Announcement PDF IMAGION BIOSYSTEMS LIMITED ABN: 42 616 305 027 2023 Annual Report - Year Ended 31 December 2023 1 Letter from the Chairman Dear Shareholders, In 2023 Imagion Biosystems completed the world’s first clinical study for a molecular MRI imaging agent. Our novel MagSense® technology has now been shown in actual human patients to have the potential to provide radiologists with valuable information to aid in the diagnosis and staging of breast cancer. Additionally, we made substantive progress in the development of two additional imaging agents, one for prostate cancer and one for ovarian cancer, with both now ready to be advanced towards clinical studies. It is clear that our MagSense® nanoparticle technology is a platform that can change the way we look at cancer. Unfortunately, that success has been overshadowed by the constraints of the capital markets. We have taken aggressive steps to cut costs and restructure the organization and with the support of Mercer Street Capital are now positioned to move forward to realise the value of the technology we have developed. I want to thank our shareholders for their patience and for your continued support. I look forward to updating you on our progress. Robert Proulx Executive Chairman Imagion Biosystems Limited 2 Imagion Biosystems Limited Directors' Report For the year ended 31 December 2023 Directors' Report The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity') consisting of Imagion Biosystems Limited (referred to hereafter as the 'Company' or 'parent entity' or ‘Imagion’) and the entities it controlled at the end of, or during the year ended 31 December 2023. Directors The following persons were directors of Imagion Biosystems Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Mr Robert Proulx Executive Chair Robert has been Chair of Imagion Biosystems since February 2015. Previous employment experience includes President / General Manager for Silicon Biosystems and a career in marketing and sales management with more than 25 years experience in the computer, life science and medical diagnostics industries. Some of Robert's other relevant experience include: Vice President Marketing and Sales for Nanogen Inc.; Senior Vice President of Marketing and Business Development at Gene Logic; and General Manager, Life Sciences at IGEN International Inc. Robert holds an M.A. and B.A. from The State University of New York at Albany and an Executive MBA from the Penn State Smeal College of Business. Mr Michael Harsh Non-Executive Director Michael is a co-founder and Chief Product Officer of Terapede Systems, a digital X-ray startup that focuses on developing an ultra-high resolution medical flat panel X-ray detector. Prior to co-founding Terapede Systems in 2015, Mr. Harsh had a 36-year long career with General Electric, including serving as Global Technology Leader – Imaging Technologies at the GE Global Research Center and culminating with him serving as Vice President and Chief Technology of GE Healthcare. Additionally, he serves on the boards of directors of Endra Life Sciences (NASDAQ: NDRA), EmOpti Inc. and Compute Health Acquisition Corp (NYSE:CPUH). He had previously served as a director for FloDesign Sonics until its acquisition by MilliporeSigma, a division of the Merck Group. Mr. Harsh is a graduate of Marquette University, where he earned a bachelor’s degree in Electrical Engineering. He holds numerous U.S. patents in the field of medical imaging and instrumentation. In 2008, Mr. Harsh was elected to the American Institute for Medical and Biological Engineering College of Fellows for his significant contributions to the medical and biological engineering field. Mr David Ludvigson Non-Executive Director David is currently a director (was formerly President & CEO) af Nanomix, a point-of-care diagnostic medical device company. David is a financial and operating executive with over 35 years of international experience in life sciences and technology companies including Biogen (formerly IDEC Pharmaceuticals), Matrix Pharmaceutical, Nanogen, and MIPS Computer Systems. His experience over 15 years in the diagnostics arena has led numerous new product efforts from concept to market launch. David has conducted many successful strategic transactions including multiple acquisitions, corporate partnerships, technology and intellectual property licensing agreements, and OEM relationships and his financing experience includes venture capital, corporate, mezzanine, lease, bank credit line, LBO, IPO and secondary public sources. 3 Imagion Biosystems Limited Directors' Report For the year ended 31 December 2023 Ms Jovanka Naumoska Non-Executive Director Jovanka is an Australian-qualified corporate lawyer with board-level experience in legal and regulatory issues pertaining to medical imaging technology. Jovanka was formerly a nonexecutive director of Security Matters Limited (ASX:SMX) and serves Australian scientific development organisations in an expert capacity on matters relating to corporate law, business operations, intellectual property development and regulatory compliance. Jovanka resigned from the consolidated entity on 2 May 2024. Mr Mark Van Asten Non-Executive Director Mark has over 30 years of experience in the medical diagnostics and life sciences industry. Much of this time has been in international business development, strategic planning and introduction of new technology. Through Diagnostic Technology, a company he founded, he has been responsible for the development and introduction of a number of innovative technology platforms and technologies into mainstream healthcare use, including HPV DNA testing for cervical cancer screening and the molecular monitoring for both viral infections and cancer treatments. He holds an Adjunct Senior Lectures position at the School of Biotechnology and Biomolecular Science, University of NSW where he has collaborated on a number of research projects related to biosynthetic pathways in bacteria. Ms Dianne Angus Non-Executive Director Dianne has worked as a senior executive within the biotechnology, medtech, agritech and healthcare sectors for over twenty years and currently serves as non-executive Chair of Argenica Therapeutics Limited (ASX: AGN) and non-executive director of Neuren Pharmaceuticals Limited (ASX: NEU) and Cyclopharm Limited (ASX:CYC) as well as being a member of the Deakin University Council. She has built competitive and differentiated product portfolios, from investment in innovative research and product development to commercialisation and market entry. Dianne has created many global industry partnerships to accelerate asset development, financing and provide reputational validation & endorsement. With twenty years’ experience in ASX and NASDAQ listed companies, Dianne has expertise in corporate governance, capital raising and stakeholder engagement within the listed capital market sector. Dianne holds a B.Sc. (Ed), B.Sc. (Hons), M.(Biotechnology) and is a registered patent & trade mark attorney. Dianne resigned from the consolidated entity on 2 May 2024. Dr Isaac Bright Managing Director Isaac was appointed as Managing Director on 14 November 2023 after joining Imagion as Chief Executive Officer on 20 June 2023. Isaac resigned from the consolidated entity on 15 January 2024. 4 Imagion Biosystems Limited Directors' Report For the year ended 31 December 2023 Company Secretary Mr Geoff Hollis Company Secretary Prior to joining Imagion in December 2020 Geoff spent over 10 years in ASX listed companies as CFO and Company Secretary. Geoff commenced his career with almost 10 years at leading Melbourne based accounting and business advisory firm, Pitcher Partners. Geoff is experienced in capital and debt raisings along with ongoing investor relations function in addition to other CFO and Company Secretarial experience required for an ASX listed entity on a growth journey. Geoff is also a member of the Corporate Governance Institute and Chartered Accountants Australia and New Zealand. Geoff resigned from the consolidated entity effective 10 May 2024. Principal activities During the financial year the principal continuing activities of the consolidated entity consisted of: Nanotechnology; Biotechnology; Cancer Diagnostics; and Medical Imaging using Magnetic Resonance and Superparamagnetic Relaxometry. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Review of operations Operating loss for the year of $12,473,916 (2022: $9,807,208 loss) was materially in line with expectations and increased from the prior year mainly due to increased expenditure in relation to preparation of the HER2 Breast Cancer imaging agent for IND filing, refer below for further discussion. Revenue and other income Total revenue increased by $1,899,831 to $4,970,756 (2022: $3,070,925). Revenue and Other Income comprised income generated through sales of nanoparticles manufactured by the consolidated entity to customers. Total receipts from sales of super-paramagnetic iron oxide nanoparticles over the year increased by $609,508 to $1,082,937 (2022: $473,429). These sales were undertaken directly through the consolidated entity and includes sales to New Phase, an Israeli-based company, for the exploratory use of their SaNP hyperthermia treatment as well as other sales to another key customer. The consolidated entity received its 2022 research and development tax incentive claim $3,534,075 during the year. This was materially higher than the prior claim of $2,500,966 reflecting increased activity of the business during 2022. Operating expenses Total expenses increased by $4,566,539 to $17,444,672 (2022: $12,878,133). Included in the increase are noncash related costs (share based payments, depreciation, foreign exchange loss, fair value loss and notional interest expenses) of $2,372,935 (2022: $1,936,981). Research and development expenses Research and development expenses increased by $1,634,741 to $5,250,592 (2022: $3,615,851). The increase is mainly due to expenses relating to the MagSense® HER2 Breast Cancer program. Phase 1 study expenses reduced as the study was completed and closed in the second-half of the year but there were increases in other costs as the consolidated entity proceeded towards an IND submission to support a phase 2 study in the United States. Costs were associated with the commencement of collecting additional non clinical and clinical data (pharmacokinetics); and commencement of manufacturing additional MagSense® HER2 imaging agent material to support a US Phase 2 study. 5 Imagion Biosystems Limited Directors' Report For the year ended 31 December 2023 Employment expenses Employment expenses increased by $1,376,192 to $6,239,698 (2022: $4,863,506). In addition to salary increases and promotions in the ordinary course of business the consolidated entity in 2022 increased its organisational capabilities with key hires including: clinical operations employees to increase clinical operations capabilities related to the consolidated entity’s plans for the next phase of clinical development and; operations employees to improve manufacturing and quality capabilities in support of clinical development plans and external sales; establishing a quality team and a supporting employee to support clinical operations and manufacturing. These 2022 hires predominantly accounted for the increase in costs for the full 2023 fiscal-year. In October and then again in December of 2023 the consolidated entity reduced its workforce significantly, these reductions, in addition to the resignation of former CEO Dr. Isaac Bright in January 2024, will result in significantly reduced employment expenses in 2024. Liquidity The consolidated entity had cash at 31 December 2023 of $0.23 million. In 2024 up to the date of this report the consolidated entity has received $0.9 million in nanoparticle revenues. The consolidated entity expects to receive its research and development tax incentive of $0.4 million in the second quarter of 2024. The consolidated entity has been pursuing a wide range of strategic financial and restructuring options while undertaking significant cost reduction measures since October 2023. The cost reduction measures include a significantly reduced workforce, no director fees and cessation of nanoparticle manufacturing whilst the consolidated entity seeks a pathway to capitalization. At this time, the expressions of interest ranging from refinancing, partnering or acquisition have yet to materialize to change the consolidated entity's financial position. As referred to in note 1(b) the consolidated entity is in negotiation with Mercer for further funding up to $2.5 million, including receiving immediate funding of $220,000. If the Mercer negotiations don't result in a positive outcome or no partnering or acquisition offers are resolved, the Company will need to cease operation. Clinical development MagSense® HER2 Breast Cancer Program The MagSense® HER2 imaging agent provides potentially new information for radiologists when assessing HER2 breast cancer which is not available through conventional imaging methods. During the year the consolidated entity announced that an independent blinded review by a panel of expert breast cancer radiologists corroborated the consolidated entity's previously reported positive findings from its MagSense® HER2 breast cancer phase 1 study. The radiologists ascertained that the MagSense® HER2 imaging agent produces a change in Magnetic Resonance Image (MRI) contrast and that the contrast in nodes highly suspicious for tumour is distinctly different from the MRI contrast seen in non-involved nodes. The independent reviews are consistent with the consolidated entity's previous assertion that the MagSense® imaging agent potentially provides new information for the radiologist not available through conventional methods, like ultrasound, and has the potential to aid in the clinical assessment of nodal metastasis in HER2 positive breast cancer. As of December 2023, the consolidated entity had successfully completed its first-in-human phase 1 study for the MagSense® HER2 imaging agent and reported results at a global breast cancer forum. The consolidated entity anticipates it will need an additional ~$1.0 million of capital to continue the progression of the cancer imaging agent towards an IND submission for the next phase of clinical testing. At present there is no activity on the Breast Cancer Program due to the current cash and funding limitations. 6 Imagion Biosystems Limited Directors' Report For the year ended 31 December 2023 MagSense® Prostate Cancer Program The prostate cancer project continued during the year with the consolidated entity securing a second grant of $50,000 under the Entrepreneurs’ Programme of the Australian Government Department of Industry, Science, Energy and Resources. The consolidated entity used the first grant in 2021 to support its early preclinical research efforts for prostate cancer detection in collaboration with researchers at Monash University. The second grant is being used to continued that program, building on the preclinical results that were reported at the World Molecular Imaging Conference in September 2022. In addition to researching prostate cancer the researchers at Monash University are also looking at the use of the consolidated entity's targeted nanoparticle formulation to detect other forms of cancer that express the target antigen, such as triple negative breast cancer. The prostate cancer imaging agent is now ready pre IND-enabling studies which will only occur when the consolidated entity is appropriately resourced. MagSense® Ovarian Cancer Program The ovarian cancer project continued during the year with the consolidated entity presenting two scientific posters related to the consolidated entity's ovarian cancer detection program at the Annual Association of Cancer Research in Florida. The ovarian cancer imaging agent is now ready pre IND-enabling studies which will only occur when the consolidated en ty is appropriately resourced. MagSense® Brain Cancer Program In 2021 the consolidated entity initiated a collaboration with Patrys Limited (ASX: PAB) to explore combining the consolidated entity’s MagSense® nanoparticle technology with Patrys’ DNA-targeting molecules to develop an imaging agent for hard-to-diagnose cancers such as brain cancer. In 2023 the consolidate entity and Patrys jointly expanded the collaboration through and engagement with The University of Sydney to further explore the potential for a MagSense® imaging agent to detect brain cancers using the University of Sydney’s expertise in models of Glioblastoma Multiforme. The results of the studies were received in early 2024 and indicate that further development and optimization of the imaging agent is required. No further work on this program is planned until funding is available. MagSense® Pancreatic Cancer Program In August 2023, a Memorandum of Understanding (MOU) was executed with Prestige Biopharma, a biopharmaceutical company specializing in innovative antibody therapies. Together, Imagion and Prestige Biopharma will jointly pursue the development of the world’s first non-invasive early detection diagnosis and staging platform for pancreatic cancer. Combining MagSense® molecular MRI and Prestige Biopharma’s PAUFbased antibody drug, PBP1510, the partnership aims to accelerate accurate diagnosis and therapeutic intervention. The MOU covers preclinical feasibility research that should be completed in the short-term. Should the research produce favourable results, both companies may then agree to expand the collaboration to further advance the technologies. Outlook Refer to the significant changes in state of affairs and matters subsequent to the end of the financial year below. Significant changes in state of affairs The consolidated entity has significantly reduced staff and paused all research and development activities due to a lack of funding. Before undertaking any further development efforts the company will need sufficient capital resources to rebuild staff and/or secure contractors. Without an inflow of capital the consolidated entity has material uncertainty as to whether the consolidated entity will continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the Annual Report. Refer to note 1(b) for further discussion in relation to going concern considerations. 7 Imagion Biosystems Limited Directors' Report For the year ended 31 December 2023 Matters subsequent to the end of the financial year On 15 January 2024 the consolidated entity's former CEO, Dr Isaac Bright, resigned with immediate effect. Mr Bob Proulx, the consolidated entity's executive chairman has assumed CEO duties on an interim basis. On 12 March 2024 the consolidated entity executed a recapture agreement with its landlord, BRE-BMR Oberlin LP to effectively terminate the consolidated entity's premises lease. Subsequently on 30 April 2024 the consolidated entity vacated its premises in accordance with the Recapture Agreement. The consolidated entity is currently operating virtually. In February March and April 2024 the consolidated entity further reduced operating expenses through further staff reductions and has taken steps to reduce other operating costs going forward. On 9 May 2024 the consolidated entity and Mercer executed a drawdown notice for a subsequent investment amount of $220,000 to be utilised for immediate working capital expenses. The effective closing date pursuant to the Convertible Securities Agreement is expected to be 16 May 2024. The consolidated entity has received a further $0.9 million of nanoparticle revenue in the first four months of 2024, these funds have been used to remunerate staff and to meet essential business expenses. As at the date of this report no material further revenues have been secured. The consolidated entity is not anticipating any further material nanoparticle revenues in the short-term. On 2 May 2024 Dianne Angus and Jovanka Naumoska resigned as directors with immediate effect. Given the lack of liquidity and staff reductions the consolidated entity has paused all other research and development activities including proceeding towards an IND filing for its MagSense HER2 Breast Cancer program. Likely developments and expected results of operations The consolidated entity has significantly reduced staff and paused all research and development activities due to a lack of funding. Before undertaking any further development efforts the company will need sufficient capital resources to rebuild staff and/or secure contractors. Without an inflow of capital the consolidated entity has material uncertainty as to whether the consolidated entity will continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the Annual Report. Refer to note 1(b) for further discussion in relation to going concern considerations. Environmental regulation The Consolidated Entity is not subject to any significant environment regulation under Australian Commonwealth or State Law. Information on Directors Name and title: Qualifications: Expertise and experience: Other current directorships: Former directorships (last 3 years): Membership of committees: Interest in shares: Interest in options: Interest in rights: Contractual rights to shares: Mr Robert Proulx (Executive Chair) - Master of Arts and Bachelor of Arts, The State University of New York at Albany; - Executive Master of Business Administration, Penn State Smeal College of Business. Robert has over 25 years’ experience bringing life science and medical device products through development and commercialisation and joined the predecessor company, Senior Scientific as President and Chief Operating Officer. None None None 154,082 shares 150,000 options Nil Nil 8 Imagion Biosystems Limited Directors' Report For the year ended 31 December 2023 Name and title: Qualifications: Expertise and experience: Other current directorships: Former directorships (last 3 years): Membership of committees: Interest in shares: Interest in options: Interest in rights: Contractual rights to shares: Name and title: Qualifications: Expertise and experience: Other current directorships: Former directorships (last 3 years): Membership of committees: Interest in shares: Interest in options: Interest in rights: Contractual rights to shares: Mr Michael Harsh (Non-Executive Director) - Bachelor’s degree in Electrical Engineering, Marquette University With over 36 years’ service to GE, mostly with GE Healthcare on his résumé, Michael Harsh is extraordinarily fluent in the complex processes of transforming high-potential platform technologies into successful medical diagnostic products. ENDRA Life Sciences (2016 – present); EmOpti, Inc. (2015 – present); Compute Health Acquisition Corp (2021-present). NociMed (2019-2020). Audit and Risk Committee, Remuneration and Nomination Committee 6,500 shares 12,500 options Nil Nil Mr David Ludvigson (Non-Executive Director) - Bachelor of Science in Accounting, University of Illinois - Masters in Accounting Science, University of Illinois. David is a director (formerly President and CEO) of Nanomix, Inc, a mobile diagnostics company. Previously, David held executive leadership positions with Nanogen, Matrix Pharmaceutical, IDEC Pharmaceuticals, MIPS Computer Systems, and other high-tech companies. He began his career at Price Waterhouse. China Stem Cells Ltd (2010-present); Nanōmix Inc. (2014-present); One BioMed PTE Ltd (2021-present). None Audit and Risk Committee, Disclosure Committee 13,625 shares 12,500 options Nil Nil 9 Imagion Biosystems Limited Directors' Report For the year ended 31 December 2023 Name and title: Qualifications: Expertise and experience: Other current directorships: Former directorships (last 3 years): Membership of committees: Interest in shares: Interest in options: Interest in rights: Contractual rights to shares: Name and title: Qualifications: Expertise and experience: Other current directorships: Former directorships (last 3 years): Membership of committees: Interest in shares: Interest in options: Interest in rights: Contractual rights to shares: Ms Jovanka Naumoska (Non-Executive Director) - Bachelor of Science degree, University of Wollongong; - Bachelor of Law degree and the Graduate Diploma in Legal Practice, University of Wollongong; -Graduate Diploma in Applied Corporate Governance, Governance Institute of Australia. Jovanka is an Australian-qualified corporate lawyer with board-level experience in legal and regulatory issues pertaining to medical imaging technology. Jovanka serves Australian scientific development organisations in an expert capacity on matters relating to corporate law, business operations, intellectual property development and regulatory compliance. None Security Matters Limited; National Accreditation Authority for Translators and Interpreters Disclosure Committee 7,313 shares 12,500 options Nil Nil Mr Mark Van Asten (Non-Executive Director) - Bachelor of Science, University of New South Wales As the Managing Director and founder of Diagnostic Technology Pty Ltd, Mark has been responsible for the development, introduction, and mainstream healthcare adoption of technologies throughout Australia and Asia. Mark has also held several director-level business development positions with US and Australian diagnostics corporations. None Cimtech Limited Audit and Risk Committee, Remuneration and Nomination Committee 15,329 shares 12,500 options Nil Nil 10 Imagion Biosystems Limited Directors' Report For the year ended 31 December 2023 Name and title: Qualifications: Ms Dianne Angus (Non-Executive Director) - Bachelor of Science (Hons), University of Melbourne; Masters in Biotechnology, Monash University. Dianne has worked as a senior executive or director within the biotechnology, medtech, agritech and healthcare sectors for over twenty years. With numerous years’ experience in ASX and NASDAQ listed companies, Dianne has expertise in corporate governance, capital raising and stakeholder engagement within the listed capital market sector. Neuren Pharmaceuticals Limited; Cyclopharm Limited; Argenica Therapeutics Limited. None Remuneration and Nomination Committee, Disclosure Committee 8,085 shares 12,500 options Nil Nil Expertise and experience: Other current directorships: Former directorships (last 3 years): Membership of committees: Interest in shares: Interest in options: Interest in rights: Contractual rights to shares: Dr Isaac Bright resigned on 15 January 2024 and has no shareholding or rights to any options or rights. Company secretary Geoff is a member of Chartered Accountant Australia and New Zealand, holds a Graduate Diploma in Applied Corporate Governance from the Governance Institute of Australia and a Bachelor of Commerce from Deakin University. Geoff has 75,000 options which are subject to prescribed vesting conditions. Meetings of directors The number of meetings of the company's Board of Directors ('the Board') and of each Board committee held during the year ended 31 December 2023, and the number of meetings attended by each director were: Board Mr Robert Proulx Mr Michael Harsh Mr David Ludvigson Ms Jovanka Naumoska Mr Mark Van Asten Ms Dianne Angus Dr Isaac Bright No. of meetings eligible to attend 8 8 8 8 8 8 1 Audit & Risk Management Committee Attended No. of Attended meetings eligible to attend 7 8 2 2 8 2 2 7 7 2 2 8 1 11 Remuneration & Nomination Committee No. of Attended meetings eligible to attend 3 3 3 3 3 3 Imagion Biosystems Limited Directors' Report For the year ended 31 December 2023 Remuneration Report (audited) The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The remuneration report is set out under the following main headings: • Principles used to determine the nature and amount of remuneration; • Details of remuneration; • Service agreements; • Share-based compensation; • Additional information; and • Additional disclosures relating to key management personnel. Principles used to determine the nature and amount of remuneration (a) The objective of the consolidated entity's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good reward governance practices: • Having strategic objectives as a core component of the reward framework design; • Focusing on sustained growth in shareholder wealth, which may comprise growth in share price, increasing opportunities for the consolidated entity as well as focusing the executive on key non-financial drivers of value; • Alignment of executive compensation to performance; and • Acceptability to shareholders. (b) The performance of the consolidated entity depends on the quality of its directors and executives. The remuneration philosophy is to attract, motivate and retain high performance and high-quality personn