Intelligent Ultrasound : Annual reports and accounts 2023

Classroom to Clinic ultrasound

Intelligent Ultrasound Group plc

2023 Annual Report and Accounts

Intelligent Ultrasound Group plc  2023 Annual Report and Accounts	Overview	Strategic Report	Corporate Governance	Financial Statements	1

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Contents

Overview			Strategic Report			Corporate Governance			Financial Statements
Highlights	2		Chairman's Statement	5		Board of Directors	41	Independent Auditor's Report	59
What We Do	3		Chief Executive's Review	7		Chairman's Introduction	43	Group Statement of Profit and Loss
									and Other Comprehensive Income	63
			Business Model	13		Corporate Governance Report	44
				Group and Company Statements
			Our Strategy	14		Nomination Committee Report	49
				of Financial Position	64
			Strategy in Action	15		Audit and Risk Committee Report	50
				Group Statement of Changes in Equity	65
			Key Performance Indicators	17		Remuneration Committee Report	52
				Parent Company Statement of Changes
			Environmental, Social and Governance	18		Directors' Report	56
				in Equity	66
			S172 Statement	26		Statement of Directors' Responsibilities	58
				Group and Company Statement
			Risk Management	30					of Cash Flows	67
			Principal Risks	32					Notes to the Financial Statements	68
			Financial Review	38					Glossary of Terms	94
									Corporate Directory	94

Chief Executive's Review

Another year of good progress

Page 7

Business Model

How we create value for our stakeholders

Page 13

Our Strategy

Making ultrasound easier to learn, making ultrasound simpler to use

Page 14

Environmental, Social and Governance Report

Page 18

Intelligent Ultrasound Group plc  2023 Annual Report and Accounts	Overview	Strategic Report	Corporate Governance	Financial Statements	2

Highlights

Financial

£11.2m

Group revenue

+11%

£3.0m

Cash and cash

equivalents

-58%

£2.0m

Clinical AI revenue

+203%

£2.6m

Loss after tax

-13%

Operational

ScanNav Assist (SonoLyst)

SonoLystlive launched as a standard feature on GE Healthcare's Voluson Expert 22 and 20 ultrasound machines.

Simulation

New version upgrades for Bodyworks and Babyworks launched as well

as a new endometriosis module for Scantrainer.

ScanNav FetalCheck

New AI development programme for gestational age (GA) estimation in pre-natal care.

ScanNav Liver

Signed a research agreement with the University of Dundee to develop AI- based tools for screening patients with liver disease.

Intelligent Ultrasound Group plc  2023 Annual Report and Accounts	Overview	Strategic Report	Corporate Governance	Financial Statements	3

What we do

Providing real time support from 'Classroom to Clinic'

Our purpose

Our vision

Easier to learn	Simpler to use	Unlock ultrasound
Real-time ultrasound education	AI-driven image analysis to	for everyone
and training through high-fidelity	make ultrasound smarter	Training
ultrasound simulation	and more accessible
Guiding
Simulation products	Clinical AI products
Supporting

Our markets - 2023 revenue			Specialties
Direct - North America		£4.8m	-	Anaesthesiology	-	Intensive care
	-	Cardiology	-	Needling
Direct - United Kingdom	£2.8m
	-	Critical care	-	Obstetrics & Gynaecology
Reseller network - Rest of the World	£3.6m		-	Emergency medicine	-	Paediatrics & Neonatology
			-	General radiology

Intelligent Ultrasound Group plc  2023 Annual Report and Accounts	Overview	Strategic Report	Corporate Governance	Financial Statements	4

What we do continued

A unique range of ultrasound products in a growing market

Classroom

simulationPoCUS**

Hospital training rooms and simulation centres

Market

by 2026*

c.$200m

Echo

• https://www.stratviewresearch.com/2288/ultrasound-simulator-market.html
• Point of care ultrasound

OBGYN

Neonate and

Paediatric

Clinical AI software

Clinical scanning and operating theatres

Market

by 2028***

$1.3bn

• Artificial Intelligence in Ultrasound Imaging Market - Global Industry Trends and Forecast to 2028 | Data Bridge Market Research

Obstetrics

AI image analysis for obstetric ultrasound

Anaesthesiology

AI assistance for

regional anaesthesia

Needling

Ultrasound guided needling simulator

Intelligent Ultrasound Group plc  2023 Annual Report and Accounts	Overview	Strategic Report	Corporate Governance	Financial Statements	5

Chairman's Statement

'Classroom to Clinic' gathering pace

This has been a positive year of progress for the Group, driven by our AI-related sales almost tripling to £2m (2022: £0.7m) and as a result Group revenue rose by 11% to £11.2m (2022: £10.1m).

£2m

Clinical AI

revenue

Importantly, our AI software developments continued to hit key milestones during the year: GE HealthCare launched SonoLystlive as standard on the Voluson Expert range of ultrasound machines; ScanNav FetalCheck, our new AI gestational age estimation software that is in development was purchased for a number of field trials in Africa funded by the Bill & Melinda Gates Foundation; and we commenced the proof- of-concept development work for our AI liver software, following the signing of our data agreement with Dundee University and NHS Trust.

new proprietary stand-aloneAI-driven products such as ScanNav FetalCheck gestational age estimation aimed at opening up new global medical imaging markets

This novel 'Classroom to Clinic' approach enables us to work with future clinical customers early in their medical careers, aiding brand recognition and product credibility and then, as they progress to real patient scanning and life-long learning, supports them with workflow or diagnostic AI-based medical imaging software.

Riccardo Pigliucci

Non-executive Chairman

£11.2m

Group

revenue

Strategy

Our unique 'Classroom to Clinic' ultrasound strategy is based on:

• Growing the Group's 'Classroom' related revenues through increased sales of our four ultrasound simulator platforms and the continued expansion of our simulator range into new medical market segments
• Continuing to build our 'Clinic' related AI revenues through increased royalty income from GE HealthCare, who incorporate our 20-week obstetrics ScanNav AI technology in their Voluson ultrasound systems; increased sales of our proprietary stand alone AI-driven ScanNav Anatomy and NeedleTrainer Plus systems, sold through our direct sales and reseller operations; and future

We believe this unique approach to ultrasound will enable the Group to continue to grow in 2024.

People

I would like to thank all our staff, in the UK, US and China, for working so hard to grow the business during the year and meet all our development and regulatory milestones.

Shareholders

We continue to have a broad spread

of supportive shareholders, and we maintain an open-door policy at our head office in Cardiff and would welcome any visitors who wish to enjoy hands-on experience of our cutting-edge 'Classroom to Clinic' technology.

Intelligent Ultrasound Group plc  2023 Annual Report and Accounts	Overview	Strategic Report	Corporate Governance	Financial Statements	6

Chairman's Statement continued

"Another year of important progress and we achieved our key target to grow AI-related sales to £2m in 2023"

11%

Revenue growth

in 2023

Board and governance

During the year, Ian Whittaker, who has served as an Executive Director and Chief Operating Officer (COO) since joining the Group on the acquisition of Inventive Medical Ltd in August 2016, chose to retire from the Board of Directors and his position as COO. Ian remains with the Group in a part-time capacity to assist on projects, as required.

The Board extends its thanks to Ian for his commitment and invaluable contribution to significantly growing the simulation revenue over the last seven years and wishes him continued success in his business and personal endeavours.

ESG

ESG remains an important part of our reporting and we believe we continue to have a positive impact locally, nationally and globally. We have continued to make improvements in all aspects of ESG and aspire to be a global force for good, empowering people to have access to medical ultrasound, one of the world's most important imaging modalities.

See our full report on page 18.

Outlook

2023 has been another year of important progress for the Group, as we commercialize our regulatory-approved clinical AI software products and develop the next generation of diagnostic AI software.

We achieved our number one target for the year, which was to grow AI-related sales to £2m. In addition, our relationship with GE HealthCare continued to develop positively with the launch of SonoLystlive, powered by our obstetrics AI software, on the Voluson Expert ultrasound machine range and post year-end on the Signature ultrasound range. In Q4 2023, we announced the first trials in Africa that will be using our ScanNav FetalCheck AI software to enable an unskilled user to automatically obtain the gestational age of a fetus.

As we start 2024, the UK market is experiencing tougher trading conditions due to the current reduction in NHS capital expenditure spending. We are therefore keeping a tight control on our overheads to offset any potential reduction in UK revenue. When these cost controls are combined with the growing revenue from our high margin AI-related products and non-UK related simulation markets, the business continues to forecast that

it will reach profitability with its current cash resources.

Riccardo Pigliucci

Non-executive Chairman

30 April 2024

Intelligent Ultrasound Group plc  2023 Annual Report and Accounts	Overview	Strategic Report	Corporate Governance	Financial Statements	7

Chief Executive's Review

Easier to learn

Simpler to use

We make clinical diagnostic ultrasound easier to learn and simpler to use by providing clinicians around the world with real-time support from the classroom to the clinic.

SIMULATION (Classroom)

We design, develop and sell some of the world's leading high-fidelity ultrasound training simulators. Training medical professionals in the skills required to competently scan with diagnostic

UK simulation revenues £m	2023	2022	Movement
Alternative performance measure basis	2.4	3.0	-22%
Unadjusted	2.4	4.9	-52%

AI is a key element of this unique approach, and the report below details the progress made in 2023 and the key challenges faced during the year.

ultrasound remains an important building block of our business.

The Group's simulation revenue declined slightly by 3% to £9.1m (2022: £9.4m) in 2023, mainly due to lower-than-expected sales in Western Europe and China throughout the year and recognised revenue being slightly less than we anticipated in the final quarter of 2023. However, it should

These ultrasound training platforms are, in the main, high-value, capital equipment sold to the global medical institution market, through our direct sales forces in the US and UK, plus a network of 23 resellers covering over 30 countries in the rest of the world. To date we have sold c. 1,700 simulators into over 800 medical institutions around the world.

BodyWorks 4.5

In August we launched BodyWorks 4.5, the latest version of our female patient point-of-care simulator that includes ten new high-value cases within the lung and gastric regions, as well as improvements to the custom patient lists to deliver increased flexibility for trainees and tutors.

Stuart Gall

Chief Executive Officer

be noted that the 2022 UK simulation revenue figures included c.£1.9m of one- off orders from the NHS, so adjusting for this, simulation revenue in 2023 actually increased by 21% (2022*: £7.5m).

We have four ultrasound simulation-only platform technologies focused on the following markets:

• ScanTrainer - obstetrics and gynaecology (OBGYN)
• HeartWorks - echocardiography and anesthesiology (ECHO)
• BodyWorks - emergency medicine, critical care, intensive care and point-of-care (PoCUS)
• BabyWorks - neonate and paediatrics

• Alternative performance measure for 2022 UK simulation revenues

Research & Development

During the financial year, the simulation R&D team focused on the following developments:

3D Echo MPR release for HeartWorks

In February, we added Multiplanar Reconstruction (MPR) as an optional extra to the HeartWorks simulation platform for cardiac anatomy and echocardiography, enabling students to build their confidence in 3D cardiac image acquisition and manipulation techniques.

BabyWorks 2.0

In June we launched an upgraded version of BabyWorks with new modules for cardiac, cranial, gastric and line placement. The modules were developed in collaboration with leading specialists in infant medicine to ensure the content is aligned with the latest requirements of neonatal and paediatric point-of-care ultrasound (PoCUS).

Endometriosis module for ScanTrainer

It is estimated that 10% of women worldwide have endometriosis so

in May a new endometriosis augmented reality training module was launched for ScanTrainer to support clinicians

in learning how to locate and identify endometriotic disease in the ovaries, bowel and bladder using transvaginal ultrasound.

Intelligent Ultrasound Group plc  2023 Annual Report and Accounts	Overview	Strategic Report	Corporate Governance	Financial Statements	8

Chief Executive's Review continued

"We train medical professionals in the skills required to competently scan with diagnostic ultrasound"

Territory Review - Simulation

United Kingdom

Revenue declined by 52% to £2.4m (2022: £4.9m) partly due to the receipt of £1.9m of one-off orders from a UK NHS training initiative in 2022. Excluding these exceptional orders, the UK like-for-like revenue declined by 22%.

There were two main factors that impacted simulator training budgets in the UK during 2023. Firstly, the NHS has had to implement cost savings to cover the increased cost of locum doctors and overtime caused by the doctors strikes during the year. Secondly, the merger of Health Education England (HEE) and NHS England impacted one of the biggest sources of funding for simulation in the NHS. All these reduced anticipated training spend in the second half of the year, by pushing expected orders into 2024.

Although this merger is now broadly complete, the UK market is dominated by NHS-related spending and there are concerns that the ongoing junior doctor strike will reduce funds normally made available for capital purchases. So although there remains strong purchasing interest in all our simulation products, we are monitoring closely whether the shortfalls in NHS Trust finances will impact 2024 training budgets.

North America

Revenue increased by over 60% to £4.5m (2022: £2.8m), a record high, with strong sales across all our simulator product platforms. We were particularly encouraged by the take-up of our new est simulator, BabyWorks, with medical schools such as the University of Nebraska Medical Center (UNMC) investing in the simulator, to expand its clinical simulation programme into bedside ultrasound for infants.

We continued to invest in the US-based sales team in 2023 and moved to a larger office and build space in Alpharetta. We also improved our application specialist web-based demo facilities and with an encouraging long-term sales pipeline, we look forward to continued growth in the North American direct-to-market operation in 2024.

Rest of the World

Revenue increased by 31% to £2.3m (2022: £1.7m).

We currently have 28 resellers that sell our simulators outside the UK and North America and the revenue stream has been somewhat of a rollercoaster in recent years. 2023 continued that trend with sales returning to 2021 levels and, although we had positive sales growth in India, Scandinavia, South Africa and Israel, the sales growth in China was slower than expected and sales in Western Europe, Gulf and Australia were disappointing.

Simulation revenue

UK

£2.4m

(2022*: £3.0m)

-22%*

North America

£4.5m

(2022: £2.8m)

+62%

Rest of the World

£2.3m

(2022: £1.7m)

+31%

Intelligent Ultrasound Group plc  2023 Annual Report and Accounts	Overview	Strategic Report	Corporate Governance	Financial Statements	9

Chief Executive's Review continued

"One of the leading independent AI software vendors in real-time ultrasound image analysis. Our products provide real-time workflow enhancements that support faster, more standardised scanning and support decision-making"

203%

growth in

Clinical AI revenues

in 2023

However, with over £1m of revenue being generated in the final quarter of 2023, and with the increased range of products, growing pipeline and anticipated sales growth from China, we hope to continue to grow the reseller market in 2024.

CLINICAL AI (Clinic)

Real-time clinical AI software that makes medical ultrasound easier to use is a key part of our 'Classroom to Clinic' vision, and we were delighted that our AI-related revenue tripled to £2.0m (2022: £0.7m).

We are one of the leading independent AI software vendors in real-time ultrasound image analysis and our products provide real-time workflow enhancements that support faster, more standardised scanning, and importantly also support decision-making, so that the stress of scanning can be reduced and the potential 'burn-out' of clinicians being asked to increase productivity is minimised.

We have three AI-related software products available in the market:

• ScanNav Assist obstetric AI software that powers GE HealthCare's SonoLyst software on their Voluson range of women's healthcare ultrasound machines;
• ScanNav Anatomy Peripheral Nerve Block (PNB) for real-time regional anaesthesia highlighting; and
• NeedleTrainer that incorporates the PNB software to teach ultrasound- guided needling skills.

We expect 2024 to be another year of significant sales growth for our AI-related products.

ScanNav Assist (SonoLyst)

Our ScanNav Assist AI technology drives GE HealthCare's SonoLyst X/IR and Live software, the world's first fully integrated ultrasound AI tool that automatically and in real-time recognises the 21 views recommended for the second trimester (20 week) fetal sonography scan.

Integrated into GE HealthCare's Voluson SWIFT and Expert ultrasound machines, SonoLyst is available in two formats:

• SonoLyst X/IR is a virtual on-board expert utilising AI to automatically identify fetal anatomy on the operator's saved views, enhancing efficiency and providing quality assurance by comparing the image to the standard criteria to ensure image acquisition quality and consistency.
• SonoLystlive is a fully automated version of X/IR that automatically saves the optimal views live as the operator scans, enhancing efficiency, consistency and saving up to 40% of time on routine 20-week scans.

By automatically and in real-time supporting the sonographer in their decision-making, the software can also help reduce the often considerable stress of obtaining the recommended views.

The issue of burnout in scanning centres is increasing around the world and it is hoped that the adoption of this technology will help reduce this burden.

GE HealthCare is the largest medical imaging company in the world and under our long-term agreement has exclusive rights to our clinical AI technology in the field of women's healthcare until 2029. The royalty terms, product sales and the timings of the related product launches under this agreement are undisclosed.

The launch in October of SonoLystlive

as a standard feature on GE HealthCare's Voluson Expert 22 and 20 ultrasound machines was a key commercial milestone as this is GE HealthCare's premium ultrasound machine in the obstetric market. Post year-end Sonolystlive was also launched on the Voluson Signature range.

GE HealthCare is the dominant manufacturer in this market, with over 50% market share of the 35,000-plus ultrasound machines that are sold annually. We therefore expect to see increased SonoLyst sales throughout 2024 and beyond as SonoLyst continues to be rolled out globally.

ScanNav Anatomy Peripheral Nerve Block (PNB)

Our FDA and CE cleared ScanNav Anatomy PNB AI software simplifies ultrasound-guided needling by providing the user with real-timeAI-driven anatomy highlighting for a range of medical procedures. The device supports the performance of healthcare professionals who are suitably qualified, but who perform ultrasound-guided local anaesthesia procedures on a less frequent basis.

The device supports ten common peripheral nerve blocks and is sold as a standalone screen that is plugged into existing anaesthesiology ultrasound machines to provide clinicians with real- time highlighting of their live ultrasound image. Our aim is to support anaesthetists, who are competent but less confident in the specialist knowledge of ultrasound anatomy, to perform nerve blocks and as a result increase the number of ultrasound- guided nerve blocks that they can perform.

The device is available for sale in the US, UK, France, Germany, Spain and Scandinavia. During the year several important studies were released to demonstrate how ScanNav Anatomy PNB can help support the adoption

of ultrasound-guided regional anaesthesia (UGRA).

The accuracy of ScanNav Anatomy PNB was rated as 93.5% by expert clinicians1:

• Clinical trials demonstrated that ScanNav Anatomy PNB is:
• • helpful in identifying specific structures: in up to 99.7% of cases1
  • helpful for confirming the correct block view in up to 99.3% of cases1

Could reduce the incidence of adverse events (such as nerve injury) and block failures by between 62.9% and 86.3%.

Studies also demonstrated a relative increase in delivery of UGRA by 40.4%1 showing ScanNav Anatomy PNB is;

• helpful to experts in teaching (including in clinical setting);
• helpful to non-experts in training and clinical practice.

With over 25,000 anaesthesiology machines in operation in the US, UK and Western Europe markets, and ultrasound- guided peripheral nerve blocks increasingly being used as a prudent alternative to general anaesthesia as well as a method of concurrent analgesia (potentially reducing opioid usage), we continue to believe that ScanNav Anatomy PNB has considerable growth potential over the coming years.