Scibase : Annual Report 2023 Report

ANNUAL REPORT 2023

Content
Key ratios	3
2023 in brief	4
Patentportfolio	6
Comment by CEO Pia Renaudin	7
Business and market overview	10
Product portfolio	12
Market overview	13
Key studies within the skin barrier segment	15
Trends	17
Market drivers	18
Regulatory requirements	19
Competing methods	20
Strategy and business plan	21
US skin cancer facts source AAD:
(American Academy of Dermatology)	23
Sustainability report SciBase AB	24
Share capital and ownership structure	25
SciBase investment case	27
References	28
Directors' report	30
Consolidated income statement	42
Consolidated statement of comprehensive income	42
Consolidated statement of financial position	43
Consolidated change in shareholders' equity	44
Consolidated statement of cash flows	45
Income statement, Parent company	45
Statement of other comprehensive income,
Parent company	45
Balance Sheet, Parent company	46
Changes in shareholders' equity, Parent company	47
Cash flow analysis, Parent company	48
Notes to the Annual Report and Consolidated
Financial Statements	49
Certification	71
Auditor's report	72
Board of directors, senior executives and auditors	74
Management	75
Glossary	76
Definitions	76
Welcome to the AGM	77

SciBase in brief

About SciBase

SciBase is a global medical technology company, specializing in early detection and prevention in dermatology. SciBase develops and commercialize Nevisense, a unique point-of-care platform that combines AI (artificial intelligence) and advanced EIS technology to elevate diagnostic accuracy, ensuring pro- active skin health management. Nevisense is approved for detection of melanoma in the USA (PMA - Pre Market Approval), within the EU (CE marking under MDR) for the detection of melanoma and non-melanoma skin cancer as well as for the assessment of the skin barrier function for atopic dermatitis and for the detection of melanoma in ­Australia (TGA - Therapeutic Goods Administration).

Our commitment is to minimize patient suffering, allowing clinicians to improve and save lives through timely detection and intervention and reduce healthcare costs.

Built on more than 20 years of research at Karolinska

Institute­ in Stockholm, Sweden, SciBase is a leader in dermatological advancements.

The company has been Nasdaq First North Growth Market exchange since June 2, 2015. For more information, please visit www.scibase.com..

Content

Business model

The company's business model is based on customers initially purchasing a Nevisense or Nevisense Go device then buying consumables (electrodes) on an on-going basis. Each electrode can only be used on one patient but can test up to 20 moles or skin areas.

Certified Advisor (CA)

Vator Securities

Email: [e-mail]

Tel: [phone]

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Content

Key ratios

THE GROUP	2023	2022
Net sales, SEK ths	23,245	17,890
Gross margin, %	69.0%	62.8%
Equity/Asset ratio, %	66.9%	50.6%
Net indebtness, multiple	0.49	0.98
Cash equivalents, SEK ths	34,121	18,832
Cashflow from operating activities, SEK ths	-51,984	-44,466
Earnings per share (before and after dilution), SEK	-0.51	-0.63
Shareholder's equity per share, SEK	0.40	0.37
Average number of shares, 000'	107,980	68,475
Number of shares at closing of period, 000'	119,831	68,475
Share price at end of period, SEK	0.83	3.82
Number of sold electrodes, pieces	51,920	41,712
Average number of employees	23	20

+30%	MELANOMA	NMSC	BARRIER
MARKET SIZE	MARKET SIZE	MARKET SIZE
SEK >4.0BN	SEK 1.4BN	SEK >6-7BN
SALES GROWTH	MELANOMA MARKET	NMSC MARKET	BARRIER MARKET
	POTENTIAL	POTENTIAL	POTENTIAL

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2023 in brief

2023 was the year when SciBase made the transition from product- and market development to commercialization. During 2023 SciBase saw its best sales to date in Germany which continues to deliver a positive operating profit and is cashflow-positive.

   SciBase also took several important steps in the US with the two updated fee schedules and the development of a dedicated US team to build reimbursement and sales. SciBase also did a limited launch of its newest application in Germany - Skin Barrier Assessment for Atopic Dermatitis. It's an emerging, promising area with a great focus on dermatology, there are currently an astonishing number of new drugs being launched within AD but ­limited guidance for physicians on how these drugs should be distributed across the patient group.

• The company also saw several important studies being published that further established Nevisense as a reliable tool in the field of skin barrier assessment.

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Highlights 2023

• US advancement with updated fee schedules from two Medicare Administrative Contractors (MACs).
• Expanding coast to coast in the US - 4 new dermatology chains with 147 clinics and
  strengthened­the US commercial team.
• Raised net SEK 70 million in a rights offering.
• Several key skin barrier studies published spurring increased interest from researchers and industry.
• Continued profitable sales growth in Germany, +48%, and a limited launch of a new application
  - Atopic Dermatitis.

First quarter

• During the first quarter the board of directors of SciBase Holding AB (publ), by virtue of the authorization from the annual general meeting on 18 May 2022, resolved to carry out a fully guaranteed issue of new shares with preferential rights for existing shareholders of approximately SEK 79.6 million before transaction costs. After issue costs SciBase received approximately SEK 70 million.
• SciBase entered into a collaboration agreement with Schweiger Dermatology group ("SDG") to pilot Nevisense in their Freehold, NJ office. Schweiger Dermatology Group is the largest dermatology practice group in the Northeastern US, with over 90 offices and more than 300 healthcare
  providers­ throughout New York, New Jersey, Pennsylvania and Connecticut.

Second quarter

• Two Medicare Administrative Contractors (MACs): First Coast Service Options (First Coast) and Novitas Solutions (Novitas) published an updated fee schedules for SciBase's early detection test for melanoma (0658T). First Coast
  covers­ the state of Florida and Novitas covers the central and mid-Atlantic US and together they cover about one- third of the US Medicare population. The new rates, which were applicable retroactively from 1 January 2023, were increased to levels seen as more appropriate by clinicians.
• Previous CEO Simon Grant announced on May 15th that he will leave his position as CEO for personal reasons. Simon gradually transitioned out of his role through to the end of November but remained formally as CEO during this time. Simon Grant will also remain available to the Board in a
  consulting­ capacity after the end of the planned transition time. The Board initiated subsequently the process to recruit a new CEO.

• The AGM 2023 was held on May 17, 2023. The meeting resolved to adopt the profit and loss account and balance sheet for the group and the Company included in the annual report, to adopt the profit and loss distribution, to discharge the board members and managing director from liability, re-election of Tord Lendau, Diana Ferro, Dr Matt Leavitt and Thomas Taapken as members of the Board. The meeting also decided upon the board fees. PricewaterhouseCoopers AB (PwC) (re-election) was elected as auditor with Magnus Lagerberg as responsible auditor. Furthermore, the meeting resolved to adopt principles for the appointment the nomi- nating committee for the annual general meeting 2024. The AGM furthermore decided to authorize the board of directors to increase the share capital through issuance of new shares, warrants and/or convertible debentures. New issues of shares and issues of warrants and/or convertibles may occur with or without preferential rights for shareholders

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Content

of the Company and may be made either in cash and/or by way of set-off or contribution in kind or otherwise be condi- tional. Through issuances resolved upon with support from the authorization - with deviation from the shareholders' preferential rights - the number of shares issued, or number of shares created in connection with exercise of warrants or conversion of convertibles, shall correspond to not more than a 20 per cent dilution of the share capital and the number of shares and votes in the Company after such issue(s).

Third quarter

• The Board appointed Pia Renaudin as the Company's new Chief Executive Officer (CEO). Pia joined SciBase as CEO on October 1st, 2023. Pia Renaudin has extensive experience in the global Life Science and MedTech industries. She has spent over 20 years in leading positions in companies such as Senzime AB, Gilead Sciences, Stryker and AstraZeneca. Pia joins SciBase from Senzime AB, a Swedish MedTech Company listed on Nasdaq Stockholm main market, where she held the position of CEO from 2019 to 2023. During her tenure she significantly grew the sales, for instance in Q1-23 sales in Senzime grew by 161% with the US constituting the majority of the sales and growing by 215%.
• SciBase entered into a collaboration agreement with Bare Dermatology to pilot Nevisense in select locations in Texas. Bare Dermatology is a dermatology practice group in the Greater Dallas area, with five offices and a team of nationally renowned dermatologists.
• The clinical results from a study performed together with the University Children's Hospital Zürich was published in the journal Allergy. The study demonstrates the ability of Nevisense to distinguish children with and without Atopic Dermatitis (AD). The study was performed on children between 4 months and 3 years of age and aimed at identifying children with Atopic Dermatitis with the use of Nevisense. The authors concluded that EIS (Nevisense) can detect skin barrier dysfunction and differentiate skin of children with AD from healthy skin and suggests that EIS may have the ability to predict future AD development.

• The results from a collaborative scientific project with the Swiss Institute of Allergy and Asthma Research (SIAF) in Davos, Switzerland was published in the journal Allergy. The study is the first to use Nevisense to measure skin barrier function in human excised skin samples, demonstrating Nevisense as an effective laboratory research device. Nevisense and its underlying Electrical Impedance Spectros- copy (EIS) technology were used to assess the effect of
  commercially­available detergents on the skin barrier of mice and human skin samples. The study indicated among other things that EIS is a reliable biomarker/indicator of the skin barrier function in both ex vivo (lab research) and in vivo (human studies) models, with a higher sensitivity than trans-epidermal water loss (TEWL).

Fourth quarter

• SciBase entered into a collaboration agreement with the Skin and Cancer Institute to pilot Nevisense in several of their California locations. The Skin and Cancer Institute is a world-renowned dermatology practice group of
  dermatologists­and skin cancer surgeons, and was the first dermatology practice group in California to bring AI-driven technology to their patients for skin cancer detection.
  With more than 50 offices across a three-state network comprised of California, Arizona and Nevada, they are one of the largest dermatology groups in the country.
• SciBase announced that its US coast-to-coast momentum continued with a collaboration agreement with the Skin and Cancer Reconstructive Surgery Center ("SCARS Center") in California. This partnership will help further introduce Nevisense to a broader US market.A nominating committee for the Annual General meeting 2024 was appointed consist- ing of Thomas Axelsson (Gell Group), Dharminder Chahal (VanHerk Group), Peter Elmvik (Stockholms Elbolag) and Tord Lendau (Chairman of the Board).

After the end of the year

• The first direct comparison between electrical impedance spectroscopy (EIS) using Nevisense and trans-epidermal water loss (TEWL) has been published in the scientific
  journal­ Annals of Dermatology. The study demonstrates Nevisense as a more robust technique to assess skin barrier function than the commonly accepted TEWL measurement technique. The authors concluded that EIS (Nevisense) can assess skin barrier function with less sensitivity to
  confounding­lifestyle factors than TEWL For SciBase, these findings help to open up the cosmetic and pharmaceutical research markets for Nevisense, potentially as the new state-of-the-art tool for skin barrier assessment.
• SciBase initiates a partnership with Skinobs, a leading global platform connecting researchers with the tools they need for their cosmetic and medical research. Through this partnership, SciBase will now offer Nevisense for assessing skin barrier function within cosmetic testing on the Skinobs platform.
• SciBase resolves on a directed issued of approximately SEK 33 million and a rights issue of approximately
  SEK 15 million, and postpones the Annual General Meeting and publication of the interim report for the first quarter of 2024.
• SciBase published the outcomes in the directed issue, were MSEK 33 were subscribed for and in the rights offering were MSEK were subscribed for corresponding to a subscription rate of 61%.

Full Year 2023

• Net sales increased by 30%.
• Number of sold electrodes increased by 24%.

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Patentportfolio

An early focus on patents from SciBase's founders forms the basis for the Company's broad patent portfolio. The company's patents are divided into eight approved patent families. The Company continuously evaluates ongoing projects for possible patentability and whether these can extend the Company's patent protection.

For each patent, an evaluation is also made of which markets it is important to apply for a patent as each patent application entails costs.

• SciBase has twenty-three (23) approved patents and four pending applications divided into eight families.

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23

APPROVED PATENTS

AND FOUR PENDING

APPLICATIONS DIVIDED INTO

EIGHT FAMILIES.

Patentfamily	Description	Registered patents	Patent applications	Expiration dates
Family 1	Medical apparatus for determination of biological	1 patent in US.		US patent expires in 2029.
	condition using impedance measurements by use
	of electrodes with spikes
Family 2	Medical apparatus for determination of biological				All patents expired 2023.
	condition using impedance measurements by use
	of reference data
Family 3	Medical apparatus for determining biological	2 in Germany and US		German patent expires in 2026 and the
	condition­	using impedance measurements				US patent expires 2029.
Family 4	Switch probe for multiple-electrode	Nine (9) in China, Japan, the US, Taiwan, Australia,		All patents expire 2029.
	measurements of impedance	France, Germany, the UK and Sweden.
Family 5	Method and apparatus for diagnosing a diseased	Six (6) in France, Switzerland, Germany, the UK,		All patents and patent applications
	condition in tissue of an object	Australia­	and Japan		expire 2030.
Family 6	Method and device for quality assessment of an	One (1) in Germany,		German patent expires 2030.
	electrical impedance measurement tissue.
Family 7	Method and apparatus for extracting tissue	Three (3) in Sweden, Germany and the UK.		All patents expire 2038.
	­properties from impedance measurement to
	assist in assessing diseased condition
Family 8	Barrier measurement with EIS	One (1) in Sweden	Three (3) ongoing applications US,	The Swedish patent expires in 2038.
					China and PCT.
Family 9	Test method and test kit for tissue samples	One (1) provisional application in the US. Conversion	One (1) ongoing application in
			to regular application in August	the US.

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Comment by CEO Pia Renaudin

Increased access to Nevisense boosts growth

2023 was an eventful year for SciBase with new partnerships, expanded customer base and a new commercial strategy.

We have now laid a solid foundation to continue driving growth and give more patients access to better diagnostics and care.

As we closed 2023, we had delivered 14 consecutive quarters of sales growth. For the full year, total sales increased by 30 percent. In Germany, sales increased by 48 percent driven by both systems and electrodes. Sales in the US decreased by

37 percent, but we saw a recovery towards the end of the year driven by new customers and an impact of the improved fee schedules that drove usage. Total electrode sales increased by 24 percent and reached 51,920 (41,712) pieces, of which sales to repeat customers increased by 31 percent, which shows increased utilization of installed systems.

Nevisense is today used primarily to detect skin cancer, both melanoma and NMSC (Non-melanoma skin cancer), but also for research to assess the skin's barrier function, such as atopic dermatitis. Our current commercialization strategy is focused on skin cancer - which is a large and rapidly growing market concentrated to a small number of countries with a population in significant need of safe and early diagnosis. The focus going forward to drive growth is continued expansion in the US through broader reimbursement and increased sales, continued profitable sales growth in Germany and development of applications based on the evaluation of the skin barrier.

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COM MENT BY CEO PIA R ENAUDIN

New commercial strategy in the US

During the year, we have participated in a number of important scientific congresses in the US and there is a great interest in Nevisense on the American market. We have strong support among key opinion leaders and have entered into several ­collaboration agreements during 2023 that testify to the

interest­ and the possibility of being able to offer patients

­better diagnostics in skin cancer in order to offer treatment at the earliest possible stage.

During the latter part of 2023, we began to roll out a new commercial strategy on the US market, and we could already in the fourth quarter see the effects of the measures we took. We are now broadening our geographical presence and marketing of the US market through new employees in Texas and California, where we now also have large dermatology networks as customers. In the areas where we have reimbursement via fee schedules, we work with selected private insurance companies to achieve a higher degree of coverage. California is the next state where we are working to obtain reimbursement through Medicare. Sales increased by as much as 34 percent in the fourth quarter, which is, among other things, a result of the collaboration agreements we entered into at the end of the year with major dermatology networks.

Our strategy of working with larger networks of dermatology clinics is set and we believe it is a cost-effective way to expand in the US market. In California, at the end of 2023, we entered into collaboration with, among others, the Skin and Cancer Institute, a dermatology network with more than 50 clinics, and with the Skin and Cancer Reconstructive Surgery Center ("SCARS Center"). On the East Coast, we entered into a collaboration with the Schweiger Dermatology Group, which is the largest network of dermatology clinics in the northeastern United States with over 90 clinics and 300 care providers. My ambition is that in 2024 we will sign additional collaboration agreements in order to achieve a better geographical reach throughout the United States.

That we are back to growth in the US is an important ­milestone, as we work to obtain broader reimbursement for Nevisense. The dermatology networks in California that since the end of 2023 are using our technology have begun to scale

up their use, generating sales and claims for reimbursement with insurance companies, which is the path we need to take to achieve broader reimbursement and greater impact for Nevisense. Our goal is to establish Nevisense as the standard of care in the United State

New markets in EU

Germany continued to deliver strong sales growth of both ­systems and electrodes while showing a positive operating profit. One of the most important driving forces for the strong development is the new indication NMSC (non-melanoma skin cancer) which has led to a wider use of Nevisense and more than half of all our customers in Germany now have access to the NMSC application. Our success in the German market shows that Nevisense is an attractive and commercially

successful­ product and we have succeeded in establishing Nevisense as the standard treatment for skin cancer detection in Germany. We now have such a strong base in Germany that we are ready to build on the success and expand into neighboring countries. We have initially chosen to expand into Switzerland and Austria and have hired a sales representative in Austria who has previous experience in establishing businesses in dermatology, and he is now responsible for establishing Nevisense in these markets.

Partnerships and research

Detection of skin cancer is today the primary use of Nevisense, but there is increasing interest in extended applications such as the skin barrier function. The ability to easily identify a reduced skin barrier can help detect, manage and treat skin

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COM MENT BY CEO PIA R ENAUDIN

diseases before diseases such as atopic dermatitis develops. An important avenue for us to broaden the use of Nevisense is our collaborations with research groups as well as industrial partners and we have made progress in 2023 in terms of sales to these groups. Among other things, the collaboration with Kenvue (formerly Johnson & Johnson Consumer Health), which is our first agreement with an industrial partner, has created increased interest from both of these groups. For 2023, sales in the area of the skin's barrier amounted to SEK 1.4 million.

In the long run, these areas will also be important from a

­commercial perspective. I expect that we will see continued development of sales, clinical studies and partnerships in the coming years.

Improved gross margin

The increased sales and mainly the increased sales of electrodes contributed to our underlying improved profitability. For the full year 2023, the gross margin amounted to 69 percent, which was an improvement from 63 percent for 2022. I assess that we should be able to see underlying profitability improvement over time as electrodes account for an increasing share of total sales. An important contributing component is higher electrode sales in the US where the price level is higher than in Europe. Our goal is to reach a stable gross margin above 70 percent. The operating profit for the full year amounted to SEK -54 million. It is above all increased investments in the US that are behind the increased operating loss.

Sustainability

In 2023, we have initiated work to integrate sustainability into the business and we strive to reduce our environmental impact and improve our social responsibility. As a medical technology company, SciBase is governed to a large extent by laws and regulations regarding standards, safety and product quality. Our work is based on our vision, values and code of conduct. We have identified a number of activities that we will focus on in 2024 to further improve our work in the area of sustainability.

Financing

In the beginning of 2024, we announced that we will carry out a capital raise in the form of both a directed and a rights issue. I am very pleased that the short-term and long-term funding of SciBase now is secured. It now makes it possible to focus wholeheartedly on our business. I am grateful for the support we have from our existing owners and welcome our new shareholders to SciBase. I especially want to say a big thank you to all the owners who have been with us for a long time and persevered. I now look forward to focusing on driving sales and the business forward.

Outlook

Our new commercial strategy is now being rolled out and I am convinced that with a clearer focus we can also build greater value in the long term for both shareholders, the healthcare system and patients. We estimate that we can reach profitability with an installed base of approximately 800 - 1,000 ­systems each using around 6 - 7 electrodes per week. We

currently­ have an installed base of around 400 customers in Germany, of which around 200 clinics use Nevisense routinely with just under 6 electrodes per week.

Our goal is to establish Nevisense as standard of care in the markets where we are established. We are already there in Germany and now the focus is the US. The possibilities are many over time, we can expand into new markets and add new applications. At SciBase, we are driven by being able to give doctors and healthcare professionals a better opportunity to diagnose, enable disease monitoring and facilitate early intervention of skin cancer and other skin diseases in order to improve care and save lives.

CEO Pia Renaudin

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Business and market overview

SciBase is a global medical technology company, specializing in early detection and prevention in dermatology. SciBase develops and commercialize Nevisense, a unique point-of-care platform that combines AI (artificial intelligence) and advanced EIS technology to elevate diagnostic accuracy, ensuring proactive skin health management. SciBase commitment is to minimize patient suffering, allowing clinicians to improve and save lives through timely detection and ­intervention and reduce healthcare costs.

Business idea

SciBase is a leading developer of augmented intelligence-­ based solutions for skin disorders. SciBase develops and sells unique point-of-care devices for the evaluation of skin disorders such as skin cancer and atopic dermatitis. Its first product, Nevisense, helps doctors to detect melanoma, the most dangerous type of skin cancer. Further development has led to Nevisense also being used for the detection of non-melanoma skin cancer (NMSC) and as a tool to assess the skin barrier and inflammation. Nevisense is based on extensive research, with over 88 "peer-reviewed" publications including the largest clinical study to date) (in terms of number of patients and lesions) conducted for the detection of melanoma where Nevisense achieved results that demonstrate the value of the method within healthcare. In 2020, the new product platform Nevisense Go, a handheld and portable version of Nevisense, was presented initially for research purposes within the skin barrier segment.

Nevisense is based on a method called Electrical Impedance Spectroscopy (EIS), which uses the varying electrical properties of human tissue to categorize cellular structures and thereby detect malignancies and abnormalities. Nevisense is CE marked (MDR) in Europe, an FDA approval (PMA) in the United States and has TGA approval in Australia.

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