Thank you for standing by, and welcome to the ImpediMed Limited 2023 AGM. I would now like to hand the conference over to McGregor Grant. Please go ahead.
Thank you very much. Good morning, and welcome to the Annual General Meeting for ImpediMed for the 2023 financial year. My name is McGregor Grant, and I'm the Executive Chair and Interim CFO of ImpediMed. I wish to advise that today's AGM is being recorded, and the, and the recording will be made available on our website after the meeting. It is now just past 11 A.M., the nominated time for the meeting. I have been informed that a quorum is present. I note that the meeting has been validly constituted, and I declare the meeting open. The notice of meeting was made available to all registered shareholders within the notice period required. With your consent, I will take that document as read. Firstly, I would like to introduce your directors who are joining us today in person and online.
Christine Emmanuel-Donnelly, Non-Executive Director and Chair of the Remuneration Committee. Andrew Grant, Non-Executive Director, who joins us online from the company's offices in Carlsbad, and Janelle Delaney, Non-Executive Director. We also have our Company Secretary, Leanne Ralph, and representatives from the company's share register, Link Market Services, with us today. Our audit partner from Ernst & Young, Jennifer Barker, is also present online to respond to comments and questions in relation to the audit. There are three components to today, to today's meeting. First, I will provide you with an update, which will be followed by an opportunity for general business questions. We will then move on to the formal business of the meeting, where the items set out in the notice of the meeting will be put to shareholders. Our shareholders have the choice of participating in today's meeting in person, via our online webcast, and by phone.
Shareholders and proxy holders will have an opportunity to ask questions on each item of formal business. There will also be an opportunity for shareholders and proxy holders to ask general questions or make comments relating to the management of the company when we consider the 2023 financial report. There are two ways to ask a question: via your attendance in person here today and by submitting a question to the online platform. I will outline each of these options. We did not receive any questions to submit. Sorry, we did not receive any requests to submit questions by phone. Shareholders and proxy holders present in the room will be holding a yellow or blue card. If you need assistance, please ask one of the registry staff in the auditorium or the foyer.
To ask a question, please raise your card, and when indicated by me, identify yourself and ask your question. Thanks to online participants, the information I'm about to provide you is contained in the online meeting guide available in the Download section on your screen. You'll see at the bottom of your screen three boxes: Ask a question, Get a voting card, and Downloads. To ask a question, click the Ask a Question button. A box will appear with two sections as shown on the screen. Select from the drop-down menu the item of business to which your question relates, then type your question in the space provided. Online questions relevant to our business will be read aloud by our company secretary during the relevant item of business.
The order in which we address questions for each item of business will be first, questions from shareholders present in the room, then questions received via the online platform. If we receive multiple questions on the same topic, we may amalgamate them in the interests of time and clarity. Turning now to voting procedures. All items of business will be voted on by poll, and the representative of the company's share registry, Link Market Services, is the Returning Officer for this meeting. I declare the poll now open. If you are eligible to vote, there are two ways that you can cast your vote: in person or via the online platform. If you are present in the room, you will have a yellow voting card, which you will be asked to complete and hand to the registry staff at the appropriate time.
I will advise you when it is time to complete your voting card. If you need assistance, please ask one of the registry staff in the room or the foyer. If you have a yellow voting card and need to leave early, you may, if you wish, hand your completed voting card to the staff at the registration desk as you leave. Online voting. To cast your vote online, click the Get a Voting Card button, follow the prompts, and follow the prompts. You may cast your live vote at any time during the meeting. I will give you a five-minute warning before we close the online platform. You will see a red bar appearing across the top of the online platform with a countdown timer of how long you have remaining to cast your vote.
Where undirected proxies have been given to me as Chair of the meeting, I confirm, as set out in the notice of the meeting, that I will vote the undirected proxies in favor of all resolutions. I will vote all directed proxies given to me as Chair of the meeting in accordance with the directions provided. I've been advised that all proxies received for the meeting have been checked, and I declare them valid for voting. We will display on the screen the number of direct and proxy votes received prior to the meeting, when each resolution is put to the meeting and prior to asking for questions or comments. The final results of the voting will be released to the market as soon as they are available.
As announced to the ASX on 20 November 2023, Dr. Michael Seiden resigned as a director of the company, and therefore, we are withdrawing his election resolution from this meeting. I will now provide my address. As I'm sure you're aware, there have been a lot of changes at ImpediMed over the last 18 months, including most recently, the departure of the CEO and the CFO, announced last week. Accordingly, there will be no CEO presentation at this AGM. However, as part of my address, I will provide an overview of ImpediMed's operations and achievements during the 2023 financial year. I would like to take this opportunity to provide some context to the recent changes and why I believe they put the company in a stronger position to capitalize on the compelling commercial opportunity that SOZO and our unique bioimpedance technology offers.
At the general meeting held on 28th September this year, ImpediMed's shareholders voted in favor of replacing four of the company's directors with new directors. Subsequent to that vote, the two remaining non-executives who were part of ImpediMed's previous board have resigned. As a result, ImpediMed's board currently comprises the four directors who were elected at the general meeting. I think it's important to recognize that many of ImpediMed's shareholders felt that it was necessary to make changes at the board level. In July this year, the company received a notice from a number of experienced long-term private shareholders, requesting the company call a general meeting to consider a proposal to remove and replace four of the directors.
While I do not intend to go through a detailed description of all the events leading up to this September general meeting, the result of the meeting confirmed there was strong support for change. I would also like to comment on the recently announced departure of CEO, Rick Valencia, and CFO, Tim Cruickshank. As mentioned in the ASX announcement, having taken into consideration the strengths and capabilities of ImpediMed's core management team and the need to deliver robust execution, combined with tighter fiscal management, the board determined that new leadership was required to drive towards profitable growth and maximize the company's long-term potential. I have assumed the role of CFO, initially on an interim basis, and will be working with Tim over the next couple of months to ensure an orderly transition.
For those who do not know, I was the CFO for 12 years at the ASX-listed company, Nanosonics, and during my time with the business, annual revenue grew from AUD 2 million to AUD 166 million dollars. Like ImpediMed, Nanosonics' business model is based on generating revenue through the initial sale of capital equipment into healthcare settings, and then generating annuity revenue from the use of that capital equipment. So this is something that I have been living and breathing for the last 12 years. It is also with delight that we announce the appointment of Dr. Parmjot Bains as Managing Director and CEO. Again, initially on an interim basis. As well as being a medical doctor, Dr. Bains has an impeccable track record of setting and executing on commercial strategy, aligning team capabilities, driving public and private reimbursements, management of key accounts, implementing marketing programs, and accelerating sales.
Most recently, Parmjot was a senior executive at Pfizer, where she had several roles across the U.S., Asia, Middle East, and Australia. Prior to this, Dr. Bains held CEO, CEO roles at two life sciences companies and was a manager at the consulting firm, McKinsey & Company. The board believes Parmjot's breadth of experience across all of these areas will be invaluable in capitalizing on the opportunity available for SOZO in the United States, following the recent inclusion of bioimpedance spectroscopy in the NCCN guidelines and the subsequent nationwide expansion of private payer coverage. I would also like to emphasize that the board believes in our respective roles of CEO and CFO, Dr. Bains and I have the experience, capabilities, and passion to drive commercial outcomes, provide strong discipline over expenditure, and ensure strong corporate governance.
Importantly, we are firmly of the view that our appointment will ensure stability and continuity of the business's operations, ensuring we maximize the significant commercial opportunity for SOZO. It is the board's intention that the CEO and CFO positions will convert to permanent roles in three to six months' time. However, the board decided that it was prudent to make our initial appointments interim, so that in the event that they do not work out for any reason, the company is not exposed to any ongoing financial obligations associated with the appointment of new executives. As I mentioned earlier, the board currently comprises four recently elected directors, which will increase to five when Dr. Bains joins the company in early January.
The board has commenced the search process to identify potential directors to join the board, and expects to announce the appointment of one or two additional directors in the coming months. I would like to conclude this portion of my address by adding that the last eight weeks have provided the board with the opportunity to gain a deeper understanding of the potential of the business. As I previously indicated, there is a very capable core management team and a unique and distinctive product portfolio, which combine to create an exceptional commercial opportunity. The board is excited to be part of the ImpediMed story, and we look forward to supporting the business with a clear focus on achieving profitable growth. I'll now provide an overview of the financial and operational highlights for FY 2023, which shows why we are so excited by the commercial opportunity provided by this business.
The summary of the financial results is for FY 2023, is shown on this slide. The key metrics to note include: SOZO revenue in FY 2023 was $ 10.6 million, which was an increase of 7% compared with FY 2022. The net loss before tax for FY 2023 was $ 20.5 million, which compares with a net loss of $ 19.8 million in FY 2022. Free cash outflow of $ 24.1 million in FY 2023, compared with free cash outflow of $ 20.9 million in FY 2022. As of 30 June, the company was holding cash and cash equivalents of $ 45.7 million, compared with $ 40.7 million a year earlier. I note in the recent Q1 FY 2024 Appendix 4C announcement, the company reported cash and cash equivalents of-...
for $ 42.4 million as of 30 September 2023. As I mentioned earlier, there have been many changes in ImpediMed over the last 18 months, including three CEOs and the refreshing of the entire board. The current board is fully aware that these changes have been disruptive for the business and there is a need for stability. With these recent changes, the board is confident we now have the right leadership in place, and the company can look forward to a period of stability, allowing the management team to focus on the immediate objective of successfully commercializing the lymphedema opportunity. In March this year, the NCCN guidelines were updated to include bioimpedance spectroscopy, or BIS, as an objective measurement tool to identify early signs of lymphedema. These guidelines now recommend regular screening for all cancer survivors at risk of lymphedema, not just breast cancer patients.
Most significantly, ImpediMed has the only FDA-cleared BIS technology for the assessment of lymphedema. Inclusion in the NCCN Guidelines in Oncology for Survivorship will help establish BIS as the standard of care and will accelerate the adoption of ImpediMed's technology by private payers and providers. Inclusion in the NCCN Oncology Survivorship Guidelines also significantly expands the addressable market opportunity beyond breast cancer. There are 1.9 million new breast cancer diagnoses in the U.S. each year, and breast cancer-related lymphedema represents approximately 300,000 new cancer diagnoses in the U.S. each year, or 15% of all cancer diagnoses. However, based on the inclusion of BIS in the Cancer Survivorship guidelines, ImpediMed SOZO technology is relevant for over 1.1 million new cancer diagnoses in the U.S. each year, which equates to approximately 58% of all cancer diagnoses.
These 1.111 million cancer patients are treated at over 5,600 inpatient and outpatient facilities across the United States. In the recent Appendix 4C quarterly activities report, the company confirmed 12 positive medical policies have been published since inclusion of SOZO and BIS in the NCCN guidelines, including top five national payer, Cigna Healthcare and seven Blue Cross Blue Shield policies. There were three confirmed regional medical policy revisions pending publication, and 27 payers were providing silent coverage for CPT Code 93702. Significantly, on third November 2023, the company announced that United Healthcare, the largest private payer in the U.S., had amended its policy to state that CPT Code 93702 no longer required clinical review, effective from 1 January 2024, i.e., they will provide silent coverage.
During FY 2023, Michigan achieved critical mass, with over 97% of lives covered. Michigan is a key market with strong reimbursement rates. In Q1 FY 2024, the company signed a master services agreement with a large Michigan IDN, representing over 20 hospital systems. In this quarter, the company expects an additional three to six states will achieve critical mass, and a number of these states are considered to be key markets. In addition to securing expanded reimbursement coverage from private payers, we are also starting to see some momentum around patient testing. In November 2022, the company reported that the 500,000th patient assessment using SOZO had been conducted. By the time of the annual report, this number had increased to 650,000 assessments.
While we have yet to see a significant acceleration in the rate of testing since the announcement of the NCCN guideline inclusion, we do expect this to occur over time due to the greater number of eligible patients under the survivorship guidelines and greater reimbursement coverage, leading to greater adoption of routine monitoring. The number of new patients indicated in dark blue on the bars provides a useful lead indicator of future testing as they transition into routine follow-up and monitoring programs. It's useful to review the company's progress in terms of the number of SOZO systems sold. Since the launch of SOZO, a total of approximately 500 SOZO units have been sold in the U.S. and approximately a further 500 units sold in markets outside the U.S., predominantly in Australia.
During FY 2023, a total of 78 SOZO systems were sold in the U.S., including 34 systems sold in Q4 FY 2023. Recently, we reported an additional 19 units were sold in the U.S. in Q1 FY 2024. It's important to recognize a number of other achievements in FY 2023. These include obtaining FDA clearance for SOZO Pro, which is expected to be launched in calendar 2024. Note that the FDA clearance was recently modified to remove the contraindications for implantable pacing and cardioverter-defibrillator devices. Extending the clinical trial contract with AstraZeneca also occurred during FY 2023, although I note that revenue under this contract ended in quarter one, FY 2024. Raising a total of $30 million in capital via $20 million institutional placement announced in May 2023 , and a $ 10 million and $ 10 million via an oversubscribed share purchase plan announced in June.
Turning to the outlook for FY 2024 and beyond, the key focus is to drive ImpediMed towards profitable growth. There is a compelling opportunity with guidelines and expanding private payer coverage. There will be an increased internal focus on execution to achieve robust sales and commercial outcomes. Importantly, we will seek, we will seek to achieve growth with an appropriate cost structure and cost controls. The organization is in place to achieve profitable growth.... We have a very capable and motivated core management team. We have a distinctive product portfolio with an undeniable commercial opportunity, and we have a new board completely aligned with the interests of its shareholders. Finally, we have experienced new leadership focused on driving towards profitable growth. Thank you. I would now like to open the meeting to general business questions.
You'll have the opportunity to ask questions pertaining to each resolution when we get to the formal business of the meeting. I would like to remind you that this is a shareholder meeting, and therefore, only shareholders or proxy holders are able to ask questions or make comments at this meeting. I now invite questions or comments from shareholders or proxy holders present in the room. Please state your name and then ask your question.
Thank you. Ian Hyde, Ian Hyde, shareholder. The sales in the last however period of time you want to describe has been very ad hoc. We now have two states that have had critical mass for quite some time, with more coming on board. I now understand you guys have just been there for a couple of weeks, so there's probably a lot of things still to be formulated, but can you articulate what steps you're going to do to actually focus on these areas? Because Michigan by itself will turn the company into profitable, and then you've got Alabama, and you've got these new states coming in. So as one of the many long-suffering shareholders are waiting to see a buck be turned, what can you tell shareholders about what you're doing that's actually going to get this thing running, please?
Thanks, Ian. Obviously, the most significant thing we've done is we've appointed a new CEO who is highly experienced in driving sales in the healthcare field. So, I think that's very important. We do have a solid sales team. There was a position that was filled in Michigan that became vacant and has now since been refilled, and we are looking at the right mix of states and location of reps to focus on sales in those states where we do have critical mass.
You're right. We've been at it for just a few weeks, and so this, and there's been quite a bit going on over these few weeks, but at a macro level, that's the plan, and certainly with increased focus on those areas where we can quickly get sales, will be the goal.
Okay, thank you. Following on from that, it was mentioned that there was a contract that was supposedly substantial, which didn't execute last quarter and anticipated it coming into this quarter. Has that completed, or can you describe anything about that?
I don't have the specific details of that particular contract. So, but I do know that, you know, sales, of course, continuing into this quarter. Whether or not that was that particular contract, I just don't have that to hand.
Okay, thank you.
That's David Robinson, shareholder. Can you comment on, have you been able to make an assessment of, staff morale, subsequent to the, all the,
Change in CEO.
that we've had and how much, what churn there's been in staff, not just the sales staff that's been talked about in the U.S., but the back office staff as well?
Yeah. Yeah, thanks, David. Currently, we're very conscious of that issue, and last week, Christine and I were in the U.S. and spent a couple of days with the team there. We had a number of meetings with the team as a group. We met with all of the sales team, and we had a number of one-on-one meetings with each of the senior executives there. Clearly, this is a significant change, and there was some, a degree of surprise and shock.
But as we have talked about our vision for the business and they've had an opportunity to understand the experience and credentials that Parmjot will bring to the team and the discipline that we believe that she will bring to supporting that team to be successful. I believe that by the time Christine and I left there was a much greater degree of understanding of the change and an acceptance of that change. My sense is that the team are actually completely motivated to make this business as successful as possible. That is the driving force here, and our challenge has been to ensure that everyone has kept focused on that opportunity, and I believe that that is the case.
In terms of meeting with others around the business, so that's in the U.S.. Last week, Janelle and Andrew visited the offices in Brisbane, where there's some key people there, and obviously, they hadn't seen anybody since the board change and had an opportunity to spend a morning with Janelle and Andrew to understand the reasons for the change and to continue to be focused on the future. My sense is that it is the opportunity that people are focused on. And you know, when the four of us arrived in the U.S. after the last general meeting, there was concern that you know, people with three-headed monsters would come in.
But I think the businesses realized that we're all completely aligned with the employees within the company and with all our shareholders to and we're just focused on the success of the business and getting it to profitability in the shortest way possible.
Me again. Can we go over to the IP and protection of the company? It's something that the requisition shareholders were concerned about. Is there anything you say that you can inform us about how we're protecting our position since we are first mover and the advantages that we wanna lock in with the IP lawyer, et cetera?
Um, well-
No pressure.
Yes, look, it is. I've only been a short time that I've been with my feet under the desk, and we've clearly been busy doing lots of things. But it is a large portfolio. It's well managed. And there is a combination of, you know, patented as well as know-how, as well as kind of secrets that, trade secrets that the company has. So I'm pretty sure that over time, we can start to implement some real work around that portfolio as the business develops and grows. So I'm pretty confident of that. Yes.
Okay, thank you. Questions on STIs, or should we use that in the formal section? 'Cause it's just as a shareholder, $ 1.6 million of benefit paid out with company revenue increasing by $ 770,000 for the year does not seem to be aligned with shareholders' interests. So the quantum that was paid, how it was paid, how it was calculated, just seems a total disconnect.
I think that what has occurred in FY 2023 is what has occurred, and we are, as a board, reviewing the incentive programs and ensuring that they appropriately reflect the right balance between motivating the team and aligning the shareholder interests. The point is understood, but I don't think that there's any value in dwelling too much on that. It is what it is, and the changes that have occurred since are reflective of shareholder sentiment.
Ian Moore, shareholder. Something over the years, we've always got bugger all comment on is the sales staff, the quality of the sales staff, how they're organized. You know, how do they match up with other, you know, companies in a, in a similar situation? It's just been a complete void. I have no idea what's going on. So hence the question.
There is a plan to grow the size of the sales team right now. There are a number of new members of the team. I think there's one or two acquisitions. We've just approved another clinical specialist last week. The team are growing and motivated. I think this is one of the first challenges that Parmjot will have, is to come in, understand, shape the team, understand what additional support and resources they require, how better to monitor progress, how better to support, how to effectively sell the product. And I think these are all works in progress, actually. So look forward to providing you with more clarity on that the next time we report back.
But it is growing, and Christine and I did have a meeting with all of the sales team, so on screen, and then that meeting moved into a business type meeting, and, you know, they are getting stuck into it. So, but I do think that the support and experience that Parmjot will bring will help that team progress more clearly, more effectively. And, I think I look forward to providing, you know, when you meet with Parmjot and we talk at the next quarterly, we can perhaps provide a bit more information about that.
Thanks. So Peter Gregory is my name, a shareholder. McGregor, thanks very much for that update you shared with us earlier on. Just picking up on the question that was asked before about sales coverage. I've been somewhat confused about how the sales organization fits with what I believe is another organization called Customer Experience. I'm not quite sure what those different organizations do. And looking at the organization, where I see there's a lady called Lisa, who's in charge of sales, Joanne, who's in charge of strategy, and Shashi, as CRO, has some of the customer experience responsibility.
I understand there was a plan in place to recruit a chief customer officer, who I expected would take over all of those responsibilities and bring it together so that there was a real core focus on the customer and the customer's connection with the organization. Is that still in play?
The... I think all open positions remain open until we get until Parmjot is on board to review the requirements of the business. I think the chief customer experience officer there was a question mark that we had the need for that role when we came in looking at at the business and and the plans for for growing the team. So I won't say definitively no but it's certainly we're thinking about how how to more effectively structure the team. Currently there are essentially two groups. There's the sales team and then the clinical support team... That's what's in place right now. To the extent that that team needs to be enhanced in some way we we will review that.
But, that particular role you mentioned there is not currently being recruited for.
How many in each center?
It's about, I think there's nine sales reps at the moment. There might be 10 now, and a similar number on the clinical side.
Can I also ask you, with the role that you're carrying out on an interim basis and also the CEO on an interim basis, would you both be located in, is it Carlsbad?
Carlsbad.
Carlsbad, sorry.
San Diego. We plan to spend at least half of our time here with the team on the ground in the U.S. The interim arrangement is to allow both the company and ourselves to better understand the requirements. It is our intention for this to go forward on a permanent basis, but it does give us the opportunity to think about what is the best structure. And if we feel that there's a need to follow a different path, we'll do that, but we are going forward with that in mind. So at this stage, that is not the intention that we would be permanently located there. But if a different arrangement makes sense, then we would certainly consider that.
Okay, look, I appreciate the difficulties in doing that, but I also feel a little bit of concern that given the extraordinary amount of change that people have gone through, that having the two senior people who are there part-time could be a little uncomfortable.
Yeah, two things I'd say to that. One is, we recognize that this is the largest commercial opportunity for this business is in the U.S., and it needs to be run by people who are based in the U.S. And at the core, selling the clinical support capability in the U.S. It is also a global business, and well that's the ambition for the business and with other aspects to it, and we need to bear that in mind. The second point, which is just coming to mind as I'm looking out the window, is that this is like many businesses like this, is the people in the company are spread all over the country. This business actually runs online a lot anyway.
So, not as in actually physically being on the ground all the time, is not necessarily impeding to the business, you know, operating successfully. So I think that the way of operating has changed, and this business, I know, has a very significant proportion of the team who operate online, even when they live in Carlsbad. So there are times when they come together. But, I do believe that we can find the right balance.
Who's doing the CEO gig now?
Beg your pardon?
Who's doing the CEO function now?
Oh, right. Okay. I guess I'm acting in that role until Parmjot comes on board.
Catherine Kingston, shareholder. Just to follow on from a bit on Peter's question, would you consider moving the head office from Brisbane to Sydney or Melbourne to get staff?
We've made no decision about that. This period coming up is one of just investigation and understanding of what is the right thing for the business in terms of where resources are located, where there may be opportunities to operate or conduct certain activities in lower cost areas, that might include Australia. As you know, we have a team in Greece, who do all the software development work for the product. So it's not, it's not unimaginable that this multi sort of locational structure could continue.
And I just want to say thank you for the IP question, because my concern at the 4C call, when the IP was dismissed by the former CEO, so thank you for addressing that already. And my final question is just about continuous disclosure. The contraindication removal that you mentioned was actually granted by the FDA on the 17th of October, and I saw it on the website of the FDA on the 24th of October, and it wasn't announced until the 4C. And I just wonder how this plays into the continuous disclosure obligations.
So, I think in terms of continuous disclosure, we need to consider would that information have a material impact on the share price at that time? The view would have been taken that that was not the case. And clearly, it's commercially important, but strictly in the terms of ASX obligations, I don't believe that was the case.
Hi, McGregor. Vic Windeyer from the Australian Unity Future of Healthcare Fund, we're shareholders. Just wanted to ask around, so there's an interim role for six months where you're the CFO and currently interim CEO, till Parmjot comes on. What's your intention? Is your intention to stay as the CFO, in which case, you know, are you gonna resign as Chair, or are you intending to stay as Chair and appoint an interim CFO?
We're in a period of assessment or evaluation of what is the right thing for the business and for myself and for the board. As I mentioned, we're in the process of identifying two, one or two new directors to join the board, and depending on the outcome of that, we'll review what the right mix of roles and skills is for the business. So that may result on if, for example, if I continue as CFO, which is, you know, the intention at this stage, subject to, you know, to this period over the next three to six months... Then it would make sense for, clearly, for me not to continue as Chair.
This is an interim arrangement, and we are working through a process to add to the board and to make adjustments as we consider appropriate in the rest of the short period of time.
Okay. So, your intention really is to stay on as CFO, and then, I mean, surely you can't be the Chair and the CFO?
Correct. Correct. But we're going through a process of adding to the board, and that will result in changes as we go through that process.
Okay. And so do you mention that, Bains, Parmjot will come on? And if, why, why is her arrangement temporary as well?
Well, for the reasons we've said before, which just gives both us and her the opportunity to assess the business and decide whether or not continuing in that arrangement is the right thing. But I think it's important to understand, she is joining the business with the intention of this being a permanent arrangement. But, we've set it up as interim for now, to give all of us the opportunity to assess the situation, decide what's the right thing, and then once we've made that decision, we will confirm it.
Okay, thanks much.
The prior boards had a history of spending money without really getting anything for it. Can you give us any indication as to your approach and what programs or attitude or whatever, however you'd like to describe it, that you'll be using with the existing shareholder capital, so it's not wasted like the other five capital raisings that have gone before it? Thank you.
Yeah, thanks, Ian. Yeah, we, of course, that message is front and center for us. And it's important to understand that the cost base is just like with Nanosonics, it's a significant portion of the cost base, 70%-80% of it is labor. So, it's not so flexible, and we've got labor that we wanna add to the front of the business to drive revenue. We are taking a prudent approach in the way that we add costs, the way we manage costs, the way we see where costs should be incurred. So, yes, we're very cost conscious, but the most important thing that is going to see this business get to profitability is growing revenue, and that is getting the installed base of the SOZO systems up.
I think we need to be fronting focused and driving revenue. That's the way we're gonna get there.
Okay, so we'll watch this space.
Well, we will manage costs as prudently as we can.
Sure.
You know, we understand, we understand the sentiment as to why the changes have been made, and we're very conscious of that.
Okay, thank you.
There, there is solution at IDN, but I can't remember how certain.
I think it's 20, yeah.
You think that would be the number one driver? Well, through the 80%, yeah. The idea is to check that customer, see any of those, so how many people are on that task, both in the sales side and the people?
There are people on it, and I can't give you the specifics of that, but I know that there's a high awareness that that is, that's fertile ground where the company is focused. As I said, you know, I think we need to be careful not to... This is a term that Andrew described, which was sort of do a peanut butter approach and just try and spread resources everywhere, but be very targeted in the customers and states that we go after, in order to get, you know, to get the outcomes. As you mentioned earlier, you don't need a lot of SOZO units to, you know, get things moving, so a focused approach is gonna be key, I think.
But surely some of the, are some of these people, these nine people in sort of states which are, they're only paying in short term, which are not auspicious. That's probably making it.
The staff that are being added, those staff that are being added, are being added into those states where they are what we call key markets. So large markets, where, you know, a critical mass is anticipated to be achieved in the fairly short term. So the question then is, do we, you know, if let's say, for example, there were half a dozen states that were key, do we focus on only two or three of those for the short term and devote all the resources there? The detail of that is not something that I'm able to really speak to at this stage, and I think we need a few weeks and months before we can really articulate more clearly what our strategy in that area is.
Okay.
You said that it's a global business, and you understand that. The previous board basically said the U.S. and the rest of the world. So since you're Australians in Australia with an Australian company, are you actually going to start to put some focus here? Because we've probably got as many devices around here sold as what's in the U.S., but we're not making any money, and it just seems insane.
Point understood, and obviously, you know, the installed base here in Australia is very good. We need to look at what the business model here is and what it could be elsewhere as well. So we're on a journey figuring that out.
Understand, and I know it's a couple of days since you've been in, but it's, it's another focus for many shareholders.
Understand. Understood.
Is there anything you can share with us about any conversations or meetings, et cetera, with group master corporate IDN contracts? Because there's thousands of those with hospitals signed up with that, and we were told previously they're low-hanging fruit, but nothing's happened.
... So there are many of those. There, you're right, there are many master agreements signed up with customers. So the foundations are laid. It's about execution.
Okay, thank you.
Hello. Just building on the other gentleman's question before about the interim position. So just clarifying whether, as far as making things permanent, that will just be, will that be, sort, feedback sought from the shareholders or just decision taken by the board moving forward to the next AGM?
It'll be a decision that the board will make, and it'll be based on its assessment of Andrew's and my performance and our own assessments of what we see in the business and what we see as making sense.
Back to me. McGregor, are you—I think you probably partly answered this with your peanut butter analogy, but has the position previously has been the U.S. is the world. I expect that there could probably be some competitive products available in Europe, perhaps not delivering the same level of capability that SOZO does, but a sufficient level of performance. Has there been consideration given to entering the European market as a defensive mode as much as anything else?
I'm not aware of any discussions or plans specifically to approach the European market. And I'd say that's a function of not having had the time to really explore that. Clearly, the U.S. is the most important, significant opportunity for this business, so we must be successful there first. However, I think we can, we can walk and chew gum at the same time on that and a range of other topics. So, we need some more time to really before we can give you a better answer.
Similarly, the focus is still on lymphedema. The renal and heart conditions are there, but not the focus?
The oncology opportunity, particularly lymphedema, is front and center, and there has been, over the years, various amounts of activity and work and so on, done in relation to renal and heart issues. We're in the process of doing an audit of what has actually happened, where things stand, and what is the best way to move each of those things forward. But again, that's a, I'll have to come back to you when we've got clearer plans on that. But fair to say, though, we are and intend to continue to actively examine those opportunities, to fully understand what the size of the opportunity and how to approach it.
And then, once we've got a better understanding of that, we'll, we'll come back and, and make sure how it's done. Okay. Leanne, anything online?
We do. So John Hardy has two questions. The first one is: What changes are you planning to make to the existing strategy from the old management?
The core strategy of pursuing the lymphedema opportunity remains unchanged. We are focused on execution, we're focused on cost management, and we're focused on ensuring a sense of urgency is in the business and the way we execute on those opportunities. We are, as I said just now, we are exploring the opportunities in the other indications, and once we have completed our review of all of that, we'll be in a better position to report on any changes or additions to our strategic direction with those opportunities.
John, the second question is: What are the sales targets for the next four quarters, especially the January 2024 to March 2024 quarter?
That's a very good question, but we will not be providing any guidance in relation to sales targets.
We have a question from Andrew Walton: What steps are you putting in place to ensure the significant changes to the board and senior management do not impede new business momentum confidence from prospective customers?
Thank you. So clearly, there has been some change, and there is an element of disruption that comes with that. But my involvement as CFO and Parmjot's appointment, effective beginning of January, goes a long way to ensuring that any disruption is minimized. This is a period of time of the year anyway, with Thanksgiving last week, Christmas coming up, where things tend to slow down anyway. The business is, as I said, there is a strong core management team. They are very motivated by the opportunity that this business presents. Things are continuing. Hiring is continuing, teams are out there selling. Things, you know, things are continuing to progress. So we believe that the disruption, if any, has been minimized.
We have another question or two questions from Paul Bourgeaud. First question is: Are you able to reassure shareholders that the motivation behind a recent board spill was not to sell the business in the short term, but to fully realize the potential of the business over the long term?
Yes, I can.
Paul, second question. With regard to stabilizing and building a strong base for the share price, can you make a commitment to provide the market with regular announcements and updates and keep the market and shareholders informed?
Yes, I can do that, too. And of course, we will do that as part of our obligations from a ASX perspective. But in terms of information that is commercially relevant to shareholders, we will provide ongoing updates.
We have a question from Jane Strang: Does ImpediMed need U.S. representation on the board? For example, recent Blue Cross Blue Shield changes sounded like a surprise. Have we lost a lot of corporate knowledge with staff exits? Can we please have regular updates in 2024 from our new CEO, financial and break-even operational and IT. Glad to hear that renal and cardiac opportunities will be reviewed. Thank you.
I'll take that as a comment, although, of course, we will continue to provide updates throughout the year.
We have no further questions.
Okay. Thank you. Thank you. Let me catch up with my, my notes here. So thank you, ladies and gentlemen, for your questions and comments. We will now move to the formal business of the meeting. The first item of notified business is to receive and consider the financial report, the director's report, and the auditor's report for the year ended June 30, 2023. There's no formal resolution required for this item, but I invite shareholders to ask questions or make a comment on the financial report or the reports of the directors and auditors. Ask questions or make a comment of the management of the company. That may be difficult, as we do not have... I suppose that would be me.
Ask any questions of the auditor relevant to the conduct of the auditor, or the audit, preparation and contents of the auditor's report, accounting policies adopted by the company in relation to the preparation of the financial statements, or the independence of the auditor in relation to the conduct of the audit. I will now take questions on this item of business. Are there any questions from shareholders or proxyholders in there? Peter.
McGregor, I refer to the big audit matter of dealing with revenue. Are you satisfied that the way that revenue, equipment, and software is being appropriately dealt with, and that the revenue and costs are aligned?
I have been having a discussion with the finance team and with EY about the company's revenue recognition policy or its application of the income recognition policy, IFRS 15, I think it is. That is something that is on ongoing review. I'm satisfied for the purposes of the financial statements that have just been published, but the company will continue to review. I'm not aware of there being any major issues, but that's something we will monitor ongoing. It's an ongoing discussion with everyone. It clearly is. It's a high risk. It's a high-risk area for the auditors, and 'cause it's an important part of the business, and certainly it's an issue that we dealt with at Nanosonics. I'm familiar with those issues.
Are there any other further questions on this item?
We have no questions online. Thank you.
I'll now move to the next item of business, the remuneration report. I put the resolution to the meeting as displayed on the screen. The director and proxy votes for this item received prior to the meeting are now showing on the screen. I'll now take questions on this item of business. Any questions in the room?
Obviously, some questions are irrelevant, given most of the people on the Rem Report aren't there anymore. There was previously a facility where 60% of the non-executive directors' remuneration was paid in equity. What's the board's position on that, given apart from Ms. Emmanuel-Donnelly, no one up there has shares in the company?
My understanding is that the decision to, for the former board members to take their remuneration partly in cash and partly in equity, was to address two issues. One was the need for those directors to have a shareholding in the business, and it was a way of ensuring that occurred. But also, it was a message that the board at the time wanted to give around our cash flow conservatives, if you like. Since that time, the company's, of course, raised more capital, and we've taken the decision that the board fees will be paid in cash, and each of us have the opportunity to acquire shares using that cash. This is the approach that we've taken.
Thank you.
Any more questions?
We have no questions online.
As the next item of business concerns me, I'll turn the meeting over to Christine Emmanuel-Donnelly, who is the Chair of our Remuneration Committee.
Okay, so this item is for the re-election of Mr. McGregor Grant as a director. I've put the resolution to the meeting as displayed on the screen. The direct and proxy votes for this item received prior to the meeting are now shown on the screen, and before I invite questions or comments, McGregor will say a few words in support of his re-election.
Thanks, Christine. As I mentioned earlier, I joined the board in September 2023, following the general meeting, and at our first board meeting, I was appointed as chair of the board. I became a shareholder of ImpediMed many years ago and have followed the company's progress since that time. More so now than ever, I'm convinced of the commercial opportunity available to SOZO, particularly since the significant change to the NCCN guidelines earlier this year. It is this conviction that was an important factor in my decision to stand for election to the board. I believe my experience in various roles in medical device and healthcare industries located in Australia and the United States provides me with highly relevant commercial experience. Importantly, my enthusiasm for this business has only increased as I see how relevant my experience at Nanosonics is to the challenges and opportunities facing ImpediMed.
It is a privilege to be a director of your company, and as many of you would have experienced, it is a responsibility I take very seriously. I thank you for your support in re-electing me as a director.
So, I'll now take questions on this item of business. First, I invite questions or comments from shareholders or proxy holders present in the room.
McGregor, we're in a rather unusual situation of having directors before us who were appointed to the board without going through the normal recruitment process that would have been in place. The normal due diligence, it's come about purely because of the, you know, set of circumstances that happened. To give shareholders a better understanding and to be consistent, I think, with the ASX corporate governance guidelines and recommendations, can you commit to providing a board skills matrix in a very short space of time so that shareholders do have a better understanding of the skills that are required by directors and the directors that contribute those skills?
Thanks, Andrew. It's a very important point. We are in—as I've said—we are in the process of identifying one or two new directors to join the board. In going through that process, we're very mindful of the skills that are appropriate for this business. When we make those decisions and announce those appointments, we will demonstrate to shareholders through the board skills matrix that we'll publish in the corporate governance statement. Hopefully through that, you will see how the people that we hire, who, sorry, join the board, match the skills requirements of the business. It's not something I want to do in sort of public forum like this, but we will go through that process, and I'm convinced that we will find the right skills to join the board.
The interest levels of the people that I've spoken to are very high, and I'm confident we will find really well-suiting people to join.
Just on that, the corporate governance statement, I think, is normally only published once a year. Would you then be able to provide that at the point of appointing new directors?
We will publish the background and skills of those directors as we appoint them. In terms of formally putting out a skills matrix at that time, I don't believe we'll do that.
Okay, and just another question. You're currently chair of the board and also chair of the audit committee-
Yeah.
- which is, according to the board charter, is not appropriate.
Right.
But I think it's probably something we turn a blind eye to, given the circumstances. But now, as CFO, it's absolutely unacceptable that you have that role.
Yeah. We thank you. We discussed that, and we will be addressing that shortly.
Yeah.
Yeah, so it's Victor again. I'd just like to ask Christine, because, as McGregor, and I think the company's lucky to have McGregor, if he's willing to step in as CFO on an ongoing basis, but as he manages this transition, as sort of, I think, as head of the remuneration component, you know, there's a high-risk period in there where McGregor comes into the seat and installs himself in the business, and we get going again, and we start making progress, and then, you know, you've got a negotiation again in six months' time. So how is the board managing that risk, around that?
Very carefully. Now, we're very, very conscious of some potential conflict there, so we're all being very careful about it. It's a, you know, scenario that is not a common one, but I guess in the same way, we're not here as directors in that common, usual way, so we're just gonna have to deal with it appropriately. We're conscious of the potential for conflict, and we'll manage it appropriately.
So, I mean, is there anything that's been put in place in relation to the interim contracts? And, you know, should they go forward, you know, is there any sort of established basis for how that looks or, or what's your direction?
Yeah. So at the moment, they are contract. There's no STI, LTI component, et cetera, related to the interim contract. And as we're looking at the entire package for the organization, the STI, LTI framework for the entire company, so we will be looking at that in these two roles if they become permanent, as we expect them to. So it'll be... It will be considered along with the package that the organization as a whole is going to need to, you know, to develop a right-sized kind of policy, I guess. Yeah.
Thank you.
Okay, any online questions, Leanne?
We have no online questions for this item.
Okay, thank you. I'll now hand the meeting back to McGregor.
Thank you, Christine. The final item of business concerns the re-election of Christine Emmanuel-Donnelly as a director. I put the resolution to the meeting as shown on the screen. The direct and proxy votes for this item received prior to this meeting are now shown on the screen. Before I invite questions or comments, Christine will say a few words in support of her re-election.
Okay. So firstly, thank you for entrusting me with this role. It's been a baptism of fire, I think, more so than anything else. But for these last two months, I think the board has worked incredibly hard to align and to make decisions that we believe are in the interest of the shareholders and propose to keep doing that. So I now request your confidence for the next three years. My background, I've spent mostly in research, development, intellectual property, both overseas and Australia, and I've covered most of the parts of that IP and commercialization ecosystem across that ecosystem. So I've developed from managing intellectual property with CSIRO, the largest IP portfolio, homegrown in Australia, to managing commercialization and to managing the equity portfolio, which are all the startups and spin-outs from that organization.
So I do have a very clear idea of how IP can be developed and used to deliver outcomes for business. That's my specialty. Everyone on the board brings their own specialty. I'm very humbled to be on the board with such good experience alongside. I'm also bringing experience from the other board roles that I'm currently on as part of an audit and risk committee on one and Rem Committee on the other. And this experience is really around small to medium medical device companies that have grown from Australian innovation to cement their position globally. That's what drives my passion, and I'm hopefully, you know, gonna be involved in this business that I see going the same way. There's a huge engaged workforce that is in ImpediMed.
There are very personal alignments with the impact that this business can create. So, I'm hoping that that personal passion by the employees, but also from my side, can be cemented as we go forward. So thank you.
Thank you, Christine. Well, I'd like to... Are there any questions from the room and online?
We have no questions online.
Okay, thank you. Ladies and gentlemen, this concludes the formalities of the meeting. I now ask that you complete your voting card, if you have not already done so, and Link will collect these cards. For those attending online, you should now submit your votes. The poll will remain open for a further five minutes to allow you to complete your voting on your electronic voting card, with the poll closing after that time. As I mentioned earlier, the results of the meeting will be announced to the ASX as soon as they've been counted and verified. I now declare this meeting closed. Thank you.