Medicalgorithmics S.A. — Earnings Release 2022

Apr 24, 2023

Title:Estimated financial results and provisional recognition of contributionin kind value according to IFRS in financial statements

Currentreport No.: 11/2023

Preparationdate: April 21, 2023

Legalbasis: Article 17(1) of the MAR Regulation - confidential information.

TheManagement of Medicalgorithmics S.A., based in Warsaw, presents thedraft selected financial results for 2022, both on a stand-alone andconsolidated basis, with comparable data for 2021, as well asprovisional recognition of the contribution of Kardiolytics Inc.(_quot;Kardiolytics_quot;) in accordance with IFRS requirements.

TheManagement reminds and emphasizes that the consolidated results for2022, starting from the report for the first half of 2022, are adjustedby removing the current results and comparable data of Medi-Lynx andrecognizing them as discontinued operations, in accordance with theappropriate IFRS requirements, including IFRS 5.

Tobetter illustrate the impact of this change on the Company's and itscapital group's (_quot;Group_quot;) results, the Management also presentsrevenues, direct costs, and profit on sales for the 4th and 3rd quartersof 2022 in the attached PDF to this report.

Consolidatedrevenues of Medicalgorithmics increased by 30% YoY to PLN 62.7 million.EBIT amounted to PLN 17.2 million compared to a loss of PLN 9.6 millionin the previous year. The estimated EBITDA increased to PLN 21.2 millioncompared to a loss of PLN 5.4 million in the previous year, and the netloss, including non-cash financial costs related to the sold company inthe United States, decreased to PLN 30.5 million from PLN 171.0 milliona year earlier.

Ona standalone basis, Medicalgorithmics' revenues increased by 31% YoY toPLN 60.7 million from PLN 46.2 million in 2021. Profit on sales amountedto PLN 17.9 million, which was 47% higher than the previous year, whilethe net loss, including non-cash costs related to the sold company inUSA, decreased to PLN 29.5 million compared to PLN 172.4 million a yearearlier.

TheCompany acquired 100% of Kardiolytics' shares through a Transaction onNovember 8, 2022, which involved the issuance of 4,976,384 shares at anissuance price of PLN 44.27 per share in exchange for a cashcontribution of PLN 13.8 million and a contribution of 100% ofKardiolytics' shares valued at USD 44,890,589 by the auditing firm BakerTilly TPA, equivalent to PLN 206.5 million (_quot;Transaction_quot;), according tothe current report no. 66/2022 dated November 16, 2022. The changes tothe Company's articles of association related to the issuance andincrease of equity were registered by the District Court on November 29,2022, in accordance with the current report no. 67/2022 dated November29, 2022.

TheManagement informs that, after conducting an analysis regarding therecognition of the value of Kardiolytics' contribution in the financialstatements, with the support of the Supervisory Board, externaladvisors, and after discussions with the auditor during the audit of the2022 financial statements, it has decided to recognize the value ofKardiolytics in accordance with the most conservative and rigorousinterpretation of IFRS and IAS, and the accounting resulting from thevaluation is non-cash in nature.

Asa result, in the stand alone financial statements of the Company, thevalue of Kardiolytics' contribution was finally recognized at PLN 49.9million, which is equal to the value of 4.9 million shares of theCompany_#160;acquiredby Biofund in the Transaction at the closing price of Medicalgorithmics'shares on November 8, 2022, at PLN 12.82 per share, i.e., PLN 63.7million, reduced by Biofund's cash contribution of PLN 13.8 million. Thedifference between the valuation of the contribution in the Transactionand the valuation adopted in accordance with IAS in the stand-alonefinancial statements was recognized as non-cash capital adjustment topremium from the issuance of shares. According to paragraph 69 of IAS 13_quot;Fair Value Measurement,_quot; the quoted price in an active market providesthe most reliable evidence of the fair value of financial instruments.As a result, the amount of PLN 219.4 million initially recognized inequity as a premium in accordance with the valuation of the contributionby the valuation auditor in accordance with the requirements of thePolish Commercial Companies Code, was adjusted in the accounting recordsby PLN 156.5 million. This amount represents the difference between thevaluation of Kardiolytics' contribution established in the Transactionof PLN 206.5 million and the value established in accordance with therequirements of IAS of PLN 49.9 million.

Accordingto the knowledge of the Management supported by the opinion of the BakerTilly Company advisor and discussions with the auditor during theongoing audit, this is the only permissible way of accounting for theacquisition of Kardiolytics in the Issuer's stand-alone financialstatements, as the MSSF does not provide any other way of settling theacquisition of Kardiolytics. The valuations adopted in the stand-alonefinancial statements in accordance with MSSF are final.

Inthe opinion of the Management, various factors influenced the shareprice of the Company adopted to determine the value of shares in thesubsidiary, including: the liquidity of shares on the GPW market,investors' assessment of changes in the liquidity situation of theCompany after the Transaction, and limited market knowledge ofKardiolytics.

Inthe consolidated financial statements in accordance with point 45 ofMSSF 3, the Company applied provisional settlement of the contributionin kind and has to make the final settlement within 12 months from thedate of the Transaction, i.e., until November 2023. As at the date ofpreparing the consolidated financial statements for 2022, the accountingsettlement of the acquisition has not been completed, which means thatthese values may change. The acquisition of Kardiolytics is subject tothe purchase method in accordance with MSSF 3 _quot;Business Combinations_quot;.

Duringthe analysis, various scenarios of possible technological development,as well as parameters used for valuation, were taken into account.Additionally, during the preparation of financial statements for 2022,the Company decided to engage an advisor to determine the fair value ofacquired assets and assumed liabilities, especially intangible and legalvalues in the form of the VCAST technology developed by Kardiolytics.The Management received a valuation of the technology prepared by BakerTilly TPA, indicating the value of the assets at PLN 139.2 million. Thisvaluation was based on consistent assumptions as in the valuationprepared for the purpose of determining the value of Kardiolytics in theTransaction. However, for the purpose of preparing the provisionalsettlement of the transaction, the most conservative approach wasapplied with respect to the analyzed scope of parameters used forvaluation, also after discussions with the Company's auditor during theongoing audit. As a result, the estimated and provisionally adoptedvalue of the technology amounted to PLN 41.2 million, the net assetsvalue amounted to PLN 31.8 million, and the value of the goodwillamounted to PLN 18.2 million. This value will be subject to verificationand final settlement in future periods after deciding on the finalapproach to the valuation of the asset.

TheCompany states that both the consolidated financial statements of theGroup and the stand-alone financial statements of the Company aresubject to verification by an independent auditor as part of the auditof the financial statements for 2022, and therefore the possibility ofchanges to the indicated amounts or their presentation cannot beexcluded. In the event of significant changes, the Company will informseparately with current reports.

Adjustmentsto the value of Kardiolytics' contribution and equity resulting from theadopted approach in both stand-alone and consolidated financialstatements are non-cash accounting entries in accordance with theprovisions of IFRS. These changes do not affect cash flows or resultfrom the evaluation of the status of the VCAST artificial intelligencetechnology development in Kardiolytics or its potential. Theseassumptions remain unchanged with the valuations adopted for Transactionpurposes. Management confirms that the VCAST project in Kardiolytics isprogressing according to the assumptions outlined in the presentationattached to the current report No. 58/2022, dated October 17, 2022. Thisis further confirmed by Kardiolytics obtaining another patent for VCASTtechnology, as noted in current report No. 10/2023, dated April 3, 2023.