CEO Statement

Introduction

I am excited to have recently joined Polarean, and was initially attracted to the Company's promising functional imaging technology, the large clinical unmet need that it addresses, and the business model. I am confident that our technology will be clinically useful for the pulmonary diseases covered by the current FDA approval in ventilation, including asthma, COPD, and cystic fibrosis. In addition, it has even greater potential as we expand into the high-value areas of interstitial lung and pulmonary vascular disease. The XENOVIEW MRI technology has the potential to transform the visualisation and measurement of pulmonary and cardio-pulmonary disease.

I have spent the last two months working with the team to understand the technology and the commercial opportunities. I am very encouraged by the scientific and medical community's appreciation for the large unmet medical need in the pulmonary functional imaging space, and we are in the process of refining our commercialisation strategy to deploy XENOVIEW. My long tenure in the medical device industry, particularly focused on large capital products, will be very valuable as we look to ramp up commercial sales.

Results overview 

Polarean received FDA approval in December 2022, which enabled the Company to start selling its products to the clinical market.  As per US regulations, we could not start to market the system and services until we received FDA approval. Our efforts during the first half of 2023 were mainly focused on preparing our legacy research sites for the conversion to clinical scanning, obtaining the required state drug licenses, and beginning the commercial launch process. Whilst we have been encouraged by the successful clinical conversion of two of our prominent research sites, and the highly positive response from physicians in both existing and prospective new sites, the process has gone more slowly than the Company had originally hoped. The slower-than-expected early commercial sales are primarily due to the hospital contracting process, which we continue to actively address. From my perspective, the early results from this type of first-in-class medical imaging technology launch are not different than in my past experiences.

Group revenues for the first half were US$0.1m (H1 2022: US$0.8m), based on sales of xenon gas blend cylinders and parts and service for polarisers installed at our customer locations.  Operating expenses for H1 2023 (US$7.7m) increased from H1 2022 (US$7.0m), as we incurred commercialisation costs to launch our products. In H1 2023, the Company recognised finance income of US$0.2m (H1 2022: US$nil), due to interest earned on our bank deposits.  Other gains / (losses) of US$0.1m (H1 2022: US$(0.2m)) were due to the strengthening of the British pound during the 2023 period versus a weakening of the British pound during the 2022 period. The overall loss before tax increased to US$7.4m in H1 2023 (H1 2022: US$6.9m), due to higher operating expenses, partially offset by the interest income and foreign exchange gain described above.  As of 30 June 2022, the Company held US$9.9m in net cash or cash equivalents.

Commercialisation plans

We are in the market development phase of our novel functional imaging technology. In order for hospital administrators to embrace our technology, we need to focus on the most compelling clinical use cases that lead to meaningful outcomes for patients. We are working with our experienced research user-base to continue generating case studies, while also equipping them to utilise the technology in their clinical practice setting. In addition, we are in conversations with our highest-priority early adopter sites for new placements, and exploring ways for them to acquire polariser systems that they can use for both research and clinical uses of our technology. The recent reimbursement code issuance should aid the market adoption of the polariser systems.

An important part of our strategy will be to seek industry partners, which includes pharmaceutical and medical device companies as well as specific disease advocacy organisations to expand the uses of our technology and provide potential sources of resources and funding. In June 2023, we announced that we had entered into a collaboration with Philips, a global leader in health technology. The collaboration was featured at the 2023 International Society for Magnetic Resonance in Medicine Annual Meeting in Toronto, and facilitates the sharing of technical data and marketing materials to jointly advance the field of Xenon MRI into the clinical realm. The collaboration was shortly followed by Polarean receiving an additional 510(k) from the FDA for our specialised MRI chest coil to now include Philips 3.0T MRI scanners. This was an important milestone, not only highlighting the value that Philips sees in the XENOVIEW MRI technology in furthering pulmonary imaging but also in growing the number of healthcare systems that are able to utilise XENOVIEW MRI.

Outlook

As I approach my three-month mark as CEO, I strongly believe that the novel Polarean imaging platform holds the potential to bring significant benefits to both patients and clinicians. The technology will revolutionise the landscape of diagnosis and longitudinal monitoring in the fields of pulmonary and cardio-pulmonary medicine. The recent milestone approval of a new C-code, which is linked with a new technology APC code featuring a payment range of US$1,201 to US$1,300, represents another significant achievement by our Company. This accomplishment establishes a solid foundation for our reimbursement endeavors within our two targeted fields.

In my 30-year career in high-tech medical devices, I have seen the early days of several minimally invasive disruptive technologies that have since changed the course of medicine in their respective fields. Each experience has taught me the importance of focus and cash efficiency while continuing to build value. In my experience of selling large capital equipment, I have found that early sales are often irregular and difficult to forecast whilst the commercialisation process is still evolving.  Therefore, while I am confident in the demand for our product and its ability to gain commercial traction, we feel it is sensible to withdraw the previously stated commercial targets at this time. We will, however, be providing renewed guidance at a suitable time.

We are focusing our efforts and expenditures on activities that we believe can deliver important milestones within our current cash runway. These activities have led to the identification of specific growth initiatives, which include:

1)    Driving utilisation at our newly established clinical sites;

2)    Expanding to our highest-priority targeted clinical sites;

3)    Establishing reimbursement coverage and payment;

4)    Developing key industry partnerships; and

5)    Planning for the expansion of our current FDA labeling to include visualisation and measurement of gas exchange

The Company is funded until the end of Q2 2024, and the continued progress on the above initiatives will help support future financing at the appropriate time.

I look forward to leading Polarean through this exciting journey and developing this large potential market for our employees and investors. Together, we are committed to successfully increasing access to the XENOVIEW MRI technology because so many people are counting on this technology to improve patients' lives.

Christopher von Jako, Ph.D.

Chief Executive Officer

7 September 2023

POLAREAN IMAGING PLC

Consolidated unaudited statement of comprehensive income

for the six months ended 30 June 2023

POLAREAN IMAGING PLC

Consolidated unaudited statement of financial position

at 30 June 2023

POLAREAN IMAGING PLC

Consolidated unaudited statement of changes in equity

at 30 June 2023

POLAREAN IMAGING PLC

Consolidated unaudited cash flow statement

for the six months ended 30 June 2023

NOTES TO THE INTERIM ACCOUNTS

1. Basis of presentation

This interim consolidated financial information for the six months ended 30 June 2023 has been prepared in accordance with AIM rule 18, 'Half yearly reports and accounts'. This interim consolidated financial information is not the Group's statutory financial statements within the meaning of section 434 of the Companies Act 2006 (and information as required by section 435 of the Companies Act 2006) and should be read in conjunction with the annual financial statements for the year ended 31 December 2022, which have been prepared in accordance with UK-adopted International Accounting Standards (UK IFRS) and have been delivered to the Registrar of Companies. The auditors have reported on those accounts; their report was unqualified but drew attention to a material uncertainty related to going concern. It did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The interim consolidated financial information has been prepared in accordance with the accounting policies adopted in the Group's most recent annual financial statements for the year ended 31 December 2022.  A number of amendments to IFRS accounting standards have become applicable for the current reporting period. The Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these amended standards.

The judgements, estimates and assumptions applied in the interim condensed consolidated financial information, including the key sources of estimation uncertainty, were the same as those applied in the Group's last annual financial statements for the year ended 31 December 2022.

The interim consolidated financial information for the six months ended 30 June 2023 is unaudited. In the opinion of the Directors, the interim consolidated financial information presents fairly the financial position, and results from operations and cash flows for the period. Comparative numbers for the six months ended 30 June 2022 are also unaudited.

This interim consolidated financial information is presented in US Dollars (US$).

2. Going concern

The interim consolidated financial information for the six months ended 30 June 2023 have been prepared on the going concern basis.

In considering the appropriateness of this basis of preparation, the Directors have reviewed the Group's working capital forecasts. It is anticipated that additional capital will need to be raised by the end of the second quarter of 2024 in order to continue to fund the Group's activities at their planned levels beyond this date. This represents a material uncertainty that may cast significant doubt about the Group's and Company's ability to continue as a going concern. However, the Directors have a reasonable expectation that this uncertainty can be managed to a successful outcome, and based on that assessment, the Group has adequate resources to continue for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing these financial statements.

3. Loss per share

The basic and diluted loss per share for the period ended 30 June 2023 was US$0.035 (2022: US$0.033) as the warrant and options have an anti-dilutive effect in the current and prior period. The calculation of loss per share is based on the loss of US$7,351,169 for the period ended 30 June 2023 (2022: loss of US$6,918,131) and the weighted average number of shares in issue during the period for calculating the basic loss per share of 213,052,247 shares (2022: 210,921,193).

4. Called up share capital

5. Borrowings

6. Share based payments

Share Options

The Company grants share options at its discretion to Directors, management and employees. These are accounted for as equity settled transactions. Should the options remain unexercised after a period of ten years from the date of grant the options will expire unless an extension is agreed to by the Board. Options are exercisable at a price equal to the Company's quoted market price on the date of grant or an exercise price to be determined by the Board.

Details of share options granted, exercised, forfeited and outstanding in the period ended 30 June 2023 are as follows:

There were 5,650,000 options granted in the period to 30 June 2023. There were no options exercised and 329,166 options forfeited in the period to 30 June 2023.

The weighted average contractual life of the share options outstanding at the reporting date is 5 years and 84 days.

Share Warrants

The Company grants share warrants at its discretion to Directors, management, employees, advisors and lenders. These are accounted for as equity settled transactions. Terms of warrants vary from agreement to agreement.

Details of warrants granted, exercised, forfeited and outstanding in the period ended 30 June 2023 are as follows:

There were 852,822 warrants exercised and 3,400 warrants forfeited in the six months ended 30 June 2023. There were no warrants granted during this period.

The weighted average contractual life of the share warrants outstanding at the reporting date is 1 year and 180 days.

7. Related party transactions

The Company paid US$11,650 of consulting fees to board member Daniel Brague in the six months ending 30 June 2023. 

8. Events after the reporting period

On 4 August 2023, the Company issued a total of 1,948,262 shares upon the exercise of warrants with an exercise price of US$0.00749 per share for total proceeds of US$14,583.