Announcement PDF 31 August 2023 ASX ANNOUNCEMENT 2023 Annual Report ImpediMed Limited (ASX: IPD) is pleased to release its Annual Report for the financial year ended 30 June 2023. Authorised for release by the Board of ImpediMed Limited. Contact Details Investor Relations Contact: Hannah Howlett WE Communications T: +61 450 648 064 E: hhowlett@we-worldwide.com E: investorrelations@impedimed.com About ImpediMed Founded and headquartered in Brisbane, Australia with US and European operations, ImpediMed is a medical technology company that uses bioimpedance spectroscopy (BIS) technology to generate powerful data to maximise patient health. ImpediMed produces the SOZO® Digital Health Platform, which is FDA-cleared, CEmarked, and ARTG-listed for multiple indications, including lymphoedema, heart failure, and protein calorie malnutrition and sold in select markets globally. In March 2023, the NCCN Clinical Practice Guidelines In Oncology (NCCN Guidelines®) for Survivorship were updated and reference bioimpedance spectroscopy as the recommended objective tool to screen at-risk cancer patients for early signs of lymphoedema. With the SOZO Digital Health Platform and L-Dex®, ImpediMed is the only company to offer FDA-cleared technology that uses bioimpedance spectroscopy for the clinical assessment of lymphoedema. The connected digital health platform and large, attractive cancer-related lymphoedema market present an opportunity for continued strong growth through ImpediMed’s SaaS subscription-based business. For more information, visit www.impedimed.com. Annual Report For the Year Ended 30 June 2023 Platform Technology. Transforming Care. impedimed.com Table of Contents 1. CORPORATE INFORMATION Corporate Information Chairman’s Report Chief Executive Officer’s Letter 2. DIRECTORS’ REPORT Directors and Executives Principal Activities Milestones Operating and Financial Review Environmental, Social and Governance (ESG) Reporting 3. REMUNERATION REPORT Remuneration Report (Audited) Directors’ Meetings 4. FINANCIAL STATEMENTS Platform Technology. Transforming Care. 5 6 8 10 17 24 34 36 40 61 Financial Statements 65 Notes to the Financial Statements 70 Directors’ Declaration 106 Shareholder Information (Unaudited) 111 Corporate Information CHAPTER 1 June 13, 2023 at 13:56 Today’s measurement provided a detailed breakdown of this patient’s fluid levels and body composition. This information is being used to proactively manage her care. Remeasure this patient at her next visit to track her progress. MD Michael Doe Aug 3, 2023 at 10:59 MEDICATION CHANGE Patient’s medication changed today. L-Dex History Right Arm JD Jane Doe Baseline Platform Technology. Transforming Care. Corporate Information This financial report covers the consolidated entity comprising ImpediMed Limited (the “Parent”) with its wholly owned subsidiaries (the “Group” or the “Company”). The Parent’s functional and presentation currency and the Group’s presentation currency is the Australian dollar (AUD or $). Certain prior year amounts have been reclassified for consistency with the current year’s presentation. A description of the Group’s operations and of its principal activities is included in the operating and financial review in the Directors’ Report. The Directors’ Report is not part of the financial report. Directors Additional Company Details Non-Executive Directors (NED) Websites D Williams, Chairman www.impedimed.com www.preventlymphedema.com D Anderson Share Register Link Market Services Level 21 10 Eagle Street Brisbane QLD 4000 Phone: +61 7 3320 2200 A Patel M Seiden (appointed July 2023) D Sharp (appointed July 2023) ImpediMed Limited shares are listed on the Australian Securities Exchange (ASX): ASX code “IPD”. J West. AM (appointed Aug 2022) Executive Director R Valencia, Managing Director and CEO (Appointed Managing Director and CEO 1 December 2022) Solicitors Johnson Winter & Slattery Level 25, 20 Bond Street Sydney NSW 2000 Company Secretary Sheppard Mullin Richter & Hampton LLP 12275 El Camino Real Suite 200 San Diego CA 92130 US L Ralph Bankers Commonwealth Bank of Australia 240 Queen Street Brisbane QLD 4000 Company Offices Registered Office Unit 1, 50 Parker Court Pinkenba QLD 4008 Bank of America 701 B Street Suite 2300 San Diego CA 92101 US Principal Places of Business US Headquarters 5900 Pasteur Court, Suite 125 Carlsbad CA 92008 US Phone: +1 760 585 2100 Auditors Ernst & Young Level 51, 111 Eagle Street Brisbane QLD 4000 AU Headquarters Unit 1, 50 Parker Court Pinkenba QLD 4008 Phone: +61 7 3860 3700 Remuneration Advisors to the Board of Directors Aon – Rewards Solution 425 Market Street, Suite 2800 San Francisco CA 92105 US 5 Chairman’s Report Donald Williams, Chairman of the Board On behalf of ImpediMed’s Board of Directors and Management, I am pleased to present the Annual Report for ImpediMed Limited (ImpediMed or the Company) for the 2023 financial year. Having been the Board Chair for less than two years, I was anticipating a message focusing solely on the Company’s success during the past year and the positive forward-looking opportunity before us. Unfortunately, I must also address the current action by a small number of shareholders creating distraction for both the Board and management. payers on how the SOZO platform improves patients’ lives, the best testing protocol, and guiding appropriate policy wording. The Company successfully completed a capital raise which de-risks the Company’s opportunity for future growth and strengthens the balance sheet to allow us to attract highly qualified talent to fill the Chief Commercial Officer and Chief Medical Officer roles, as well as other positions vital to future success. The capital raise enables ImpediMed to operationally move from a strategy of moderate growth and the achievement of breakeven at a low growth rate and revenue target, to a strategy of exponential growth and a much higher revenue target. The revenue uptake is already being seen in the size of new SOZO contracts; however, it will be mid 2024 financial year before steady, predictable impact occurs. These improved growth metrics will modestly move the breakeven by approximately two quarters. Given the significant milestones achieved during the year, it is appropriate for me to start with the progress we have made. Most significantly, following a successful Interim CEO stint by Board member David Anderson, ImpediMed secured a dynamic and highly experienced leader when Rick Valencia joined the Company in December 2022 as Managing Director and Chief Executive Officer. In a short period of time, Rick has visited in-person with our workforce in Brisbane, Thessaloniki, and Carlsbad, stabilised and raised the morale of the global team, and created an open line of communication with all executives and the leadership team. The future success of the Company is now in the hands of a well-organised and highly motivated team, with a strategy and operational plan that is focused, and has the full support of the board. While successfully completing the raise, some shareholders provided their feedback on the timing and structure of the raise. Whilst this feedback was balanced with significant support for the capital raise, we do acknowledge the need to provide a greater level of detail in our communication to ensure all shareholders are informed and understand our plans. After becoming board chair within the last 2 years, we have initiated a board succession program to refresh our board and ensure the skills and experience is aligned with our current and future needs – particularly to leverage our first to market opportunity in the oncology related lymphoedema sector. Four of our seven board members are new in the past 12 months. Both Jan West and Danny Sharp are Australian residents. Jan brings over 20 years as a Deloitte Partner and 10 years as a Non-Executive Director. Danny brings over 25 years of investment banking and investor relationships as well as Non-Executive Director experience. The long-awaited publication of the NCCN Guidelines® occurred in March 2023. Based on data from the PREVENT Trial, the submission to the NCCN Survivorship Committee related to breast cancer related lymphoedema. In the updated guidelines, the use of BIS technology was expanded to include ALL cancer related lymphoedema. The broader inclusion significantly increased the total addressable market for SOZO and is where we are rapidly positioning ImpediMed to capitalise. As anticipated, insurance payers in the US began to review their policy for reimbursement of SOZO testing services provided to patients. With the preparedness of the management team, 12 of the top 62 payers in the US have already changed their reimbursement policy and we expect more to follow rapidly. The policy changes to date not only identify BIS as medically necessary, but many specifically name ImpediMed, SOZO and L-Dex. This success comes with no small measure of effort by the ImpediMed team to educate Michael Seiden is a US resident and is a Board-Certified Oncologist and former President of US Oncology Network. The fourth is Rick Valencia, our new MD/CEO. The refreshed Board continues to be primarily remunerated with equity to minimise the use of cash resources and to better align investment interests with shareholders. Shares held by Non-Executive Directors have increased over 140% to 6 over 26 million shares in the past year. The majority of the shares held by NEDs have been purchased on the open market. NEDs have committed to additional share purchases during open periods which allow such acquisitions. We are proudly an ASX listed company and intend to remain such. Additionally, 70% of the Company’s cash is maintained in Australia. While the commercial business opportunity is in the US and best addressed by management and board members in the US, the financial support of the company is over 94% Australian. We believe that a continuous review of board composition is necessary. We heard from many shareholders that greater Australian representation and gender diversity was desired. We are committed to continuing to review our board composition and skills matrix with a focus on both Australian representation and gender diversity. Going forward our shareholders should expect increased communications and in-person visits to provide more regular updates and for the board and management to hear feedback directly from shareholders. The 2023 financial year was one of slower growth with a significant focus on cash management. Despite the focus on cash and not receiving NCCN inclusion until March 2023, the team was able to grow Core Business SaaS Revenue 33% year over year with a gross margin of 95%. Customer contract retention was 97%, reflecting satisfaction with both the SOZO Digital Health Platform as well as customer support following the sale. In closing, let me affirm that the success of ImpediMed is our primary focus which will lead to greater shareholder value. We must preserve the opportunity before us to build a successful health business to scale. Governance, diligence, and improved communication will be among the pedestals required to achieve the value creation expected of us by shareholders. ImpediMed is in its strongest position in history, with total contracted revenue greater than A$20 million, monthly SaaS revenue per SOZO system approaching $2,500, 12 payer policy changes to date, a robust balance sheet and a strong executional leadership team. Yours sincerely However, this progress is clouded by the actions of a small, yet important, group of shareholders who have taken steps to effectively take control of ImpediMed by replacing four of seven board members. The four director candidates are handpicked by this small group of shareholders, without a proper nominating and governance process, without a stated strategy or plan and without the input from all shareholders. Certain concerns raised by the Requisitioning Parties focused on our recent financing, board composition and ASX listing which we believe have been addressed. Don Williams Chairperson 7 Chief Executive Officer’s Letter “We have a disruptive technology that works exceptionally well, a customer-base that loves us, and inclusion in the NCCN Guidelines that is rapidly leading to private payor reimbursement. The opportunity we now have in front of us is one most Companies could only dream of, and we have a board and team capable of achieving our goals.” Rick Valencia, Managing Director and CEO It is a privilege to be the MD & CEO for a business with such a compelling purpose and exciting future. When the Board appointed me to the CEO role in December 2022, I was given a very clear mandate to execute a commercial strategy that could capitalise on the growing opportunities and build shareholder value. Between our two Leadership Team planning sessions, the team was able to efficiently draft these guiding principles. Please refer to our Corporate Governance Statement for our Vision and our Values and to our ESG report for our Mission. But I want to focus on our values for a moment. We have an established set of values which define what type of organisation we aspire to be and what it expects from its directors, executives and employees to achieve that aspiration. We are an organisation that cares. With the Board’s support and a strong leadership team we’ve made considerable progress executing our strategy in just the nine months since my appointment to the role. This progress has been evidenced in our recent share price momentum. Since the 8th of March this year, we have seen our share price appreciate over 250% and trading at or near a 2-year high. C.A.R.E.  We Challenge each other be great. We support and respect one another, challenge ideas, and embrace feedback. We push ourselves to be leaders in our industry and teamwork is our biggest competitive advantage. Building a Highly Functioning Team I take pride in my history of developing exceptional talent and building a strong, mission-driven corporate culture. In addition to the tremendous commercialisation progress during the year, we took a positive step forward with the newly formed Leadership Team. The Leadership Team is composed of the strongest cross-functional leaders within the organisation, with nearly 50% female representation.  We hold ourselves Accountable. We are humble yet explicit in our intentions. We speak openly when we have questions or concerns. We take personal responsibility for our actions and outcomes, and we reliably deliver on our commitments.  We do the Right thing. We always act in accordance with our Company’s high ethical standards and quality policy. We are honest and trustworthy. We serve patients, our customers, and shareholders, and guide them to a shared purpose. We are pleased to include, for the first time, the current progress on our ESG journey as part of our Annual Report this year. Our ESG report is included within our Directors’ Report and details our current pillars of ESG and some of the areas where we are making progress. We are early in our ESG journey, but we hope the report provides valuable insights to our stakeholders into our commitment to a sustainable future.  We are focused on Execution. We deliver on our operating objectives, but we remain curious and never stop learning. We relentlessly improve our products, services, and internal processes, to continuously drive the transformation of our company and of healthcare. One of the highlights of the ESG report for me is our Net Promoter Score (NPS) of 83. NPS is one single indicator of how customers are feeling about your products and services. The scores range from -100 to 100, so as you can see 83 is an incredibly high score that we at ImpediMed are very proud of. I would like to thank our shareholders for their support. In under nine months since being appointed to this role, I’ve proven what a highly functioning team is capable of. I’m looking forward to keeping you updated on our success throughout the coming year. “We have a disruptive technology that works exceptionally well, a customer-base that loves us, and inclusion in the NCCN Guidelines that is rapidly leading to private payor reimbursement. The opportunity we now have in front of us is one most Companies could only dream of, and we have a board and team capable of achieving our goals.” Yours sincerely, Rick Valencia Managing Director and CEO Our Mission, our Vision, and our Values As part of building a highly functional team, it was imperative to me to revisit the Company’s mission, vision and values. 8 Directors’ Report CHAPTER 2 June 13, 2023 at 13:56 Today’s measurement provided a detailed breakdown of this patient’s fluid levels and body composition. This information is being used to proactively manage her care. Remeasure this patient at her next visit to track her progress. MD Michael Doe Aug 3, 2023 at 10:59 MEDICATION CHANGE Patient’s medication changed today. JD Jane Doe L-Dex History Right Arm Baseline Platform Technology. Transforming Care. Directors Non-executive Directors Listed company directorships held since 1 July 2020: Company Name Appointed Retired / Resigned ImpediMed Limited March-17 - Akari Therapeutics (i) June-16 - Alphatec Holdings Inc (i) May-15 August-21 Forte Biosciences (i) Jun-20 - Palisade Bio, Inc (i) Apr-21 - (i) US-based publicly traded company. Donald Williams BAcy, CPA Non-Executive Director Donald Williams was appointed to the Board in March 2017 and appointed to Chair of the Board in fiscal year 2022. Mr. Williams currently chairs the Nomination Committee. Don has more than 40 years in leadership roles as a Certified Public Accountant (CPA) and an accredited public company director, serving the life science, biotech, and medical device industries. Don has significant experience assisting companies and management teams with initial public offerings, complex business challenges and analysis of financial reporting matters. His breadth of experience includes a diverse set of growing domestic and international companies including venture financings, public equity offerings, public debt offerings, mergers and acquisitions, and interaction with the US Securities and Exchange Commission and Public Company Accounting Oversight Board. While at both Ernst & Young and Grant Thornton, Don was focused on the Life Sciences Industry. For over 15 years, he directed Ernst & Young’s Venture Capital and Emerging Growth Markets in the Southeast Market and in the Pacific Southwest Market. During his seven years at Grant Thornton, he was the National Leader of the United States Life Sciences Industry. His oversight of the National Life Sciences Industry included setting strategy, establishing the sales and marketing plan and oversight of industry operations. Don completed his Board of Director Certification at UCLA Anderson School of Business. Listed company directorships held since 1 July 2020: Company Name Appointed Retired / Resigned ImpediMed Limited May-20 - David Anderson BSc Non-Executive Director David Anderson was appointed to the Board in May 2020 as a Non-executive Director, and currently serves on the Remuneration and Nomination Committees. From July 2022 – November 2022, Dave also served as Interim CEO for the Company. Prior to being appointed to the Board, David served as President and CEO of HealthNow Systems Inc, operating as Blue Cross Blue Shield (BCBS) health plans in New York State. 10 HealthNow operates as a licensee of the Blue Cross Blue Shield Association, which in total, provides health care services to 1 in every 3 Americans across all 50 states and US territories and is accepted at over 90% of US doctors, hospitals and other health care providers. David is a US health care industry executive who serves on the board of the National Institute of Healthcare Management, Blue Cross Blue Shield Association board of Directors, the board of the New York State Business Council and the New York State Insurance Advisory Committee as appointed by the Commissioner of the Department of Financial Services. Additionally, David serves as an advisor and speaker for Modern Healthcare’s CEO Power Panel and the Aspen Institute. Prior to his role at BCBS, Mr. Anderson was CEO of United Healthcare’s Southern California Health Plan. Mr. Anderson is a native of Fort Wayne, Indiana, and a graduate of Indiana University’s Kelly School of Business, with a B.S. in Finance. Listed company directorships held since 1 July 2020: Company Name Appointed Retired / Resigned ImpediMed Limited March-17 - Amit Patel MBA, BME Non-Executive Director Amit Patel was appointed to the Board in March 2017 and serves as the Chair of the Remuneration Committee and as a member of the Nomination Committee. Amit is a Co-Founder and CEO of Murata Vios (formerly Vios Medical), which has created an FDA-cleared patient management platform that integrates IoT-based monitoring, remote care services, and big data analytics to alleviate gaps in patient vigilance across in-hospital and home environments. Vios is currently commercialising its monitoring and services solution across major hospital systems in the US and India. Vios Medical was acquired by Murata Manufacturing in October of 2017. Prior to founding Vios, Amit was with HeartFlow where he created a joint go-to-market strategy with GE Healthcare’s imaging division, managed the DeFACTO clinical study across multiple UK sites, and developed a health economic story for the NHS. Prior to HeartFlow, Amit was with Medtronic’s Corporate Development group and was responsible for acquisitions, minority investments, and joint ventures spanning existing businesses and strategic whitespace areas. Amit has an MBA from Stanford University and a Bachelors of Biomedical Engineering from the University of Minnesota. 11 Listed company directorships held since 1 July 2020: Company Name Appointed Retired / Resigned ImpediMed Limited Jul-23 - Michael V. Seiden MD, PhD Non-Executive Director Michael V. Seiden, MD, PhD was appointed to the Board in July 2023 and serves as a member of the Audit and Risk Management, Remuneration, and Nomination Committees. Dr. Seiden is a Board Certified Medical Oncologist with a broad collection of leadership positions across the cancer care and business ecosystem, ranging from the science that underpins oncology drug development through the economics of cancer care delivery. Currently, he serves as the CEO and Board Director of Gladius Therapeutics a clinical stage oncology drug development company. Previous roles included serving as the president of The US Oncology Network, a McKesson owned company that includes the largest collection of community based oncology care practices in the US. Prior to his role as President of US Oncology, Dr. Seiden served as the senior vice president and Chief Medical Officer of The US Oncology Network. Before joining The Network, he served as CEO and President of Fox Chase Cancer Center, a National Cancer Institutedesignated Comprehensive Cancer Center research facility and hospital in Philadelphia as well as a founding member of the NCCN. Prior to Fox Chase, Dr. Seiden spent many years practicing oncology and conducting research at Massachusetts General Hospital and Harvard Medical School, where he served as Chief of the Clinical Research Unit and Associate Professor in Medicine at Harvard University. Dr. Seiden received his undergraduate degree in Chemistry from Oberlin College and a master, medical and Ph.D. degrees from Washington University. He completed his residency at Massachusetts General Hospital, fellowships in medical oncology and bone marrow transplant at Dana Farber Cancer Institute, with post-doctoral fellowship training at Brigham and Women’s Hospital in the department of pathology. Listed company directorships held since 1 July 2020: Company Name Appointed Retired / Resigned ImpediMed Limited Jul-23 - Alcidion Limited Sep-21 - Botanix Pharma Limited Mar-22 - Race Oncology Dec-22 Jun-23 Daniel Sharp, CFA BEc, LLB Non-Executive Director Daniel Sharp, CFA was appointed to the Board in July 2023 and serves as a member of the Audit and Risk Management and Nomination Committees. Originally commencing his career as a lawyer, Daniel has over 25 years senior executive experience in investment banking and corporate finance. 12 From 2012-2020, Daniel was an Executive Director of Corporate Finance at Canaccord Genuity where he led dozens of equity capital market transactions and corporate finance advisory projects across the healthcare, life sciences, technologies, financial services, and general industrials sectors. Prior to his executive role at Canaccord, Daniel headed the corporate finance division at two of Australia’s leading independent Investment Banking/Stockbroking firms. Daniel has managed the IPOs, capital raising and corporate advisory activities for many successful ASX listed companies in the healthcare, technologies, and general industrials sectors. He is closely connected to strong networks of institutional, family office and high net worth investors both in Australia and overseas. Daniel has bachelor’s Economics and Law (Monash University) and is a CFA Charter Holder. Listed company directorships held since 1 July 2020: Company Name Appointed Retired / Resigned ImpediMed Limited Aug-22 - Jan West AM, BCom, FCA, FAICD Non-Executive Director Jan West AM was appointed to the Board in August 2022 and serves as the Chair of the Audit and Risk Management Committee and as a member of the Nomination Committee. Jan brings in excess of 30 years’ experience as a Non-Executive Director across a range of industries, combined with 23 years’ experience as a Deloitte partner, which included leadership positions within the firm and the Chartered Accounting profession. Her experience covers public sector, community and private organisations. She is currently a member of the International Federation of Red Cross Red Crescent Societies Audit and Risk Commission, and has recently been a Director of Australia Post, Australian Red Cross Society, Neurosciences Victoria and Dairy Australia. Additionally, Jan has been Chairman and President of The Institute of Chartered Accountants in Australia, a member of the Financial Reporting Council and an Independent Member, Audit and Risk Management Committee of the Department of Health and Human Services, Victoria. 13 Executive Director Listed company directorships held since 1 July 2020: Company Name Appointed Retired / Resigned ImpediMed Limited Dec-22 - Rick Valencia Executive Director Richard "Rick" Valencia was appointed Managing Director and Chief Executive Officer in December 2022. Rick has over 30 years of leadership in the healthcare and technology industry sectors with a background rooted in corporate strategy execution, market disruption, M&A, organizational development, deal structuring, value creation, growth and transformation, and strategic partnerships. He is renowned for building exceptional management teams to implement change in the delivery of services to a broad customer base in the areas of connectivity of medical monitoring devices and solutions to improve electronic health record applications via digital health and cloud-based SaaS platforms. Prior to his current role, Rick was Chairman & CEO of WaveForm Diabetes, and a Board member at Tandem Diabetes Care. He also was Senior Vice President at Qualcomm Incorporated and the founder and President of Qualcomm’s healthcare business, Qualcomm Life. There he led a team focused on client relationships at over 2,500 hospitals globally and numerous top pharmaceutical, medical device and health insurance companies. He also founded and provided oversight to Qualcomm’s digital health venture fund and the Rx Capital, a digital therapeutics venture fund in partnership with Novartis. Rick has also played an active role in founding, financing and growing numerous other businesses. 14 Interest in the Shares and Options of the Group and Related Body Corporate As at the date of this report, the interests of the current Directors in ImpediMed Limited were: Director D Williams D Anderson A Patel M Seiden (i) D Sharp (i) J West R Valencia (i) Title Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Managing Director and CEO Ordinary Shares 8,047,990 5,510,382 3,197,406 8,234,192 1,309,237 1,810,000 M Seiden and D Sharp were appointed to Board in July 2023 Company Secretary Leanne Ralph Company Secretary Leanne Ralph was appointed to the position of Company Secretary in January 2015. Leanne has over 15 years of experience in company secretarial roles and holds this position for a number of ASX-listed entities. Leanne is a Fellow of the Governance Institute of Australia and a Graduate Member of the Australian Institute of Company Directors. 15 Executives Timothy Cruickshank Shashi Tripathi Joann Yao Chief Financial Officer Chief Operating Officer Chief Strategy Officer (i) (ii) Dennis Schlaht Lisa Prom Senior Vice President R&D and Technology (i) Vice President, Sales (i) (i) (ii) Certain Executives are not considered Key Management Personnel for purposes of the Remuneration Report. Joann Yao was named Chief Strategy Officer in August 2023. 16 Principal Activities Founded and headquartered in Brisbane, Australia with US and European operations, ImpediMed is a medical technology company that uses bioimpedance spectroscopy (BIS) technology to generate powerful data to maximise patient health. ImpediMed produces the SOZO Digital Health Platform, which is FDA-cleared, CE-marked, and ARTGlisted for multiple indications, including lymphoedema, heart failure, and protein calorie maln