Good morning and welcome to Imricor's full-year results of the financial year 2023, ending 31 December, 2023. On the line, we have the company's founder and CEO, Steve Wedan, and the company's CFO, Jonathon Gut. Before I hand it over to Steve to go through the presentation, I'll just remind you that you can submit questions through the Q&A button at the bottom of the screen, or alternatively, you can raise your hand and I'll allow you to talk. But Steve, I'll hand it over to you to get started. Thanks very much.a
Thanks, Simon. Hello everyone, and thank you for joining us today to discuss Imricor's full-year results for 2023. I'm Steve Wedan, Imricor's Chair and CEO, and I'm joined by Jonathon Gut, our CFO. Today, I'll provide you with a business update on the progress we've made in 2023, including our key achievements, and then Jon will discuss the financial results. I'll finish up with a brief summary of the business as we enter into March and look forward to the rest of 2024, and then we'll move to a Q&A session. First, our key achievements. There's a big shift underway in the field of electrophysiology, and Imricor is at the forefront of this shift. Together with our partners, we've now completed the development phase of all the tools required to make it possible to do a cardiac ablation procedure using superior imaging and guidance offered by MRI.
On this slide, you can see what a modern iCMR lab looks like, and we've listed all the tools that had to be developed to make this a reality. You'll note that at Imricor, we developed a dozen of these tools, and various partners have developed things like MRI systems themselves, along with RF generators, in-room monitors, patient monitors, defibrillators, headsets, and 12-lead ECG systems. Imricor and our partners all generate revenue from the one-time capital equipment sale to outfit each lab, but importantly, Imricor captures 100% of the ongoing consumable revenue for interventional procedures conducted in each of these labs. This is not a niche market. There are well over 1 million cardiac ablations conducted globally each year, and we believe that with higher first-time success rates and faster procedure times, there's a potential for this number to increase even further.
As you can see on this slide, there's a broad interest in what we're doing. We have customer sites in seven countries already, and we're focused on three major things: expanding the number of countries, expanding the numbers of sites per country, and increasing the number of procedures per site. These are the foundation of everything we did last year and everything we're doing this year. For instance, these operational highlights completed in 2023 are the keys to unlocking both the volume potential at each site and expanding the number of sites. So I'd like to spend a moment to go through them. First, we received approval from the FDA to commence our global VISABL-AFL trial, and then at Johns Hopkins Institutional Review Board subsequently also approved the trial.
As of today, we've installed all the equipment, and the team at Hopkins are doing the final preparations and recruitment to begin the trial. Given the sheer volume of cases in the U.S. and the fact that reimbursement rates per procedure are over four times higher than in some European countries, this is possibly the most significant milestone in Imricor's history and the largest revenue opportunity for us. We also received approval to commence our VISABL-VT trial in Europe and we're very close to commencing enrollment. As the data from this trial begins to surface, it will show the broadening of our capabilities, and we believe the benefits that our technology brings to the more complex arrhythmias where MRI can add the most value.
It's my strong belief that as the participating doctors begin to publish on their experiences with complex cases, the pipeline of new sites will increase. It takes some time to establish these new labs, and these sites will likely begin the process even well before the final regulatory approval is granted, just as we saw before in Europe with sites building out their labs prior to Imricor receiving CE Mark for atrial flutter. Looking at the next bullet, as you know, we've had a longstanding relationship with Siemens and Philips, and now with a master service agreement signed with GE where they are paying Imricor to make our tools and systems work with their scanners, we'll be compatible with virtually every MRI scanner in the field and therefore have access to the entire market. Next, the Middle East is a really exciting market for us.
You may recall that last year at this time, it was our goal to break into the Middle East, and in 2023, we did it. During the year, we received approval from Saudi FDA and signed with a great distributor who has over $1 billion in revenue. We followed that by signing another great distributor in Qatar, and even as we prepare to launch across these countries right now, we're working to expand into more. The Middle East is an attractive sight due to both the volume of the cardiac ablations but also due to the modern and increasingly modernized healthcare system there, strong capital budgets, and a desire to be leaders in the adoption of cutting-edge technology. I look forward to the near-term launch and for our first sales in the second half of this year.
The last highlight I want to note is our collaboration with ADAS, an AI company out of Switzerland. In 2013, we consolidated our longstanding relationship with ADAS by signing a joint development agreement that has two major goals: one, to integrate their AI into our NorthStar 3D Mapping System, and two, to make NorthStar be the front-end user interface for their iCMR simulator, which you can see on the next slide. There. Here in the left-hand picture is an actual iCMR lab. This is in the CHUV in Switzerland and also the new ADAS ARTSim system. In the right picture, you see Imricor's Vision-MR ablation catheter being used with the ARTSim system. Our collaboration with ADAS began years ago by providing our ablation catheters to train the simulator's AI to track and simulate the catheter's location as if it were in a patient's heart.
Now that that's done, we're working with ADAS to make ARTSim user the user environment for ARTSim be NorthStar so that simulating a procedure and doing a procedure are the same experience. This will help with demonstrations and training, and we will unveil the system at the European Heart Rhythm Association Congress in April where doctors will, for the first time at a congress, get to try our catheters in a simulator and get a real feel for iCMR procedures. Meanwhile, sophisticated AI is being developed by ADAS to increasingly harvest the value of MR imaging of cardiac tissues for interventional procedures, and by integrating these AI modules into NorthStar, we will provide this value to our users. It's really exciting work, and we expect the results in groundbreaking capabilities in the near future. Speaking of NorthStar, for those of you who haven't seen it, here it is.
NorthStar is a very important piece of any iCMR lab infrastructure. It forms the central hub of your iCMR lab and provides the primary user interface for all procedures. Within NorthStar, you can control the MRI so you don't have to have anyone sitting at the MRI console. NorthStar receives all MR images in real-time from the scanner, but unlike the scanner, NorthStar displays everything in three dimensions. NorthStar tracks Imricor catheters. It facilitates electroanatomical mapping, and of course, it registers ablation therapy points. As we grow the NorthStar platform with the AI capabilities that we and ADAS are developing now, NorthStar will become the most sophisticated 3D mapping system on the planet, providing information and value that no other mapping system without MRI can provide. This drives adoption, and adoption drives shareholder value. With that, I'll now hand it over to Jon to quickly run through the financials.
Thank you, Steve, and hello everyone. As a reminder, all numbers are in US dollars. As we set out on slide nine, we generated total revenues of $616,000 for the year, which was down 25% compared with the prior year. Much of the decline was attributable to equipment revenues, which were comprised of monthly rental fees and one third -party equipment sale in the current year, while the prior year included sales of third-party equipment to select sites that were preparing to resume procedures post-pandemic. For consumable product sales, revenue of approximately $291,000 was down 26% compared to the prior year. The prior year benefited from orders placed by sites that were resuming procedures post-pandemic, while the current year's revenues were constrained by fewer active sites able to consistently perform procedures.
Our sales team has been diligently working with sites to navigate the reactivation process, which commonly involves updating the hospital's MRI system or software. Consulting revenues of $130,000 were related to the MSA we signed with GE to develop the interface to connect our equipment with their MRI scanners. Costs and non-R&D expenses decreased by $579,000 in 2023 compared to the prior year. This reduction was primarily due to lower staffing costs, along with decreases in charges for new inventory reserves and D&O insurance premiums. However, these savings are partly offset by increases in professional services costs. R&D spend was generally flat in 2023 compared to the prior year, primarily due to reduction in consulting costs related to the development of our NorthStar 3D Mapping System and lower spending on prototypes.
It's worth recalling that we initiated the development of NorthStar at the beginning of 2022, and the early stages of the project incurred higher external costs, which declined in the current year as more of the project work was completed with internal resources. These reductions in product development spend were partially offset by higher clinical and regulatory costs, with the increase in clinical being driven by the manufacturing of equipment and consumable devices needed for our VISABL-VT and VISABL-AFL clinical trials. The fair value charge recognized in the current period is primarily related to the convertible notes issued in December 2022 and March 2023. The change in fair value of these notes correlates with the movement in our stock price, and the charge recorded in 2023 parallels the increase that occurred during the year.
Net loss for the period was $22.6 million, an increase of 30% from the prior year, which was driven by the charges related to the fair value changes and capital commitment agreement. Adjusted for these items, our net loss for the year would have been $16.6 million, a decrease of 4% compared to 2022's adjusted net loss of $17.4 million. Our balance sheet is provided on slide 10. Regarding significant changes in the balance sheet, the increase in accounts payable is primarily driven by invoices for third-party equipment inventory and regulatory compliance and submission fees that were received in the fourth quarter. The regulatory work was generally completed in the first half of 2023, and these costs were included in accrued expenses on our mid-year financials released in August.
Contract liabilities represent deferred revenue where Imricor has at least one future obligation to be met before the revenue can be recognized. Most of the current portion relates to the sale of equipment that is pending final installation at the customer sites, and our teams are working closely with the hospitals to complete that work in 2024. The outstanding convertible notes at the end of the period are recorded at their estimated fair value of approximately $8.5 million, with the outstanding principal and interest accrued at December 31, totaling $5.4 million. The option and warrant liabilities relate to securities issued as part of the GEM capital commitment agreement and the equity placements completed in the second half of the year. These are also recorded at their estimated fair value in accordance with U.S. GAAP, and additional detail can be found in notes nine and 10 of our year-end financial statements.
Moving to cash flow on slide 11. Our operating cash outflow for the year amounted to approximately $13 million, showing a decrease of $3.5 million in comparison to the prior year. This reduction is partially attributed to lower operating costs, which were detailed on slide nine. These decreased costs and expenses were supported by a reduction in non-cash charges related to inventory reserves. Alongside these non-cash items, we received full prepayment for the research equipment orders that we processed for a U.S. hospital earlier in the year. During the year, we completed three equity placements and issued the second tranche of the convertible notes based on the securities purchase agreement we signed in December 2022, all of which resulted in proceeds of approximately $8.4 million. The decrease in other financing activities is the result of lower monthly payments on our finance leases that were tied to the purchase of equipment.
At the conclusion of the period, our cash balance stood at $832,000. However, it's important to highlight that subsequent to year-end, we launched a capital raising initiative comprising two concurrent placements and an entitlement offer. To date, the capital raising has resulted in total gross proceeds of approximately $5.7 million, bringing our pro forma cash balance at 31st of December to approximately $6.5 million. I'll now hand back to Steve to take you through the rest of the presentation.
Thanks, Jon. Let's take a look at where we are now as we enter March and where we'd like to go for the rest of this year. Reviewing our company timeline, we started out as an R&D company. We transitioned to a clinical stage trial or clinical trial stage, is better to say, company, and graduated to a commercial company. All along the way, we put many major partnerships in place, all the ones I mentioned earlier in the first slide, that were required to put a complete technological and commercial solution in place to enable the new age of MRI-guided interventions. Our commercial launch was interrupted by the pandemic, but we and our partners continued to develop the products that would round out the entire offering I showed you at the beginning of this presentation.
All of that work has set us up for 2024 to be really a tremendous year with many exciting milestones ahead of us, each of which represents a major step forward and collectively embodies the fulfillment of our mission to change the standard of care and build shareholder value. In 2024, we're very focused on creating that shareholder value by delivering on these primary drivers, which in turn deliver on the foundational items I mentioned before: more countries, more sites, more procedures. Our two global trials will firstly enable entry into the biggest market, the United States, and the VT trial will prove what we have always believed, that MRI guidance will add maximum value for the more complex arrhythmias and the difficult procedures.
As we work closely with our existing sites to get them up and running and doing consistent procedure volumes each week, even as we grow the number of active sites throughout the year, this will all translate to steady overall growth and a continuous building of momentum. Meanwhile, we'll grow our pipeline and continue to expand our footprint not just in Europe but also across the Middle East and soon Australia once TGA approval of our ablation catheters received. Stated differently, these are the three concrete areas through which we'll create value in 2024: advanced FDA approval, do VT to consistently grow revenue and with it, momentum. Folks, it's happening. You'll see an announcement about starting VISABL-AFL at Johns Hopkins very soon, and you'll see an announcement about starting VISABL-VT after that.
I can say this with the utmost confidence because all of the many things that have to happen behind the scenes to make these important milestones a reality have come together, and we can clearly see these milestones approaching. I'm not naming dates, but I think I know what they are. Meanwhile, I've just returned from Europe where I, along with our European sales team, was engaged with customers across several sites. I can tell you with firsthand experience that momentum and excitement are building again. It's happening, and that means the growth of the business, growth of the field that we represent, and the growth in shareholder value are all coming to fruition. Finally, as you know, we've received the letter of intent to invest in the Pioneer Capital Fund in North Dakota.
They've done extensive due diligence, and they're now deep into the administrative side of making this a reality. Governments don't always move at the pace we'd like, and we can't control that, but we are focusing on what we can control. Those things are on track and are working. In the meantime, we'll keep an eye on the progress in North Dakota, and we'll take advantage of that opportunity when it does arise. I'd like to close by thanking those investors who participated in our recent placement and those who both did that and/or took up the rights in the entitlement. We really appreciate that support, and I think what we're all doing together is a very significant thing for not just all of us as shareholders but for the world of interventional medicine as well. Thank you very much.
With that, I'd like to hand it back to Max for questions or Simon.
All right. Thanks, Steve. We'll just pause there for any questions to come through. Just a reminder, if you did want to ask a question, the Q&A panel at the bottom of your screen or raise your hand, please.
Simon, is it still sharing the screen?
Yeah, that's fine. That's all good, Steve.
Okay. Very good.
Just a question through, Steve, just on North Dakota. What's the timeline look like? You talked about administrative side, but what's the potential timeline look like for a key decision to be made?
Yeah, it's hard for us to tell, but I'm hoping for the first half of this year. I speak to the folks in North Dakota periodically to keep abreast of the situation. It's a political process, and I'm not intimately involved in it. It's really their work to get that money allocated to themselves, and they're moving forward. I don't have a hard date on that. I'm much more aligned with things that we can control, like customer engagement, customer adoption, procedure volumes, and things like that.
All right. Just on that point, Scott Power at Morgans has just said, "Hi, Steve. In Europe, how's the reactivation of sites going?"
Yeah. Thanks, Scott. That's a great question. It's going very well. It's been a bit of a process because each of these sites, for various reasons, either needed new MRI software or they had to move their MRI lab to a different location or on and on, lots of different things. And so what we've been really focused on is going to each site - this is really the second half of 2023's major work from the sales standpoint - going to each site, engaging with them closely, and saying, "All right, what are the roadblocks that are stopping you from restarting and getting back on the path and the track that you were on before the pandemic?" And at each site, there were all solvable problems and sometimes introductions to new people who were in new roles.
That's the work that we were doing for the past six, seven, eight months, and that's what's coming to fruition now. So we're seeing not just that sites are becoming active. If they were active and were paused for some reason, they're reactivating, becoming what I'm saying now, actively active. We're setting each of them up for consistency. So we don't want to see doing three or four cases one month and then no cases the next month and then seven cases the month after that. We want consistency across each of our sites so that as we add sites, that consistency then translates to consistent growth. That's what we believe will be happening, and we're starting to see the signs of that now, although, of course, it's still early in the year.
All right. Thanks, Steve. I've just got a question from Sarah Mann who I'll now allow to talk from Moelis. Go ahead, Sarah.
Hi, Steve. Hi, guys. Hope you can hear me okay. Just a follow-up.
Perfect.
Great. Thank you. Just a follow-up question to Scott's question then. So in terms of the reactivation, would you be able to tell us how many sites are currently performing procedures? And as you've done the work with the reactivation, have you seen this kind of step up across January, February, March this year as well?
Yeah. That's a good question too, Sarah. Thanks for that. I've always talked about these active sites as sites that are installed and able to do cases. I've had to sort of change my nomenclature now because several of the active sites paused procedures to update their software either because they had to, it became unworkable, unusable, or because they had to do that in order to take advantage of NorthStar as they regrouped and moved to NorthStar because the Philips iSuite project was cancelled. So right today, actually, only Leipzig is actively doing consistent cases. So let's call them actively active. I should note that the fact that these sites are temporarily inactive is in no way an indication of the loss of enthusiasm from these customers. It's quite the contrary, really, right?
They're doing the necessary preparation and spending the necessary money that they need to spend in order to get back up and running and maximize the value of this technology with 3D mapping and NorthStar, something that wasn't really available to all of them pre-COVID. So it's a little bit of just stepping back, reorganizing, and then getting started again. But now with MRI software licensing being installed and NorthStar studies being initiated across sites, we'll add more and more sites to this actively active list, about eight of them this year, we figure. And as we do that, it's really important to note that while Leipzig is the only active site today, they did more procedures in February than all the sites did in Q4 of 2023.
This is an example of how our re-engagement and consistency planning is really working, and that's what we're doing across all sites. We are really excited, and we see a clear path toward consistent and what would you call it? P redictable growth as we move forward through this year.
That makes sense. Thanks, Steve. And I guess the other following question is just with regards to as the VT trial comes online, how do you think that's going to, I guess, get some of the other sites maybe that have signed but haven't installed and started doing procedures to come on? And also more broadly, as you commence the VT trial, would you expect further interest from new customers coming into the pipeline?
Yeah, definitely. That's actually the same story. It's been for years. I've always expected, and we continue to expect that VT will play a big role in adoption because doctors who want to try this but can't make the argument to their hospital today to just do it for one indication, atrial flutter, will then have an argument to go to their administration and say, "Now, this is a real EP lab with an MRI capability just like the rest of our EP labs, and there's a clear path forward for us to do all these complex ablation procedures as well, VT and eventually atrial fibrillation." And then now look at all the value that MRI brings to our practice with, as we hope, faster procedures and much better procedures based on the MRI. We still think and believe that that will change the adoption timelines for many, many sites.
Got it. And in terms of the VT trial, so you called out that you expect it to kind of commence reasonably soon. So Leipzig's approved, and Amsterdam, it looks like, you've got all the approvals. So that's just a matter, I presume, of recruiting the patients. But could you give us some color around what still needs to happen for some of those other sites that you're targeting to do the VT trial?
Yeah. So let me use Leipzig as an example because it's actually impossible to generalize what happens at each site as we move through late 2022 and through 2023. So here's a specific example to give you some color of what that's like. In Leipzig, the PI, the principal investigator, and the leader of electrophysiology, Professor Gerhard Hindricks, has left. He's moved to the Charité in Berlin and with that, left a vacuum in the electrophysiology leadership. So we were sort of stuck with, there was no leader of electrophysiology. So things just ran sort of on autopilot for a while.
We re-engage now with the new head of electrophysiology, and that's the person whom we're having these conversations with and who's saying, "Yeah, I can commit us to one-two procedures a week for the rest of this year in atrial flutter, and let's start moving toward VT." As we look toward moving toward VT, where it's already approved that there was nobody steering the ship, now she is steering the ship, and that approval process is moving us in the right direction. On the other hand, the EP who was slated to do those VT cases, herself, is on maternity leave for the rest of this calendar year. They had to, we didn't, they did, find another person to do VT procedures.
They tried a couple in-house but ultimately went with a nearby electrophysiologist who used to be at Leipzig but is now at the nearby Halle Hospital. He's a VT expert and is interested and got the approvals from his hospital to go to Leipzig to do the MRI-guided VT procedures associated with our trial. So you can see how many things, as the dust settled after COVID, changed, and we had to reorganize everything and kind of restart the process of getting things all lined up. That's where we are now. So that process is moving forward. Another great example is at Amsterdam, the Amsterdam University Medical Center with Marco Götte. He is putting together one of the most impressive iCMR programs anywhere on the planet. That's a site now that will start a NorthStar study in April. It's all approved, 100% approved.
We just have to wait for some doctors to come back from vacation, and that thing will get started. And he's also submitted for VISABL-AFL, our FDA trial, and he submitted for VISABL-VT, the VT trial. And all those things will be happening there as he's also a center of excellence where people will come to get trained, not just in the real lab and see those real procedures but also in simulated environments that he and his PhD students have put together and all sorts of great things. So all that is coming together in Amsterdam. And what was holding us back there was the fact that during the pandemic, the lab he had spent years setting up was decommissioned and deconstructed. So he had to find a new lab.
And now that he's got access every other week to an MRI lab, then he got that lab upgraded by Siemens so that it could work with NorthStar. That was a nine-month process. And now he's got approval to begin those NorthStar procedures and following that VISABL-AFL and VISABL-VT. So each of these sites has these completely different reasons for these pausings, but they're all coming back on. And when you look at Amsterdam and the NorthStar study that they'll be doing atrial flutter cases in, he's committing to two-three procedures each day they have that lab. So imagine what happens when they have a dedicated iCMR lab, which is being built now in their brand new cardiology center, and they have all the indications available to them.
This is the kind of thing, the real value that we're setting ourselves up for, and these types of places see it. The last thing I'll mention about VT is once it does start, it's a significant deal. I shouldn't downplay VT. It's a serious condition, and it's a hard procedure. This is a really great opportunity for MRI to add a ton of value. Having one place do it and others to be able to go and visit and see a case and then bring that back to their own facility is going to be really valuable.
Thanks, Steve. Last question from me is just on the U.S. trial. So you've gotten all the approvals for Johns Hopkins. Can you give us any color around what the final hurdles are before you can begin recruitment and also any indication of what their average volumes they do out of that site for flutter at the moment is?
I don't have a verifiable value for the volume, so I can't say. But what I do know is that the electrophysiology team has already met last month to reach out in all of their referral networks to broaden and identify flutter patients to bring in. So our expectation is that more patients will flow through Johns Hopkins for this flutter trial than would normally even flow through Johns Hopkins for atrial flutter. And in terms of the dates that there are roadblocks, there's nothing standing in the way. Recruitment's actually technically underway now. What the EP group and the anesthesiologists are doing is getting together on March 12th to do a dry run-through so all of the EPs can see the lab and experience along with their anesthesiology partners. And then recruitment is expected to begin shortly thereafter.
As soon as we have a date that is solid where it's patient scheduled, I'll certainly let the market know.
Great. Thanks very much, Steve. Appreciate that.
Great. Thanks, Steve. And just last question submitted. What does the revenue ramp look like for the fourth quarters for the Q4 of 2024 based upon all of the outlined initiatives?
Yeah. So we're not in a position at this really early stage of commercialization to put out guidance in that respect. It's a little premature for us to do that. I look forward to establishing a consistent growth of revenue this year that then gives us a better platform to make some predictions perhaps for what next year is going to look like. But in general, what we're building here at Imricor is a long-term, highly valuable channel to sell our current and future products into. What I mean is that there's some CapEx involved in getting set up. And once they're established, we've got this 100% of the consumable revenue. All of these things are put together not for 2024 revenue. What we need to show in 2024 is momentum.
We have product roadmaps for the future of electrophysiology for atrial flutter, for ventricular tachycardia, for congenital heart disease ablations, for atrial fibrillation, and beyond the revenues of electrophysiology into other things like cardiac biopsies and other interventions. All of these hospitals that are investing in these iCMR labs are not doing this because of some niche opportunity to do a handful of atrial flutter cases each year. This is really a huge, significant deal that we are just at the early, early stages of tapping into. We are going to grow consistently this year, and then we are going to get to a cash flow break-even point as quickly as humanly possible. It's the number one priority that I quote for myself is to get us to a place where we can then grow unfettered by any type of financial restrictions.
Great. Thanks, Steve. That covers that nicely. Might just finish it up there with any closing remarks from yourself?
Yeah. I'd just like to say thanks, everyone, for joining us. I look forward, of course, as always, to catching up with you again soon but also keeping you informed as we drive this business forward through this exciting time. Our expectation is that there will be lots of little announcements that you'll see coming out that show you the progress that we're making across the things that I talked about today. I hope to keep your eye out for those. It's going to be a fun year. Thank you.
Great. Thanks, Steve. Thanks, all. If any other further questions, details are up on the screen or at the bottom of the announcements. Thanks, all, for joining. Cheers.