April 3, 2025 in Stockholm, Sweden. Shareholders may contact the Committee with proposals regarding the work of the committee. Proposals shall be submitted in due time before the Annual General Meeting to ensure that the proposals can be considered, but not later than 31 January 2025. Proposals must be sent to the Chairman of the nomination committee, via ir@episurf.com.

Nomination Committee ahead of 2025 Annual General Meeting

In accordance with the decision by the Annual General Meeting, Episurf Medical's Nomination Committee shall consist of four members. The members are selected by the three largest shareholders in the company that wish to participate in the committee. In addition, the Chairman of the Board is to be appointed to the Nomination Committee. The members of the Nomination Committee shall agree on a chairman/woman of the committee. In accordance with the above principles, the Nomination Committee consists of the following four members; Ulf Grunander, (Chairman of the Board Episurf Medical AB), Ilija Batljan, (representing Health Runner AB, Sebastian Jahreskog, Niles Noblitt, (representing Sajaco Investments LLC).

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

The following analysts follow Episurf Medical's development Redeye Analyst: John Westborg

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