Annual Report (ESEF) • Mar 22, 2024
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Download Source FileMedistim ASA www.medistim.com 2023 2023 CORPORATE ANNUAL REPORT Contents 1. MEDISTIM IN BRIEF 4 2. KEY FIGURES 6 3. HISTORY 8 4. LETTER FROM THE CEO 10 5. EXECUTIVE MANAGEMENT & BOARD OF DIRECTORS 12 5.1 Management Team 12 5.2 Board of Directors 14 6. BOARD OF DIRECTOR’S REPORT 16 6.1 Operational review 16 6.2 Regional development 17 6.3 Organization, HSEQ and sustainability 20 6.4 Financial Review 20 6.5 Parent company financial review 22 6.6 Corporate governance 22 6.7 Main risk factors 22 6.8 Events after the balance sheet date 23 6.9 Outlook 23 6.10 Shareholder information 24 7. COMPANY DESCRIPTION 26 7.1 Vision, mission, values 26 7.2 Medistim’s solutions 27 7.3 Strategy 27 7.4 Technology and Products 29 7.5 Research and Development 30 7.6 Clinical application areas and target markets 32 7.7 Market for cardiac procedures 32 7.8 Market for Vascular Surgeries 33 7.9 Geographical target markets 34 8. CORPORATE GOVERNANCE REPORT 36 8.1 Implementation and reporting on corporate governance 36 8.2 Business activity 36 8.3 Equity and dividend 36 8.4 Equal treatment of shareholders and transactions with closely related parties 37 8.5 Shares and negotiability 37 8.6 The general meeting 37 8.7 Nomination committee 38 8.8 Board of directors, composition and independence 38 8.9 The work of the Board of directors 39 8.10 Risk management and internal control 39 8.11 Remuneration of the board of directors 40 8.12 Remuneration of executive personnel 40 8.13 Information and communications 40 8.14 Takeovers 41 8.15 Takeovers 42 8.16 Auditor 42 9. SUSTAINABILITY REPORT 43 9.1 Strengthening human health through improved surgery 43 9.2 Product stewardship 45 9.3 Responsible business 47 9.4 People 49 10. GROUP CONSOLIDATED FINANCIAL STATEMENTS 51 10.1 Consolidated Income Statement of Profit or Loss and other Comprehensive Income 51 10.2 Statement of Financial Position 52 10.3 Consolidated Cashflow Statement 53 10.4 Statement of change in equity 54 10.5 Basis for preparation of financial statements 55 10.6 Use of estimates and judgement 55 10.7 New and amended standards effective from 2023 55 10.8 New and amended standards not yet effective 55 10.9 Notes to the accounts 56 11. PARENT COMPANY FINANCIAL STATEMENTS 88 11.1 Income Statement Medistim ASA 88 11.2 Balance Sheet Medistim ASA 89 11.3 Cash Flow Statement 90 11.4 Accounting Principles 91 11.5 Notes to the accounts 92 12. ALTERNATIVE PERFORMANCE MEASURES 105 13. AUDITORS REPORT 108 1. MEDISTIM IN BRIEF Cardiac and vascular diseases continue to be the most common cause of death in the western world. Globally, more than 700,000 patients undergo coronary artery bypass surgery annually while more than 1,300,000 patients have vascular surgery procedures performed. Over the past four decades, Medistim’s mission has been to serve patients, surgeons and health care providers with innovative and cost-effective medical devices that measure blood flow and visualize atherosclerosis, and thereby help improve the quality and outcome of cardiac and vascular surgery. One million beating hearts later, Medistim has set the standard in the field. Today, Medistim’s proprietary products are regarded to be standard-of-care in most European countries and Japan, while market adoption is growing in the USA, Asia and the Middle East. In addition, Medistim’s third party business represents about 100 different medical technology companies as a distributor of their products in Scandinavia. Medistim is a market leader within intra-operative transit time flow measurement (TTFM) and ultrasound imaging, providing the MiraQ™ system to the global market. These systems enable medical professionals to reduce risk and enhance quality of cardiac, vascular and transplant surgery. They provide clinically relevant information that empowers surgeons to make better-informed decisions in the operating room. The company’s devices are developed by working closely together with surgeons, who in turn have produced a growing amount of clinical data and studies that point to their efficacy and cost- effectiveness. Medistim is committed to continuing to serve the cardiac and vascular surgeons by investing in new product development. Medistim has wholly owned subsidiaries with marketing and sales organizations in the USA, Germany, China, Spain, Canada, the United Kingdom, Denmark, Sweden and Norway. In addition, a global distributor network is representing the company in more than 60 countries in Asia, Europe, Latin America and Africa. Medistim ASA is listed on the Oslo Stock Exchange and has its global head office in Oslo, Norway. 4 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Each of us likely knows a friend or family member grappling with some form of cardiovascular disease. When facing invasive surgical procedures, we naturally seek out the expertise of top surgeons. These leaders in the field have already embraced flow measurement and ultrasound imaging technologies to guarantee the finest surgical quality and outcomes for their patients. Consequently, in numerous countries, the utilization of these techniques has become the gold standard in the operating room. It is Medistim’s vision to extend these benefits universally so that every patient and surgeon worldwide can access optimal cardiovascular health care. Kari E. Krogstad President & CEO “ 5 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 6 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 2. KEY FIGURES Sales in MNOK EBIT in MNOK and EBIT % 0 20 000 40 000 60 000 80 000 100 000 120 000 0% 5% 10% 15% 20% 25% 30% 202020192018201720162015201420132012201120102009200820072006200520042003200220012000 0 5 10 15 20 25 30 Ebit Prosent 202020192018201720162015201420132012201120102009200820072006200520042003200220012000 EBIT per year EBIT % 8 % 37 % 55 % Leader in a large untapped CABG market Competition market share Medistim market share Open market (finger palpation) (332M people) 200,000 procedures >35 % market share (83M people) 44,000 procedures > 80 % market share USA (68M people) 16,000 procedures market share UK (213M people) 40,000 procedures < 5 % market share Brazil Germany >700.000 procedures 7 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Headquartered in Oslo, with production facilities in Horten, Norway. Medistim sells its products through more than 60 distributors world-wide, including Medistim’s own sales offices in USA, China, Germany, Spain, UK, Canada, Norway, Denmark, and Sweden. Dividend in NOK per share and Pay-out ratio Recurring sales Capital sales Capital sales and recurring sales of own products in MNOK Dividend per share per year Payout ratio 0 20 000 40 000 60 000 80 000 100 000 120 000 0% 5% 10% 15% 20% 25% 30% 202020192018201720162015201420132012201120102009200820072006200520042003200220012000 0 5 10 15 20 25 30 Ebit Prosent 202020192018201720162015201420132012201120102009200820072006200520042003200220012000 0 20 000 40 000 60 000 80 000 100 000 120 000 0% 5% 10% 15% 20% 25% 30% 202020192018201720162015201420132012201120102009200820072006200520042003200220012000 0 5 10 15 20 25 30 Ebit Prosent 202020192018201720162015201420132012201120102009200820072006200520042003200220012000 0 20 000 40 000 60 000 80 000 100 000 120 000 0% 5% 10% 15% 20% 25% 30% 202020192018201720162015201420132012201120102009200820072006200520042003200220012000 0 5 10 15 20 25 30 Ebit Prosent 202020192018201720162015201420132012201120102009200820072006200520042003200220012000 (83M people) 44,000 procedures > 80 % market share (1.4 B people) 60,000 procedures market share China (1.3 B people) 160,000 procedures < 1 % market share India (126 M people) 13,000 procedures > 90 % market share Japan 8 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 3. HISTORY 9 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Medism’s Milestones 10 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 21 st March 2024 Kari E. Krogstad President & CEO I am pleased to report that our total sales for the year reached a new high of MNOK 526.4, representing 7 % growth over 2022. Throughout the year, we remained committed to engaging with customers and prospects and educating them about the value proposition of our TTFM and HFUS technologies. These efforts have been met with positive response, particularly within the vascular product segment, which experienced significant growth over the past year. We are excited to further explore opportunities in this area, including the planning of a clinical study in vascular peripheral bypass surgery. In 2023, Medistim strategically invested in several key areas to drive future growth and enhance our competitive position. We embarked on a journey of geographical expansion, significantly growing our direct sales footprint by adding China, Canada, and Sweden to our list of direct countries. By establishing closer relationships with end-users and reducing distributor mark-ups, we aim to accelerate revenue growth and capture market share more effectively. Additionally, we made advancements in our operations by implementing a second shift in probe production, enabling us to meet growing demand and ensure timely delivery to our customers. These initiatives have led to an increase in expenses, and we acknowledge the short-term impact on our EBIT margin, which ended at 25.0 % for the year. We remain confident in the long-term value that these initiatives will deliver to our business and our shareholders. Medistim continues to maintain a robust competitive stance, coupled with significant interest in our product offerings. Notwithstanding the favorable momentum in our business, we remain aware of the hurdles posed by macroeconomic dynamics, such as increased deliberation in procurement processes and a lower inclination towards investment in higher-priced capital equipment within specific markets. Looking to 2024 and beyond, we are excited about the opportunities that lie ahead. With a dedicated and increasingly global team, innovative products, and a clear strategic direction, we are well- positioned to deliver sustainable growth and create long-term value for our stake holders. Thank you for your continued support and investment in Medistim. We look forward to updating you on our progress in the time to come. 4. LETTER FROM THE CEO 11 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 12 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 5. EXECUTIVE MANAGEMENT & BOARD OF DIRECTORS 5.1 Management Team Kari Eian Krogstad President and CEO, Medism ASA Kari E. Krogstad joined Medistim as CEO in September 2009. She has more than 30 years of experience from the biomedical industry, from commercial leadership roles within the international pharma, biotech and medtech sectors. Before joining Medistim, she spent 11 years at Dynal and held the position as General Manager of Invitrogen Dynal after the acquisition from U.S. based Invitrogen in 2005. Ms. Krogstad holds a Cand. Scient. degree in Molecular Biology from the University of Oslo as well as a Business degree from IHM Business School. Helge Børslid VP Manufacturing, Medism ASA Helge Børslid joined Medistim as Vice President Manufacturing in January 2017. Before joining Medistim, he was production manager at Halliburton, a company that offers products to the oil and gas industry. Previous experience ranges from test engineer to quality engineer at Norautron, Infineon Technologies, Kongsberg Maritime, and Sensor Development. Mr. Børslid holds a B.Sc. in Electronics Engineering from Vestfold University in Norway and a Master’s degree in Management from the Norwegian Business School (BI). Ole Arne Eiksund Chief Business Development Ocer, Medism ASA Ole Arne Eiksund joined Medistim as CBDO in April 2022. He has more than 25 years of experience from the biomedical industry, with commercial leadership roles within the pharma and biotech sectors. Former positions include Commercial Director at GSK Pharma, VP Global Sales at Hofseth BioCare and before joining Medisitim he was the CEO of Arctic Bioscience. Mr. Eiksund holds a M.Sc. degree in Computational Science from the University of Manchester (UMIST) and an Executive MBA from Hult International Business School, London. Mike Farbelow President, Medism USA, Inc. Mike Farbelow joined Medistim as Vice President of the US sales team in May 2012. He has extensive sales and management experience from the medical device industry. He served for many years with Smith & Nephew’s Endoscopy division both as a sales representative and the Director of Sales for the central region. His most recent position prior to joining Medistim was with Richard Wolf USA where he served as their national sales manager in spinal endoscopy. Farbelow holds a degree in management from the University of Minnesota Carlson School of Management. 13 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Håkon Grøthe Chief Innovaon Ocer, Medism ASA Håkon Grøthe joined Medistim as CIO in April 2019. He is an experienced leader with a passion for increasing customer value through digital innovation. Grøthe has put disruptive technologies such as AI, VR and Machine learning into work in his leadership roles from IT technology companies such as Impact Reality and Inspera. He also brings methodology experience relevant for agile processes, such as Google Sprint, Design Thinking and Kanban. Grøthe holds an M.Sc. degree in Industrial Economics/Computer Science from the Norwegian University of Science and Technology (NTNU). Thomas Jakobsen CFO, Medism ASA Thomas Jakobsen joined Medistim as VP Finance in 2001. Previous experience includes Controller and Finance Manager at Sysdeco (1993-1998), and Finance Director of Microtronica Nordic (1998-2001), where he was responsible for building the finance team and converting to a new MIS system. Mr. Jakobsen holds a B.Sc. in Management from the Norwegian Business School (BI). Roger Morberg VP Sales APAC, Medism ASA Roger Morberg joined Medistim as VP Sales in June 2010. He has extensive experience from the healthcare industry and is a trained medical professional. Before joining Medistim he worked for Siemens Medical as Country Manager for Ultrasound. Morberg has previously held various roles within sales and senior management positions in Marquette Electronics, GE Healthcare and Hewlett Packard. Stephanie d’Avout Stenhagen VP Sales EMEA, Medism ASA Stephanie d’Avout Stenhagen joined Medistim in 2017 as Sales Manager Europe. With over two decades of experience in the medical device industry, she brings a wealth of expertise and strategic vision to drive Medistim’s sales efforts across the EMEA region. Prior to joining Medistim she held various leadership roles in strategic marketing and business expansion at Medtronic Inc. and served in a Global Marketing capacity for Nobel Biocare. Ms. Stenhagen holds an MBA in Marketing from the Fox School of Business at Temple University. Erik Swensen VP R&D, Medism ASA Erik Swensen joined Medistim as VP Research & Development in 2002. Previous experience includes Development Engineer at ABB, Norway, where he participated in the development of advanced process control systems and developing ABB’s new control system for safety critical applications. Swensen holds a M.Sc. degree in Engineering Cybernetics from the Norwegian University of Science and Technology (NTNU). 14 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Tone Veiteberg VP Regulatory Aairs & Quality Assurance, Medism ASA Tone Veiteberg joined Medistim as VP Quality Assurance & Regulatory Affairs in 2013. She has more than 35 years of experience in Medical and Regulatory Affairs from the pharmaceutical and medical device industry, including Clavis Pharma, the Norwegian Association of Pharmaceutical Manufacturers, Leo Pharmaceuticals, and Glaxo/GlaxoWellcome (now GlaxoSmithKline). Veiteberg holds a M.Sc. in Pharmacy from the University of Oslo. VP Markeng, Medism ASA Hæge J.K. Wetterhus joined Medistim as VP Marketing in 2010. She has more than 25 years of experience working with diagnostic, analytical and biotech device companies. Before joining Medistim, she worked for Invitrogen Dynal where she held a variety of leadership roles in strategic marketing, product development and business development in the area of life science and biotechnology – always with an international focus. Wetterhus is a business economist from BI Norwegian School of Management, a chemical engineer from the Technical University of Bergen and holds a B.Sc. Honour in molecular biology from the University of Glasgow, United Kingdom. Anne Waaler VP Medical Department, Medism ASA Anne Waaler joined Medistim as VP Medical Department in 2016. She has more than 25 years of experience from the pharma and medtech industry, including roles within medical, marketing and strategy with Nycomed and GE Healthcare. Waaler holds a M.Sc. in Pharmacy from the University of Oslo, an MBA from the BI Norwegian School of Management in Oslo, and an ESCP-EAP in Paris. 5.2 Board of Directors Øyvin Brøymer Chair Øyvin Brøymer has served as Chair of Medistim since 2000. He works as an investor through his own company Intertrade Shipping AS and Fløtemarken AS, holds the position as Chair in Vistin Pharma ASA. Previous experience includes executive positions in The Aker Group, Hafslund Nycomed ASA and Leif Höegh & Co ASA, as well as broad board room experience from many other companies. He holds a degree within economics and business from Norwegian School of Management and an MBA from the University of Wisconsin. He is also Chair of the remuneration committee. Anna Ahlberg Board Member Anna Ahlberg is the CFO at the Swedish medical simulation company Surgical Science. Her previous career includes executive positions at several listed Swedish companies, such as med-tech companies Q-Med and Vitrolife. Ms. Ahlberg holds a MSc in Business Administration and Economics from the School of Business, Economics and Law, University of Gothenburg. She is an independent Board member and is a member of the audit committee. 15 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Board member Anthea Arff-Pettersen is a Partner and Investment Director at Aeternum Capital. She holds a Master’s in Investment Management from Cass Business School and a BSc in Business Administration from the University of Bath. Her previous experiences are from Schroders and M&G investments in London, private equity firm Credo Partners in Oslo, as well as Höegh Autoliners in New York. She is a member of the audit committee. Ole J. Dahlberg Board Member Ole Dahlberg is CEO at Curida, a life science company that develops and manufactures medicines, ensuring a safe supply of life-improving products. He has been in executive leadership roles both on the commercial side and in R&D at Dynal Biotech, German Biotech company Qiagen, and more recently for Thermo Fisher Scientific in the US. Mr. Dahlberg holds a MSc in Genetics and Marine Biology from the University of Oslo. Jon H. Hoem Board member Jon Hoem was one of the early employees at Medistim, joining the company in 1994, and contributing to structuring Medistim’s initial sales effort in Europe, Japan, and the United States. He has founded multiple early-stage cardiovascular medical device companies. Mr. Hoem holds a MSc degree in microelectronics and organizational development from the Norwegian Institute of Technology (NTNU). Lars Rønn Board member Lars Rønn has been board member in Medistim since 2010. He works as a consultant for Korn Ferry with focus on recruitment of executives within the med-tech area. He has previous experience as Executive Vice President, Sales & Marketing in Ambu, a Danish med-tech company and as CEO in Origio. He has also experience from several positions in Maersk-Medical AS. Rønn holds a BSc in Business, Language & Culture and has a Graduate Diploma in Int. Trade from Copenhagen Business School. He also has a Management Program from INSEAD. He is member of the remuneration committee. Tove Raanes Board member Tove Raanes has been board member in Medistim since 2014. She works as an advisor in the investment companies Dyvi Invest AS and Nore-Invest AS and serves as board member in Bouvet ASA, Multiconsult ASA, Krefting AS, and Noria Group AS. Her experience includes strategy, finance and business development from investment companies and management consulting from McKinsey & Company. Raanes holds a MSc from the Norwegian School of Economics (NHH). She is also Chair of the audit committee. 16 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 6. BOARD OF DIRECTOR’S REPORT The global market is facing macro-economic turmoil, with energy crisis, inflation pressure, increasing interest rates and cost levels and uncertainty related to the Palestinian and Ukrainian war. In this situation the company has been able to deliver solid profit and cash flow, and the need for Medistim’s products has not changed. The long-term consequences of the growing geopolitical uncertainty are unclear but might lead to continuing challenges in the global flow of goods. Medistim is taking mitigating actions to ensure access to key components to secure production and maintain growth and profitability also for the future. Further, the company is financially sound to face future challenges, with no interest-bearing debt and an equity ratio of 78.7 %. With these uncertainties, the need for Medistim’s products has been confirmed through the last two years' development. The company's solutions continue to be in increasing demand among cardiac and vascular surgeons. Medistim's core business is within developing, producing, servicing, leasing and distributing medical devices. The Group is headquartered in Oslo, with production facilities in Horten, Norway. Medistim sells its products through 60 distributors world- wide, including Medistim’s own sales offices in USA, Germany, China, Spain, UK, Canada, Denmark, Sweden and Norway. At the end of 2023, Medistim’s equipment was in use in more than 60 countries with about 3,500 clinics all over the world. The business is focused on ensuring quality within cardiac and vascular surgery. Cardiovascular diseases are the most common cause of death in the western world and on the rise in Asian and Latin American countries adopting western lifestyles. The Group’s products contribute to improved quality of surgery, which in turn reduces risk to the patients and contributes to a more efficient health economy. Worldwide, over 700,000 CABG (Coronary artery bypass Graft procedures) and 1,300,000 vascular procedures are performed each year. On a global scale Medistim has a leading position within quality control of CABG. Medistim is also a distributor of other medical devices through its subsidiaries Medistim Norge AS, Medistim Danmark Aps and Medistim Sverige AB. The products distributed are medical devices within all types of surgery. 6.1 Operational review Medistim increased its coverage of cardiovascular surgery procedures in 2023. The medical facilities strict requirements for distance-keeping and comprehensive infection control regimes during the pandemic has affected Medistim’s customer relations activities positively. During the pandemic Medistim adopted digital solutions for conferences and meetings by applying digital communication platforms and remotely controlling ultrasound systems. This has created a new meeting place that Medistim actively continues to use to demonstrate products and perform end-user training efficiently. However, with less restrictions and infection control, physical meetings and exhibition participation has increased in 2023. Medistim experiences that this improves close customer contact, exchange of information, influence and business progress. Cost related to travel and physical meetings went up in 2023, but the improved customer contact contributed to a positive development and a solid pipeline of leads entering 2024. However, due to the macroeconomic turmoil, Medistim experienced weaker capital sales in 2023 compared to 2022, especially in USA. As a consequence, operating profit (EBIT) ended at MNOK 131.4 with an EBIT margin of 25 % compared to last year EBIT of MNOK 141.2 or 28.7 %. Adjusted for currency effects, sales revenue declined 2.5 %. Sale of own products declined 3.8 % while sale of third-party products was up 4.7 % from 2022. Note: Medistim has adjusted its geographic regions from the former USA, Asia, Europe and ROW to AMERICAS (USA, Canada and Latin America), APAC (China, Japan and rest of Asia Pacific and EMEA (Europe, Middle East and Africa) when reporting sales of own products. Third party sales will be reported separately without any geographic split, as sales are only in Norway and Denmark. All comparable numbers are adjusted according to the new region split. 17 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Despite weaker capital sales the consumable sales were maintained in the major markets like AMERICAS and EMEA. The reduction in consumables in APAC and Europe was related to stock buildup due to the 10 % price increase entering 2023 and the transition period changing the Chinese setup establishing a direct presence in the Chinese market. During 2023, Medistim sold 240 new systems (250), where 50 were replacement of old systems and at year-end the total installed base of Medistim systems was 3500 units (3300). Probes and other consumables related to use of the medical systems represent a significant share of total sales for Medistim, depending on number of systems installed and utilization. Increased market penetration and surgical activity positively impacted Medistim’s sales of consumables for the year. Medistim continues to strengthen its position within both cardiac and vascular segments. Sales revenue from the cardiac segment ended in 2023 at MNOK 365.6 (MNOK 346.5), a 5.5 % growth. Sales revenue from the vascular segment ended at MNOK 81.3 (MNOK 69.5), a 16.9 % growth. Sales of imaging products decreased with 1.6 % after a record year in 2022 with 44 % growth. Medistim’s strategic progress relies on strong clinical documentation by leading medical centers to create support from Key Opinion Leaders (KOLs) within cardiac surgery and vascular surgery. It is a strategic priority to support this by increasing the focus on blood flow measurements, ultrasound imaging, surgical guidance, and quality assurance in relevant forums and channels. Clinical studies is described in more detailed under chapter 7. For some time and in parallel with cardiac surgery, it is Medistim’s goal to develop a strong position for the transit time flow measurement (TTFM) and high-frequency ultrasound (HFUS) imaging devices within the Vascular market. The recommendation of ultrasound imaging as an alternative to the current gold-standard angiography marks another milestone for Medistim in the efforts to establish HFUS technology for completion control in Carotid Endarterectomy (CEA). In the CIDAC study, which was part of the Knappich meta-analysis, Medistim’s MiraQ Vascular device was used, and it demonstrated the benefits of using HFUS compared to angiography. In 2023 the vascular product portfolio revenues have grown 16.9 %, and with the support of these revised Guidelines, Medistim is in a great position to continue this growth path. Medistim’s success is explained by the company’s focus on customer, market, product development and people skills. This requires a strong and competent management and Medistim’s team represent several years of experience within the MedTech field. A key to succeeding with winning in both Cardiac (CABG) and Vascular markets is continued innovation and product development. Customers expect to see improved performance from both the Flow and Imaging core technologies, as well as new features that will advance the clinical value and make the products even more user-friendly and attractive to build into their workflows. Medistim has expanded the Innovation and Product Development teams with additional headcount, as an important investment for the future. Not only does this increase the capacity to drive innovation initiatives, but it also brings in new competencies, experience, and ideas. 6.2 Regional development Americas USA is the largest market within the region and is the largest market in the world for Medistim’s products, representing 33 % of global CABG procedures. Total U.S. sales amounted to MNOK 197.1 (MNOK 198.1) in 2023 and represented 95 % of sales for the region. Adjusted for currency effects, sales were down 9.5 %. Sales development for the USA has been weak in 2023 compared to 2022 and 2021 with less capital sales in general, but especially the combined flow and imaging system. We attribute these repercussions to the prevailing macroeconomic landscape characterized by high inflation and escalating interest rates, corresponding also to what we experienced during the financial crisis around 2009 and during Covid in 2020. In addition to the macroeconomy, burnout among nurses post-Covid may be adding to the hospitals’ MNOK 2023 2022 CHANGE IN % AMERICAS 209.0 203.6 2.7 % APAC 83.0 79.0 5.0 % EMEA 155.0 133.5 16.0 % THIRD PARTY 79.4 75.8 4.7 % TOTAL 526.4 491.9 7.0 % expenses as well as challenging their ability to uphold surgical procedure volumes. However, the total number of flow procedures sold in 2023 is up by 5 %. While the global economy is expected to remain uncertain throughout 2024, there are signs of an improving economic outlook, that will fuel our US growth engine. Utilization of installed base however continue to grow as number of procedures covered increases. During the year, 89,526 procedures were sold, (86,030) of which 72,873 were flow procedures (69,417) and 16,653 were imaging (16,613). Capital sales were 33 units, compared with 46 units in 2022. In 2023, 86 % of sales was within the cardiac segment, hence the vascular segment is a large untapped opportunity for Medistim USA. Some 60 % of all bypass surgeries in the U.S. are performed by surgeons, using their fingertips to check for a pulse as the only quality assurance. This is a clinically proven unreliable method, highlighting the need and potential for Medistim’s products. Medistim’s current market penetration is 30 % of the total market of approximately 200,000 bypass surgery procedures performed annually. In comparable markets like Germany, Scandinavia, and Japan, Medistim has achieved TTFM market penetration exceeding 80 %. Medistim expects that market penetration in USA will develop in the same manner over time. To strengthen its market outreach, Medistim offers several business models in the USA. In addition to traditional capital investments and purchase of consumables, hospitals can choose to either pay per procedure or enter leasing agreements. In 2023, procedural sales amounted to 76 % of the total sales, ending at MNOK 151.6 (MNOK 139.1). This is up 9 % from 2022 (0 % currency adjusted). Total capital sales in systems and probes as consumable in number of units for the region is shown in table below. Number of procdures from: 2023 2022 CHANGE IN % PPP smart cards or lease flow 29 168 30 005 -2.8 % Flow probes to capital customers 43 706 39 412 10.9 % Total flow procedures 72 873 69 417 5.0 % PPP smart cards or lease imaging 11 153 10 713 4.1 % Imaging probes to capital customers 5500 5900 -6.8 % Total imaging procedures 16 653 16 613 0.2 % Total flow and imaging procedures 89 526 86 029 4.1 % 18 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Note: From 2023 onwards, Medistim will report on the split between the number of procedures sold based on sales of ‘pay per procedure’ (PPP) smart cards and estimated number of procedures from sales of capital probes, see table geographic split of sales in units. AMERICAS 2023 2022 CHANGE IN % Flow systems 16 17 -5.9 % Flow & imaging systems 23 32 -28.1 % Flow probes 1 806 1 707 5.8 % Imaging probes 58 60 -3.3 % Medistim strengthened its position in the region and announced in 2023 that a direct sales operation had been established in Canada. Medistim already had a strong position in Canada with presence in 15 of Canadas 38 cardiac centers. About 18 000 coronary bypass surgeries are performed in Canada per year, and about 37 % are supported with Medistim’s technology. The company is well positioned to continue the growth with local sales representatives who will focus on attracting new customers as well as driving the conversion from devices with Transit Time Flow Measurement (TTFM) technology only, to devices combining TTFM and High Frequency Ultrasound (HFUS). In addition, the market within Vascular surgery provides further opportunities for growth. The Canadian team is supported by the US management in the daily operations. Sales to Canada ended at MNOK 6.7 in 2023. In Latin America, Medistim is represented through local distributors and sales ended at MNOK 5.1. Sales in APAC and EMEA In these markets, the systems are owned by the hospitals and revenues are more evenly split between capital sales and sale of consumables. In 2023, sales of flow and imaging measurement probes amounted to 64 % of total sales, ending at MNOK 152, compared with MNOK 134 in 2022. Currency neutral sales were at the same level as last year, where EMEA had a 3 % increase and APAC 12 % decline year-over-year. The increased market penetration within both the cardiac segment and Vascular segment contributes to increase sale of consumables. In 2023, consumable sale amounted to 62 % of total sales. Sale of consumables is expected to increase as sale of systems continues to increase from MNOK 78 in 2022 to MNOK 85 in 2023. EMEA More than 90 % of the revenue from the region is from Europe either through direct representation or through distributors. Medistim has developed a strong market position in Europe with about 1150 systems installed, representing a solid base for future recurring revenues. Total European sales of own products in 2023 ended at MNOK 143.6, up 15 % from MNOK 124.8 in 2022. Currency neutral sales were up 2 %. 59 % of sales from Europe was through direct channel and 41 % of the sales was through distributors. Direct sales channel had a 5.5 % currency neutral increase while distributor sales had a 2.5 % currency neutral decrease in sales. Total capital sales in systems and probes as consumable in number of units for the region is shown in table below. EMEA 2023 2022 CHANGE IN % Flow systems 58 57 1.8 % Flow and imaging systems 37 35 5.7 % Flow probes 4 737 4 943 -4.2 % Imaging probes 50 63 -20.6 % Medistim’s direct representation in Europe is in Norway, Denmark, UK, Spain, Germany and Sweden. Both Spain and Germany are mature markets within cardiac, but have large opportunities within the vascular segment and converting cardiac customers to the combined flow and imaging solution. Norway and Denmark are well penetrated in both segments, while in the UK there is growth potential within both segments. In Sweden Medistim established a direct sales office in 2023. The company is well positioned to continue its growth by further developing the conversion from devices with Transit Time Flow Measurement (TTFM) technology only, to devices combining TTFM and High-Frequency Ultrasound (HFUS). In addition, the company has established exclusive distribution agreement with the Austrian manufacturer Agency for Medical Innovations (A.M.I.) with their product portfolio in urology, coloproctology and urogynecology. Medistim already has the rights for A.M.I. products in Norway and Denmark. With a direct presence in these three countries, Medistim is positioned to build a broader, Scandinavian distribution business for third party products. Sales through distributors of own products ended at MNOK 53.8, up 11 % compared to 2022. The installed base continued to increase, which will secure future consumable sales of probes. APAC Sale to Asian markets were MNOK 83 for the year, up from MNOK 79 in 2022. Currency neutral sales was a 7 % decline. Sales in the region was driven by sales to China. Sales to China ended at MNOK 42.6, up 15 % compared to 2022. Currency neutral growth was 5 %. The number of CABG procedures increased with 5 to 10 % per year, and China is a strategic market for Medistim. Medistim covers about 70 % of the 60,000 procedures performed in China. 19 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 20 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 To follow this opportunity Medistim established a direct sales representation in 2023. Medistim’s equipment is today installed in all the nation’s top 10 cardiac surgical centers. The company is well positioned to continue its growth by further expanding the local distributor network and building on the ongoing conversion from devices with Transit Time Flow Measurement (TTFM) technology only, to devices combining TTFM and High-Frequency Ultrasound (HFUS). In addition, a large market within Vascular and Transplant surgery provides opportunities for further growth. The second largest market in the region is Japan and sales ended at MNOK 24.0, down 6 % compared to 2022. The introduction of MiraQ to the Japanese market late 2019 continues to drive system sales in Japan. Total capital sales in systems and probes as consumable in number of units for the region is shown in table below. The volume reduction of flow probes is explained by the 10 % price increase announced in 2022 for 2023, where distributors purchased for inventory. It is also explained by the transition period with the former Chinese distributor completed projects and filled local Chinese distributors inventory before Medistim established direct presence during the first half of the year. Third party products Medistim established a presence in Sweden during 2023 explained under EMEA section. Medistim also has agency on third party products in Sweden and can now offer to distribute third party products in Scandinavia. 6.3 Organization, HSEQ and sustainability Medistim has sales representation in its main markets and production and main office functions in Norway. At year-end 2023, Medistim had 152 employees, compared to 131 in 2022. The working environment and culture in Medistim are considered strong, and there is continuous focus on initiatives for improvement. In 2023, absence due to sickness was 4.0 % or 1598 days. This compares to 4.4 % or 1510 days in 2022. Medistim strives to be an attractive workplace that offers challenging and motivating jobs and equal development opportunities for all. There is no discrimination due to gender, nationality, culture or religion with respect to remuneration, promotion or recruitment. The Company is committed to recognize diversity and ensure equal opportunities, including fair employment conditions. Medistim supports the United Nations Universal Declaration of Human Rights and the standards advised by the International Labour Organisation (ILO). For more information, please see Chapter "9. Sustainability Report" of this Annual Report. 6.4 Financial Review Going concern The Board of Directors confirms that the financial statement has been prepared based on the assumption of a going concern. Profit & Loss Medistim's sales for the full year 2023 ended at MNOK 526.4 (MNOK 491.9). Currency neutral, sales declined 2.5 %. Sales in AMERICAS increased 2.7 %, while sales in APAC and EMEA increased 5 % and 16 %, respectively. Sales of third-party product in Scandinavia through the subsidiaries in Norway, Denmark and Sweden rose 4.7 %. Total sales of own products in 2023, amounted to MNOK 446.9 (MNOK 416.1), while sales of third-party products were MNOK 79.4 (MNOK 75.8). Currency adjusted, sales of own products, decreased 3.8 % during the year, while sale of third- party products increased 4.7 %. The development in the markets are described under 1.2 regional development. Average NOK exchange rates towards USD and EUR in 2022 were 9.61 and 10.10 APAC 2023 2022 CHANGE IN % Flow systems 70 75 -6.7 % Flow & imaging systems 33 34 -2.9 % Flow probes 2 573 3 296 -21.9 % Imaging probes 60 48 -25.0 % 21 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 respectively, while equivalent rates in 2023 were 10.56 for USD and 11.42 for EUR. Cost of goods sold (COGS) amounted to MNOK 112.3 (MNOK 106.5), representing 21.3 % of sales (21.7 %). Weaker sales through direct operation and a growth in sale of third-party products, explain why COGS in percent is unchanged from 2022. In recent years, COGS in precent of sales has declined, since sales of Medistim's own products have grown at a higher pace than third party products. Salary and social expenses were MNOK 162.6 (MNOK 146.4), while other operating expenses were MNOK 96.4 (MNOK 74.5). The main reason for higher salary and social expenses is related to increased number of employees. The organization has been strengthened primarily within Innovation and Product development (R&D), but also within business development, sales, service, and administration. The increase is also related to the establishing direct presence in China, Canada and Sweden. The activity level in marketing and sales were higher this year, explaining the increased other operating expenses in addition to the establishment of direct operations described above. In total for salaries and other operating expenses, there is a negative impact of MNOK 11.7 related to foreign exchange rates differences. Medistim continuously invests in existing and new products to cover the surgical requirements for quality verification. The company has historically invested between 4 % and 10 % of annual sales in research and development (R&D). In 2023, total R&D investments amounted to MNOK 29.0 (MNOK 23.8), corresponding to 6.5 % of sales of own products. Of this, MNOK 13.3 (MNOK 9.9) was activated in the balance sheet. Operating profit before depreciation and amortization expenses (EBITDA) ended at MNOK 155.1 (MNOK 164.5). Depreciation for the year amounted to MNOK 23.6 (MNOK 23.4). The operating profit (EBIT) ended at MNOK 131.4 (MNOK 141.3), corresponding to an EBIT-margin of 25.0 % (28.7 %) The Group recorded net financials of MNOK 3.8 (MNOK 4.8), of which MNOK 13.3 of financial expenses (MNOK 11.7) and MNOK 17.1 of financial income (MNOK 16.5). Net finance was related to realized and unrealized gains or losses related to currency, cash in USD and EUR and customer receivables. Profit before tax was MNOK 135.2 (MNOK 146.0). Tax amounted to MNOK 31.4 (MNOK 32.1) and the net profit for the year was MNOK 103.8 (MNOK 114.0), corresponding to earnings per share for the full year of NOK 5.68 (NOK 6.25). The average number of shares outstanding during the year was 18.267.157 (18.247.550). Cash Flow Statement Net cash flow from operating activities amounted to MNOK 113.2 (MNOK 113.5). Working capital increased MNOK 3.1 during the year, driven by a MNOK 31.1 increase in inventories and MNOK 27.3 decrease in receivables. Net cash flow from investing activities was negative MNOK 29.7 (MNOK 21.1) where MNOK 16.4 as related to investments in assets and MNOK 13.3 was related to product development. Net cash flow from financing activities was negative MNOK 84.9 (MNOK -70.3), of which MNOK 82.2 (MNOK 68.4) was payment of dividends. Leases amounted to MNOK 8.7 (MNOK 7.3). At 31 December 2023, total cash and cash equivalents amounted to MNOK 153.9 (MNOK 152.6). Financial position At 31 December 2023, Medistim’s working capital totaled MNOK 188.8, compared with MNOK 185.7 the year before. During the year, inventory increased by MNOK 31.1. Even with increased sales, account receivables decreased MNOK 27.3 during the year. Account payables ended at the same level as last year. By year end the group had MNOK 17.6 in interest bearing liability related to lease contracts. MNOK 9.3 of this was long term liability and MNOK 8.3 was short term liability. Total long term liability of MNOK 13.5 was related to MNOK 9.3 lease contracts and MNOK 4.2 was related to deferred revenue. The total balance sheet amounted to MNOK 505.7 (MNOK 482.7). Total equity was MNOK 397.9 (MNOK 367.7), corresponding to an equity ratio of 79 % (76 %). Book value of properties, plants and equipment amounted to MNOK 57.3 (MNOK 51.3). Intangible assets were MNOK 45.4 (MNOK 36.1), of which product development and goodwill represented MNOK 31.3 and MNOK 14.1 respectively. The group 22 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 has a deferred tax asset of MNOK 5.1 (MNOK 3.6) related to temporary differences between carrying amount and tax values. The year-end cash position was MNOK 153.9 (MNOK 152.6). Medistim's financial position, cash flow and ability to finance its activities is considered satisfactory. Share capital and number of shareholders At 31 December 2023 the share capital of the Medistim ASA parent company was NOK 4,584,334 distributed on 18,337,336 shares outstanding at par value of NOK 0.25 per share. The share is freely traded on the Oslo Stock Exchange. The company had over 1000 shareholders and owned 55,617 treasury shares at year-end. 6.5 Parent company financial review The parent company Medistim ASA had 2023 sales of MNOK 341.0 (MNOK 308.6). Operating profit was MNOK 108.0 (MNOK 101.7) and profit before tax amounted to MNOK 124.7 (MNOK 129.4). Medistim received a dividend from its subsidiary in Norway of MNOK 11.0 in 2023 (MNOK 26.8). No group contribution was received in 2023 or 2022. Profit after tax for the parent company was MNOK 99.5 for the full year (MNOK 108.1). At 31 December 2023, the parent company’s total assets amounted to MNOK 402.2 compared to MNOK 382.2 as of 31 December 2022. Equity in the company was NOK 201.1 (MNOK 191.7), corresponding to an equity ratio of 50.0 % (50.2 %). At year-end 2023, the parent company had MNOK 82.5 in cash. The company’s financial position and ability to finance future activities and investments was considered satisfactory. Cash flow from operating activities was MNOK 96.9 for the parent company in 2023. Allocation of profit The Board of Directors suggests that MNOK 82.3 of the 2023 net profit is allocated to ordinary shareholder dividend, equal to NOK 4.50 per share (NOK 4.50 for 2022). The remaining MNOK 17.2 is allocated to other equity. The Board of Directors will propose the dividend to the general meeting general. The proposed dividend equals a pay ratio of 79.2 % (72.1 %). The dividend reflects the Board's positive expectations of future earnings. Over the past 10 years, the company has paid MNOK 490 in accumulated dividends to shareholders. 6.6 Corporate governance Medistim depends upon good relations with its stakeholders to succeed. Good corporate governance is important to build and maintain trust and confidence in the company and ensure long-term value creation in the best interest of the company’s shareholders. The company’s corporate governance structure is based on Norwegian legislation and the Norwegian Code of Practice for Corporate Governance, last revised in October 2021. Medistim complies with the Code of Practice, with certain deviations, as outlined and explained in the Corporate Governance Report in this annual report. 6.7 Main risk factors MARKET/OPERATIONAL RISK Competition: Medistim has one single direct competitor for TTFM technology. Medistim today has about 80 % of the penetrated market. Medistim is not aware of new competitors or technologies that could change the competitive landscape significantly. Risks related to device malfunction: Medistim has established comprehensive procedures as part of its Quality Management System in compliance with ISO 13485:2016 to ensure the safety of its products. There were no events reported in 2023. FINANCIAL RISK Foreign exchange risk Medistim is exposed to changes in exchange rates with most of the company’s revenues generated in USD and EUR. The company has entered hedging contracts to reduce exposure to changes to foreign exchange rates and the potential impact on financial performance. Liquidity risk Medistim prioritizes managing liquidity risk to ensure the company meets its obligations in time and maintains its financial flexibility. Cash generated from operations is Medistim’s main source of liquidity. Over the past five years, Medistim has utilized strong revenue and profit development to build a cash reserve to meet increased working capital requirements as the company grows. 23 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Interest rate risk The company is exposed to changes in interest rate levels through its long-term lease contracts. Macroeconomic risk, international conflicts and pandemics The global market is facing macro-economic turmoil, with energy crisis, inflation pressure, increasing interest rates and cost levels. The long-term consequences of the pandemic aftermath and growing geopolitical uncertainty are unclear but might lead to continuing challenges in the global flow of goods. Medistim is taking mitigating actions to ensure access to key components to secure production and maintain growth and profitability also for the future. Further, the company is financially solid to face future challenges, with no interest-bearing debt and an equity ratio of 79 %. The global economic situation will affect the company since Medistim is a supplier to the health care sector in many countries. Management closely monitors the associated financial risks. Credit risk Medistim considers the risk that customers are unable to fulfill economic obligations as low, which is confirmed by the level of historic losses on receivables. The customers are mainly public hospitals with secure financing. OTHER RISK FACTORS Regulatory risk Medistim depends upon regulatory approvals from health authorities for permission to sell its products. The company is revised on a regular basis to verify that approvals can be maintained. There is a latent risk that changes in regulatory conditions can result in a loss-off-approval to sell products in a given market. Health care priorities In general, health care institutions have many priorities and limited resources. For this reason, it is imperative for Medistim that the company's solutions have clinical acceptance in order for health care systems and institutions to invest in Medistim’s products. The Russia/Ukraine and Israel/Palestine conflicts The Russia/Ukraine and Israel/Palestine conflicts are expected to have minor impact on Medistim sales, since sales revenues from these countries were less than 2 % of total sales in 2023. Insurance and transparency act The company has director and officer's liability insurance. The insurance covers the board of directors' and management officers' legal personal liability for pure property damage related to the duties performed as directors and officers. The updated transparency act report from Medistim will no later than the 30 th of June be published on the Medistim website www.medistim.com 6.8 Events after the balance sheet date The Board of directors has no knowledge about events after 2023 that will affect the annual report and financial statement for 2023. 6.9 Outlook Medistim’s ambition is making blood flow measurements and intraoperative ultrasound imaging standard-of-care in clinical practice for CABG procedures and vascular surgery and making its technology available for all patients and surgeons worldwide. Medistim is already the global leading provider of flow and imaging systems, with dominant market positions in most developed markets, continuously expanding its footprint represented by a current installed base of about 3,500 systems in more than 65 countries. However, market penetration varies from above 80 % in selected European and Asian markets, to 30 % in USA, the world’s largest market for CABG procedures. This represents a significant market opportunity for Medistim. Through continued strengthening of its sales organization, introduction of alternative business models and convincing clinical documentation and support from KOLs, Medistim aims to develop this large under- penetrated market. The company has also extensive growth ambitions in developing economies. Medistim has delivered solid profit and cash flow despite the impact from conflicts and macro- economic turmoil in 2023. The need for Medistim’s products has not changed. Medistim will also continue its technology and product development to improve its offering and combined with recurring revenues from its already installed base of about 3,500 systems, the company is well positioned to continue its journey of profitable growth. 24 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 6.10 Shareholder information Share price development Medistim ASA has one class of shares. There were 18,337,336 shares issued at the end of 2023, each with a nominal value of NOK 0.25, unchanged from end of 2022. During the year, the shares traded between NOK 181 and NOK 300 per share, and 3.85 million shares were traded in total. Major shareholders and voting rights Medistim had 1028 registered shareholders in the Norwegian Central Securities Depository (VPS) at 31 December 2023, whereof the 20 largest shareholders owned 73.3 %. The percentage of issued shares held by foreign shareholders was 57 %. All the shares registered by name carry equal voting rights. The shares are freely negotiable. 20 largest shareholders is shown in note 20. An overview of the 20 largest shareholders is available on Medistim’s website, updated every week. Dividends and dividend policy Medistim aims to maximize shareholder value. This will be achieved through sound business development and an ambitious growth strategy. Medistim will seek to provide annual dividends, depending upon the company’s financial capacity and financing needs to ensure future growth. The company will at all times ensure that it has the financial capacity and equity to achieve future plans for growth. Based on the 2023 results, the Board of Directors will propose to pay a dividend of 4.50 for 2023 corresponding to a pay-out ratio of 79 %. For 2022, Medistim paid a dividend of NOK 4.50 per share corresponding to and a pay-out ratio of 71 %. Over the last ten years, Medistim has paid MNOK 490 in accumulated dividend to shareholders. Analyst coverage DNB, Danske Bank and Sparebank1 had active coverage of Medistim ASA in 2023. For contact details, please see the company website www. medistim.com. General Meetings and Board authorisations The 2023 AGM granted the Board of Directors the following authorizations: 1. Authorisation to increase the share capital by up to NOK 458,433.25. 2. Authorisation to acquire treasury shares in Medistim ASA for up to a maximum nominal value of NOK 458,433.25. Further information can be found in the minutes from the Annual General Meeting, available from the company’s website www.medistim.com and www.newsweb.no Corporate actions 2023 2022 Financial statements approved by the Board 23.03.23 Annual report 2022 disclosed 30.03.23 Annual General Meeting 24.04.23 Resolution to distribute dividend of NOK 4.50 per share 24.04.23 Ex dividend NOK 4.50 25.04.23 25 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Øyvin A. Brøymer Chair Sign. Ole J. Dahlberg Board member Sign. Lars Rønn Board member Sign. Anna Ahlberg Board member Sign. Jon H. Hoem Board member Sign. Kari Eian Krogstad President & CEO Sign. Board member Sign. Tove Raanes Board member Sign. Oslo, 21 st March 2024 Board of Directors and CEO of Medistim ASA 26 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 7.1 Vision, mission, values Medistim’s technologies and solutions increase the probability of a positive outcome of surgery for the patient and enable greater efficiency and lower costs for health care providers by reducing additional and unnecessary surgical re-interventions. The company’s long-term vision is stated as: Medistim is standard-of-care in the operating room. This implies, making Medistim’s solutions the standard-of-care in clinical practice for Coronary Artery Bypass Graft (CABG) surgery procedures and vascular surgery, ensuring that blood flow measurements and intraoperative ultrasound imaging are performed on all patients. Values All conduct is based on the four elements of the company’s core values – Courage, Innovation, Quality and People. Addressing serious, common and increasing global medical problems Cardiovascular diseases (CVDs) are the number one cause of death, representing approximately 1/3 of all deaths worldwide 1 . CVD is a general term for conditions affecting the heart or blood vessels. It is usually associated with a build-up of fatty deposits inside the arteries (atherosclerosis) and an increased risk of blood clots. It can also be associated with damage to arteries in organs such as the brain, heart, kidneys and eyes. 1 Journal of the American College of Cardiology Volume 76, Issue 25, 22 December 2020 The main risk factors for CVD are high blood pressure, dietary risks leading to obesity, diabetes, smoking, in addition to higher age. Both obesity and diabetes are increasing world-wide, reflecting economic growth and a growing middle class in developing economies. In parallel, the number of people above 60 years of age is also growing globally. Treatment alternatives include the use of pharmaceuticals, endovascular procedures and open surgery. 7. COMPANY DESCRIPTION COURAGE INNOVATION QUALITY PEOPLE To set challenging goals To be open and transparent To share knowledge and experience To try without fearing to fail To challenge accepted beliefs Encourage creativity, dis- covery, and innovation Value new ideas and test them out Problem-solving and solu- tion-oriented mindset Outstanding quality in every- thing we do Commitment to Medistim QMS High competence and unique expertise World-class products and services Amazing customer experience Trustworthy, honest, and ethical Generous and welcoming to customers and colleagues Value, trust and respect each other Promote physical and emotional health and quality of life 27 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Endovascular procedures, including Percutaneous Coronary Intervention (PCI), are considered less invasive by accessing blood vessels through a surgical small incision and using a catheter to insert and to place a stent inside the arteries to obtain revascularization. A coronary artery bypass graft (CABG) is an open chest surgery and involves taking a blood vessel, also known as a graft from another part of the body (usually the chest, leg or arm) and attaching it to the coronary artery above and below the narrowed area or blockage. 7.2 Medistim’s solutions Medistim’s devices are increasingly used to support CABG and other vascular surgical procedures. The solutions enable cardiac imaging, blood flow measurement and provides surgeons with immediate feedback on procedure outcome. Intraoperative surgical guidance and quality assessment with ultrasonic imaging and blood flow measurement reduces risk of stroke for the patient. It also provides the surgeon with a tool to verify graft functionality, indicate when revisions are needed and to optimize graft strategy during surgery. Globally, more than 700,000 CABG procedures are carried out on an annual basis. Although the use of solutions for real-time blood flow measurement and ultrasound imaging during procedures is increasing, the vast majority are executed by surgeons merely relying on experience and physical finger palpation for graft patency assessment. Currently only approximately 45 % of the global CABG market is utilizing support systems. Development of the overall market, by increasing acceptance and use of supporting technology such as Transit Time Flow Measurement (TTFM) and High-Frequency Ultrasound Imaging (HFUS) represents Medistim’s main growth opportunity. Medistim is already the leading provider of flow and imaging systems, with dominant market positions in most developed markets. The offering is two-fold; 1) medical systems for monitoring and analysis, and 2) consumables, including re-usable cardiac and vascular probes and ultrasound imaging probes. Sales of consumable correlates to the number of procedures executed and is highly dependent on size of installed base of systems. The company is continuously expanding its footprint represented by a current installed base of approximately 3,500 systems in more than 65 countries. Medistim develops this large under-penetrated market through convincing clinical documentation and support from Key Opinion Leaders (KOLs), to make HFUS and TTFM standard of care for CABG surgery. Medistim will continue its technology and product development to maintain its strong position and strengthen its sales and marketing organization improving capacity and outreach. Medistim’s ambition is that its products and solutions shall benefit all patients and surgeons all over the world. Medistim assembles and manufactures its devices and probes in Horten, Norway, except for the imaging probes which are produced by third parties. 7.3 Strategy Medistim’s strategic progress relies on strong clinical documentation, technology and product innovation and development, and the ability to effectively commercialize its product portfolio worldwide. Strong clinical studies by leading medical centers create support from KOLs, and it is a strategic priority to support this by sharpening the focus on blood flow measurements, ultrasound imaging, surgical guidance, and quality assurance in relevant forums and channels. Continuous technology and product development are required to maintain and develop Medistim’s leading position within cardiac as well as vascular surgery, and the company plans to launch new products tailored to the specialties within these fields. The company is continuously strengthening all parts of its organization. This includes the sales, service, marketing and medical teams which interact directly with customers, and the innova- tion, R&D, QA & Regulatory, and manufacturing departments. 28 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Medistim’s strategic priorities 1. Convert Flow-only market to a Flow-and- Imaging market by establishing surgical guidance and quality assessment as the new standard of care through: a. Early adopter and KOL support b. REQUEST study c. Ease conversion from Flow to Imaging with MiraQ 2. Achieve routine use of both Flow and Imaging by fighting ignorance, indifference and ease- of-use objections through: a. Clinical marketing, guidelines and educational programs b. Product innovation for ease of use c. Increased sales force capacity 3. Offer an entry-level solution to reach emerging, price-sensitive, high-growth markets 4. Build and strengthen position in vascular surgery through: a. Dedicated system (MiraQ Vascular) & probes b. Building position with societies and KOLs 5. Expand direct market coverage 7.4 Technology and Products Medistim’s medical devices are used to improve quality of cardiovascular surgery and are subject to high requirements and product certifications with regards to quality and safety, and require high competence and excellent quality systems. Technology Medistim’s blood flow measurement (TTFM) and high-frequency ultrasound imaging (HFUS) systems measure, monitor and image blood flow through veins or arteries with precise accuracy during surgery. The solution comprises two different modalities: a quantitative measuring modality (TTFM) and a qualitative imaging modality (HFUS). The sensor technology is based on probes. The flow probes are placed on a blood vessel, with the volumetric flow measured and analyzed by the system unit and displayed on-screen as blood flow curves, values, and images. The imaging functionality provides surgeons with real-time guidance during surgery and enables them to uncover possible causes of poor blood flow, correct technical problems, and achieve optimal clinical outcomes. Transit Time Flow Measurement -TTFM With TTFM, ultrasound is used to measure blood flow volume directly, based on the fact that the time required for ultrasound to pass through blood is slightly longer upstream (tu) than downstream (td). The MiraQ offers the fastest and most accurate flow measurements, verifying graft patency while the patient is still in the operating table. High-Frequency Ultrasound Imaging – HFUS Ultrasound Imaging can generate images of target areas by transmitting ultrasound pulses and receiving different echoes depending on density. To help locate and understand technical imperfections during blood vessel surgery, the high frequency ultrasound imaging probe can image areas of concern on a real-time basis and reveal morphological (structural) issues for immediate correction before closure. Epiaortic imaging allows a sensitive, direct diagnosis of aortic disease, which can lead to modifications in intraoperative surgical management. Epicardial imaging can be used intraoperatively to assess coronary quality, strategize graft placement, and visualize constructed anastomosis (connections). Imaging of the major carotids blood vessels in the neck after carotid endarterectomies (CEA) can reveal technical imperfections that may lead to thrombus formation and stroke if left unrepaired. Medistim also provides equipment for Doppler measurements of blood flows. However, this technology is increasingly being replaced by HFUS. Products Medistim launched its first flowmeter based on transit time flow measurement (TTFM) technology in 1994, the CardioMed. Since then, the company has developed several generations of quality assurance equipment. In 2009, Medistim introduced the first ultrasound imaging probe, and the company is currently the only supplier in the world that offers a user-friendly integrated TTFM and intraoperative high frequency ultrasound (HFUS) imaging system. Solutions for cardiac and vascular surgery The MiraQ™ is Medistim’s most advanced product line with configurations for both cardiac and vascu- lar surgery. The MiraQ platform offers specialized configurations for cardiac and vascular applications in the products MiraQ Cardiac and MiraQ Vascular, respectively. The MiraQ Vascular system includes a 29 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 30 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 specialized application menu with a customized user interface adapted to vascular surgeons’ require- ments, and probes tailored for vascular applications. The MiraQ is also available with both configurations, as the MiraQ Ultimate. TTFM probes (cardiac and vascular family) Flow probes utilize the reliable transit time technology to accurately measure blood volume flow intraoper- atively in a wide range of applications, from cardiac and vascular, to transplant surgery. Used together with Medistim’s systems, they provide fast, accurate and reproducible information to the surgeon instan- taneously to provide verification of graft patency and function. The ultimate benefit is quality assurance with immediate feedback that leads to improved surgical outcomes. Imaging probes Medistim’s imaging probes are used to provide intra- operative surgical guidance. Epiaortic imaging allows a sensitive, direct diagnosis of aortic disease, which can lead to modifications in intraoperative surgical management. Epicardial imaging can be used intra- operatively to assess coronary quality, strategize graft placement and visualize constructed anastomosis. Medistim’s flow probes can be used 50 times and the imaging probe can be used 100 times and even more if treated properly. All the electrical components in use comply with environmental standards for electronic waste. 7.5 Research and Development Medistim continuously invests in existing and new products to cover the surgical requirements for quality verification. The company has historically invested between 4 % and 10 % of annual sales in research and development (R&D). In 2023, the company invested 6,5 % of annual sales of own products in research and development (R&D). Product development for increased “ease of use” In order to grow technology adoption, it is pivotal to make the products as easy to learn and use as possible. Medistim is therefore focusing on innovation to develop new features and ensure “ease of use” for the end-customer. The company’s innovation team collaborates closely with a network of surgeons and hospitals to test prototypes and new ideas. The goal is to capture the end-customers’ needs and expectations before initiation of costly development projects which are subject to strict regulatory regimes. The ambition is to accelerate product innovation and reduce development time by clarifying product design and functionality before a formal development process is initiated. The Innovation team has developed a prototype of a new user interface which is under development. New production technology A separate project is established to redesign the flow probes in order to be able to automate the production process of flow probes. The project is expected to go on for several years and will improve the probe production capacity vastly. Guideline endorsements Inclusion in the leading health organizations’ guidelines for clinical surgery is vital to achieve «Standard of Care» status for TTFM and HFUS in coronary bypass surgery. Medistim engages in continuous dialogue with a broad range of organizations to increase awareness of and knowledge on the company’s solutions. Currently, TTFM during CABG procedures are endorsed by the guidelines from the European Society of Cardiology (ECS), the European Association for Cardio-Thoracic surgery (EACTS), and The British National Institute for Health and Clinical Excellence (NICE). All are highly respected organizations and their recommendations are expected to influence clinical practice also in countries outsides their jurisdictions, including in the USA. The health care providers and surgeons performing CABG procedures are conservative and it is hard to measure the direct effect from recommendations and studies. However, it is Medistim’s experience that the recommendations have influenced demand positively over time and expects increasing recognition to continue to support demand in the years to come. Clinical studies support routine use of Medistim’s technology Medistim’s strategic progress relies on strong clinical documentation by leading medical centers to create support from Key Opinion Leaders (KOLs) within cardiac surgery and vascular surgery. It is a strategic priority to support this by increasing the focus on blood flow measurements, ultrasound imaging, surgical guidance, and quality assurance in relevant forums and channels. The circulation publication in 2021 and the use of TTFM during CABG: In 2021 Medistim ‘s Transit Time Flow Measurement (TTFM) technology received strong support from leading experts, in a new publication in the top journal Circulation. 31 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Circulation – the official journal of the American Heart Association – and one of the highest ranked journals in cardiology and cardiovascular medicine, published a consensus paper by 19 of the world’s highest renowned specialists in coronary artery bypass surgery (CABG) on October 5th. The study describes a systematic review to identify best practice evidence for guideline development published the last 20 years. Over 2,200 articles identified, more than 1,550 of them screened, and 38 of them included in this review paper. The expert consensus process resulted in a new flowchart for decision making guidance to cardiac surgeons on how to utilize TTFM during surgery. The first of the 10 consensus statements and justifications states “TTFM should be used in every CABG case”. The panelists agree “that quality assurance in CABG procedures should be established as a key component to improve patient outcomes”. This is a pivotal paper for Medistim that clearly graces all the initiatives to position MiraQ™ technology for routine use during CABG surgery. Having the technology in focus in one of the world’s most renowned cardiovascular journals indicate that Medistim is moving in the right direction with its strategy. Medistim’s REQUEST study published in 2020 was one of the key papers that was assessed to underpin the importance of routine use of quality assessment. This strong advocacy will not only exert peer influence within the community of cardiac surgeons, but it may pave the way for new and enhanced clinical guidelines worldwide. In 2022, Mojgan Laali et al. published the study “Impact of transit-time flow measurement on early postoperative outcomes in total arterial coronary revascularization with internal thoracic arteries: a propensity score analysis on 910 patients”. Outcome in 430 CABG patients where TTFM was used was compared with outcome from 480 CABG patients where the surgeons were unwilling to perform TTFM. The key finding is a significant reduction in Major Adverse Cardiovascular Events (MACE) from 6.9 % to 3.3 % - a 50 % reduction by adding 3 extra minutes on TTFM. This result was so convincing that the previous non-believers at the hospital have adopted TTFM for graft evaluation. This set of data is included in a large multi-center study in France that Medistim believe might ease the adaptation of TTFM in France. In 2023 Medistim announced its partnership with ROMA-Women, a groundbreaking cardiac surgery trial that is specifically focused on women. Historically, cardiovascular research and treatment protocols have primarily focused on men, leaving women underrepresented in clinical studies and potentially receiving suboptimal care. Recognizing this disparity, Medistim has joined forces with the trial to champion gender-specific healthcare advancements. The multicenter randomized clinical trial, ROMA- Women, will enroll about 2,000 women, studying the use of single versus multiple arterial grafts in coronary artery bypass (CABG) surgery. The trial is spearheaded by renowned experts in the field of cardiac surgery, including principal investigators Mario Gaudino, Professor at Weill Cornell Medicine, USA, and Stephen Fremes, Professor at Sunnybrook Health Sciences, Canada. More than 100 centers across the world are expected to participate. The trial is an extension of the ongoing ROMA trial and has already enrolled about 700 women. ROMA-Women aims to address the unique cardiovascular needs and challenges faced by women. Compared to men, women are referred for CABG at an older age and have more frequently diabetes, hypertension, and dyslipidemia. From a surgical perspective, the CABG operation is generally more complex in women because of smaller and more spastic coronary arteries than men. Hence, it is believed that graft assessment may be even more important in women, and in this trial, graft patency will be assessed with Medistim’s Transit Time Flow Measurement (TTFM) and High Frequency Ultrasound (HFUS) technologies. Guidelines recommend intraoperative ultrasound after Carotid Endarterectomy (CEA) in 2022: The European Society of Vascular Surgery (ESVS) revised their Clinical Practice Guidelines in 2022 on the management of atherosclerotic carotid and vertebral artery disease by among others, adding a recommendation of the use of intra-operative completion control with ultrasound imaging, to reduce risk of peri-operative stroke for patients undergoing carotid endarterectomy. The Guidelines are set to identify luminal thrombus after flow restoration, diagnose intimal flaps and diagnose residual stenoses during surgery. The new recommendation is based on a meta-analysis by Knappich et al. 2021 that shows that both ultrasound imaging and angiography are associated with a reduced risk of death and stroke after CEA. Professor Eckstein, University Hospital Rechts der Isar, Munich, Germany, states that “This new guideline recommendation clarifies that intraoperative 32 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 morphological control is worthwhile. In my practice, ultrasound imaging for completion control after CEA has become the standard of care, especially when surgery is performed under locoregional anesthesia. Intraoperative angiography is only needed if a cerebral problem is suspected.” It is Medistim’s goal to develop a strong position for its transit time flow measurement (TTFM) and high- frequency ultrasound (HFUS) imaging devices within the Vascular market, including the CEA segment. The recommendation of ultrasound imaging as an alternative to the current gold-standard angiography marks another milestone for Medistim in the efforts to establish the HFUS technology for completion control in CEA. In the CIDAC (Comparison of Intra- operative Duplex Ultrasound and Angiography after Carotid Endarterectomy) study, which was part of the Knappich meta-analysis, Medistim’s MiraQ Vascular device was used, and it demonstrated the benefits of using HFUS compared to angiography. The results demonstrated that HFUS detected significantly more high-grade defects that needed revision compared to angiography, and with significantly higher interobserver reliability. The authors conclude that given the lesser invasiveness, HFUS could be considered as an alternative to angiography for intra-operative completion control in CEA, further strengthening the support of using Medistim’s ultrasound imaging device and probe for reducing the risk of stroke after CEA. Based upon the results from the study The European Society of Vascular Surgery (ESVS) included the use of HFUS when treating CEA patients. 7.6 Clinical application areas and target markets Lifestyle diseases such as obesity and diabetes have increased significantly in recent decades, increasing the need for revascularization procedures. Cardiovascular diseases (CVDs) are the most common cause of death in the western world and on the rise in Asian and Latin American countries adopting western lifestyles. The adoption of TTFM and HFUS for surgical guidance and quality control is increasing. However, over 60 % of surgeons still rely on physical palpation for graft patency assessment, even though “feeling” the pulse is an unreliable indicator of actual blood flow through the vessel. Hospitals and payers for surgery, such as insurance companies, are increasingly requiring documentation of performance and quality control during any procedure, which is expected to support the adoption of Medistim’s solution over time. 7.7 Market for cardiac procedures Percutaneous Coronary Intervention (PCI), i.e. the use of stents, covers approximately 80 % of the revascularization procedures, with CABG covering the remaining 20 %. Clinical trials document superior results achieved with CABG compared to PCI for patients with multi-vessel disease. The number of coronary artery bypass surgeries performed has been stable over the past several years, of more than 700,000 globally per annum. A decrease in the number of procedures performed in Western countries in recent years has been compensated by an increase in the BRICS countries (Brazil, Russia, India, China and South Africa). Globally, Medistim expects a stable to growing trend in coming years. Approximately 80 % of CABG procedures are on- pump procedures while 20 % are off-pump. Both are equally relevant for Medistim’s technology for Transit Time Flow Measurement (TTFM) and High Frequency Ultrasound Imaging (HFUS). The US is the single largest market for Medistim’s products, representing close to 30 % of the world market, with a combined European market of a similar size. Large untapped market To date, Medistim has installed about 3,500 systems in more than 65 countries, and Medistim’s flow meters have been used on more than two million patients worldwide. Medistim is the clear market leader in its niche, and its systems are currently being used in about 37 % of all bypass surgeries performed worldwide. Competing providers using the transit time measurement principle are estimated to be used in about 8 % of the procedures performed. This implies that no equipment is being used to verify blood flow in about 55 % of the bypass surgeries. This untapped market represents Medistim’s largest opportunity. Medistim expects market penetration and market share to increase gradually, as surgical quality assurance gains more attention and the superiority of the Company’s solutions gain wider acceptance. 33 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Total value of the global TTFM market for CABG is estimated at to BNOK 1 per year. A unique product offering Adding intraoperative ultrasound imaging more than doubles Medistim’s market potential, due to an expanded number of applications and higher pricing compared to traditional flow measurement technology. The total market size within cardiac bypass surgery is therefore estimated at around BNOK 2 annually. The MiraQ imaging functionality makes the system relevant also for other types of cardiac surgery, such as heart valve surgery. Medistim estimates this added market potential to be approximately BNOK 1 on an annual basis. This market represents an add-on opportunity to widen the use of the device beyond CABG only and is not considered an independent commercial strategy. The combination of Medistim’s ultrasound imaging technology and the MiraQ platform represents a unique and differentiated product offering in this market segment, which provides Medistim with a competitive advantage. Medistim recognizes the value of clinical documentation and has initiated clinical studies to support verification of the impact from its solutions on CAGB surgery. The published results from the REQUEST study in 2020 proved the clinical value of adding HFUS to TTFM and the advantages of combining the two modalities are increasingly being recognized by the medical societies and cardiac surgeons. This is supported by the study published in the Circulation where 19 of the world’s highest renowned specialists in coronary artery bypass surgery (CABG) makes the statement: “TTFM should be used in every CABG case”. Penalties for readmissions Several countries are going through reforms to make quality healthcare available to a growing population in a financially sustainable way. This includes demands for higher quality procedures with less errors and re-interventions. In the US, the Centers for Medicare and Medicaid Services have, for example, cut reimbursement for 30-days re-admission after CABG as a penalty if hospitals have not been able to deliver and document high quality surgical results. Implementing technology that provides intraoperative surgical guidance and quality assessment is one way of achieving and document improved quality and outcomes. Installed base conversion Medistim expects several hospitals to upgrade current systems to the more advanced MiraQ system. It offers a wider range of uses and the system’s imaging functionality provides valuable additional information to current TTFM, increasing the economic value for the users. 7.8 Market for Vascular Surgeries Medistim has a strong position in the vascular market in the Nordic countries and in Germany and is working to build similar positions in other markets as well. Medistim’s focus areas within Vascular Surgery include peripheral bypass, CEA and AV access. The addressable market includes about 1,300,000 procedures and a market potential of BNOK 4. Peripheral bypass surgery is primarily performed on the major arteries in the legs, whereas CEA is a procedure where blockages in the neck arteries are surgically removed to reduce risk of stroke. AV access surgery is performed to create a successful shunt or fistula that are used to connect a patient in need of dialysis to a dialysis machine. The MiraQ Vascular solution supports all three types Applications # of procedures Clinical needs Peripheral bypass > 500,000 Improve long-term graft patency | Improve quality of life CEA > 250,000 Reduce risk of death and stroke | Improve cost effectiveness AV Access > 500,000 Secure maturation of shunt/fistula |Reduce risk of cardiac failure and hand ischemia Liver transplant surgery > 35,000 Increase success rate for this costly procedure 34 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 of interventions with ultrasound imaging and blood flow measurements guiding the surgeon during the procedure to assure the quality of the clinical outcome. The MiraQ Vascular is a “versatile tool for a variety of applications.” Clinical support and studies are key enablers for Medistim to increase market penetration, also in vascular surgery, which the CIDAC study mentioned in section 1.5 is a good example of. 7.9 Geographical target markets Medistim is the undisputed market leader in the global CABG market with a strong position in core geographical markets. AMERICAS (USA, Canada and Latin America) Representing close to 30 % of the global CABG market, USA is the most important market for Medistim, accounting for 48 % of total revenue from own products in 2023. The US subsidiary has 25 employees and sales representatives covering all states, all of which have extensive healthcare experience. The company has had direct sales operations in the US since 2007. Medistim has over 650 systems installed in the US. In addition to regular sales activities, the commercial strategy includes cooperation with influential surgeons and key opinion leaders at leading cardiac centers. Company representatives are in close dialogue with medical associations like The American Association for Thoracic Surgery (AATS) and The Society of Thoracic Surgeons (STS), to motivate these organizations to include Medistim’s equipment in guidelines for standard of care for CABG. The US CABG-market is underdeveloped, with less than 35 % of surgeries performed with support from medical systems ensuring proper blood flow. Medistim has a market share of approximately 30 % of a total market of approximately 200,000 annual bypass surgery procedures and sees a substantial market potential due to the still low penetration of CABG surgery support systems. To strengthen its offering, Medistim has introduced a flexible business model for the US market. In addition to traditional capital investments and purchase of consumables, hospitals can choose to either pay per procedure or enter leasing agreements. Under these agreements the systems are placed at the hospitals free of charge, with the customer purchasing a “per’ surgery” smartcard or paying a monthly lease. In 2023, Medistim established a direct sales operation in Canada. Medistim already has a strong position in Canada with presence in 15 of Canada’s 38 cardiac centers. About 18,000 coronary bypass surgeries are performed in Canada per year, and about 37 % are supported with Medistim’s technology. The company is well positioned to continue the growth with local sales representatives who will focus on attracting new customers as well as driving the conversion from devices with TTFM technology only, to devices combining TTFM and High Frequency Ultrasound (HFUS). In addition, the market within Vascular surgery provides further opportunities for growth. In Latin America, Medistim is represented through a distributor network. EMEA EMEA and Europe in particular represents Medistim’s second largest market. The main European markets are served through direct in-country operations, while remaining markets are covered by distributor agreements. Nordic countries Medistim has a strong position within all cardiac centers in Norway, Sweden, Finland and Denmark, with directs sales in Norway, Denmark and from late 2023, Sweden. Several vascular centers also have Medistim systems that are being used on a regular basis. The market share of CABG procedures is above 70 %. Both markets are mature, with revenues mainly generated from sale of consumables and irregular replacement of old systems. In Norway, Denmark and Sweden, Medistim also operates as distributor for other surgical products. Germany Germany is the largest market in Europe, with about 44,000 CABG procedures performed per year and Medistim has had direct representation there since 2002. Medistim has a high penetration within coronary surgery in Germany with a market share of more than 80 % but still have opportunities for growth by converting customers to become both flow and imaging customers. The vascular market represents an opportunity for growth in the future. United Kingdom In the UK, Medistim has had direct representation since 2012. Some 16,000 CABG procedures are performed in the UK every year, and Medistim’s equipment is currently used in about 10 % of these. 35 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Market penetration in the UK has taken longer than anticipated, and sales are still modest compared to the perceived potential. Medistim expects increased adoption of TTFM and HFUS following the 2018 update to the NICE recommendation for use of Medistim’s solutions. The company has also established a solid reference center in Oxford through the REQUEST study, further supporting marketing of Medistim medical solutions. Based on the US model, pay-per-procedure or enter leasing agreements were introduced to UK customers in 2023. Spain Medistim established direct representation in Spain in 2017. Around 7,000 coronary artery bypass surgery (CABG) procedures and 8,000 vascular procedures are performed per year. Medistim has an installed base of 80 systems, most of them on the VeriQ platform and older versions. These versions only include TTFM and do not support imaging modality. Medistim sees great potential in upgrading of the installed base to the MiraQ platform, which provides the combination of ultrasound imaging and TTFM in one system. Medistim's technology is used in 80 % of all coronary surgical procedures as the installed base is primarily in cardiac centers. This indicates an untapped potential in the vascular market, which represent only a small number of Medistim’s installed base. European distributor markets Elsewhere in Europe, Medistim is represented through distributors. This includes countries such as Poland, Italy and France which are considered promising long-term growth markets. APAC China In order to expand the market coverage in China, Medistim opened a direct sales office in Guangzhou in 2023. This move was part of the company's ongoing commitment to providing exceptional service to customers as well as fulfilling the company’s global growth strategy. More than 60,000 coronary bypass procedures are performed in China annually and the number is expected to continue to grow high single digit in the years to come. Today, about 70 % of these procedures are supported by Medistim’s equipment, which is installed in all the nation’s top 10 cardiac surgical centers. Japan With over 90 % of all CABG procedures using Medistim technology for blood flow measurement systems and ultrasound imaging, Japan is one of the most developed markets for Medistim’s solutions. The Japanese market counts some 13,000 procedures annually. India Approximately 160,000 CABG procedures are performed annually. Medistim’s market share is below 5 %. This is an interesting target market for Medistim and with the new distributor partnership with LivaNova, it is expected that the Indian market will become a future driver for growth. Other markets Medistim has established distributor partnerships with LivaNova in Australia and India, and Pacific Medical Systems in Asia and is experiencing positive development in these markets. The company has a high market share in the Middle East. 36 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 8. CORPORATE GOVERNANCE REPORT Medistim depends upon good relations with its stakeholders to succeed. Good corporate governance is important to build and maintain trust and confidence in the company and ensure long-term value creation in the best interest of the company’s shareholders. 8.1 Implementation and reporting on corporate governance Medistim is a Norwegian public limited company listed on Oslo Stock Exchange and bases its corporate governance structure on Norwegian legislation and recommended guidelines. The corporate governance policy is subject for an annual review by the Board of Directors. The company observes the Norwegian Code of Practice (“Code” or “Code of Practice”) for Corporate Governance, last revised 14 October 2021, issued by the Norwegian Corporate Governance Board. This report discusses Medistim’s main corporate governance policies and practices and how Medistim has complied with the Code of Practice in the preceding year. Application of the Code is based on the “comply or explain” principle, and deviations from the Code is explained under each item. 8.2 Business activity Medistim’s mission is to develop cost-effective solutions to health-care providers, patients and payers in the global surgical market. Its Ultrasonic Surgical Guidance & Quality Assessment systems are built for intuitive imaging of vascular morphology and instant assessment of blood flow. With its tools, Medistim helps surgeons improve surgical quality to reduce adverse events and re- interventions, and ultimately improve the patients’ quality of life. The company’s business scope is clearly described in section 3 in the articles of association: “to conduct research, development, production, distribution and sale of medical equipment through its own business or through participation in other companies, as well related activities”. Medistim was founded in 1984 and develops innovative technology and devices which increase the probability of a positive outcome of surgery for patients and enable greater efficiency and lower costs for healthcare providers by reducing additional and unnecessary surgical re-interventions. The company’s long-term objective is to make its solutions “standard-of-care” in the operating room. The board has developed a clear strategy to effectively commercialize its existing product portfolio worldwide. Risk management and internal control systems are in place to manage operational and financial risks. A description of the key risk factors and risk management can be found in the board of director’s report in the annual report. The company has prepared a code of conduct including principles for ethical behavior, trade and anti-corruption that applies for all employees. A separate report on how these guidelines and procedures are integrated with the company’s activities and how they relate to value creation for the company’s stakeholders can be found in Chapter "9. Sustainability Report" of this Annual Report for 2023. The company’s objectives, strategies and risk profile are subject to annual review by the Board. Deviaons from the Code of Pracce: None 8.3 Equity and dividend At 31 December 2023, the company’s equity was MNOK 398, which is equivalent to 78.7 % of total assets. The board continuously evaluates the company’s capital requirements to ensure that the company has a suitable capital structure considering its objectives, strategy and risk profile. Medistim aims to maximize shareholder value. This will be achieved through sound business development and an ambitious growth strategy. Medistim will seek to provide annual dividends, depending upon the company’s financial capacity and financing needs to ensure future growth. The company will at all times ensure that it has the financial capacity and equity to achieve future plans for growth. The Board of Directors proposes to pay a dividend for 2023 of NOK 4.50 per share corresponding to MNOK 82.1 based on the financial results for 37 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 the year. For 2022, the company paid a dividend of NOK 4.50 per share, corresponding to MNOK 82.1. Over the past ten years, Medistim has paid a total of MNOK 490 in dividend to shareholders, corresponding to an average payout ratio of 77 %. At the annual general meeting on 24 April 2023, the board was granted two authorizations: 1. Authorisation to increase the share capital up to NOK 458,433.25 by issuing 1,833.733 new shares at par value of NOK 0.25. The authorisation covers both cash and non-cash considerations, including mergers. As of 31 December 2023, the authorisation had not been used. 2. Authorisation to purchase own shares for up to NOK 458,433.25, equal to 1,833,733 new shares at par value NOK 0.25. The authorisation can be used for financing purposes, acquisitions or other commitments related to strategic or industrial partners. As of 31 December 2023, the authorisation had not been used. Both authorizations are valid until the next annual general meeting. There was a separate vote on each of the two authorizations. For supplementary information, see the minutes of the annual general meeting available at www.medistim.com. Deviaons from the Code: None 8.4 Equal treatment of shareholders and transactions with closely related parties Medistim has one class of shares. Each share carries equal voting rights, including the right to participate in general meetings. All shareholders shall be treated on an equal basis, unless there is just cause for treating them differently. In the event of a capital increase based on an authorization from the annual general meeting, where the pre-emptive rights of shareholders are set aside, the company shall provide reasons for the action in the stock exchange release in which the capital increase is announced. There were no such events during 2023. Any transactions in own shares, i.e. a share buy-back program, will be carried out either through Oslo Stock Exchange or at otherwise at stock exchange prevailing prices. If there is limited liquidity in the company’s shares, the company will consider other ways to ensure equal treatment of all shareholders. There were no purchases of own shares during 2023. Previously purchased own shares has been used to fore fill option grants and share program to management. When there are major transactions between the company, its shareholders, subsidiaries, members of the board, leading employees or other close related parties, an evaluation will be performed by an independent third party. The general meeting will treat the matter according to law and jurisdiction for Norwegian public companies. There were no such transactions in 2023. Deviaons from the Code: None 8.5 Shares and negotiability The shares of Medistim are freely negotiable. There are no restrictions on owning, trading or voting for shares in the company’s articles of association. Deviaons from the Code: None 8.6 The general meeting The general meeting is the company's highest decision-making body. The general meeting is open to all shareholders, and Medistim encourages shareholders to participate and exercise their rights at the company's general meetings. The board, or shareholders representing at least five percent of the shares, may call for an extraordinary general meeting when deemed necessary. Notice will be sent to shareholders minimum 21 days before the meeting as required by law. The agenda, related documents and information about the issues to be considered will be included in the notice. To participate, shareholders will have to register at the latest one day before the meeting. Shareholders unable to attend, may vote by proxy. Guidelines for proxy voting is given in the notice documents, with the opportunity for separate voting instructions. The board of directors is represented at the meeting. The chairperson of the board normally chairs the general meeting. The company’s auditor and nomination committee will participate at the meeting. In 2023, Medistim held its annual general meeting on 24 th of April with 62.76 % of the shares represented. There were no extraordinary general meetings during the year. Deviaons from the Code: None. 38 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 8.7 Nomination committee Medistim has established a nomination committee, as regulated in the articles of association section 7. The committee consists of three members elected by the general meeting for a term of two years. Name Role Considered independent of the main shareholder and management Representing a specific shareholder Served since Term expires Participation in nomination committee meetings in 2023 Bjørn Henrik Rasmussen Chair Yes Follum Capital 2009 AGM 2025 100 % Jonathan Schönbäck Member Yes Odin Forvaltning 2022 AGM 2024 100 % Vegard Søraunet Member Yes Aeternum Capital AS 2021 AGM 2024 100 % The guidelines for the nomination committee are governed by the company’s articles of association, which stipulate that members of the nomination committee shall be shareholders in the company or shareholder representatives when elected as committee members. The nomination committee is responsible for suggesting candidates to the board of directors and yearly compensation to the board and board committees. Proposals for candidates to the board must be sent to the nomination committee at latest 14 days before the notice of the general assembly is distributed Proposals are to be sent to the nomination committee chair on email to: Bjørn H. Rasmussen [email protected] Remuneration of the members of the nomination committee is determined by the general meeting. Deviations from the Code: None 8.8 Board of directors, composition and independence The board of directors shall constitute of up to seven directors as regulated in the articles of association section 5. The board and the chairperson are elected by the general meeting for a period of two years and may be re-elected. The nomination committee ensures that not all board members are up for election at the same time. At 31 December 2023, the board consisted of the following seven directors: Name Role Considered independent of main shareholders Served since Term expires Participation board meetings 2023 Share ownership in Medistim (direct/ indirect) Øyvin A. Brøymer Chair No 2000 AGM 2025 100 % 7.01 % Anna Ahlberg Director Yes 2023 AGM 2025 100 % 0 % Anthea Arff- Pettersen Director No 2022 AGM 2025 100 % 0 % Ole J. Dahlberg Director Yes 2023 AGM 2025 100 % 0.01 % Jon H. Hoem Director Yes 2023 AGM 2024 83 % 0 % Tove Raanes Director Yes 2014 AGM 2024 100 % 0.01 % Lars Rønn Director Yes 2010 AGM 2024 100 % 0,01 % 39 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 The composition of the board is based on representation of the company’s shareholders, as well as the company’s need for competence, experience, capacity and ability to form balanced decisions. Information on each director’s expertise, background and capabilities can be found on the company’s website www.medistim.com. The nomination committee has evaluated all the directors to be independent of the company’s executive management and material business contacts. Five out of seven members are regarded as independent of the company’s main shareholders. The independence of board members is also evaluated by the board. Deviaons from the Code: None 8.9 The work of the Board of directors The board has the ultimate responsibility for the management of the company and for supervising management, while the CEO is responsible for the day-to-day management. The board has adopted instructions for the board and the CEO, which are focused on determining allocation of internal responsibilities and duties. The board normally meets six to seven times a year, while the CEO and Chair has continuous dialogue on the company’s development. The board has implemented procedures to ensure that members of the board and executive personnel make the board aware of any material (direct or indirect) interests that they may have in items the company is about to enter. The board will also be chaired by some other member of the board if the board is to consider matters of a material character in which the chair of the board is, or has been, personally involved. The board has appointed an audit committee and a remuneration committee. The board performs a self-assessment of its work once per year. Deviaons from the Code: None 8.10 Risk management and internal control The board carries the responsibility to ensure that the board carries the responsibility to ensure that the company has sound and appropriate internal control systems and risk management systems reflecting the extent and nature of the company’s activities. Sound risk management is an important tool to create trust, ensure good environment, health and safety standards and enhance value creation. Internal control should ensure effective operations and prudent management of significant risks that could prevent the company from attaining its targets. The board holds at least one meeting a year with the auditor, to review the company’s internal control routines, including identified weaknesses and areas subject to improvements. Medistim complies with all laws and regulations that apply to the group’s business activities. The group’s ethical guidelines, anti-corruption policy and code of conduct for ethical trade describes the main principles for ethical behavior which applies to all employees and suppliers. A quality manual has been prepared based on internationally recognized quality standards, to ensure that the company delivers high quality products and services in accordance with product specifications, relevant acts and regulations. The guidelines and quality manual are subject to annual review by the board in connection with the evaluation of the company’s internal control and risk management. Medistim is also subject to strict medical rules and regulations, requiring close monitoring and frequent audits of medical equipment and the company’s practices concerning health, safety and environment (HSE). Medistim prepares its accounts in accordance with the International Financial Reporting Standards (IFRS), which are intended to give a true and fair overview of the company’s assets, financial obligations, financial position and operating profit. The board receives monthly reports from management on developments and results related to finance and risk management, which is compared against budget, strategy approved by the board and last year’s performance. In addition, quarterly reports are prepared in accordance with the recommendations from Oslo Stock Exchange, which are reviewed and approved by the board prior to disclosure. The board has an annual meeting to review the company’s strategy for the next three years, risk exposure and such internal control arrangements. A summary of the main risks and risk management is presented in the director’s report in the annual report. Deviaons from the Code: None 40 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 8.11 Remuneration of the board of directors The board of directors receives a fixed yearly compensation decided by the general assembly, based on the nomination committee’s recommendation. The remuneration reflects the board’s responsibilities, competence, time involved and the complexity of the business. The remuneration of the board members is not performance based and the company does not grant share options to any board members. No loans are provided to board members. The board members, or companies with which they are associated, have not been engaged in specific assignments for the company in addition to their appointments as members of the board. More information on remuneration to the board can be found in note 21 to the annual accounts. Deviaons from the Code: None 8.12 Remuneration of executive personnel The main principle of Medistim’s executive remuneration policy is that the compensation shall be competitive and provide the motivation to attract and retain individuals with the required competence. The board determines remuneration for the CEO, while the CEO determines remuneration for the management team and leading employees. Compensation of the management is based on market terms and evaluated on a yearly basis. The terms have remained the same over several years. Remuneration of the CEO includes a share-based incentive plan. The executive remuneration consists of a fixed salary and a variable part linked to the company’s achievement, and pension schemes. No executives will receive additional compensation when leaving the company. Details on executive remuneration can be found on note 21 of the annual accounts. Deviaons from the Code: The Code recommends that the company’s guidelines are included as a separate appendix to the noce calling for the general meeng. The guidelines should inform which aspects that are advisory and which, if any, are binding. The general meeng should vote separately on each of these aspects of the guidelines. Further, the Code recommends that the guidelines contain informaon on criteria related to performance related remuneraon, which should be subject to an absolute limit. Medism includes a general descripon of the company’s guidelines for remuneraon in the annual report, alongside informaon on remuneraon to each director. Execuve remuneraon is treated as one item by the general meeng. 8.13 Information and communications The board has adopted a shareholder and information policy which sets the basic principles for the company’s communication and dialogue with capital markets participants. The company is committed to provide its shareholders timely, relevant and accurate information on the company’s developments and plans. Communication with stakeholders shall be based on the principles of equal treatment and transparency in order to build trust and stakeholder confidence. The responsibility for the company’s investor relations activities lies with the CEO and the CFO. Medistim’s IR activities shall help capital markets participants to make an informed view on Medistim as an investment case, including its financial situation and prospects, which will contribute to optimize the cost of capital and support a fair valuation of the company’s shares. The company does not give any guiding on future sales and results. Medistim provides interim reports in line with Oslo Stock Exchange’ recommendations. Presentations are given in connection with the disclosure of the interim results to provide an overview of operational and financial developments. The presentations are open to the public and made available through a webcast. All information is provided in English, and is distributed to the company’s shareholders through Oslo Stock Exchange’ news channel www.newsweb. no and on the company’s website www.medistim. com. Deviaon from the Code. The company has not prepared any policy or guidelines specifying who is entled to speak on behalf of the company or regulang communicaon with shareholders outside general meengs, as recommended by the Code. As a general principle, the board has decided that the company’s spokespersons are the CEO and CFO on investor maers, while the CEO handles media and other inquiries. 41 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 8.14 Takeovers In a potential offer where the effect of the transaction is a takeover, the Board of Directors will handle the matter in a professional manner and ensure same information and treatment of all shareholders. A takeover requires a general meeting and the board of directors will give their recommendation related to a potential offer for the company’s shares. Deviaons from the Code: The board has not established separate guidelines in the event of a take- over bid as recommended by the Code. Take-over bids are usually specic, one-o, events which makes preparaon of guidelines challenging. In the event of a take-over process, the Board will ensure that the company’s shareholders are treated equally, and that the company’s acvies are not unnecessarily interrupted. The board will further seek to comply with the relevant recommendaons from the Code. Communication with stakeholders shall be based on the principles of equal treatment and transparency in order to build trust and stakeholder confidence. The responsibility for the company’s investor relations activities lies with the CEO and the CFO. Medistim’s IR activities shall help capital markets participants to make an informed view on Medistim as an investment case, including its financial situation and prospects, which will contribute to optimize the cost of capital and support a fair valuation of the company’s shares. The company does not give any guiding on future sales and results. Medistim provides interim reports in line with Oslo Stock Exchange’ recommendations. Presentations are given in connection with the disclosure of the interim results to provide an overview of operational and financial developments. The presentations are open to the public and made available through a webcast. All information is provided in English, and is distributed to the company’s shareholders through Oslo Stock Exchange’ news channel www.newsweb.no and on the company’s website www.medistim.com. Deviaon from the Code. The company has not prepared any policy or guidelines specifying who is entled to speak on behalf of the company or regulang communicaon with shareholders outside general meengs, as recommended by the Code. As a general principle, the board has decided that the company’s spokespersons are the CEO and CFO on investor maers, while the CEO handles media and other inquiries. 8.15 Auditor BDO AS has been the company’s auditor since 2010. The auditor is considered independent of Medistim ASA. Medistim uses the same auditor for all companies within the group. The board receives an annual confirmation from the auditor that the requirements regarding independence and objectivity have been satisfied. In 2023, a tender process for audit services was performed, with all major audit firms invited to give an offer. The process was thorough, and meetings were held with several of the main audit firms. The outcome of the tender process was that the company chose to continue using BDO as the company auditor as they proved to be competitive both in regard to competence and pricing. The auditor participates in the board meeting dealing with the annual accounts. In this meeting, the auditor gives their views on accounting matters and principles, risk areas and internal control. The auditor participates in other board meetings on the request from the board when the board wants to get the auditors view in a specific matter. The auditor has attended four meetings with the audit committee during 2023. Remuneration paid to the auditor is set by the general meeting and described in the notes to the annual accounts. The auditor attends the annual general meeting. Deviaons from the Code: None 42 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Medistim distributors Medistim subsidiaries 43 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 9. SUSTAINABILITY REPORT 9.1 Strengthening human health through improved surgery Medistim develops and sells products contributing to improve patients’ quality of life and supporting effective health care systems by enhancing quality during surgical procedures. The quality assurance improves surgical outcomes and increases the likelihood that the procedure is performed in a correct manner the first time. This benefits patients, the health care system and reduces negative impacts and cost for society at large. Medistim’s mission over the past three decades has been to serve patients, surgeons and health care providers with innovative and cost effective medical devices that measure blood flow and visualize atherosclerosis, and thereby help improve the quality and outcome of cardiac and vascular surgery. Medistim’s organization and culture are key drivers for the stakeholder value creation. The culture is built on its four core values, described in Chapter 7.1 which guides the daily activities. The Board of Directors has the overall responsibility for aligning Medistim’s strategy and sustainability considerations, while the day-to-day responsibility lies with the CEO, supported by the Group management. Medistim operates in a highly regulated market with regards to product quality, safety and compliance with requirements. The company has a history of technical innovation and financial growth. It recognizes sustainability as an important part of product and service development and operations, and that it is a key contributing factor to the long term growth and value creation for all stakeholders. We believe that, over time, companies that place environmental, social and governance considerations at the top of their agendas will be able to capitalize on growth opportunities, increase returns on capital and reduce the cost of capital. Contribution to UN Sustainable Development Goals (SDGs) Medistim supports the UN SDGs. The company considers its greatest impact is helping to strengthen human health through improved surgical out- come by providing high quality medical devices meeting strict safety requirements. SDG 3.4 specifies a targeted reduction of premature mortality by 2030 from non-communicable diseases through prevention and treatment of amongst other cardiovascular disease. Medistim can definitely contribute to that through the use of quantitative measuring modality and qualitative imaging modality. Several papers and journals have been written on the topic. The REQUEST study published in 2020 was one of the key papers that was assessed to underpin the importance of routine use of quality assessment. In 2021, Circulation (the official journal of the American Heart Association), stated that “TTFM should be used in every CAGB case”. The company also supports SDG target 12.6 by adopting sustainable business practices and integrating sustainability information into its reporting cycle. Stakeholder engagement and materiality In 2021, Medistim conducted a materiality analysis following a stakeholder identification process. Investors, distributors, suppliers and employees were identified as key company stakeholders and invited to participate in the materiality analysis via a digital survey, followed up with selected in- depth interviews. The stakeholders were asked to grade the importance of ESG related factors, based on the SASB materiality map and selected additional factors, by importance for Medistim. A total of 46 stakeholders participated in the survey. Their answers combined with interviews and a weighting of the stakeholder groups provided the external stakeholder ranking of the ESG factors. This was contrasted with the responses of an internal Medistim working group and summarized in the materiality matrix. 1. The Sustainability Accounng Standards Board (SASB) 44 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 45 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 By summarizing the factors identified through the analysis, Medistim has defined the following themes as material to the company. The themes form the foundation for this report: • Product stewardship • Responsible business • People Priorities going forward This is the company’s fourth ESG report. Medistim has continued to work with the material topics identified and considered initiatives on how the company can improve performance for a more sustainable business conduct. This includes seeking to develop relevant ESG KPI’s and GRI’s related to Medistim’s activity. 9.2 Product stewardship Patient safety is Medistim’s absolute priority as a producer of medical devices. This means focusing on quality and compliance with applicable international and national laws and regulations. Increasingly, in line with stakeholders’ priorities, the company is working to reduce the environmental impact of Medistim’s products, manufacturing process and distribution. Product quality and safety Medistim develops and produces medical devices used to improve quality of cardiac and vascular surgery. The products are subject to high quality and safety requirements and product certifications and require high competence and excellent quality systems. Medistim’s quality management system (QMS) ensures that its products and services are delivered in accordance with relevant acts, regulations and requirements. The company’s QMS is based on the ISO 9000:2015 and ISO 13485:2016 standards, and complies with national and international standards, rules and regulations for manufacturers and suppliers of medical devices. The QMS consists of a set of policies, standard operation procedures, forms and work instructions to ensure that the products meet required quality and safety standards. During the last few years, Medistim has put efforts in the preparation for MDR, the new Medical Device Regulation (2017/745/EU). This is the new regulation from EU that will strengthen patient safety through stricter demands related to quality and safety. All medical device manufacturers must be compliant with the MDR regulation within 2027 and 2028, depending on Medical device risk class. However, since Medistim is focusing on quality and safety in general, much preparations for the new regulation has already been done the last few years. Medistim relies on third-party suppliers to achieve desired quality results for products and services. All vendors of products, raw materials and services used in the design, development, production and servicing of Medistim medical devices is subject to supplier qualification. This includes consulting services that can affect the quality management system and product quality. The QMS also includes procedures for selecting, assessing and approving third-party suppliers such as supplier audit programs and necessary documentation to verify quality and ensure traceability. The QMS is subject to regular reviews by the management team. Employees are trained on the company’s quality policies and standard operating procedures which are continuously evaluated and refined. All reports of adverse events and product complaints are promptly investigated and addressed. Adverse events are reported to applicable health authorities according to procedures. Medistim had no quality incidents affecting patient safety that led to any market actions or need for reporting to health authorities e.g. product recall or field corrective action in 2023. Product life cycle and environmental footprint Medistim has implemented an environmental policy to increase environmental focus, ensure sustainable operations and reduce its environmental footprint. The company’s direct environmental impact relates primarily to the production facilities in Horten, the distribution of products as well as some traveling in connection with sales and training activities. Medical equipment is distributed by postal services with commercial logistics providers based in the Nordic region. Employees are encouraged to take environmentally friendly options into consideration, e.g.; minimize number of flights. Employees are further encouraged to reduce consumption and waste generated from their daily business activities. Medistim has established routines for management of chemicals and waste. The lifetime of Medistim’s products is defined either by the number of use or expected time 46 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 47 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 of performance after distribution to the market. Average lifetime of the MiraQ machines is seven years. The upgrade option with the MiraQ platform from a flow system to a flow and imaging system reduces electronic waste. Flow probes can be used 50 times and the imaging probe can be used 100 times and even more if treated properly. All the electrical components in use comply with environmental standards. Hospitals and treatment centers are responsible for safe disposal of the equipment when it has reached end-of life. All relevant materials used are subject to biocompatibility testing to ensure that they are not harmful for the patient or operator. All equipment which is in contact with human tissue is designed to withstand required sterilization processes. In addition, Medistim seeks to include in the supplier agreements the intent to use environmentally friendly materials and transport. Medistim is assessing the opportunity to provide remote servicing of its devices, which may reduce travel activity and reduce shipping. The goals for 2023 were: • Developing KPIs for Energy and Water consumption to Medistim reporting • Introduce lead-free soldering of wires for all TTFM transducers Medistim has through 2023 started to establish measuring points and initiated data collection for energy consumption in order to be ready to report on ESG KPIs in line with established guidelines for companies of Medistim’s size. Also, discussions have been held with logistics suppliers, with the aim of switching to sustainable fuel for transportation of goods. A project for lead-free soldering of wires has been initiated, and testing with positive indications are performed through the year. Focus areas going forward are to continue reducing plastics used in packaging of products and increase the use of recyclable cardboard for packaging and transportation of products. Further, the company aims to minimize waste of plastic material, electronics and molded silicone parts and glue in production. Also, when developing new and improved products, a sustainability evaluation will be part of the assessment for new product ideas. Medistim is assessing the opportunity to provide remote servicing of its devices, which may reduce travel activity and reduce shipping. Goals for 2024: • Refine ESG strategy for Medistim ASA in order to comply with CSRD in 2025 • Continue working on KPIs for emissions and consumption • Reduce carbon footprint related to transportation of goods by switching to sustainable fuel on goods in and out of production site in Horten • Update the company’s Transparency Act report from 2023 Product risk management Risk management of Medistim’s products’ life cycle is based on current standards, regulations and national legislation related to medical devices, clinical experience and documentation with these and similar devices as well as state-of- the-art technology. The company’s product risk management procedures are governed by the QMS. In the making of upgrades, new products or next generation of product, the company strives to focus on “ease of use”. Not only does it lower the threshold for surgeons to take the equipment in use to improve quality of the surgery, it also reduces the risk of making an error during the procedure. 9.3 Responsible business Ethical business conduct and compliance with Norwegian Transparency Act Compliance with national, regional and international laws and regulations is mandatory in all of Medistim’s activities, but good business ethics goes beyond mere compliance. In order to live up to the company’s mission and values and achieve its strategic goals, everyone is responsible for acting in a manner that safeguards the interests of Medistim and its stakeholders. This way, Medistim will continue to build trust and credibility as a foundation for sustainable operations over time. Medistim’s framework for good business conduct includes ethical guidelines and an anti-corruption handbook that together shall ensure compliance and sustainable operations across the company and its supply chain. The ethical guidelines are built on central UN and ILO (International Labour Organization) conventions and principles for human and labor rights and reflects Medistim’s values and ethical view on good business conduct. The guidelines clarify Medistim’s expectations to employees’ behavior and cover 48 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 areas such as discrimination and harassment, substance abuse, confidentiality and protection of information, privacy protection, conflicts of interest, communication, inside information and whistle blowing. Medistim is committed to a zero-tolerance policy of corruption, which means that the company strictly opposes all forms of corruption. The anti-corruption handbook describes and explain the company’s anti- corruption policy and how employees shall act to avoid any illegal or unethical situations in relation to existing and potential business partners. The ethical guidelines and anti-corruption manual are applicable to all Medistim’s employees, including subsidiaries and board of directors, as well as business partners for sales and distribution. All employees and partners must approve in writing that the guidelines are read and understood. This is also followed up after revisions and updates to the guidelines. Violation of the guidelines may have consequences for the employment or partner relationship. There were no reported concerns during 2023. In July 2022, the Norwegian Transparency act based on OECD guidelines was implemented. The new act obligates companies to conduct human rights and decent work due diligence and follow- ups throughout their supply chain and business relationships. Medistim has conducted such due diligences on suppliers and business relationships for many years and has a well-established routine for such due diligences. The Medistim Transparency Act Report was presented during the first half of 2023 and shows that Medistim is operating in line with Transparency guidelines set by OECD. The complete report can be found at www.medistim. com. Whistle blowing Medistim has established routines for reporting concerns related to illegal or unethical conduct, including a whistle blowing channel for discrete and confidential handling of any potential reports. There were no reported concerns during 2023. Responsible selling practices Medistim is a global leader in developing products for quality control within of cardiac and vascular surgery. The company's products are sold either directly through subsidiaries or distributors in all continents. A standardized sales process has been established to ensure truthful and responsible selling practices as well as clearly defined requirements related to implementation of the solutions. All customer communication is done by trained and authorized personnel. Medistim has a flexible business model in which product offerings and prices are adapted to individual markets. Each distributor sets the local end user-price in their markets. The company engages in continuous dialogue with a broad range of organizations to increase awareness and knowledge of its solutions. Inclusion in leading health organizations’ guidelines for clinical surgery is vital to achieve “Standard of Care” status. Data security and customer privacy As a healthcare company, Medistim may gather and store personal data as part of its research and development projects. At the same time, personal data is increasingly at risk of being misplaced, stolen or shared without consent. Medistim recognizes its responsibility of managing the data collected in a responsible manner and keeping the data safe. The company is subject to laws and regulations that stipulate how personal data can be collected and managed, such as General Data Protection Regulation (GDPR). Strict guidelines and procedures have been implemented to ensure compliance. This involves regular reviews and development of the company’s internal control systems and risk management processes to continuously improve and address existing and emerging data security and privacy threats. No service is conducted on equipment before patient data have been deleted. To ensure a modern, secure and well-functioning IT platform, the company has outsourced its IT management to a professional service provider. Any breaches to data security and consumer privacy will be reported and followed up immediately. Medistim registered no data and GDPR breaches and no wrongful sharing of personal customer data incidents in 2023. 49 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 9.4 People Medistim is committed to being a responsible employer and promotes an open and strong corporate culture. The company supports internationally recognized human rights and labor standards, as defined by the International Labour Organization’s (ILO) fundamental conventions and the UN Declaration of Human Rights. When assessing compensation there is a distinction between educated and skilled employees. The skilled group is typically trained employees by Medistim where formal education is not required. In total, the gender balance is equal, but more women are in the group of skilled employees. This explains the difference in average salary. Comparing men and women in the same groups the terms are equal. The compensation includes both fixed salary and bonuses. There is only one part time female employee and this is by own choice. All other employees are compensated with a 100 % position. Goal for 2024: • Complete employee engagement survey Employee skills and job engagement The ability to attract and retain a skilled workforce is imperative for Medistim to succeed over time. At year-end, Medistim employed 152 people (131). The company has developed a competence matrix which clarifies required competence and resources needed to ensure the right quality of the products and services provided and to meet customers’ needs. Individual training programs are set up for each employee, either when onboarding new workers or after individual evaluations. The training is tailored to each role, tasks and duties and includes tutoring and participation at internal and external courses, seminars and other relevant arrangements. Working environment Medistim strives to ensure a good working environment. All employees are entitled to an annual performance review with its immediate supervisor. Sick leave for the year totaled 4,0 % or 1,598 days (4,4 % or 1,505 days). In 2020, Medistim moved its production facility to new and more functional premises, with recreational areas and easy access to massage and chiropractor services. No work-related incidents or accidents were registered in 2023 (0). In order to improve the working environment, actions are taken to reduce static load for the operators in production and reduce exposure towards dust, gases and chemicals. Long term, the goal is to add automation in the production process. A separate project is established to redesign the PS probes through machine learning and automation. The project is expected to go on for several years and will improve the probe production capacity vastly. Furthermore, Medistim has established a company sports team, of which taking part in the Holmenkollen relay race was a highlight also in 2023. Also, vegetarian lunch every Tuesday is implemented at the Head Quarter in Oslo. Diversity and equal opportunities Medistim promotes a productive and inclusive working environment, free from harassment, discrimination, and disrespectful behavior. All employees are offered equal opportunities with regards to hiring, compensation, training and promotion regardless of gender, age, ethnic and national origin, religion, sexual orientation, social background or other distinguishing characteristics. Competence is the main priority when recruiting for new positions. Medistim has equal gender distribution with 52 % women and 48 % men, as the Group traditionally has recruited from environments where women and men are equally represented. The company practices equal pay within the same salary range, but on average Group level, men are paid more due to the higher share of higher-level positions. Medistim offers full pay during parental leave for both men and women, and in 2023 1.3 % of Medistim’s female and 1,4 % of male employees took parental leave. On average, women took 18 weeks, while men took 14 week. Medistim is a company in growth with an increasing number of employees, which increase diversity and complexity. Medistim acknowledges this and an HR function was established 2021. 50 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 INDICATORS 2023 2022 Working environment, health and safety Number of employees 152 131 Number/ share of part-time employees 1 1 Turnover - number of employees leaving 14 12 Sickleave (%) 4.0 % 4.4 % Number of work-related injuries 0 0 Gender balance, % women of group total 52.0 % 51.1 % Gender balance, % women executive management 41.7 % 38.5 % Gender balance, % women Board of Directors 42.9 % 50.0 % Number of women hired during the year 25 13 Number of men hired during the year 10 14 Age distribution, employees < 30 years 7 5 Age distribution, employees 30-50 years 80 67 Age distribution, employees > 50 years 65 59 Average salary female employees in NOK 766 814 698 789 Average salary male employees in NOK 1 217 246 1 134 203 All employees incl. management level, womens share of salary per position 983 140 911 510 Executive management, womens share of salary per position (Hay Grade) 34 % 21 % Number of weeks for maternity leave (women) 18 16 Number of weeks for paternity leave (men) 14 1 Responsible operations Employees conducted training in ethical guidelines/ Code of Conduct ( %) All Reported whistleblower incidents 0 % 0 % Reported incidents of corruption 0 % 0 % Breaches of labour practices in the supply chain 0 % 0 % Governance Number of board members 7 6 Independent board members 5 3 Average age of board members 54 57 % meeting participation 97 % 100 % 51 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 INCOME STATEMENT 2023 2022 1 = NOK 1000 Note Operating income and expenses Revenue 521 109 486 262 Other income 5 255 5 675 Total revenue 1,2 526 364 491 937 Change inventories of finished goods and work in progress 3 92 876 95 574 Raw materials, consumables used, freight, and other 3 19 404 10 912 Salary and social expenses 4,5,21 162 597 146 376 Other operating expenses 8 96 388 74 537 Total operating expenses before depreciation and amortizataion expenses 371 265 327 398 Operating profit before depreciation and amortizataion expenses 155 099 164 539 Depreciation and amortisation expenses 6,7,12 23 657 23 288 Operating profit 131 442 141 251 Financial income and expenses Financial income 9,20 17 123 16 546 Financial expenses 9,20 13 352 11 748 Net finance 3 770 4 799 Profit before tax 135 212 146 049 Tax expense 10 31 389 32 077 Profit for the year 103 823 113 973 Earnings pr. share Basic 11 5.68 6.25 Diluted 11 5.67 6.24 Statement of other comprehensive income 2023 2022 Profit for the year 103 823 113 973 Items that may be reclassified to profit and loss Exchange differences arising on translation of foreign operations 2 597 10 659 Total comprehensive income 106 420 124 632 10. GROUP CONSOLIDATED FINANCIAL STATEMENTS 10.1 Consolidated Income Statement of Profit or Loss and other Comprehensive Income 52 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 10.2 Statement of Financial Position Consolidated balance sheet Note 31.12.2023 31.12.2022 1=NOK 1000 Assets Non-current assets Property, plant and equipment 6 57 305 51 312 Deferred tax asset 10 5 142 3 591 Intangible assets 12 45 375 36 069 Other long term receivable 21 6 331 5 793 Total non current assets 114 152 96 764 Current assets Inventory 14 145 391 114 333 Accounts receivable 15 74 303 101 657 Other receivables 15 18 000 17 263 Cash 16 153 872 152 641 Total current assets 391 566 385 894 Total Assets 505 718 482 659 Equity and liabilities Equity Share capital 17 4 585 4 585 Treasury shares 17 -13 -21 Share premium 17 41 852 41 852 Other paid in capital 17 24 743 18 742 Issued capital 17 71 167 65 158 Other reserves 17 19 394 16 797 Retained earnings 17 307 380 285 737 Retained earnings 326 774 302 533 Total equity 397 941 367 691 Non current liabilities Lease liabilities 7,24 9 260 10 020 Deferred revenue 24 4 234 5 126 Total non current liabilities 18 13 493 15 146 Current liabilities Accounts payable 25 083 24 470 Income tax payable 10 28 404 25 873 Other current liabilities 19 31 426 42 043 Provisions 22 988 350 Lease liabilities 18,24 8 384 7 086 Total current liabilities 18 94 284 99 822 Total liabilities 107 777 114 967 Total equity and liabilities 505 718 482 659 53 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 10.3 Consolidated Cashflow Statement Consolidated Cashflow statement 2023 2022 1 = NOK 1000 Note Cash flow from operations: Profit before tax 135 212 146 049 Income tax paid -25 699 -19 167 Plus depreciations 6,7,12 23 657 23 288 Change in inventory 14 -31 058 -16 920 Change in accounts receivable 15 27 354 -33 023 Change in accounts payable 613 11 265 Change in other accruals -16 891 1 999 Net cash from operating activities 113 189 113 491 Investing activities: Purchase of property, plant and equipment 6 -16 399 -9 251 Product development investments 12 -13 327 -11 851 Net cash from investing activities -29 726 -21 102 Financing activities: Dividend 11 -82 180 -68 396 Principle and interest paid on lease liabilities 7, 24 -8 712 -7 312 Other financing activities 6 009 5 404 Net cash from financing activities -84 883 70 304 Foreign currency effect on cash 2 651 1 066 Net change in cash and cash equivalents 1 231 23 151 Cash and cash equvivalents as of 01.01 152 641 129 490 Cash and cash equvivalents as of 31.12 16 153 872 152 641 Available cash and cash withholding Available cash as of 31.12 16 146 082 144 164 Cash withholding for taxes 16 7 790 8 477 Cash and cash equivalents as of 31.12 153 872 152 641 13.8 MNOK was related to bonus and commission payment accrued in 2022 and paid in 2023. 54 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 10.4 Statement of change in equity CONSOLIDATED CHANGE IN EQUITY 1 = NOK 1000 Note Share capital Treasury shares Share premium fund Other paid in capital Total paid in capital Other reserves Retained earnings Other equity Total Equity Equity as of 31.12.21 4 585 -26 41 852 13 344 59 754 6 138 240 160 246 298 306 052 Total comprehensive income for the period - - - - - 10 659 113 973 124 632 124 632 Sharebased payments 17 - 6 - 5 398 5 404 - - - 5 404 Dividend 11 - -68 396 -68 396 -68 396 Equity as of 31.12.22 4 585 -21 41 852 18 742 65 158 16 797 285 736 302 533 367 691 Total comprehensive income for the period - - - - - 2 597 103 823 106 420 106 420 Sharebased payments 17 - 8 - 6 001 6 009 - - - 6 009 Dividend 11 - - - - - - -82 180 -82 180 -82 180 Equity as of 31.12.23 4 585 -13 41 852 24 743 71 167 19 394 307 380 326 774 397 941 Comments to other reserves: Other reserves in the equity reconciliation are differences related to translating equity from foreign subsidiaries to NOK. The subsidiaries present their financial statements in EUR, GBP, DKK, CAD, SEK, CNY and USD. When translated to NOK a difference occur due to the change in the exchange between NOK and these currencies. By year end 2022 this difference was 16,797 TNOK and the change for the year was TNOK 10,569. By year-end 2023, the equivalent was TNOK 19,394, a change of TNOK 2,597 from the year before. Treasury shares When treasury shares are purchased, the purchase price including directly attributable costs is recognized in equity. Treasury shares are presented as a reduction of equity. Loss or gain on transactions of treasury shares are not recognized in the income statement. 55 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 10.5 Basis for preparation of financial statements Accounting policies Medistim ASA is a public company listed at the Oslo stock exchange. Medistim ASA is incorporated in Norway. The main office is located in Økernveien 94, 0579 Oslo, Norway. The Medistim group’s business is within developing, producing, service, leasing and distribution of medical devices. The board of Director’s and the CEO authorized these financial statements for issue on March 21, 2024. The financial statement for the group is prepared in accordance with IFRS® Accounting Standards as adopted by the EU and effective as of 31.12.2023. The consolidated accounts have been prepared using consistent accounting policies for similar transactions and events. The accounting principles for the group for 2023 are the same as for the principles used in 2022. The group presents its financial statements in NOK. This is also the functional currency for the parent company. Asset and liabilities of subsidiaries with other functional currency than NOK, are translated to NOK using the exchange rate at the balance sheet date. For the income statement, the average monthly rate in the period is used. Translation differences arising from translation to presentation currency, is recognized in other comprehensive income and presented as “other reserves” in the balance sheet. Translation differences is recognized in profit and loss when the investment is sold. Exchange rate differences on monetary assets and liabilities that in substance is part of the net investment in a foreign operation, is also included in translation differences. The consolidated accounts include Medistim ASA and companies controlled by Medistim ASA 10.6 Use of estimates and judgement The preparation of the consolidated financial statements requires management to make judgments, estimates and assumptions that impact the recognition and measurement of certain assets, liabilities, revenue and cost. The following area involves the most critical estimates and judgements for the company: CONSOLIDATED CHANGE IN EQUITY 1 = NOK 1000 Note Share capital Treasury shares Share premium fund Other paid in capital Total paid in capital Other reserves Retained earnings Other equity Total Equity Equity as of 31.12.21 4 585 -26 41 852 13 344 59 754 6 138 240 160 246 298 306 052 Total comprehensive income for the period - - - - - 10 659 113 973 124 632 124 632 Sharebased payments 17 - 6 - 5 398 5 404 - - - 5 404 Dividend 11 - -68 396 -68 396 -68 396 Equity as of 31.12.22 4 585 -21 41 852 18 742 65 158 16 797 285 736 302 533 367 691 Total comprehensive income for the period - - - - - 2 597 103 823 106 420 106 420 Sharebased payments 17 - 8 - 6 001 6 009 - - - 6 009 Dividend 11 - - - - - - -82 180 -82 180 -82 180 Equity as of 31.12.23 4 585 -13 41 852 24 743 71 167 19 394 307 380 326 774 397 941 • Research and development cost relating to internally developed technology and software (Note 12) • Goodwill (Note 12) • Deferred tax assets (Note 10) • Inventory provision (Note 14) • Provison for bad debt (Note 15) The global market is in macro-economic turmoil, with energy crisis, inflation pressure, increasing interest rates and higher cost levels. Long- term consequences of the growing geopolitical uncertainty are unclear but might lead to continuing challenges in the global flow of goods. Medistim is taking mitigating actions to ensure access to key components to secure production and maintain growth and profitability also for the future. 10.7 New and amended standards effective from 2023 From 1. January 2023 there are changes in IAS 1 Presentation of Financial Statements related to requirements to disclose material accounting policy information. To reflect these new requirements certain adjustment have been made in the group’s annual report for 2023, including moving the relevant accounting policy information to the applicable note instead of a separate chapter for accounting policies. In IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors a definition of an accounting estimate has been included. The introduction of the definition doesn’t have any impact to the groups financial statement. IAS 12 Income Taxes related to the Pilar Two model rules is not relevant for Medistim. IFRS 17 Insurance Contracts is not relevant for Medistim. 10.8 New and amended standards not yet effective Standards that are effective in 2024 and 2025, interpretations or amendments that are issued, but not yet effective, are not expected to cause any significant changes for Medistim. 56 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 10.9 Notes to the accounts Note 1 Revenue Medistim uses the 5-step model as a basis for income recognition. Based on the contract model applied and the obligations in the contract, the price is determined and allocated. Depending on the first 4 steps, income recognition is initiated. The different ways of income recognition are described in detail below. Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the group expects to be entitled in exchange for those goods or services. The assets that are leased to customers are recognized as property, plant and equipment in the balance sheet. Direct cost related to the leasing agreement is added to the carrying amount of the leased assets and is depreciated over the lease term. Group revenue can be split in three different categories that have different risk and return on investment profile. The split is according to the company’s internal reporting structure. The categories are as follows: 1. Revenue from sale of capital equipment (MiraQ) and consumable (probes) 2. Revenue from lease of equipment (MiraQ and probes) 3. Distribution and sales of third-party products Category 1 and 2 covers the same equipment (MiraQ system) and consumables (probes). This is the products that are developed and produced by Medistim and is distributed through local partners unless Medistim has local representation. 1. Sale of capital equipment and consumable: The sale of the equipment and the sale of the consumables are considered separate deliveries (performance obligations). Revenue recognition varies with shipping and delivery terms that decide the timing of when the customer takes over control of the goods. Standard delivery terms is either EXW or FCA. With EXW terms customer take over ownership when it products is shipped from factory and revenue is recognized at this point. With FCA terms customer take over ownership when products are delivered at customer site and revenue is recognized when products arrive at customer site. Payment terms varies from 30 to 90 days. The group provides warranties for general repairs of defects that existed at the time of sale. This is considered an ordinary assurance type warranty, and not a separate performance obligation. A warranty provision is recognized, see note 21. In addition, service contracts / extended warranty options can be arranged. Revenue related to these contracts are recognized on straight line basis over the duration of the contract. 2. Revenue from lease of equipment and probes: The group has a range of contracts related to lease of equipment and probes and can be split in two categories • Payment per procedures • Lease of equipment and sale / lease of probes Payment per procedure: Under this model, the equipment and probes are placed at the customer site free of charge. Medistim owns all equipment placed at the customer site. For the customer to be able to use the equipment a procedure (smart card) must be purchased. One procedure equals one surgery. The customer purchases a smart card that makes the system available for use. The agreement is considered a lease with variable lease payments. Revenue is variable and recognized related to the actual use of the equipment and probes. For Medistim, this means that revenue is recognized when a new card is shipped to a customer. There are two types of customers, flow customers and flow and imaging customers. Flow customers purchases a flow procedure, while flow and imaging customers purchase both a flow procedure and an imaging procedure. It is therefore a split of revenue between flow procedures and imaging procedures. Revenue is recognized when smartcards are shipped to the customer. The customer is dependent upon the smartcard to open the equipment and probe for use. The agreements are operational since equipment is returned when the agreement expires. The individual agreement contains a minimum use clause. The duration of the agreement is 1-3 years, but divided into 12-month cycles, so minimum usage applies for 12 months at a time. If minimum usage is not achieved, Medistim has the right to extract the equipment from the customer site. 57 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Lease of systems and sales / lease of probes: Under this model, the customer leases the system and purchases probes when needed. The system revenue is recognized on a straight- line basis over the lease term. Probe revenue is recognized when the probe is delivered to the customer. When probes are leased the expected probe consumption according to the contract is recognized on straight line basis but on a regular adjusted for actual probe consumption. Other terms in the agreements: If a customer with a pay per procedure or lease agreement does not handle the equipment properly, the customer is liable towards Medistim to compensate for the damage and repair. It happens that customers after too low consumption want to keep the equipment. In such cases, the customer may purchase the equipment. In this case, this is registered as a system sale. 3. Third party sales: Sale of other third-party medical equipment is recognized when the equipment is delivered to the customer. Payment from customers is mainly due within 30 days. Other revenue in the P&L includes service, spare parts, grants and other revenue that is not own products or third-party products. Se note 2 for split of revenue. 58 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Note 2 Segments The group's activities are divided into strategic business units that are organized and managed separately. The group is organized, for management purpose, in two divisions dependent upon products and services. The segments are identified based upon different risk and return on investment profile. The division is also in accordance with the group's internal reporting structure. The main divisions are sale of own products and sale of 3. party products. Sale of own products has two business models, the capital model and the lease model. The segment reporting is similar to the internal reports that are given to the decision makers in the company. Focus in the reporting is sales in NOK and units for the respective segments. Transactions between internal business units are performed at market terms. Revenue, cost and result for each segment includes transaction between the segments. On group level these transactions are eliminated. Own Products: Medistim sells its own products either through a lease or as capital. Medistim has a flexible business model in the US and leaves it up to the customer whether they want to lease the equipment or purchase the capital equipment and buy probes as consumable. The lease model in the USA has been successful since it does not demand upfront capital to have the equipment available. However, several customers prefer to invest in the equipment and purchase probes as consumables and Medistim promotes both solutions. Medistim has direct representation in the USA, which makes it manageable to handle the lease model properly. Medistim only offers the lease option in direct markets. In recent years, the lease options have also been introduced in Spain and UK. Lease revenue outside the US is at a moderate level. Split of revenue between coronary surgery and vascular surgery: The company has in addition to coronary surgery a strategy and focus towards vascular surgery. The principles for guiding and quality assurance within vascular surgery is similar to the need within coronary surgery. Within coronary surgery, the surgeons focus is to supply sufficient blood to the heart. Within vascular surgery, the focus is to supply blood flow in other parts in the body or organs. The vascular market is an opportunity with a market size even larger than coronary surgery. It is therefore natural to report sales split between cardiac surgery and vascular surgery. Additional sales information: From 2023 on, a new reporting structure has been implemented in Medistim. Geographical sales split is monitored to be able to follow the development in sales in AMERICAS, APAC and EMEA. Third-party products: Distribution of third-party products: Distribution and sale of third-party products is a separate segment. The group sells medical devices from third party manufacturers in Norway, Sweden and Denmark. The product portfolio is carefully selected and mainly instruments and consumables within surgery. 59 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Geographic split of sales in NOK per product group2023 2022All numbers in NOK 1000AMERICASPPP and lease:Flow procedures (PPP/card based) 64 369 61 096 Imaging and flow prosedures (PPP/card based) 36 242 32 693 Capital sales:Flow systems 15 492 14 579 Flow and imaging systems 35 566 44 984 Flow probes 48 980 41 256 Imaging probes 8 374 9 000 Total sales AMERICAS 209 023 203 608APAC Flow systems 19 468 17 654 Flow and imagin 20 027 19 925 Flow probes 40 019 38 106 Imaging probes 3 469 3 315 Total sales APAC 82 983 79 000 EMEAFlow systems 20 589 17 431 Flow and imaging systems 25 892 21 524 Flow probes 104 059 89 820 Imaging probes 4 389 4 721 Total sales EMEA 154 929 133 496 Total sales in NOKPPP and lease revenue:Flow procedures (PPP/card based) 64 369 61 096 Imaging and flow prosedures (PPP/card based) 36 242 32 693 Capital sales:Flow systems 55 548 49 664 Flow and imaging systems 81 485 86 433 Flow probes 193 058 169 182 Imaging probes 16 232 17 036 Total sales own products 446 935 416 104 Sale of 3rd party products 79 429 75 833 Total sales 526 364 491 937 60 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 SPLIT OF SALES BETWEEN CORONARY AND VASCULAR 2023 2022SURGERY AND 3 PARTY PRODUCTSAll numbers in NOK 1000Split of own productsSales within coronary surgery 365 641 346 550 Sales within vascular surgery 81 294 69 554 Other - - Sales of third party products 79 429 75 833 Total sales 526 364491 937 SPLIT OF SALES BETWEEN FLOW PRODUCTS, IMAGING PRODUCTS 2023 2022AND 3RD PARTY PRODUCTSAll numbers in NOK 1000Flow products 312 976 279 943 Imaging products 133 959 136 161 Sales of 3rd party products 79 429 75 833 Total sales 526 364 491 937 SPLIT OF EBIT PER SEGMENT 2023 20221 =NOK 1000EBIT from Medistim products 120 053 128 653 EBIT margin Medistim products 26.9 % 30.9 %EBIT from 3. party products 11 389 12 598 EBIT margin 3. party products 17.7 % 20.6 %R&D - -Administrasjon -- Totalt EBIT 131 442 141 251EBIT % 24.97 %28.71 % 61 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 62 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Note 3 Split of cost of goods sold SPLIT OF COST OF GOODS SOLD 2023 20221 = NOK 1000Change in inventory of third party products 44 833 42 828Change of inventory of finished goods 48 042 52 7463.party services 743 767Raw materials and consumables used 12 586 6 059Packing material and other materials 55 54Freight 6 020 4 032Total cost of goods sold 112 280 106 485 Note 4 Split of salary expenses SPLIT OF SALARY EXPENSES 2023 20221 = NOK 1000Salary 129 501 108 056Employeers tax 18 786 15 778Bonus 6 283 14 878Cost for contribution pension plan 6 260 5 590Compensation to the Board 2 122 1 558Other social costs -354 517Total salary and social cost 162 597 146 376Full time equivalent employeesUSA 25 25 Germany 5 3 UK 1 1 Canada 2 - Sweden 1 - Spain 4 4 Denmark 1 1 Norway 111 98 Total 150 132 Employees in Medistim with a pension plan are included in a contribution plan where an agreed percentage of the employee’s salary is paid to the employee pension account. The company’s payment of contributions is expensed in the period it is incurred. For the 111 Norwegian employees there is a contribution plan that covers 5 % of salary up to 7.1G and 8 % of salary between 7.1G and 12G. 1G is the base amount in the social security system. The 25 employees in the US follows a pension plan, a 401k match that covers 4 % of salary. The total cost for the contribution plans was in 2023 TNOK 6.26, while it was TNOK 5.59 in 2022. It is compulsory by law for the company to have a pension plan for its employees in Norway. The pension plans in the company fulfill the obligation in the Norwegian law. Employees outside Norway and US do not have a pension plan. 63 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Note 5 Audit fee AUDIT FEE FOR THE GROUP 2023 20221 = NOK 1000Statutory Audit 2 027 1 842Other services 200 110 Total Audit fee 2 227 1 952 The amounts are without VAT Note 6 Property, plant and equipment Property, plant and equipment is recorded at cost less accumulated depreciations and write-downs. When an asset is sold, the carrying value of the asset is derecognized and any gain or loss from the sale is recognized in the income statement. Items of property, plant and equipment are depreciated straight line over the estimated useful life from the time it is available for use. Useful life is as follows: Machinery and equipment 3-7 years Other assets 3-5 years Property, plant and equipment are tested for impairment if there are indication of impairment. If the carrying amount exceeds the assets recoverable amount, being the higher of value in use and fair value less cost of disposal, the asset is written down to the recoverable amount. Depreciation time and method is evaluated on a yearly basis. 64 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 PROPERTY PLANT AND EQUIPMENT 2023Right-of-1 = NOK 1000 Equipment Other assetsTotal assetsuse assetsHistorical costBalance 1. January92 977 28 144 43 688 164 809Additions10 462 6 442 8 920 25 82531. December103 440 34 587 52 608 190 634Accumulated depreciation and impairmentBalance 1. January 66 023 20 892 26 583 113 497Depreciation this year 8 125 3 142 8 383 19 649Exchange rate differences 36 -219 1 -18231. December 74 112 24 252 34 965 133 329Book value29 328 10 335 17 643 57 305Depreciation in %14-33 % 20-33 % 12.5-50 %Useful life 3-7 years 3-5 years 2-8 yearsDepreciation method Linear Linear LinearPROPERTY PLANT AND EQUIPMENT 2022Right-of-use Total 1 = NOK 1000 Equipment Other assetsassetsassetsHistorical costBalance 1. January85 868 25 497 43 688 155 053Additions7 109 2 647 - 9 75631. December92 977 28 144 43 688 164 809Accumulated depreciation and impairmentBalance 1. January 58 821 17 875 19 496 96 191Depreciation this year 7 198 3 054 7 086 17 337Exchange rate differences -4 36 -1 3131. December 66 023 20 892 26 583 113 497Book value26 954 7 253 17 105 51 31214-33 % 20-33 % 12.5-50 %Depreciation in %Useful life 3-7 years 3-5 years 2-8 yearsDepreciation method Linear Linear Linear Right to use assets See note 7 for details. Fully depreciated assets Some assets with total historic cost value of 3.9 MNOK is fully depreciated as of 31.12.2023 but are still in use. Security Equipment and other assets is pledged as security as of 31.12.2023. The security is related to bank guarantees, guarantee towards landlord for rent and hedging credit facility. The group’s bank had the same security as of 31.12.2022. 65 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Note 7 Right to use assets and liabilities Right to use assets The company is renting offices in Økernveien 94 in Oslo, Bromsveien 17 and Raveien 205 in Horten and in 14000 25ave. N. Suite 108 in Plymouth in Minneapolis, Minnesota, USA. In Oslo and Raveien 205 in Horten the rental agreement expires in 2025. Bromsveien 17 in Horten expires in 2027. In the USA, the rental agreement expires year-end 2030. The rent is adjusted yearly according to National indexes for goods and services. The lease in Økernveien 94 may be prolonged with 5 years after 2025, the lease in Bromsveien 17 may be prolonged with 2 years after 2027 and Raveien 205 may be prolonged with 2 years after 2025. It is at present uncertain whether these leases will be prolonged. The group also leases office equipment and cars. The longest remaining lease term for office equipment and cars is until December 2025 and December 2026 respectively. Medistim have some other leases that are minor and not included in the balance sheet as right to use assets and liabilities. The company recognizes a lease liability and a right- of-use asset for leases with a duration of more than 12 months, provided that the underlying asset is not of low value. The lease liability is the present value of the lease payment over the lease term. Lease payment includes fixed payments and variable lease payments that depend on an index or a rate. The lease term is the non-cancellable period of the lease together periods covered by an option to extend the lease when the exercise of the option is reasonably certain. Right-of-use assets are depreciated over the shortest of the lease term and useful life. Depreciation of right-of-use assets is presented together with other depreciation in the income statement. Lease payments are allocated between installments and interest based on a constant periodic rate of interest being the interest used to calculate the lease liability. The interest expense is presented as a financial expense in the income statement. Leased assets are recorded in the balance sheet with a corresponding debt and the lease expense recorded as depreciation and interest expense. Medistim’s leased assets with right to use and liabilities are shown below. 66 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 NOTE RIGHT-OF -USE ASSETS AND LEASE LIABILITIES 20231 =NOK 1000Machinery and Right-of-use assets BuildingsVehicles equipmentRecognition of right to use of asset 1. January 15 065 126 1 915 17 105 Addition of right-of-use assets, CPI adjustments 6 899 199 1 822 8 920 and other reassessmentAmortisation 6 609 122 1 652 8 383 Carrying amount of right-of-use assets 31 15 355 203 2 085 17 643DecemberLower of remaining lease term or economic life 4-8 years 2-5 years 1-5 yearsDepreciation method Linear Linear LinearLease liabilitiesUndiscounted lease liabilities and maturity of cash outflows 2 023Less than 1 year 6 609 122 1 652 8 3831-2 years 4 022 92 704 4 8183-4 years 2 453 - - 2 4534-5 years 1 773 - - 1 773More than 5 years 2 192 - - 2 192Total undiscounted lease liabilities at 31 17 049 214 2 356 19 619 DecemberSummary of the lease liabilities in the financial Statement of: 2023statementsLease liabilities as of January 1st 17 105 New lease liabilities recognised in the year 8 920Cash payments for the principal portion of the Cash flows 8 383 lease liabilityInterest expense on lease liabilities Profit and loss 309 Total lease liabilities at 31. December 17 643 Current lease liabilities Financial position 8 383 Non-current lease liabilities Financial position 9 260 Total cash outflows for leases Cash flows 8 692 67 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 NOTE RIGHT-OF -USE ASSETS AND LEASE LIABILITIES 20221 =NOK 1000Machinery and Right-of-use assets BuildingsVehicles equipmentRecognition of right to use of asset 1 January 20 782 206 3 204 24 Addition of right-of-use assets, CPI adjustments and - - - - other reassessmentAmortisation 5 717 80 1 289 7 086 Carrying amount of right-of-use assets 31 15 065 126 1 915 17 106 DecemberLower of remaining lease term or economic life 4-8 years 2-5 years 1-5 yearsDepreciation method Linear Linear LinearLease liabilitiesUndiscounted lease liabilities and maturity of cash outflows 2 022 Less than 1 year 5 773 80 1 315 7 1681-2 years 5 340 74 742 6 1563-4 years 2 962 - 167 3 129 4-5 years 2 212 - - 2 212 More than 5 years - - - - Total undiscounted lease liabilities at 31 December 16 287 154 2 224 18 665 Summary of the lease liabilities in the financial Statement of: 2022statementsLease liabilities as of January 1st 24 192 New lease liabilities recognised in the year - Cash payments for the principal portion of the lease Cash flows 7 086 liabilityInterest expense on lease liabilities Profit and loss 226 Total lease liabilities at 31. December 17 106 Current lease liabilities Financial position 7 086 Non-current lease liabilities Financial position 10 020 Total cash outflows for leases Cash flows 7 312 68 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Note 8 Other operating expenses OTHER OPERATING EXPENSES 2023 20221 = NOK 1000Office expenses 1 378 1 722 Travel cost 15 620 10 843 Marketing 6 391 5 910 Consultants 38 058 27 254 Insurance 2 718 2 465 Freight 3 326 2 596 Communication 1 391 1 313 IT cost 18 588 14 463 Other 8 919 7 971 Total 96 388 74 537 Note 9 Financial revenue and expenses As of 31.12.2023, the company had 17.6 MNOK in interest bearing liability related to lease contracts shown in note 7. Additional cash in the group gave interest revenue of 3 275 TNOK. Other finance income and expenses was realized or unrealized gains or losses towards foreign currency. Financial income and expenses are shown below. See note 20 for comment about financial risks and exposure. FINANCIAL REVENUE AND EXPENSES 2023 2022 1 = 1000 NOKInterest income 3 275 920 Other financial income 137 1 199 Gains on foreign exchange 13 710 14 427Total financial income 17 123 16 546 Loss on foreign exchange -12 780 -11 363Interest cost on loans -151 -123Other financial expenses -422 -262Total financial expenses -13 352 -11 748Total financial income (+) expenses (-) 3 770 4 700 69 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Note 10 Income tax INCOME TAX 2023 20221 = NOK 1000Current income tax charge 32 402 32 879Correction from previous year -450Deferred tax expense -1 013 -352Tax expense from statement of profit and loss 31 389 32 077Reconciling tax expense towards income before taxTax expense for the year 31 389 32 07722 % of income before tax 29 892 32 131Change in deferred tax, temporary differences -1 013 -352 Permanent differences and different tax rates -1 497 54Calculation of effective tax rate 2023 2022Expected income tax at tax rate 22 % in Norway 29 892 32 131Permanent and other differences - -Foreign tax rate differences 1 497 -54 Income tax expense 31 389 32 077Effective income tax rate 23.2 % 22.0 %Payable tax from statement of financial position 2023 2022Income tax expense 32 419 32 879Prepaid tax -4 340 -7 006 Change deferred tax asset 325 -Income tax payable 28 404 25 873Specification of deferred taxDifference in values 2023 2022Non current assets 1 424 -1 769Current assets -25 078 -14 905Other obligations 279 348Total differences -23 375 -16 326Deferred tax asset 22 % -5 143 -3 592Deferred tax asset recognized in the balance sheet -5 143 -3 592 The tax expense in the income statement includes both payable taxes for the period and changes in deferred tax. Deferred tax is calculated based on temporary differences between tax values and carrying amount of assets and liabilities. Tax payable and deferred tax is recorded against equity if the transaction is an equity transaction. The deferred tax asset in the balance sheet is based upon future utilization of deductible temporary differences. There is no time limitation for utilization of the temporary differences. Tax rates in Germany and in the US are different from Norwegian rates. The difference in tax rates reduces average tax rate in 2023 to 23.1 %. 70 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 TAX EXPENSE FOR THE GROUP IS GEOGRAPHICALLY SPLIT AS FOLLOWS: 2023 20221 = NOK 1000 Norway 27 260 26 231Germany 2 022 2 354USA 1 669 3 154Spain 304 -Denmark 134 338Total 31 389 32 077 Note 11 Earnings per share EARNINGS PER SHARE 2023 20221 = NOK 1000Profit for the year 103 823 113 973Average numbers of shares outstanding Average number of shares used in basic EPS 18 267 18 248Effect of share options 29 29 Average numbers of sharesused in diluted EPS 18 296 18 2771 = NOK 1Profit per share 2023 2022Ordinary 5.68 6.25Diluted 5.67 6.24Paid dividend 82 180 68 396 Dividend per share 4.50 3.75Suggested dividend per share 4.50 4.50 The company has only one class of shares. Ordinary earning per share is calculated as the relation between profits for the year that is allocated to ordinary shareholders divided with average number of shares outstanding. Treasury shares are not included and average number of treasury shares are excluded from the calculation. In 2023, there were share options to CEO. The share option plan to CEO is described under chapter 3 compensation to management and note 21. By year-end the company had 55,617 own shares. Note 12 Intangible assets Product technology and additions, goodwill and license agreement Intangible assets are recognized in the balance sheet if it is probable that the future economic benefits will flow to the company, and the cost of the asset can be measured reliable. Intangible asset with finite economic life is measured at cost less accumulated amortization and write-downs. Amortization is done on a straight-line basis over expected lifetime. The amortization period and method are reviewed on a yearly basis. Intangible assets with indefinite useful life are not amortized but tested for impairment at least annually. 71 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Research and development: Research cost is expensed as incurred. Cost to internal development of technology or software is capitalized as an intangible asset when it is demonstrated that: – it is technical feasible to complete the asset, – the company has the recourse to complete the project – the product will generate future economic benefits, and – expenditure can be reliable measured. Cost capitalized include materials, salary and social expenses and other expenses that can be allocated to the development of the asset. Internally developed intangible assets are amortized on a straight-line basis over the expected useful life. Amortization starts when the asset is available for use. Intangible assets not ready for use, is tested for impairment on a yearly basis. Capitalized development costs are written down when a new product is ready for sale, or an improved product is ready for sale. Internally develop intangible asset is tested for impairment on a regular basis by discounting expected cash flow generated from the asset. If the discounted value is lower than the carrying amount the asset is written down. Capitalized cost related to development of own products are depreciated on a straight-line basis over expected lifetime. Expected lifetime varies from 3 to 8 years. Development cost related to technology and software has been recognized as an intangible asset because Medistim can demonstrate technological feasibility for the asset to be available for sale for both existing products and new products. The revenue potential for the projects exceeds the investment. The balance sheet value as of 31.12.2023 was MNOK 6.1. The estimates that form the basis for the intangible asset are performed by the management of the company, and there will always be a level of uncertainty in relation to the assessments that are performed on future revenue for future products. Capitalized development costs are depreciated over 3 to 8 years. 8 years is used if it is a new product on a new technological platform that creates the basis for a new generation of products. Based upon a platform or new generation of products there will be further developments and improvements. These enhancements of the products are depreciated over 3 years because of rapid technological development. Within 3 years, it is assumed that parts or all of existing technology is updated. In 2023, 13.3 MNOK of product technology additions, was recognized in the balance sheet related to the MiraQ products. The MiraQ platform forms the basis for future models from Medistim. All development activity is performed in the parent company. INTANGIBLE ASSETS 2023Product under Technology & Total Goodwilldevelopmentdevelopment costintangible1 = NOK 1000Historic cost 01.01 11 851 81 928 14 128 107 907 Internal additions in use - - - - External additions in use 3 543 - - 3 543Additions under development 9 784 - - 9 784 Historic cost 31.12 25 178 81 928 14 128 121 234 Accumulated depreciation - 71 839 - 71 839 and amortization expenseDepreciations for the year - 4 021 - 4 021 Total depreciation as of 31.12 - 75 860 - 75 860 Carrying amount 31.12 25 178 6 068 14 128 45 374 72 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Product technology Probes to vascular surgery – the PV probe: Within vascular surgery, there is a corresponding need to measure blood flow in the same manner as within cardiac surgery. Some vascular surgeons are already using Medistim’s equipment even though the probes are designed for cardiac surgery. The company has seen an increasing demand over time and in 2011, the company developed a specially designed probe for use in the vascular area. The market in vascular surgery is large and it is performed about 1,300,000 procedures annually. In comparison, about 700,000 procedures are performed per year within cardiac surgery. This is a significant market where Medistim can customize its solution with a modest investment. Book value as of 31.12.2023 was 1.3 MNOK. Expected useful life for the PV probes are 8 years. 4th generation of systems; the MiraQ Entering into 2023, Medistim had invested 39.2 MNOK in the system platform that represent Medistims 4th generation of systems within flow measurement and imaging to ensure quality and guiding during surgery. The platform has a flexibility that will allow customer adaption and new applications. The technological improvements have secured and strengthen Medistim’s leading position. The product, MiraQ Cardiac, based upon the platform, was launched in 2014. The MiraQ Vascular system was introduced in 2015 together with the new vascular flow probes late 2015. At the same time the MiraQ Ultimate was introduced that combines the two cardiac and vascular modalities. Book value for the MiraQ platform by year-end was 4.8 MNOK. Expected lifetime for the product is 8 years. In the table abow PV probes and MiraQ system is shown under technology and development cost. Additions under development: This is related to the development of new cardiac flow probes. The aim is to modernize design for the user to make it easier to use, but also develop a design that is more efficient to have in production. Medistim has several years of experience with inhouse production and input from customers on a better design on the probe for the user. With this extensive experience and knowledge, it is likely that a new probe will be developed with success. In 2023 4.9 MNOK was invested in the project and book value by year end 2023 was 9.8 MNOK. The next generation of software within both cardiac segment and vascular segment was under development during 2023. The new software has a new user interface and tools to aid the interpretation of the results. Medistim’s Innovation team has together with Key Opinion Leaders tested several prototypes to identify the preferred solution. In 2023 8.1 MNOK was invested in the software project and book value by year end 2023 was 13.2 MNOK. INTANGIBLE ASSETS 2022Product under Technology & Goodwill Total intangible development development cost assets1 = NOK 1000Historic cost 01.01 1 334 80 594 14 128 96 056Internal additions in use (1 334) 1 334 - - External additions in use - - - - Additions under development 11 851 - - 11 851Historic cost 31.12 11 851 81 928 14 128 107 907 Accumulated depreciation 65 887 - 65 887and amortization expense -Depreciations for the year - 5 952 - 5 952 Total depreciation as of 31.12 - 71 839 - 71 839Carrying amount 31.12 11 851 10 089 14 128 36 068 Intangible assets are depreciated on a straight-line basis over the useful life. Useful life for capitalized product development is 3 to 8 years. 73 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Medistim need to be compliant with the new Medical Device Regulation (MDR) In 2023, 0.3 MNOK was invested in making Medistim MDR compliant and book value at year end 2023 was 2.2 MNOK. In the table abow additions under development is shown under product under development. Summary product technology In total 13.9 MNOK of the R & D expenses was recorded in the P & L in 2022. Similar expense was 14.5 MNOK in 2021. With 11.85 MNOK recognized as asset a total of 25.75 MNOK was used in R & D in 2022. Comparable number for 2021 was 18.6 MNOK. Medistim received TNOK 376 in Skattefunn funds in 2021 and TNOK 236 in 2022. In the estimates used to test for impairment, the 3-year strategy plan is used with a discount rate of 14.6 %. See comment under goodwill with regard to discount rate. Goodwill A yearly test of values is done for the cash flow generating units that has a goodwill value in the balance sheet. GOODWILL 2023 20221 = NOK 1000Acquisition of Medi-Stim 7 960 7 960 Norge ASAcquisition of Kir-Op AS (merged with Medistim 6 168 6 168 Norge AS in 2006)Total goodwill 14 128 14 128 A test of values is performed by estimating the cash flow for Medistim Norge AS. This is estimated using the company’s budget for 2023 and 3-year strategy plan for the years 2024 to 2026 with the assumption of 2 % growth in 2026 compared to 2025. Cash flows for more than five years are estimated by using Gordon’s growth formula with a 2 % growth in the terminal year. The cash flow is discounted using 14.6 % discount rate. This includes an additional yield of 9.1 % compared to risk free interest. The value of the discounted cash flow exceeded the recorded book value in the balance sheet and there was no need for a write down of goodwill. The estimates in the tests are most sensitive to changes in the following parameters: • Maintaining market share and product lines • Maintaining margins and keep competitive prices • Level of minimum return on investment • Future growth • Employee know-how Maintaining market share and product lines: Within the medical device industry there are major investments done in the development of products. Medistim Norge has certain product lines that have a large portion of total sales. Medistim Norge’s financial situation will be affected if a new product was released in the market that would replace existing key products, and Medistim Norge is not distributor for the new product. The company would also be affected if a supplier changes distributor or chooses to go direct in the Norwegian market. For this reason it is important for the company to maintain know how and performance to secure key product lines. It is equally important that the company is able to see trends and take in new products with a future potential. The largest product line for the company has 20 % of total sales. If this product line is lost together with another line that is 5 – 10 % of total sales, all goodwill needs to be written down. Maintain margins and keep competitive prices: Medistim Norge AS largest customers are Norwegian hospitals. The hospitals are continuously improving their purchasing routines and purchasing is centralized and professionalized. This increases the demand for better quality and prices from the suppliers. The company’s ability to maintain prices by offering quality products and services is crucial in the competition for future contracts. The company is well connected to its suppliers and when the competition increases the suppliers is contributing by lowering their prices. However, it is not realistic to expect that the suppliers will compensate for all of the reduction in prices. The company’s experience is that about 50 % of the price change is covered by the suppliers in an increased competitive situation. A price reduction of 10 % without any compensation from the suppliers is the break-even level for write down of goodwill. Weighted average capital cost (WACC)e: The company uses a WACC that is equal to risk free interest with an addition of 9.6 %. This level is evaluated on a yearly basis and a change in the WACC could affect the evaluation of the intangible assets. Risk-free interest rate is based on 10-year government bond that at the beginning of the year was 5.5 %. Including risk free interest of 5.0 % the total discount rate in 2023 is set to 14.6 %. 74 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Future growth: It is projected growth in sales with a variation from 3 % to 2 % in the budget and strategy period, and with 2 % growth in the terminal value. To be able to maintain this increase it is crucial that the company handles existing product lines in an effective manner and that the company is able to identify and get distribution agreements for new product lines that create more business than lost product lines. Employee know-how: Medistim Norge has over the years built a competence within the medical device industry and distribution. It is essential that this know-how is updated and passed on to new employees. Sensitivity analysis: With the assumption used in the impairment test, the recoverable amount exceeds the carrying amount with 75.3 MNOK ("headroom"), and no impairment loss is recognized. Operating margin and growth is based upon historic achieved margin and sales growth. In the estimates the budget and the projections from the 3-year strategy update is used. The operating margin in the projections vary between 13.7 and 15.7 %. Sales growth vary between 3 % and 2 % If the operating margin is reduced from 15.0 % to 3.5 % everything else equal, carrying amount would require an evaluation of impairment loss. A change in the discount rate from 12.1 % to 55.0 % everything else equal, would cause an impairment loss. See overview below. Discount rate 14.6 % 28.0 % 55.0 %Headroom in MNOK 75.3 14.3 9.3 Operating margin 13.0 % 7.7 % 3.5 %Headroom in MNOK 75.3 15.7 -11.4 Note 13 Shares in subsidiaries SHARES IN SUBSIDIARIES1 = NOK 1000Unit Country Segment Owner- Value ship31.12.23Medistim USA Inc. USA Lease and sale within bypass surgery and 100 % 135vascular surgeryMedistim Deutschland Germany Capital sales within bypass surgery and 100 % 188GmbHvascular surgeryMedistim Norge AS Norway Sale of 3 pary products and capital sales within 100 % 36 953bypass surgery and vascular surgeryMedistim UK LTD UK Capital sales within bypass surgery and 100 % 1vascular surgeryMedistim Japan KK JapanDornmat company100 % 86Medistim Canada Inc.CanadaCapital sales within bypass surgery and 100 % 1vascular surgeryMedistim China Ltd China Service provider for distributors in China 100 %1 002Medistim Spain S.L SpainCapital sales within bypass surgery and 100 %28vascular surgeryMedistim Danmark Aps DenmarkSale of 3 pary products and capital sales within 100 %bypass surgery and vascular surgeryMedistim Sweden AB SwedenSale of 3 pary products and capital sales within 100 %bypass surgery and vascular surgeryTotal38 395 75 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Note 14 Inventory SPECIFICATION OF INVENTORY 2023 20221 = NOK 1000Raw material 65 035 54 263Work in progress 3 604 2 467Finished goods 64 047 42 836Spare parts 9 638 9 694Third party products 11 285 12 001Inventory provision -8 217 -6 928Total 145 391 114 333 Inventory is valued at the lower of cost, using the FIFO principle, and net realizable value. Production cost includes the cost for components, cost of conversion (including direct labor cost) and other cost in bringing the inventories to their present location and condition. Net realizable value is the estimated sales price in the ordinary course of business less cost of completion and selling cost. It is necessary for the company to keep an additional security inventory for critical components for own developed products. Due to a strict regulatory regime within medical device, it takes time to introduce new devices or components. At the same time the tendency is that electronical components life circle is shorter. For this reason, inventory level is high to secure future deliveries for Medistim developed products. Inventory is used as security for loan, see note 18. SPECIFICATION OF INVENTORY PROVISION 2023 20221=NOK 1000Gross value Provision Gross value ProvisionDemonstration products 4 554 3 837 4 763 2 687 Spare parts 9 638 4 180 9 694 4 041 Third party products 11 285 200 12 001 200 Total 25 477 8 217 26 458 6 928 Note 15 Accounts receivables and other receivables ACCOUNTS RECEIVABLE 2023 20221 = NOK 1000Accounts receivable 75 300 102 654Provision for bad debt -997 -997 Total 74 303 101 657 POVISION FOR BAD DEBT 2023 20221 = NOK 1000Inbound provision 997 359 Increased provision - -638Total 997 997 76 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 AGING ACCOUNTS RECEIVABLE0-30 31 - 60 61 - 90 Over 1 = NOK 1000Not dueTotaldaysdaysdays91 daysExpected loss in % 0.00 % 0.00 % 0.00 % 0.00 % 31.90 %Year 2023Book value of receivables 38 889 13 000 6 959 13 327 3 125 75 300 Expected credit loss - - - - 997 997 Total 38 889 13 000 6 959 13 327 2 128 74 303 0-30 31 - 60 61 - 90 61 - 90 1 = NOK 1000Not dueTotaldaysdaysdaysdaysExpected loss in % 0.00 % 0.00 % 1.00 % 5.77 % 31.50 %Year Book value of receivables 72 381 9 885 11 597 6 886 1 905 102 654 2022Expected credit loss - - - 397 600 997 Total 72 593 9 885 11 597 3 6 489 1 305 101 657 All receivables are due within one year. Historically the group losses have been limited. End customers are often public hospitals with government funding and the risks for losses are low. However, days sales outstanding is high compared to other businesses, something that the aging receivables confirm. Receivables is used as security for loan, see note 18. Other receivables are shown below: OTHER RECEIVABLES 2023 20221 = NOK 1000Other pre-payments 4 671 4 553 Unrealised value foreign currency 3 389 3 880 VAT receivable 6 958 8 840 Other 2 982 (10)Total 18 000 17 263 Note 16 Cash CASH EQUIVALENTS 2023 20221 = NOK 1000Available cash in bank 146 082 144 164Restricted cash in bank 7 790 8 477Cash 153 872 152 641Credit limit - - Cash 146 082 144 164 Cash includes bank deposits. Restricted cash as of 31.12.2023 was TNOK 7.79 and was related to tax withheld from salaries. As of 31.12.2022 the restricted cash was TNOK 8.477 related to tax withheld on salaries. The holding company did not have a credit facility by year end 2023. 77 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Note 17 Shareholder information The company had 18,337.336 shares at par value of NOK 0.25 per share and total share capital amount to NOK 4,584.334. There is only one class of shares, and all shares are treated equally. Each share represents one vote. Change in issued share capital in 2023: STATUS FOR THE PERMISSIONS AS OF 31.12.2023Number of Par value Share capital sharesper sharein NOKShare capital 01.01.2023 1 833 733 NOK 0.25 NOK 4 548 334.00Changes - -Share capital 31.12.23 1 833 733 NOK 0.25 NOK 4 584 334.00 The Board of Directors received by the shareholders meeting the 24th of April 2023 permission to purchase up to 1,833,733 Medistim ASA shares at par value NOK 458,433.25. The permission is valid until the next ordinary general assembly in 2024 in the price range of NOK 0.25 to NOK 500 per share. Further the Board of Directors got permission to increase share capital with NOK 458,433.25 or issue 1,833,733 new shares at par value NOK 0.25. The permission can be used if there is a decision to enter into a merger, acquire another company or to create an option program. The permission is valid until the next ordinary shareholders meeting in 2024. See below for changes in the equity for the last year. Status for the permissions as of 31.12.2023: STATUS FOR THE PERMISSIONS AS OF 31.12.2023Capital increase Medistim sharesPermission given at the shareholders meeting in 2023 1 833 733 1 833 733Permissions used - -Number of shares 31.12.2023 1 833 733 1 833 733 The company owned 55,617 Medistim shares as of 31.12.2023. Number of Medistim shares by 01.01.2023 was 80,046. 78 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 The 20 largest shareholders in the company were as of 31.12.2023: SHAREHOLDER Number of shares In % of totalACAPITAL MEDI HOLDCO AS 1 900 219 10,36STATE STREET BANK AND TRUST COMP 1 296 373 7,07FLØTEMARKEN AS 1 285 000 7,01VERDIPAPIRFOND ODIN NORDEN 1 180 000 6,43FOLLUM INVEST AS 970 000 5,29STATE STREET BANK AND TRUST COMP 920 390 5,02SKANDINAVISKA ENSKILDA BANKEN AB 874 584 4,77STATE STREET BANK AND TRUST COMP 637 398 3,48ODIN SMALL CAP 600 000 3,27THE NORTHERN TRUST COMP, LONDON BR 440 375 2,40SKANDINAVISKA ENSKILDA BANKEN AB 429 248 2,34SKANDINAVISKA ENSKILDA BANKEN AB 389 966 2,13VERDIPAPIRFONDET HOLBERG NORGE 383 421 2,09BUANES ASBJØRN JOHN 381 876 2,08STATE STREET BANK AND TRUST COMP 336 919 1,84SKANDINAVISKA ENSKILDA BANKEN AB 305 318 1,67J.P. MORGAN SE 286 334 1,56BNP PARIBAS 275 041 1,50SKANDINAVISKA ENSKILDA BANKEN AB 274 380 1,50THE BANK OF NEW YORK MELLON SA/NV 250 000 1,36Total number owned by top 20 13 416 842Total number of shares 18 337 336,00Total number of shares outstanding 18 337 336 20 largest shareholders in % 73.31 % 79 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Board members and management team with shares in the company: BOARD MEMBERS AND MANAGEMENT TEAM WITH SHARES IN THE COMPANYShareholder Number of shares In % of total PositionTove Raanes via Trane AS 1 990 0.01 % Board MemberRoger Morberg 16 259 0.09 % VP Sales APACErik Swensen 10 994 0.06 % VP DevelopmentThomas Jakobsen 30 526 0.17 % CFOKari Eian Krogstad 38 083 0.21 % CEOØyvin A. Brøymer (Fløtemarken AS) 1 285 000 7.01 % ChairAnne Waaler 2 440 0.01 % VP Medical Håkon Grøthe (Grøten Invest AS) 7 821 0.04 % VP InnovationStephanie d'Avout Stenhagen 2 784 0.02 % VP Sales EMEAOle Jørgen Robsrud 3 442 0.02 % Man.Dir. MSN ASTone Veiteberg 1 990 0.01 % VP QA\RegulatoryHæge Wetterhus 1 591 0.01 % VP MarketingOle Arne Eiksund 5 872 0.03 % CBDOLars Rønn 2 506 0.01 % Board Member There were no share options outstanding as of 31.12.2023 except from the share program to CEO described under chapter 8 Corporate Governance under compensation to management and note 21. Note 18 non-current liabilities Loan and borrowings are initially recognized at fair value net of directly attributable transaction costs, and subsequently measuring at amortized cost. Medistims long-term liabilities are related to lease contract. The lease agreements are described under note 7. Note 19 Other short term liabilities OTHER LIABILITIES 2023 20221 = NOK 1000Accrual for public taxes 11 388 7 168 Accrual for holiday pay 9 882 8 511 Accrual for salaries, commission and board member fee 7 192 17 070 Accrual for customer and supplier obligations 1 550 6 354 Unrealised exchange rate differences - 510 Other 1 413 2 428 Total 31 426 42 042 80 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Note 20 Financial Risk The group’s financial liabilities are leasing agreements, and accounts payable. The financial liabilities and facilities are important instruments that contribute to the financing of the group’s operational activities. The group’s financial assets are accounts receivables, and cash. From time to time the group also enters into financial derivative contracts to hedge currency exposure. Hedge accounting is not applied. The risk arising from financial instruments is market risk, credit risk towards customers, and liquidity risk Market risk: Interest rate risk: The group had as of 31.12.2023 no interest-bearing liabilities. If the group needs a loan, it is group policy to have floating interest since this will be the lowest interest rate over time. In general, the group considers the exposure towards changes in interest rates as low. Foreign exchange rates risk: The group may use forward exchange contracts to reduce exposure towards USD and EUR. Financial derivates are recognized at fair value through profit and loss. Change in fair value is recognized in profit and loss and is presented as financial income or expense. Unrealized gains or losses are recorded in the same manner as realized gains and losses. Change in exchange rates involves a direct and indirect financial risk for Medistim ASA. The company has revenue and expenses in EUR and USD where most revenue is in EUR and USD and expenses mostly in NOK. The development in NOK towards USD and EUR is continuously monitored. The group may use forward exchange contracts to reduce exposure towards USD and EUR. By the end of 2023, the company had derivative contracts for USD as shown below. Hedging contracts are entered to reduce the exchange risk towards currencies. The derivatives are recognized at fair value in the balance sheet with the changes in fair value recognized in profit and loss, presented as financial income or expense. The management and Board of directors evaluate the handling of risks related to exchange rates fluctuations continuously together with its professional advisers. HEDGING CONTRACTSNumber of Total value of Amount per Average rate Rate Unrealized Currencycontracts from contracts in monthon contracts31.12.2023gain/lossMarch 2023currencyUSD 6 300 000 1 800 000 11.11 10.17 1 679 940EUR 6 400 000 2 400 000 11.95 11.24 1 710 000Total un- 3 389 940realized loss The group had a credit facility of MNOK 6.0 to enter hedging contracts. The facility represents 10 % of the value of the contracts the group can use and the group can enter hedging contracts for a total of MNOK 60. Security related to the facility is related to assets, accounts receivable and inventory with no limit. Book value of secured items was as of 31.12.2023 MNOK 30.2 for assets, MNOK 69.2 for accounts receivables and MNOK 114.0 for inventory. 81 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 FINANCIAL ASSETS AND LIABILITIES1 = NOK 10002023 2022Original value Gain/loss Book value Original value Gain/loss Book valueFinancial assetsCash in USD 8 061 2 027 10 088 1 373 1 236 2 609Cash in EUR 5 740 1 689 7 429 9 511 -129 9 382Accounts receivable in EUR 21 556 506 22 062 44 881 530 45 411Forward curency contracts in EUR - 1 710 1 710 - - - Forward curency contracts in USD - 1 680 1 680 - 775 775Financial liabilityAccounts payable in EUR 2 971 -60 3 031 2 670 1 2 669Accounts payable in USD 761 -41 720 332 3 335 EFFECT ON PROFIT IF CURRENCY CHANGES WITH 5 %1 = NOK 1000 2023 2022Original value Gain/loss Book value Original value Gain/loss Book valueTotal exposure towards EUR 24 325 3 965 28 170 51 722 400 52 124Total exposure towards USD 7 300 3 748 11 048 1 041 2 008 3 0495 % increase EUR 1 409 2 6065 % increase USD 552 1525 % decrease EUR -1 341 -2 4825 % decrease USD -526 -145 Credit and liquidity risk: Other financial risk as credit risk and liquidity risk is viewed by the company as low based upon the group’s financial position as of 31.12.2023. Credit risk: The group is at some extent exposed towards credit risk. The general risk is low since the majority of customers are financed by public authorities. Still history records for payments, the size of the transaction and the other party’s credit risk is evaluated from case to case. The level of credit given is evaluated when there is a change in market conditions. The level of risk is reduced by using bank guaranties and prepayments in cases where the level of risk is found to be higher than normally accepted. See note 15 for a table showing the aging of accounts receivable. Liquidity risk: Liquidity risk is the risk that the group is not able to meet its obligations in time. Managing liquidity risk is therefore prioritized to secure financial flexibility. Medistim main source of cash is cash generated from operations. The group has over the last 5 years experienced an increase in profit and available cash. Therefore, the group has been able to build up a cash reserve due to strong profits to handle the increased need for working capital as the group grows. The liquidity buffer also secures cash in situations where the incoming cash is delayed. 82 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Macroeconomic turmoil: Despite challenging market conditions, the company have been able to deliver solid profit and cash flow over the years. The need for Medistim’s products has not changed, even if the global market has been facing macro-economic turmoil, with energy crisis, inflation pressure, increasing interest rates and higher cost levels. The long-term consequences of growing geopolitical uncertainty are unclear but might lead to continuing challenges in the global flow of goods. Medistim is taking mitigating actions to ensure access to key components to secure production and maintain growth and profitability also for the future. Further, the company is financially solid to face future challenges, with no interest-bearing debt and an equity ratio of 78.7 %. The table below sets out the maturity profile of the financial liabilities based on contractual undiscounted payments: OVERVIEW OF DEBT1 = NOK 1000Interest bearing loans - - - - - Lease liabilities 2 287 6 861 6 303 2 192 17 643 Accounts payable 25 083 - - - 25 083 Deferred revenue 557 1 670 2 006 - 4 234 Income tax - 28 404 - 28 404 Other debt (see note 18,19,22) 14 799 17 615 - - 32 414 Total 42 725 54 551 8 309 2 192 107 777 OVERVIEW OF DEBT1 = NOK 1000Between 1 to 5 Over Year 2022Within 3 monthsTotal3-12 monthsyears5 yearsInterest bearing liabilities - - - - - Lease liabilities 1 410 4 230 11 787 - 17 427 Accounts payable 24 470 - - - 24 470 Deferred revenue 338 1 015 3 773 - 5 126 Income tax - 25 873 - - 25 873 Other liability see note 42 072 - - 42 072 18,19,22Total 68 290 31 118 15 560 - 114 968 Financial strategy: Management strives to strengthen the group’s healthy financial position through profit and a high level of equity. This will secure continued growth and will maximize shareholders values. The group will adjust capital structure to adapt to changes in the financial climate. Capital structure can be adjusted through dividend, repayment of share capital or issue new shares. There were no changes in the financial strategy in the group in 2023 or 2022. 83 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Note 21 Related party transactions Compensation to management The management group consists of 12 people including CEO. Compensation and benefits to the management group in 2023: COMPENSATION AND BENEFITS TO THE MANAGEMENT GROUP IN 2023Share based Management Position Salary Bonus PensioncompensationOther TotalHæge Johanne VP Marketing 1 503 782 226 831 100 808 37 500 4 537 1 873 458 Krogh WetterhusAnne Waaler VP Medical 1 477 427 227 994 84 870 - 3 647 1 793 939 Roger Reino VP Sales APAC 1 840 941 476 081 94 635 137 750 4 537 2 553 944 MorbergErik Swensen VP Development 1 475 389 185 680 91 509 - 4 537 1 757 115 Tone Ann VP QA\Reg 1 277 464 241 587 80 766 - 4 537 1 604 354 VeitebergStephanie d'Avout VP Sales EMEA 1 325 985 259 192 95 607 100 000 4 537 1 785 321 StenhagenHelge Børslid VP Operations 1 355 084 214 576 93 202 - 4 537 1 667 399 Ole Arne Eiksund Busines development 1 417 361 164 435 92 000 4 537 1 678 333 Håkon Grøthe VP Innovation 1 387 576 286 963 93 153 137 750 4 537 1 909 979 Mike Farbelow VP Sales AMERICAS 2 417 828 939 175 134 280 - 135 506 3 626 789 Kari Eian Krogstad CEO Medistim group 3 025 202 1 272 321 107 642 2 796 000 4 537 7 205 702 Thomas Jakobsen CFO Medistim Group 1 995 659 498 138 92 371 183 750 4 537 2 774 455 Sum 20 499 699 4 992 973 1 160 843 3 392 750 184 523 30 230 788 There is no severance pay agreements towards any in the management team in case of leaving the company. All members of the management group have a two-way arrangement of 3 months’ notice. The exception is management in the US that has no notice period. The management group has the same pension plan as other employees. For Norwegian members of the management group, this is a contribution plan that covers 5 % of salary up to 7.1 G and 8 % of salary for G between 7.1 and 12. 1G equals NOK 118,620. Management in the US has a contribution plan that covers 4 % of salary. Share based payments The group has a share-based payment scheme for its CEO. The program is settled in shares. The fair value of the option at the grant date, is expensed over the vesting period. The expense is included in “salary and social expenses” in the income statement and a corresponding amount is recognized as other paid-in capital. The board decides incentives to CEO. Bonus and incentives to the management group is decided by the CEO. Bonus and incentives for both management group and CEO is based on achieved results. The table shows the bonus paid in 2023. Some members of the management group have loan from the company related to the share program offered to the Management team in 2023. The below table shows who in the management team purchased shares at a discount and has loan form the company: 84 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 SHARE PROGRAM FOR THE MANAGEMENT GROUP IN 2023Total Shares Match purchase Financing by Group purchased 25 % in of shares in Number Medistim in Management Positionin NOKNOKNOKof sharesNOKOle Arne Eiksund CBDO 551 000 137 750 688 750 3 410 551 000 Roger Reino VP Sales APAC 551 000 137 750 688 750 3 410 551 000 MorbergOle Jørgen CEO Medistim 200 000 50 000 250 000 1 237 -RobsrudNorge ASHæge Johanne VP Marketing 150 000 37 500 187 500 928 75 00Krogh WetterhusStephanie d'Avout VP Sales EMEA 400 000 100 000 500 000 2 474 -StenhagenHåkon Grøthe VP Innovation 551 000 137 750 688 750 3 410 -CFO Medistim Thomas Jakobsen 735 000 183 750 918 750 4 547 735 000 GroupTotal 3 138 000 784 500 3 922 500 19 416 1 912 000 For every fourth share purchased one share was given for free with a vesting period of 3 years. The loans are at tax free rate and are due for payment when the vesting period is over. The agreements was entered into on the 13th of November 2023. Compensation to the board was TNOK 1,800 in 2023 and TNOK 1,450 in 2022. The chairman received TNOK 475 as compensation in 2023 and TNOK 450 in 2022 The board members received a total TNOK 265 each as compensation in 2023, a total of TNOK 1,325. In 2022 they received TNOK 250 each, a total of TNOK 1,000. The nomination committee leader received a compensation of TNOK 20, while the two other members received TNOK 15 each. In total, the nomination committee received TNOK 50 as compensation. Compensation to Audit committee and remuneration committee was TNOK 85 and TNOK 35 respectively. CEO has an agreement with the Board that she can receive up to 24,500 Medistim shares as part of compensation if in position until 2025. The Shares is received by the CEO free of charge and last shares will be received in 2026. Fair value of the share-based payment is the share price at grant date multiplied with the and number of shares granted. The fair value of the share-based payment is expensed over the vesting period. In 2023, TNOK 2.482 including social security tax was expensed in the accounts related to the arrangement. See also overview below. 85 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 SHARE PROGRAM CEOYear 2023 2024 2025 2026Opening balanceExercisedShares granted 9 000 7 500 8 000 Ending balance 9 000 16 500 24 500 Share price at the time of grant in NOK 254 296 219 Total expense in NOK 2 286 000 2 220 000 1 752 000 Expense per grant per year in NOK 762 000 740 000 584 000 Annual expense in NOK for the grant in 2023 2 086 000 Transactions with related parties There were no other transactions than the above described share program for management towards related parties in 2023 or in 2022. Note 22 Provisions PROVISIONS 2023 20221 = NOK 1000Warranty provision 350 350Sum 350 350 The group provides warranties for general repairs of defects that existed at the time of sale, as required by law. Provisions related to these assurance-type warranties are recognized when the product is sold or the service is provided to the customer. Initial recognition is based on historical experience. The initial estimate of warranty-related costs is revised annually The warranty provision is based upon the company’s experience with sales and return of its own products. The estimate is based upon this experience to cover future obligations. The company has introduced extended warranty where customers for a fee extend the warranty period. The level of warranty contracts is in 2023 limited and there has been no expenses related to extended warranty contracts in 2023. In 2023, there are no additional provision related to the contracts. This will be monitored an if the level of extended warranty increases a method for estimating a provision is established. Note 23 Exchange rates foreign currency EXCHANGE RATES FOREIGN CURRENCYCurrency Rate 01.01.2023 Average rate Rate 31.12.2023USD 9 8573 10.5635 10.1724DKK 141.38 153.32 150.82EUR 9.9888 11.4242 11.2405GBP 10.5138 13.1361 12.9342 86 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Transactions in foreign currency Transactions in foreign currency are translated to functional currency using the exchange rate at the date of the transaction. Financial instruments in foreign currency are translated to Norwegian kroner at the closing rate of the balance day. Non-financial items measured at historic cost are translated to Norwegian kroner using the exchange rate at the time of the transaction. Foreign subsidiaries Assets, liabilities and goodwill in foreign subsidiaries that are consolidated are translated to Norwegian kroner at the date of the balance sheet. Revenue and expenses are translated to Norwegian kroner using the rate at the transaction date. Note 24 Changes in liabilities arising from financial activities CHANGES IN LIABILITIES ARISING FROM FINANCIAL ACTIVITIESDeferred revenue Lease Lease Interest bearing Total 1 = NOK 1000and interest bearing agreements agreements short term debt2023long term debtshort termlong termAt 1st of January 2023- 5 126 7 086 10 020 22 232Liabilities forgiveness- - - -New lease agreements- - 4 250 4 670 8 920Interest bearing liabilities - - - -Cash flows lease agreements- - -8 688 -8 688 Liabilities becomming - 9 565 -9 259 306current in 2023 - Effects of foreign exchange - - -0Deferred revenue - -893 - - 89331. December 2023 - 4 233 12 2135 431 21 877Deferred revenue Lease Lease Interest bearing Total 1 = NOK 1000and interest bearing agreements agreements short term debt2022long term debtshort termlong termAt 1st of January 2022 - 2 510 7 114 17 078 26 701liabilities forgiveness - - -New lease agreements - - - - -Interest bearing liabilities - - - - -Cash flows lease agreements - - -7 312 - -7 312liabilities becomming - - -7 284 7 058 226 current in 2022Effects of foreign exchange - - - - -Deferred revenue - 2 616 - - 2 616 31. December 2022 0 2 616 7 086 10 020 22 232 Note 25 Events after 2023 Information after the reporting period that provide evidence of conditions that existed at the end of the reporting (”adjusting events”), are reflected in the amounts recognized in the financial statement. Information after the reporting period that are indicative of conditions that arose after the reporting period (“non-adjusting events”) are not reflected in the amounts recognized in the financial statement but are disclosed if material. The Board of directors has no knowledge about other events after 2023 that will affect the annual report and financial statement for 2023. 87 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 88 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 11. PARENT COMPANY FINANCIAL STATEMENTS 11.1 Income Statement Medistim ASA INCOME STATEMENT MEDISTIM ASA 2023 2022 1 = NOK 1000 Note Operating income and expenses Revenues Sales revenue 26 324 056 293 169 Other income 26 16 968 15 476 Total revenue 341 024 308 645 Operational expenses 66 583 63 993 Cost of goods sold 27 89 360 80 239 Salary and social expenses 28 12 599 13 888 Depreciation on assets 27,29,39 64 457 48 832 Other operating expenses 232 999 206 952 Total operating expenses 108 025 101 693 Operating profit Financial income and expenses Dividend from subsidiaries 31 11 006 26 762 Other financial income 37 15 160 14 280 Financial expenses 37 9 504 13 286 Net finance 16 663 27 756 Profit before tax 124 687 129 449 Tax expense 30 25 233 21 342 Profit for the year 99 454 108 107 Allocations Dividend 82 256 82 126 Other equity 36 17 198 25 981 Total Allocation 36 99 454 108 107 Earnings per share Ordinary 2023 2022 Diluted 5,46 5,93 5,45 5,92 Dividend per share 4.50 4.50 89 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 11.2 Balance Sheet Medistim ASA BALANCE SHEET MEDISTIM ASA 31/12/23 31/12/22 1 = NOK 1000 Note ASSETS Non current assets Intangible assets Deferred tax 30 2 592 2 275 Marketing rights 28 1 1 R & D 28,29 31 246 21 940 Fixed assets Property, plant and equipment 28 27 394 26 693 Office equipment 28 2 945 2 759 Financial assets Shares in subsidiaries 31 38 395 37 392 Other long term receivables 13 290 11 974 Total non current assets 115 864 103 035 Current assets Inventory 33 114 039 84 702 Accounts receivables 32,41 69 212 91 109 Other receivables 32,41 20 632 19 298 Cash 34 82 485 84 033 Total current assets 286 368 279 143 TOTAL ASSETS 402 231 382 178 EQITY AND LIABILITY Equity Issued capital Share capital 35,36 4 585 4 585 Share premium 35,36 41 852 41 852 Other paid in equity 36 24 730 18 721 Other equity Retained earnings 36 143 681 126 538 Total equity 214 849 191 696 Liabilities Other long term debt Long term debt 40 40 690 39 429 Total other long term debt 40 690 39 429 Short term debt Accounts payable 10 397 18 024 Payable tax 30 25 550 22 116 Employee withholding, social security taxes 16 211 13 025 Dividend 36 82 256 82 126 Other short term debt 38,41 12 279 15 761 Total short term debt 146 693 151 052 TOTAL EQUITY AND LIABILITY 402 231 382 178 90 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 CASH FLOW STATEMENT 2023 2022 1 = NOK 1000 Note Cash flow from operations: Profit/loss before tax 124 687 129 449 Minus income tax paid -22 914 -16 521 Plus this years tax expense Plus depreciations 28 12 599 13 888 Change in inventory 33 -29 337 -10 997 Change in accounts receivable 32 21 898 -42 201 Change in accounts payable -7 627 11 233 Other changes -2 380 7 150 Net cash from operating activities 96 925 92 001 Investing activities: Minus investment in assets 28 -22 303 -20 124 Ney cash from investing activities -22 303 -20 124 Financing activities: Minus down payment of long term debt - - Dividend 36 -82 180 -68 396 Issue of new equity 36 6 009 5 404 New loans - - Net cash from financing activities -76 171 -62 992 Net change in cash -1 549 8 885 Cash as of 01.01 84 034 75 149 Cash as of 31.12 82 485 84 034 Available cash and cash withholding Available cash as of 31.12 34 75 470 77 019 Cash withholding for taxes 34 7 015 7 015 Cash and cash equivalents as of 31.12 82 485 84 034 11.3 Cash Flow Statement 91 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 11.4 Accounting Principles The financial statement and notes are according to Norwegian GAAP, Norwegian accounting law and according to best practice within Norwegian GAAP. Sales revenue Sales revenue is recognized in the profit and loss on the date of delivery and when the major risk and ownership of the product have been transferred to the customer. Systems and probes are recognized as revenue when the goods are shipped from Medistim ASA and the risk and ownership is transferred to the distributor or end customer. The same is the case for sale of procedures for quality control of cardiac surgery and other third-party products. Services are recognized as revenue at the time the service is performed. Current assets and short-term debt Current assets and short-term debt are defined as items that are due for payment within one year at the last day of the accounting year, and items defined as working capital. Current assets are evaluated at the lowest of cost and net sales value. (The lowest value principle). Fixed assets and long-term debt Fixed assets are defined as property for long-term use. Fixed assets are valued at cost in the balance sheet and depreciated of the expected economic lifetime. Fixed assets are written down to real value if the reduction in value is expected to be permanent. Write down is reversed if the basis for the write down no longer exists. Shares in subsidiaries Shares in subsidiaries are valuated according to cost. Shares in Medistim Norge AS, Medistim US Inc, Medistim Denmark Aps, Medistim UK Ltd, and Medistim Deutschland GmbH are owned 100 %. The shares are recorded at cost or written down to real value if real value is assumed to be the lowest and that it is permanent. Dividend and group contributions are recognized as revenue in the holding company as financial revenue in the year that it has been accrued given that Medistim had the ownership of the shares in this period. Foreign currency Balance sheet items in foreign currency are valued at the exchange rate on the balance sheet day. Sales revenue is recorded at the exchange rate that was at the time of the sale. Unrealized gains or losses on hedging contracts are recorded in the profit and loss. Inventory Inventory is valued at the lowest of cost (FIFO principle) and net sales value (lowest value principle). For components, the lowest of historic cost and current price is used to value the component inventory. Work in progress and finished goods Cost for finished goods includes direct cost and a portion of indirect and fixed production cost. Basis for the allocated cost to the products is a normal production situation. Goods in progress are valued at the component cost price. Accounts receivables Account receivables and other receivables are recorded in the balance sheet at par value with deduction for estimated losses. The accrual for losses is based upon a separate evaluation in each case. In addition, there has been made an unspecified accrual on receivables to cover expected losses. The same evaluation is made for other receivables. Taxes Tax cost in the income statement includes payable tax for the current accounting year and changes in temporary differences that are due for payment the coming accounting year. Temporary differences occurs using the tax rate by the end of the accounting year (22 %) and comparing tax increasing or tax reducing temporary differences between accounting values and tax values. Tax increasing or reducing temporary differences that can be reversed in the same period is recorded at net value. Deferred tax asset is recorded if it is likely that the company will be able to utilize the tax asset. Pension liabilities All employees have a contribution pension plan. Share based payments The Group has a share-based payment scheme for its CEO, the program is measured at fair value at grant date. The share-based payment for the company’s top leader is a scheme by issuing shares. For transactions that are settled in equity instruments (arrangements by issuing shares), recognize the value of shares granted during the period as a compensation expense in the income statement and a corresponding additional paid-in capital. 92 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Research and development The activities in the development department are split in 3 categories. These are maintenance, general research and development of new products. Maintenance and general research is expensed in the P & L while new products are recorded as an asset and depreciated over expected lifetime. When recorded as an asset it is expected that revenues from the product will exceed activated amounts. An immaterial asset that is acquired, or other immaterial assets that are developed, are recorded as an asset in the balance sheet if they are identifiable and that it is likely to give future economic benefits. The asset is amortized over the expected economic lifetime of the asset. The values of the assets are evaluated yearly and if the book value exceeds future economic benefit the asset is written down. The evaluation is performed by the management in the company. Cash flow analysis The cash flow analysis is prepared using indirect method. Cash is defined as cash in bank and other financial assets that are due within 3 months after it is acquired. Other financial assets Shares and other financial assets are evaluated at the lowest of cost and market value. The company enters hedging contracts in USD and EUR. The value of the contracts is based upon the exchange rate at the balance sheet day and a change in value is recorded in the P & L. Accruals Obligations and accruals are made if it is more than 50 % likely that the obligation is real. Best estimate is used to estimate the obligation. 11.5 Notes to the accounts Note 26 Geographic split of sales GEOGRAPHIC SPLIT OF SALES 2023 2022 1 = NOK 1000 USA 131 137 120 518 Asia 82 984 76 793 Europe 112 527 100 443 Rest of the world 14 376 10 891 Total sales 341 024 308 645 Other income amounted to TNOK 16,968, where TNOK 3,264 was income related to services towards subsidiaries and TNOK 13,704 was management fee. For 2022 other income amounted to TNOK 15,476 where TNOK 3,145 was services towards subsidiaries and TNOK 12,331 was management fee. 93 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 The total number of employees was through the year 97. Medistim has a pension plan for all its employees. This is a contribution plan that covers 5 % of salary up to 7.1 G and 8 % of salary for G between 7.1 and 12. 1G is the base amount (NOK 118.620) in the social security system. The cost for the contribution plan was in 2023 TNOK 4,518, while it was TNOK 3,400 in 2022. It is compulsory by law for the company to have a pension plan for its employees. The pension plans in the company fulfill the obligation in the law. SALARIES AND OTHER BENEFITS 2023 2022 1 = NOK 1000 Salary 73 451 67 564 Social taxes 13 700 10 734 Other salary and social expenses 2 209 1 940 Total salary expenses 89 360 80 239 COMPENSATION AND BENEFITS TO THE MANAGEMENT GROUP IN 2023 Management Position Salary Bonus Pension Other Total Hæge Johanne Krogh Wetterhus VP Marketing 1 503 782 226 831 100 808 42 037 1 873 458 Anne Waaler VP Medical 1 477 427 227 994 84 870 3 647 1 793 939 Roger Reino Morberg VP Sales APAC 1 840 941 476 081 94 635 142 287 2 691 694 Erik Swensen VP Development 1 475 389 185 680 91 509 4 537 1 757 115 Tone Ann Veiteberg VP QA\Reg 1 277 464 241 587 80 766 4 537 1 604 354 Stephanie d'Avout Stenhagen VP Sales EMEA 1 325 985 259 192 95 607 104 537 1 885 321 Helge Børslid VP Operations 1 355 084 214 576 93 202 4 537 1 667 399 Håkon Grøthe VP Innovation 1 387 576 286 963 93 153 4 537 1 909 979 Ole Arne Eiksund CBDO 1 417 361 164 435 92 000 142 287 1 816 083 Kari Eian Krogstad CEO Medistim ASA 3 025 202 1 272 321 107 642 2 800 537 7 205 702 Thomas Jakobsen CFO Medistim ASA 1 995 659 498 138 92 371 188 287 2 774 455 Total 18 081 871 4 053 798 1 026 563 3 441 767 26 979 499 There are no special agreements towards any in the management team in case of leaving the company. All in the team has a two-way arrangement of 3 months’ noce. There are no opons to employees or members of the Board except for CEO. The CEO will receive up to 24,500 shares as part of compensaon if in posion in 2026. Bonus paid in 2023 was based upon 2022 results. In relaon to the share program for management except CEO, following members of management parcipated in the share program. See below schedule showing value of the shares, discount given and nancing from the company to parcipate in the share program. Note 27 Salaries and other benefits 94 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Under other benefits it is included an expense related to CEO share option. CEO receives shares over a time period if in position as CEO. The share program is described in the annual report under the chapter “salary and benefits to management and leading employees”. The expense for the share option is calculated based upon the share price at the time of the granted option. The expense is distributed in equal rates over the vesting period. The share program is described in detail under note 21 in the group accounts. The amounts are without VAT COMPENSATION TO AUDITOR 1 = NOK 1000 2023 2022 Statutory audit 1 704 1 605 Other services 115 85 Total compensation to auditor 1 819 1 690 SHARE PROGRAM FOR THE MANAGEMENT GROUP IN 2023 Group Management Position Shares purchased in NOK Match 25 % in NOK Total purchase of shares in NOK Number of shares Financing by Medistim in NOK Ole Arne Eiksund Busines developer 551 000 137 750 688 750 3 410 551 000 Roger Reino Morberg VP Sales APAC 551 000 137 750 688 750 3 410 551 000 Ole Jørgen Robsrud CEO Medistim Norge AS 200 000 50 000 250 000 1 237 - Hæge Johanne Krogh Wetterhus VP Marketing 150 000 37 500 187 500 928 75 00 Stephanie d'Avout Stenhagen VP Sales EMEA 400 000 100 000 500 000 2 474 - Håkon Grøthe VP Innovation 551 000 137 750 688 750 3 410 - Thomas Jakobsen CFO Medistim Group 735 000 183 750 918 750 4 547 735 000 Total 3 138 000 784 500 3 922 500 19 416 1 912 000 COMPENSATION TO THE BOARD OF DIRECTORS DIRECTORS FEE AUDIT OR REMUNERATION COMMITTE 1 = NOK 1000 Chair Øyvin Brøymer 475 20 Board member Torben Jørgensen 265 15 Board member Siri Fürst 265 25 Board member Anthea Arff-Pettersen 265 - Board member Tove Raanes 265 35 Board member Lars Rønn 265 25 Total compensation to the Board of Directors 1 800 120 95 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Note 28 Assets and Depreciation ASSETS AND DEPRECIATION Plant & Machinery Equipment Total fixed assets Activated Development Total 1= NOK 1000 Historic cost as of 1/1 83 315 13 219 96 534 92 764 191 996 Additions 7 462 1 514 8 976 13 327 22 303 Disposals - - - - - Historic cost as of 31/12 90 778 14 733 105 511 106 091 214 299 Accumulated depreciation as of 1/1 56 622 10 461 67 083 70 824 140 604 Ordinary depreciation 7 263 1 328 8 591 4 021 12 612 Disposals 504 - 504 - 503 Accumulated depreciation as of 31/12 63 381 11 789 75 170 74 845 152 711 Book value at 31/12 27 396 2 944 30 341 31 247 61 588 Plant and machinery is depreciated over 3 to 7 years on a straight-line basis dependent upon expected economic lifetime. Tools and equipment is depreciated over 3 to 5 years on a straight-line basis dependent upon expected economic lifetime. Development cost is recorded as intangible assets when a project has reached technological feasibility and it is likely that it will result in a new product or improved product that has revenue potential that exceeds the investment. Maintenance of existing products is expensed. The investment is depreciated over 3 to 8 years dependent upon whether it is a new product or improvement of existing product. A new product that represents a new technological platform has a longer expected lifetime and for Medistim products this is 8 to 10 years. Product improvements on existing technological platform is replaced more rapid and is therefore depreciated over 3 years. Note 29 Research and development In total MNOK 15.7 of the R & D expenses was recorded in the P & L in 2023. Similar expense was MNOK 13.9 in 2022. With MNOK 13.30 recognized as asset a total of MNOK 29.00 was used in R & D in 2023. Comparable number for 2022 was MNOK 25.80. Medistim received TNOK 309 in Skattefunn funds in 2023 and TNOK 236 in 2022. From Innovasjon Norge a support of TNOK 522 was received in 2023.The capitilized expense in 2023 were related to the coronary and vascular products on the MiraQ platform. 96 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Note 30 Income tax and temporary differences INCOME TAX AND TEMPORARY DIFFERENCES 2023 2022 1 = NOK 1000 Current income tax charge for the year before deferred tax asset is utilised 25 550 23 089 Correction from previous year -973 Change in deferred tax -317 -775 Income tax expense reported 25 233 21 342 Reconciling income tax expense against profit : Income tax expense for the year 25 233 21 342 22 % of profit before tax 27 431 28 479 Permanent differences -2 198 -7 137 Specification of taxable income: 2 023 2022 Profit before tax 124 687 129 449 Permanent differences -12 704 -28 019 Change in temporary differences 2 712 3 521 Correction from previous year -4 423 Taxable profit 114 695 100 528 Payable tax in balance sheet: 2 023 2022 Tax expense for the year 25 233 21 342 Change in deffered tax -317 -775 Total payable tax 25 550 22 116 Specification of deferred tax asset Differences in accounting and tax values 2 023 2022 Fixed assets 1 742 1 194 Current assets -13 454 -11 534 Accrual for obligations -71 -2 Total differences -11 783 -10 341 Deferred tax asset 22 % 2 592 2 275 Deferred tax asset in balance sheet 2 592 2 275 Deferred tax asset in the balance sheet increased from MNOK 2.3 in 2022 to MNOK 2.6 in 2023. Deferred tax asset consists of temporary differences in valuation of assets. All deferred tax asset is recorded in the balance sheet as of 31.12.2023, since it is likely that the company will have future taxable income that will exceed temporary differences. 97 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Medistim Norge AS has a subsidiaries Medistim ASA owns indirectly through Medistim Norge AS in Denmark and Sweden. The company is named Medistim Danmark Aps and Medistim Sverige AB and is within the same segment as Medistim Norge AS. MEDISTIM ASA HAS INVESTMENTS IN THE FOLLOWING SUBSIDIARIES Unit Country Segment Ownership Balance sheet value 31 Dec 23 Profit in 2023 1 = NOK 1000 Medistim USA Inc. USA Lease and sale within bypass surgery and vascular surgery 100 % 135 5 536 Medistim Deutschland GmbH Germany Capital sales within bypass surgery and vascular surgery 100 % 188 6 207 Medistim Norge AS Norway Sale of 3 pary products and capital sales within bypass surgery and vascular surgery 100 % 36 953 10 945 Medistim UK LTD UK Capital sales within bypass surgery and vascular surgery 100 % 1 -918 Medistim Japan KK Japan Dornmat company 100 % 86 - Medistim Canada Inc. Canada Capital sales within bypass surgery and vascular surgery 100 % 1 Medistim China Ltd China Service provider for distributors in China 100 % 1 002 Medistim Spain S.L Spain Capital sales within bypass surgery and vascular surgery 100 % 28 3 686 Sale of 3 pary products and capital sales within bypass surgery and vascular surgery 100 % 468 Medistim Danmark Aps Denmark Sale of 3 pary products and capital sales within bypass surgery and vascular surgery 100 % -257 Medistim Sverige AB Sweden Total 38 395 22 404 Note 31 Shares in subsidiaries 98 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Note 32 Account receivables and other receivables SUMMARY OF FINANCIAL INFORMATION FROM SUBSIDIARIES ALL 100 % OWNED Unit Assets Debt Equity Income Profit 1 = NOK 1000 Medistim USA Inc. 140 298 27 295 113 003 206 335 5 536 Medistim Deutschland GmbH 15 439 3 468 11 971 55 463 6 207 Medistim Danmark Aps 2 343 1 732 611 6 282 468 Medistim Japan KK 86 0 86 0 0 Medistim Canada Inc. 6 095 9 564 -3 469 2 668 -3 556 Medistim China Ltd 2 247 1 130 1 116 3 130 295 Medistim Sverige AB 2 974 2 949 25 1 392 -257 Medistim Spain S.L 21 400 3 232 21 388 3 686 Medistim UK LTD 1 848 -8 950 3 510 -918 Medistim Norge AS 40 537 32 228 80 974 10 945 Total 233 266 83 412 149 854 381 141 22 404 Medistim Norge AS has offices in Oslo, Norway. Medistim USA Inc has offices in Minneapolis in the USA. Medistim Deutschland GmbH has offices in Munich in Germany, Medistim UK has offices in Nottingham in UK, Medistim Japan KK has offices in Tokyo, Japan and Medistim Denmark has offices in Copenhagen in Denmark. Medistim Spain S.L has offices in Madrid. Medistim Canada has offices in Toronto, Canada, Medistim China has offices in Guangzhou in China and Medistim Sweden has offices in Gothenburg, Sweden. Book value of goodwill related to the acquisition of Medistim Norge AS was as of 31.12.2023 TNOK 14,128. Goodwill at the time of acquisition was TNOK 16,097. None of the subsidiaries are listed at a stock exchange. Of Medistim UK’s debt of TNOK 10,798, TNOK 7,587 is a long-term debt towards Medistim ASA. The debt is part of a cash transfer to finance and establish the company in UK. Interest has been charged on this debt. Medistim ASA received from its Norwegian subsidiary a dividend of MNOK 11.0 in 2023. Medistim ASA has interest bearing debt towards Medistim US Inc of MNOK 40.7. All receivables are due within one year. Losses in 2022 were TNOK 6 and losses in 2023 were TNOK 288. It is recorded an accrual of TNOK 899 to cover expected losses. Historically the company has small losses on receivables. Other receivables are shown below. ACCOUNTS RECEIVABLE 2023 2022 1 = NOK 1000 Accounts receivable 70 111 92 008 Provision for bad debt -899 -899 Total salary expenses 69 212 91 109 99 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 OTHER RECIEVABLES 2023 2022 1= NOK 1000 Pre payments 2 174 2 338 Prepaid taxes and VAT 2 788 4 935 Accrued revenue 1 281 247 Unrealized gain hedging 3 389 779 Dividend subsidiaries 11 000 11 000 Total other receivables 20 632 19 299 INVENTORY 2023 2022 1= NOK 1000 Components 78 278 66 185 Finished goods 43 779 25 245 Inventory accrual -8 017 -6 728 Total 114 039 84 702 SPECIFICATION OF ACCRUAL 2023 2022 1= NOK 1000 Demonstration units 2 150 2 687 Service parts 1 687 1 643 Other 4 180 2 398 Total 8 017 6 728 Note 34 Cash in Bank Restricted cash amounted to TNOK 5,652 as of 31.12.2023 and was related to tax withheld on salary paid to employees. The comparable amount as of 31.12.2022 was TNOK 7,016. Finished goods are valued at production cost that includes cost for components and internal labor cost. Work in progress is valued at the total of the component cost. Inventory accrual is related to service inventory and demonstration inventory. The sales value of the products is assessed and found lower than historic cost. See table below: Note 33 Inventory 100 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Note 35 Shareholder affairs The company had 18,337,336 shares at par value of NOK 0.25 per share and total share capital amount to NOK 4,584,334. There is only one class of shares, and all shares are treated equally. Each share represents one vote. Change in issued share capital in 2023: The Board of Directors received by the shareholders meeting the 24th of April 2023 permission to purchase up to 1,833,733 Medistim ASA shares at par value NOK 458,433.25. The permission is valid until the next ordinary general assembly in 2024 in the price range of NOK 0.25 to NOK 500 per share. Further the Board of Directors got permission to increase share capital with NOK 458,433.25 or issue 1,833,733 new shares at par value NOK 0.25. The permission can be used if there is a decision to enter into a merger, acquire another company or to create an option program. The permission is valid until the next ordinary shareholders meeting in 2024. See below for changes in the equity for the last year. Status for the permissions as of 31.12.2023: The company owned 55,617 Medistim shares as of 31.12.2023. Number of Medistim shares by 01.01.2023 was 80,046. Number of shares Par value per share Share capital in NOK Share capital 01.01.2023 18 337 336 NOK 0.25 NOK 4 548 334.00 Changes - - NOK Share capital 31.12.23 18 337 336 NOK 0.25 NOK 4 584 334.00 Capital increase Medistim shares Permission given at the shareholders meeting in 2023 18 337 336 18 337 336 Permissions used - - Status for the permissions as of 31.12.2023 18 337 336 18 337 336 101 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 SHAREHOLDER Number of shares In % of total ACAPITAL MEDI HOLDCO AS 1 900 219 10,36 STATE STREET BANK AND TRUST COMP 1 296 373 7,07 FLØTEMARKEN AS 1 285 000 7,01 VERDIPAPIRFOND ODIN NORDEN 1 180 000 6,43 FOLLUM INVEST AS 970 000 5,29 STATE STREET BANK AND TRUST COMP 920 390 5,02 SKANDINAVISKA ENSKILDA BANKEN AB 874 584 4,77 STATE STREET BANK AND TRUST COMP 637 398 3,48 ODIN SMALL CAP 600 000 3,27 THE NORTHERN TRUST COMP, LONDON BR 440 375 2,40 SKANDINAVISKA ENSKILDA BANKEN AB 429 248 2,34 SKANDINAVISKA ENSKILDA BANKEN AB 389 966 2,13 VERDIPAPIRFONDET HOLBERG NORGE 383 421 2,09 BUANES ASBJØRN JOHN 381 876 2,08 STATE STREET BANK AND TRUST COMP 336 919 1,84 SKANDINAVISKA ENSKILDA BANKEN AB 305 318 1,67 J.P. MORGAN SE 286 334 1,56 BNP PARIBAS 275 041 1,50 SKANDINAVISKA ENSKILDA BANKEN AB 274 380 1,50 THE BANK OF NEW YORK MELLON SA/NV 250 000 1,36 Total number owned by top 20 13 416 842 Total number of shares 18 337 336 Total number of shares outstanding 18 337 336 20 largest shareholders in % 73.31 % Shareholder structure 102 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 SHAREHOLDER Number of shares Shares in % Nationality Tove Raanes via Trane AS 1 990 0.01 % Board Member Roger Morberg 16 259 0.09 % VP Sales APAC Erik Swensen 10 994 0.06 % VP development Thomas Jakobsen 30 526 0.17 % CFO Kari Eian Krogstad 38 083 0.21 % CEO Øyvin A. Brøymer (Fløtemarken AS) 1 285 000 7.01 % Chairman Anne Waaler 2 440 0.01 % VP Medical Håkon Grøthe (Grøten Invest AS) 7 821 0.04% VP Innovation Stephanie d'Avout Stenhagen 2 784 0.02% VP Sales EMEA Ole Jørgen Robsrud 3 442 0.02% Man.Dir. MSN AS Tone Veiteberg 1 990 0.01% VP QA\Regulatory Hæge Wetterhus 1 591 0.01% VP Marketing Ole Arne Eiksund 5 872 0.03% Busines developer Lars Rønn 885 0.004 % Board member The 20 largest shareholders in the company were as of 31.12.2023: There were no share options outstanding as of 31.12.2023 except from the share program to CEO described under chapter 8 Corporate Governance under compensation to management and note 21. Note 36 Change in equity CHANGE IN EQUITY Share capital Treasury shares Share premium Other paid in capital Retained earnings Total 1 = NOK 1000 Equity 31.12.23 4 586 (21) 41 852 18 743 126 537 191 696 Change in equity: Change in treasury shares - 8 - 6 001 6 009 Other corrections - - - - -55 -55 Profit for 2022 - - - - 99 455 99 455 Dividend to shareholders - - - - -82 256 -82 256 Equity 31.12.23 4 586 -13 41 852 24 743 143 681 214 849 103 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Note 37 Financial risk Change in exchange rates involves a direct and indirect financial risk for Medistim ASA. The company has revenue and expenses in EUR and USD where most revenue is in another currency and expenses mostly in NOK. Efforts are made to neutralize net exposure. Hedging contracts are evaluated to reduce exposure. The development in NOK towards USD and EUR is continuously monitored Unrealized gain or loss related to the contracts is recorded in the balance sheet and the change of the value related to the contracts is recorded in the profit and loss. By year end 2023 the company had 6 hedging contracts in USD totaling MUSD 1.8 and 6 hedging contracts in EUR totaling MEUR 2.4. By year end there was an unrealized gain related to the contracts of MNOK 3.4. The management and Board of directors evaluate the handling of risks related to exchange rates fluctuations continuously together with its professional advisers. 2023 2022 1= NOK 1000 Bonus and commission 2 058 8 479 Board compensation 2 236 1 835 Debt towards subsidiary - - Accrual for investment 350 350 Other 7 635 5 097 Total short term debt 12 279 15 761 Note 38 Specification of short-term debt Note 39 Other operating expenses GAINS AND LOSSES RELATED TO CURRENCY 2023 2022 1= NOK 1000 Foreign exchange gain 12 932 13 335 Foreign exchange loss 8 594 12 525 Total 4 338 810 OTHER OPERATING EXPENSES 2023 2022 1= NOK 1000 Office rental 9 193 8 824 Travel expense 5 145 3 268 Marketing 3 212 2 706 Consultancy fee 21 316 13 126 Insurance 1 018 978 Freight 1 254 1 270 Communication 18 232 14 056 Other 5 087 4 603 Total other operating expenses 64 457 48 832 104 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Note 40 Long-term debt and loan security Medistim ASA had no long-term debt by the end of 2023. Medistim ASA has a credit facility of MNOK 6.0 to enter foreign currency hedging contracts. The facility represents 10 % of the total value the company can sign up contracts for. As security for the facilities are assets, accounts receivable and inventory with MNOK 10. Book value of secured items was as of 31.12.2023 MNOK 30.2 for assets, MNOK 69.2 for accounts receivables and MNOK 114.0 for inventory. Note 41 Receivables and debt towards subsidiaries Note 42 Events after 2023 The Board of directors has no knowledge about events after 2023 that will affect the annual report and financial statement for 2023. Statement pursuant to section 5-5 of the Securities Trading Act We hereby confirm that the annual accounts for the group and the company for 2023 to the best of our knowledge have been prepared in accordance applicable accounting standards and give a true and fair view of assets, liabilities, financial position and profit and loss for the group and the company as a whole. The director’s report give a true and fair view over development and performance of the business and the position of the group and the company, and a description of principal risk and uncertainties facing the group. RECEIVABLES AND DEBT TOWARD SUBSIDIARIES 2023 2022 1 = NOK 1000 Account receivable 47 106 43 659 Other receivable 7 587 7 587 Short-term debt - 4 056 Long-term debt 40 689 39 429 105 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Alternative performance measures, concepts and abbreviations Alternative performance measures are used by investors, securities analysts and other interested parties. The intention with the alternative performance measures is to provide a better overview of achieved results and development in the company. In addition, concepts and abbreviations that are relevant for the branch Medistim operates in is explained in the below list. The company has referred to these measures over many years and has continued to do so to be consistent. Since Medistim develops its own products it is a point to put focus on how much is used within R & D. High values of intangible assets could result in a one time expense if the impairment test fail, and is highlighted for this reason. The company's exposure to foreign currency, the regulatory regime that forces the company to secure end of life parts and international customers with longer credit time, makes it useful to have measures for currency neutral development and changes in working capital. Below is the list of alternative performance measures, concepts and abbreviations Medistim uses in its reporting. ALTERNATIVE PERFORMANCE MEASURES Profit before R&D, depreciation and impairment: Margin after cost of goods, salary and social expenses and other operating expenses are deducted except for R & D expenses EBITDA: Earnings before interest, taxes, depreciation and amortization expenses. Corresponds to operating profit before depreciations and amortization expences. EBIT: Earnings before interest and taxes. Corresponds to operating result. Currency neutral growth: Compares this years sales with previous year sale when sale in foreign currency is recalculated using the same average currency rate in the reporting period to get a neutral comparison Working capital: Inventory plus accounts receivable minus accounts payable CONCEPTS AND ABBREVIATIONS VeriQ: Medistim’s 3. Generation system platform MiraQ: Medistim’s 4. generation system platform TTFM: Transit time flow measurement Vascular Surgery: Surgery involving veins and arteries in the body except on the heart CABG: Coronary Artery Bypass Surgery REQUEST: Registry for Quality Assessment with Ultrasound imaging and TTFM in Cardiac Bypass surgery. A study initiated by Medistim ASA to collect data regarding the combined use of ultrasound imaging and TTFM. HFUS: High-frequency Ultrasound CIDAC: Comparison of intraoperative duplex ultrasound and angiography after Carotid Endarterectomy NICE: British National Institute for Health and Clinical Excellence; an organization that recommends standard of care within healthcare. AATS: The American Association for Thoracic Surgery ESC: European Society of Cardiology STS: Society for Thoracic Surgery - an American organization focusing on thoracic surgery EACTS: European Association for Cardio-Thoracic Surgery - a European organization focusing on Thoracic surgery ASCVS: Asian Society for Cardiovascular and Thoracic Surgery - an Asian organization focusing on cardiovascular surgery ICC: International Coronary Congress - an organization that focuses on CABG surgery CEA: Carotid Endarterectomy CIDAC study: Prospective Comparison of Duplex Ultrasound and Angiography for Intra- operatvie Completion Studies after Carotid Endarterectomy ROMA-Women trial: Randomized Comparison of the Outcomes of Single vs Multiple Arterial Grafts in Women 12. ALTERNATIVE PERFORMANCE MEASURES 106 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 RECONSILIATION OF CURRENCY NEUTRAL REVENUE: RATES 2023 RATES 2022 USD average rate for the year 10,56 9,61 EUR average rate for the year 11,42 10,10 GBP average rate for the year 13,14 11,87 DKK average rate for the year 1,53 1,36 SPLIT OF REVENUE IN USD, EUR AND NOK 2023 REVENUE 2022 WITH 2021 RATES 1 = NOK 1000 Sales in USD Procedural revenue Imaging and flow 100 611 91 565 Capital sales MiraQ flowmeasurement instruments 15 492 14 099 Capital sales MiraQ imaging and flowmeasurement instrument 35 566 32 368 Flow measurement probes 48 980 44 576 Imaging probes 8 374 7 405 Sales in EUR MiraQ flowmeasurement instrument 40 057 35 421 MiraQ imaging and flowmeasurement instrument 45 919 40 605 Imaging probes 7 858 6 948 Flowmeasurement probes 144 078 127 404 Other - - Revenue in USD and EUR 446 935 400 393 Revenue in NOK 79 429 79 429 Total revenue 526 364 479 822 Reconciliation of working capital: Accounts receivable in balance sheet at year end 74 303 101 657 Inventory in the balancesheet at year end 145 391 114 333 Accounts payable in balance sheet at year end -25 083 -30 258 Working capital 194 611 185 733 Reconsiliation of profit before R & D and depreciation: EBITDA 155 099 164 539 Expensed R & D 13 607 14 476 Profit before R & D and depreciation: 168 706 179 015 107 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 Øyvin A. Brøymer Chair Sign. Ole J. Dahlberg Board member Sign. Lars Rønn Board member Sign. Anna Ahlberg Board member Sign. Jon H. Hoem Board member Sign. Kari Eian Krogstad President & CEO Sign. Board member Sign. Tove Raanes Board member Sign. Oslo, 21 st March 2024 Board of Directors and CEO of Medistim ASA 108 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 13. AUDITORS REPORT 109 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 110 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 111 MEDISTIM ANNUAL REPORT - FISCAL YEAR 2023 [email protected] www.medistim.com medistim.com/ contact 5967007LIEEXZXJOX4832023-01-012023-12-315967007LIEEXZXJOX4832022-01-012022-12-315967007LIEEXZXJOX4832023-12-315967007LIEEXZXJOX4832022-12-315967007LIEEXZXJOX4832021-12-315967007LIEEXZXJOX4832021-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXJOX4832021-12-31ifrs-full:TreasurySharesMember5967007LIEEXZXJOX4832021-12-31ifrs-full:SharePremiumMember5967007LIEEXZXJOX4832021-12-31ifrs-full:AdditionalPaidinCapitalMember5967007LIEEXZXJOX4832021-12-31MED:PaidInCapitalMember5967007LIEEXZXJOX4832021-12-31ifrs-full:OtherReservesMember5967007LIEEXZXJOX4832021-12-31ifrs-full:RetainedEarningsMember5967007LIEEXZXJOX4832021-12-31MED:RetainedEarningsAndOtherReservesMember5967007LIEEXZXJOX4832022-01-012022-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXJOX4832022-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXJOX4832022-01-012022-12-31ifrs-full:TreasurySharesMember5967007LIEEXZXJOX4832022-12-31ifrs-full:TreasurySharesMember5967007LIEEXZXJOX4832022-01-012022-12-31ifrs-full:SharePremiumMember5967007LIEEXZXJOX4832022-12-31ifrs-full:SharePremiumMember5967007LIEEXZXJOX4832022-01-012022-12-31ifrs-full:AdditionalPaidinCapitalMember5967007LIEEXZXJOX4832022-12-31ifrs-full:AdditionalPaidinCapitalMember5967007LIEEXZXJOX4832022-01-012022-12-31MED:PaidInCapitalMember5967007LIEEXZXJOX4832022-12-31MED:PaidInCapitalMember5967007LIEEXZXJOX4832022-01-012022-12-31ifrs-full:OtherReservesMember5967007LIEEXZXJOX4832022-12-31ifrs-full:OtherReservesMember5967007LIEEXZXJOX4832022-01-012022-12-31ifrs-full:RetainedEarningsMember5967007LIEEXZXJOX4832022-12-31ifrs-full:RetainedEarningsMember5967007LIEEXZXJOX4832022-01-012022-12-31MED:RetainedEarningsAndOtherReservesMember5967007LIEEXZXJOX4832022-12-31MED:RetainedEarningsAndOtherReservesMember5967007LIEEXZXJOX4832023-01-012023-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXJOX4832023-12-31ifrs-full:IssuedCapitalMember5967007LIEEXZXJOX4832023-01-012023-12-31ifrs-full:TreasurySharesMember5967007LIEEXZXJOX4832023-12-31ifrs-full:TreasurySharesMember5967007LIEEXZXJOX4832023-01-012023-12-31ifrs-full:SharePremiumMember5967007LIEEXZXJOX4832023-12-31ifrs-full:SharePremiumMember5967007LIEEXZXJOX4832023-01-012023-12-31ifrs-full:AdditionalPaidinCapitalMember5967007LIEEXZXJOX4832023-12-31ifrs-full:AdditionalPaidinCapitalMember5967007LIEEXZXJOX4832023-01-012023-12-31MED:PaidInCapitalMember5967007LIEEXZXJOX4832023-12-31MED:PaidInCapitalMember5967007LIEEXZXJOX4832023-01-012023-12-31ifrs-full:OtherReservesMember5967007LIEEXZXJOX4832023-12-31ifrs-full:OtherReservesMember5967007LIEEXZXJOX4832023-01-012023-12-31ifrs-full:RetainedEarningsMember5967007LIEEXZXJOX4832023-12-31ifrs-full:RetainedEarningsMember5967007LIEEXZXJOX4832023-01-012023-12-31MED:RetainedEarningsAndOtherReservesMember5967007LIEEXZXJOX4832023-12-31MED:RetainedEarningsAndOtherReservesMemberiso4217:NOKiso4217:NOKxbrli:shares
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