IRRAS — Interim / Quarterly Report 2023

May 17, 2023

INTERIM REPORT Q1, 2023

January – March 2023

Financial Summary

January - March

• Net revenue amounted to 11.2 MSEK (8.6)
• Operating loss (EBIT) amounted to -59.2 MSEK (-33.7)
• Loss after tax amounted to -59.2 MSEK (-33.3)
• EPS before and after dilution amounted to SEK -0.07 (-0.46)

CEO Statement

The first quarter served as an encouraging start to 2023 for IRRAS as our total revenue of MSEK 11.2 marked the highest quarterly revenue total in the company's history.

During last quarter's year-end report, we referenced that the US was expected to drive a higher percentage of the company's revenue in future quarters due to two reasons: (1) increased utilization from existing customers as account penetration grows, and (2) revenue contribution as a result of our commercial partnership with Medtronic. During Q1, the US market accounted for 83% of our total revenue, and 95% of our US revenue was generated by existing customers that had previously ordered. Although all revenue during Q1 was generated from IRRAS-driven accounts, customer interest driven by our partners at Medtronic was encouraging, and a robust funnel has been created during the early stages of their sales activity.

Beyond sales activity, a number of other important growth drivers also occurred during Q1 2023. World-renowned surgeons from the University of Buffalo published the first comparative clinical data to confirm the superiority of IRRAflow versus traditional passive drainage. Such clinical data and support from leading physicians continues to drive the product approval process for IRRAflow at other leading US facilities.

Finally, we made meaningful, needed progress regarding the company's next needed financing. Our existing investors remain supportive as we've signed a short-term bridge financing with Bacara Holdings, and, in the near future, we plan to finalize and announce plans to provide the company capital to support our continued growth and expansion.

Thank you for your continued interest and support.

Will Martin, CEO

Events

During the quarter

• Superiority of IRRAflow system confirmed in head-to-head clinical study performed by Neurosurgeons at University of Buffalo and published in the Operative Neurosurgery Journal. The study concluded that IRRAflow system, when used for the treatment of chronic subdural hematomas (cSDH), results in favorable clinical outcomes, low complication and revision rates, faster clearance of collected blood, and reduced rates of catheter infections compared to passive drainage using an external ventricular drain (EVD).

After the period

• Secured bridge financing agreement through a loan providing up to MSEK 40 in funding to cover working capital needs until the completion of the ongoing financing process.

Selected key indicators	2023	2022	2022
SEK Million	Jan-Mar	Jan-Mar	Jan-Dec
Net revenue	11.2	8.6	40.0
Gross margin (%)	8%	49%	Neg
Operating loss (EBIT)	-59.2	-33.7	-168.1
Net Profit	-59.2	-33.3	-166.6
EBITDA	-55.4	-29.4	-151.7
Return on equity	Neg	Neg	Neg
Share of sales in the US (%)	83%	43%	56%
Reorders share of sales (%)	81%	62%	61%

Financial Calendar: | Q2 – August 24, 2023 | Q3 – November 9, 2023 | Q4 – February 21, 2023 | Financial reports: www.IRRAS.com

Contact: investor@IRRAS.com, +46 (0)8 120 131 21

Financial reporting

Consolidated net revenue for the quarter amounted to 11.2 MSEK (8.6). The increase was driven by higher new as well as recurring sales. Cost of sales amounted to 10.2 MSEK (4.4) driven primarily by higher sales. Consolidated gross profit/(loss) totaled 0.9 MSEK (4.2). The reported gross margin was 8% (49), where the first quarter last year benefited from a relatively more favorable sales mix, and the expensing of certain development costs in 2021. Consolidated revenue and earnings – Q1

Operating expenses totaled 60.1 MSEK (38.0) reflecting increased activities in product enhancement, studies, training and sales. M&S expenses were 29.1 MSEK (13.3) driven by increased commercial activities. G&A expenses were 16.3 MSEK (17.1). R&D expenses amounted to 13.5 MSEK (7.6) where the increase reflects the product development phase coming to an end where certain finishing touches and education can't be capitalized under IFRS. Other operating income/expense totaled -1.2 MSEK (0.0) relating primarily to exchange gains and losses.

Operating loss (EBIT) was -59.2 MSEK (-33.7) and net financial income was 0.0 MSEK (0.4). Comprehensive income for the quarter was -59.4 MSEK (-32.4).

Condensed consolidated P&L	2023	2022	2022
MSEK	Jan-Mar	Jan-Mar	Jan-Dec
Net revenue	11.2	8.6	40.0
Cost of sales	-10.2	-4.4	-31.6
Gross profit/loss	0.9	4.2	8.4
Gross margin	8%	49%	21%
Marketing and sales (M&S)	-29.1	-13.3	-63.2
General and administration (G&A)	-16.3	-17.1	-66.5
Research and development (R&D)	-13.5	-7.6	-46.2
Other operating income/expenses	-1.2	0	-0.5
Total operating expenses	-60.1	-38.0	-176.5
EBIT; Operating profit/loss	-59.2	-33.7	-168.1
Net financial items	0.0	0.4	1.5
Earnings before taxes	-59.2	-33.3	-166.6
Tax	0.0	0	0.0
Net profit/loss	-59.2	-33.3	-166.6
Comprehensive income
Translation differences	-0.2	0.9	1.1
Comprehensive income attributable to Parent Company's shareholders	-59.4	-32.4	-165.5
Earnings per share before and after	-0.07	-0.46	-1.89

dilution (SEK)

The US market continues to represent the largest share of Sales per region driven by the company's more established account base and customer adoption in the US, while the European team, after extended impact from the Covid-19 pandemic, works to build clinical data and reference accounts.

Sales per Region	2023	2022	2022
MSEK	Jan-Mar	Jan-Mar	Jan-Dec
USA	9.3	3.7	22.4
Germany	0.3	2.3	4.6
Europe, excluding Germany	1.6	1.3	4.3
Rest of World	-	1.4	8.8
Total	11.2	8.6	40.0

Financial position

Non-current assets decreased to 30.4 MSEK (38.7). The lower net amount is not a reflection on future earnings expectations, but rather a reflection of the fact that the product is entering its final stages of development and that the Company maintains a conservative policy with low capitalization and high depreciation rates. Amortization of capitalized development is recognized under Cost of sales.

Inventory has increased to 39.8 MSEK (19.7) reflecting a conversion towards commercialization and preparing for expected orders as sales representation grows. Current receivables decreased to 20.3 MSEK (27.1) driven by lower levels of prepayments and account receivable realignment. Total equity was 86.9 MSEK (79.4)

Condensed consolidated Balance Sheet ^{2023 2022 2022}

	31-Dec
	20.3
	5.7
	8.8
	34.8
	29.1
	38.4
	69.3
	136.8
	171.6
	146.0
	5.9
	19.7
	171.6
31-Mar 18.4 5.4 6.6 30.4 39.8 20.3 17.6 77.7 108.1 86.9 0.1 21.0	31-Mar 27.6 5.9 5.1 38.7 19.7 27.1 19.6 66.5 105.1 79.4 0.3 25.4 108.1 105.1

Condensed change in Equity	2023	2022	2022
SEK millions	Jan-Mar	Jan-Mar	Jan-Dec
Opening balance	146.0	111.6	111.6
Net Profit	-59.2	-33.3	-166.6
Other comprehensive income	-0.2	0.9	1.1
Total comprehensive income	-59.4	-32.4	-165.5
Share based incentive programs	0.2	0.2	0.7
Share issue	-	-	214.6
Costs related to direct share issue	-	-	-15.4
Closing Balance	86.9	79.4	146.0

Cash flow

QUARTER: Cash flow from operating activities were to -53.1 MSEK (-33.2) as a result of investments in product development and the commercial expansion in combination with, as yet, limited revenues. Investment amounted to -0.2 MSEK (-1.9). Financing amounted to -0.8 MSEK (-1.2). Total cash flow for the period was -54.1 MSEK (-36.3).

Cash flow	2023	2022	2022
SEK millions	Jan-Mar	Jan-Mar	Jan-Dec
Operating profit/loss	-59.2	-33.7	-168.1
Adjustment for non-cash items1)	3.1	5.5	32.5
Net interest	-0.7		-0.6
Taxes paid	0.0		0.0
Change in working capital	6.1	-5.0	-39.6
Cash flow from
Operating activities	-50.7	-33.2	-175.8
Investment activities	-0.2	-1.9	-3.4
Financing activities	-0.8	-1.2	194.0
Cash at beginning of period	69.3	55.9	55.9
Cash flow for the period	-51.7	-36.3	14.7
Exchange rate difference in cash	0.0	0.1	-1.3
Cash at close of period	17.6	19.6	69.3

1) Pertains mainly to changes in share-based remuneration programs including social security contributions, exchange rate differences, as well as depreciation, cost adjustments in inventory, and impairments

Financial reporting – Parent Company

IRRAS AB's primary focus is Group administration related to the company's listing on Nasdaq, and services relating to Group companies. Net revenue amounted to 2.6 MSEK (0.0) year to date and reflects invoicing to subsidiaries. Operating losses amounted to -7.5 MSEK (-10.6) year to date. Net financial income amounted to MSEK 0.1 MSEK (0.6).

Condensed consolidated P&L	2023	2022	2022
MSEK	Jan-Mar	Jan-Mar	Jan-Dec
Net revenue	2.6	0.0	0.4
Cost of sales	-1.9	-2.9	-10.4
Gross profit/loss	0.7	-2.9	-9.9
Marketing and sales (M&S)	-2.4	-1.9	-7.8
General and administration (G&A)	-6.1	-5.7	-26.6
Research and development (R&D)	0.0	-0.1	-0.4
Other operating income/expenses	0.4	0.0	0.0
EBIT; Operating profit/loss	-7.5	-10.6	-44.8
Write-down of shares in subsidiaries	-	-61.9	-16.9
Net financial items	0.1	0.6	2.3
Earnings before taxes	-7.3	-71.9	-59.4
Tax	-		-
Net profit/loss	-7.3	-71.9	-59.4

Shares in group companies have increased with shareholders' contributions. The increase in financial assets reflects the conversion of an intercompany loan to equity for IRRAS GmbH.

Parent Company Balance Sheet	2023	2022
SEK thousand	31-Mar	31-Dec
Capitalized development	18.4	20.3
Licenses/patents	0.9	0.9
Financial assets1)	432.0	376.3
Capitalized development	0.01	0.0
Total non-current assets	451.2	397.6
Other receivables	5.2	1.3
Cash in bank	4.9	67.4
Total current assets	10.1	68.8
TOTAL ASSETS	461.3	466.4
Share capital	23.8	23.8
Share premium reserve	28.0	28.0
Total Restricted equity	51.8	51.8
Share premium reserve	931.9	931.9
Retained earnings and this year's profits	-536.5	-529.6
Total non-restricted equity	395.4	402.4
Long-term liabilities2)	0.0	0.0
Current liabilities	14.1	12.2
TOTAL EQUITY AND LIABILITIES	461.3	466.4

1) Participation in Group Companies and long-term Group receivables 2)Long term lease liability and provisions for social security contributions relating to incentive programs

Number of Shares

	2023	2022	2022
Number of Shares	Jan-Mar	Jan-Mar	Jan-Dec
Opening	794,813,400	79,481,340	79,481,340
Closing	794,813,400		79,481,340 794,813,400
Average	794,813,400	79,481,340	320,077,784

Employees

The average number of employees during the quarter was 47 (44). Related party transactions of MSEK 0.0 (0.2) arose from educational training sourced from a party related to the Board Member Kleanthis G. Xanthopoulos.

Effects of covid-19 and the war in the Ukraine Neither are deemed to have any material effects on the financial statements.

Long-term incentive programs IRRAS AB

The long-term incentive program issued by IRRAS AB aims to align shareholders and employee incentives. The options have been allotted at no cost, are transferred at fair market value as determined by independent valuations, are vested based on the terms of individual employment contracts and programs, can be exercised when fully vested and each option carries the right to subscribe to one new share. For additional information see AGM announcements from relevant years.

Program 1 – LTIP 2016: maximum of 1,900,000 options, vested over one to three years, entitling to subscription at SEK 13.6 by no later than 30 September 2025. Outstanding warrants at end of period: 1,652,905. Program 6 – LTIP 2020: maximum of1,050,000 options, vested over three years, entitling to subscription at a strike price set on the granting date by no later than April 27, 2029. Outstanding warrants at end of period: 655,824. Program 7 – LTIP 2021: maximum of 1,000,000 options, vested over three years, entitling to subscription at a strike price set on the granting date by no later than April 29, 2029. Outstanding warrants at end of period: 848,207. Program 8 – LTIP 2022: maximum of 12,100,000 options, vested over three years, entitling to subscription at a strike price set on the granting date by no later than 3 August 2030, at a strike price set on the granting date. Outstanding warrants at end of period: 11,165,500.

Full subscription of all programs would increase the total number of shares by 1.8%.

Financial Outlook

Revenue is expected to exceed SEK 350 million by 2025 Gross margin is expected to exceed 60% by 2025 Cash flow break-even is expected by 2025

Accounting principles and other information

Shares IRRAS AB's shares (listed on First North Premier Growth Market 2017 and moved to the main market in 2020) are traded under the stock symbol IRRAS.

The Group Structure encompasses the parent company IRRAS AB, org. no. 556872- 7134 and the wholly owned subsidiaries GmbH, reg. no. DE308005079; IRRAS USA Inc., reg no 611800152.

The accounting principles governing this report adhere to the Swedish Annual Accounts Act, and IFRS as adopted by the EU and RFR 1. The Parent Company applies theAnnual Accounting Act and RFR2. This report has been prepared in accordancewith IAS 34. The accounting policies applied herein are consistent with the latest published Annual Report. New and amended standards adopted from the current year are not deemed to have any material impact on the Group's financial position.

This report has not been reviewed by the company's auditor.

Risks and uncertainties exist given that IRRAS is a relatively young company with yet limited revenue generation. Risks and uncertainties in the Parent company are aligned with those of the Group. For further information, see Risks and Uncertainties in the last published Annual Report.

Going concern statement: This report has been prepared with the assumption that the Company has the ability to continue operations for the next12 months.

The Board of Directors and the CEO conclude that the Company will need additional financing to fully secure going concern in accordance with the company's strategic plan during the upcoming 12-month period. Given the EIB facility, the continuous interest from the capital market, and the strong current ownership base, the Board of Directors and the CEO's assessment is that the Group will attract and receive sufficient financing to continue for at least the next 12 months. They further acknowledge that should decisive conditions not be met, for example, by sales not developing as expected, the Group's continued operation might be at risk, and additional capital infusions may be required. This means that there are circumstances that may give rise to significant doubts about the company's ability to continue operations without additional financing.

Statement of assurance This report has been adopted by the Board of IRRAS AB on 17 May 2023. The Board and the Managing Director, certify that this interim report provides a fair assessment of the Parent Company, Group's activities, financial position, profits and describes material risks and uncertainties.

This document is considered information that IRRAS is obliged to disclose pursuant to the EU Market Abuse Regulation. The information was released for public disclosure, through the agency of the contact person above, on 17 May 2023 at 8:00 a.m. (CET).