Announcement PDF Annual Report 2023 ***** ASX: ENL Enlitic, Inc. ARBN 672 254 027 www.ir.enlitic.com A smarter healthcare system driven by smarter imaging data Enhancing and adding value to radiology workflow with the standardisation and de-identification of medical imaging data. Enlitic® Workflow Solutions At Enlitic, we believe that the power of artificial intelligence can transform healthcare by enabling effective data management and improving clinical workflows. Our mission at Enlitic is to revolutionize healthcare by leveraging AI and data, empower evidence-based decision-making, enhancing research, and transforming healthcare delivery. Enlitic, Inc. Annual Report 2023 Enlitic, Inc. Annual Report 2023 Welcome to Enlitic’s Inaugural Annual Report Contents Company Highlights 02 Chair’s Report 04 CEO’s Report 06 Industry Overview 07 Leadership and Governance 13 Key Management 14 Directors’ Report 16 Auditor’s Independence Declaration 36 Consolidated Statement of Profit or Loss and Other Comprehensive Income 37 Consolidated Statement of Financial Position 38 Consolidated Statement of Changes in Equity 39 Consolidated Statement of Cash Flows 40 Notes to the Consolidated Financial Statements 41 Directors’ Declaration 76 Independent Auditor’s Report 77 Securityholder Information 80 Corporate Directory 84 Enlitic, Inc. Annual Report 2023 01 Company Highlights Adaptability and growth Enlitic has adapted to shifts in market demand, culminating in its current focus on standardizing imaging data. This has resulted in revenue growth and the development of commercially viable products. 10 successful contractual arrangements in 2023 02 Enlitic, Inc. Annual Report 2023 Enlitic, Inc. Annual Report 2023 2023 January March April • Marubeni Japanese • Sentara Health • Multi, Inc. distribution agreement distribution agreement contractual agreement • Release of Curie 1.2 • Vital Radiology Services contractual agreement May July September • Clairvo Technologies/JMID • Southeast Alaska Regional • Blackford Analysis Japanese distribution agreement • Sentara Health goes live Health Consortium contractual agreement with ENCOG • Release of Enlitic Curie 1.3 with ENDEX™ and ENCOG™ October December • Wake Radiology • Summit Radiology contractual agreement contractual agreement contractual agreement • Infinitt Healthcare contractual agreement • IPO & ASX Listing Raising ~A$21m ~A$21m Initial Public Offer (‘IPO’) and listing on ASX Enlitic, Inc. Annual Report 2023 03 Chair’s Report Dear Shareholders, On behalf of the Board of Directors and Management of Enlitic, Inc. (‘Enlitic’) I am pleased to present the Annual Report for the financial year ended December 31, 2023. Enlitic is a software development company using artificial intelligence to develop products that manage medical imaging data in radiology and licences such products to healthcare providers and original equipment manufacturers. Its technology features a host of AI-powered modules that enable data standardisation, de-identification, anonymisation and workflow simplification. The year 2023 has been one of resilience, adaptability, and growth for Enlitic. In the face of unprecedented global financial market challenges, Enlitic was able to close its A$21m Initial Public Offer (‘IPO’) in mid-December 2023 and list on the Australian Securities Exchange (‘ASX’) on December 19, 2023. Enlitic focused on the development of our flagship software, Enlitic Curie, releasing its ENDEX data standardisation and ENCOG data anonymisation features. These releases advanced the capabilities and performance of Enlitic Curie. 04 Enlitic, Inc. Annual Report 2023 Our sales progress continued to accelerate, as we successfully entered into 10 contractual arrangements in 2023 with the following organisations: • Healthcare providers: Sentara Health, Summit Health, Wake Radiology, Southeast Alaska Regional and Vital Radiology Services. • OEM Healthcare Vendors: Blackford Analysis and Infinitt Healthcare. • Distributors: Marubeni and Clairvo Technologies and Multi, Inc. Enlitic’s revenue was US$470k compared to US$903k in FY22, as the Company made a strategic shift towards a subscription-based revenue model. Revenue is driven by new client agreements, including those noted above, and follows an implementation process which varies from customer to customer. All 2023 signed customers are expected to contribute revenues in H1 and early H2 2024. During the year, Enlitic also focused on bringing operational efficiencies to the organisation. LBIT was US$15.5m in FY23 compared to US$25m in FY22, primarily due to lower derivative finance costs in the 2022 year. In February 2023, Enlitic’s convertible notes were converted into preference shares (and subsequently converted into common stock as part of the IPO process), thereby substituting the convertible note liability with shareholder equity. Enlitic continued to develop and execute our strategy of addressing data standardisation and de-identification of medical images as outlined in the IPO prospectus. Our goal is to unlock and activate valuable data for providers to provide real-world clinical and economic benefits. Since early 2023, Enlitic has improved our management capabilities with the appointment of a Chief Operating Officer and the recruitment of a Chief Strategy Officer (appointed early FY24). We also welcomed Riichi Yamada, Sergio Duchini and Lisa Pettigrew to the Board of Directors, bringing a wealth of healthcare and strategy experience to the Company. Currently, Enlitic has multiple software releases scheduled for the 2024 financial year that will positively impact our delivery to contracted customers and advance the capabilities of the product and Enlitic’s strategy. Enlitic, Inc. Annual Report 2023 Thank you for your ongoing support as Enlitic continues to execute our strategy of standardising, anonymising, and unlocking the value in healthcare data. We are excited for our new customers to experience Enlitic’s product capabilities and we look forward to realising the value of our sales pipeline in the months and years ahead. We are committed to building a successful company that delivers better data quality for our healthcare customers and, in turn, maximises value for our shareholders. Yours sincerely, Lawrence Gozlan Chairman of the Board Enlitic, Inc. We are excited for our new customers to experience Enlitic’s product capabilities and we look forward to realising the value of our sales pipeline in the months and years ahead.” Enlitic, Inc. Annual Report 2023 05 CEO’s Report Last year was a defining year for Enlitic as we transformed from a private company to a publicly listed company on the Australian Securities Exchange. In a challenging market, we were able to raise funds to enable us to continue to execute our strategy to deliver better quality data to healthcare providers. Having met with many customers and partners over the past year, I am more convinced than ever that the Enlitic solutions are greatly needed. Customers face multiple challenges from their data and the aim is to generate better efficiencies, and clinical and economic value. Our concepts can organise and standardise data and create the potential for our customers to generate new revenue streams from their data. One of our key focuses in 2023 was to bring efficiency to the organisation and we took a multi-faceted approach to achieve this goal. Operationally, we reassessed our staffing needs and redirected our resources into key areas, which allowed us to downsize our office space and greatly reduce lease costs. From a product perspective we reviewed and updated our testing and build processes, streamlined our release process and increased efforts to deliver products of high quality, on time and on budget. With changing customer requirements, this can be a challenge and so we also looked to recruit a Chief Strategy Officer who could help drive our market direction and capture those requirements upfront. We successfully brought on Steve Rankin, former founder and President of Client Outlook, in February of 2024. 06 Enlitic, Inc. Annual Report 2023 Our sales team participated in major trade shows to boost our products’ visibility and increase industry awareness of our capabilities. Attendance at the Radiological Society of North America (RSNA), the largest global medical imaging conference, saw a significant increase in visits to the Enlitic booth compared to 2022. This show contributed significantly to the pipeline opportunities for 2024. As we progress into 2024, we continue to focus on how Enlitic can drive improvements in healthcare delivery. The need for facilities to generate greater efficiencies and new revenue streams continues to be a driver for Enlitic. Our product development team is working hard to accelerate our product pipeline, with a special focus on ENSIGHT, a data framework that enables customers to gain insights from their medical imaging archives. We look forward to being able to provide our customers with an early-stage release that will enable them to experience first hand how our concept will work in their environment. This is exciting news as feedback from our customer engagements indicate a strong potential demand for this product. Following our accelerated growth in 2023 from one customer to eleven signed customer agreements, our implementations are on track for these new customers to commence generating recurring revenues by mid-2024. Enlitic will continue to look for ways to improve our efficiency and bring products to market that meet our customers’ needs. We have begun to collaborate with our partners and are developing joint go-to-market plans, to expand our reach and sales opportunities. This next year promises to bring lots of activity, and I am excited to be a part of this team. I would like to thank Lawrence and the Board of Directors for their ongoing support, counsel, and dedication to Enlitic’s mission. On behalf of the Board and Management of Enlitic, I would like to thank our Enlitic team members for their dedication to delivering better imaging solutions for our customers. And to our shareholders, it is greatly rewarding to see your commitment to building a sustainable company that will contribute to delivering better healthcare through Enlitic. Sincerely, Michael Sistenich Chief Executive Officer Enlitic, Inc. We have begun to collaborate with our partners and are developing joint go-to-market plans, to expand our reach and sales opportunities.” Enlitic, Inc. Annual Report 2023 Industry Overview COMPANY OVERVIEW Enlitic is a software development company that uses AI to develop software products that manage medical imaging data in radiology (such as MRI, CT scans, X-ray and ultrasound images) and licences such products to healthcare providers. Enlitic’s mission is to revolutionise healthcare by leveraging AI and data, empowering evidence-based decision-making, enhancing research, and transforming healthcare delivery. The Enlitic solution is built upon a software framework, creating a network between applications. It houses an ecosystem that enables and supports the exchange of information or content between different interdependent applications. The framework facilitates communications between modalities, Enlitic applications, Electronic Medical Records and PACS. It features a host of AI-powered applications that enable data standardisation, de-identification, anonymisation and workflow simplification. The Company’s current portfolio addresses the challenges of incomplete, inaccurate, and patient-identified medical imaging studies by standardising and de-identifying such studies, while also overcoming issues regarding the interoperability of different systems, devices and applications. While technical interoperability has been addressed through standards like DICOM, HL7, and Fast Health Interoperability Resources, clinical interoperability is still lacking. For example, different clinicians label similar exams differently, making it challenging to search for similar cohorts, posing a dilemma for healthcare providers and creating inefficiencies. Medical vocabulary standardisation is important for improving interoperability, patient safety, and clinical outcomes. Enlitic, Inc. Annual Report 2023 07 Industry Overview Innovative analytical tools like artificial intelligence (AI) and machine learning are important in improving the efficacy and use of the vast amounts of healthcare data generated. These tools help healthcare organisations understand patient needs, identify patterns and trends, and develop personalised and effective treatments. INTRODUCTION Enlitic operates in the global healthcare IT market, which is comprised of businesses that provide products and services for the healthcare sector, such as software, mobile and telehealth technology, cloud-based services, medical devices, remote monitoring devices and assistive technologies. Within this global healthcare IT market, Enlitic specifically operates within the radiology subsector. This subsector encompasses companies that create and sell products such as PACS (Picture Archiving and Communication System), radiology imaging systems, vendor neutral archives and advanced visualisation tools. Enlitic leverages AI in its software products to solve workflow and capacity challenges experienced in radiology departments. AI refers to the simulation of human intelligence in machines or computer systems that can perform tasks that typically require human intelligence. AI enables machines to learn from experience, adapt to new situations, and perform tasks with human-like abilities such as problem-solving, decision-making, speech recognition, language translation, and visual perception. AI systems are designed to mimic human cognitive functions. 08 Enlitic, Inc. Annual Report 2023 Continued AI techniques include machine learning, where systems learn from data and improve their performance over time, natural language processing, which enables computers to understand and respond to human language, and computer vision, which allows machines to interpret and make decisions based on visual data. There are several types of medical imaging techniques, each offering different perspectives and information about the body. Some common medical imaging modalities include X-ray imaging, Computed Tomography (CT), Magnetic Resonance Imaging (MRI), ultrasound imaging, nuclear medicine imaging and mammography. Enlitic’s core software product, ENDEX, uses the techniques described above to standardise the study and series descriptions of medical images, allowing healthcare providers to realise benefits of providing improved data quality to other stakeholders within the enterprise. ENDEX uses computer vision to analyse the gross anatomy and uses natural language processing to analyse the metadata and can infer certain characteristics about the study and series (modality type, body part, presence of contrast) to create a standard nomenclature for the study and series. Through the machine learning models, Enlitic applies these inferences against medical image studies and series to create a common data model that improves searchability and display protocols. This in turn improves the quality of the medical imaging data. As demand for medical imaging has grown over the last few decades, industry stakeholders have increasingly embraced new and innovative products and services to improve operational functions, increase efficiency and enhance patient experience and outcomes. Whilst these have undoubtedly had a net beneficial impact on the industry, the evident by‑product has been a dramatic increase in radiology workflow complexity. THE RADIOLOGY SECTOR Radiology is a field of medicine that involves the use of various technologies to visualise the internal structures and functions of the human body. These imaging techniques and technologies are essential tools for diagnosing and monitoring a wide range of medical conditions. Medical imaging assists healthcare professionals in gaining valuable insights into the body’s anatomy, detecting abnormalities, diagnosing issues, and planning appropriate treatments. There are many points throughout the radiology workflow that can inhibit efficiencies. Enlitic believes that it can impact these inefficiencies and can deliver more favourable outcomes. Another key consideration impacting radiology is the increased stress levels amongst radiologists, resulting in staff retention issues. Radiologists are experiencing high rates of burn out, with sources of job‑related stress for radiologists including a steadily increasing workload alongside the advent of PACS, increasingly growing data sets to analyse, greater expectations for report turnaround times, conflicting demands on time and inadequate staffing. In Enlitic’s view, there are many challenges faced in the radiology workflow process and the adoption of AI will be important in achieving improvements in that process as set out in further detail below. Enlitic, Inc. Annual Report 2023 The Company’s current portfolio addresses the challenges of incomplete, inaccurate, and patient-identified medical imaging studies by standardising and de-identifying such studies, while also overcoming issues regarding the interoperability of different systems, devices and applications. Medical vocabulary standardisation is important for improving interoperability, patient safety, and clinical outcomes. While technical interoperability has been addressed through standards like DICOM, HL7, and Fast Health Interoperability Resources, clinical interoperability is still lacking. For example, different clinicians label similar exams differently, making it challenging to search for similar cohorts, posing a dilemma for healthcare providers and creating inefficiencies. Innovative analytical tools like AI and machine learning are important in improving the efficacy and use of the vast amounts of healthcare data generated. These tools help healthcare organisations understand patient needs, identify patterns and trends, and develop personalised and effective treatments. TARGET MARKETS The radiology ecosystem can be broken up into two main groups, these being: 1. Healthcare institutions (Enlitic’s end users); and 2. Channel partners (Enlitic’s customer acquisition channels). These groups are interdependent and integrate to form the complex systems underpinning the radiology industry we see today. (1) Healthcare institutions Healthcare institutions can be further broken down into health systems/hospitals and private radiology/teleradiology reading groups. These healthcare institutions are Enlitic’s ultimate end users and customers of the Enlitic product offering. (i) Health systems/hospitals A health system, or hospital, is a complex organisational structure that encompasses various healthcare facilities, services and professionals working together to provide comprehensive medical care to a community or population. Hospitals are designed to deliver a wide range of healthcare services, including preventive, diagnostic, therapeutic and rehabilitative care, with the goal of promoting and maintaining the health and wellbeing of individuals and communities. Hospitals play a significant role in the radiology ecosystem by centralising and coordinating various aspects of imaging services. It is common for hospitals to have numerous different radiology PACS active at one time, often resulting in a wide range of different hanging protocols and data labelling. The volume and diversity of medical imaging content generated makes health systems and hospitals an ideal customer for data standardisation technologies. (ii) Private radiology and teleradiology reading groups Private radiology and teleradiology reading groups are specialised medical entities that offer remote interpretation and reporting of medical imaging studies, such as CT scans, MRIs, X-rays and ultrasounds images. These groups provide radiology expertise to healthcare facilities, hospitals, clinics, and other medical institutions that may not have onsite radiologists or need additional support for reading and interpreting imaging studies. (2) Channel partners Channel partners are the most diverse group within the radiology ecosystem and are responsible for the construction of hardware, development of software and movement of information across the industry. They have deep penetration into healthcare institutions, both large and small, and underpin the radiology ecosystem in its entirety. These channel partners are key to companies such as Enlitic as they act as providers, vendors, retailers, or agents in the selling of services, products, or technologies, but are not direct end users of Enlitic products. Instead, they provide significant resources and act as a link between the Company and further end users who might otherwise be unavailable. Enlitic, Inc. Annual Report 2023 09 Industry Overview Key channel partners relevant to Enlitic’s operations include: • Original Equipment Manufacturers; • Distribution partners; • AI platform vendors; • Data migration vendors; and • Data vendors. ENLITIC PRODUCT PORTFOLIO Enlitic currently offers the following key products: • ENDEX™ – a medical imaging solution that standardises and structures data from medical images. This is Enlitic’s core product; and • ENCOG™ – de-identifies medical imaging data. Enlitic also has in development the following two products: • ENCODE™ – will seek to improve data quality that impacts coding and reimbursement; and • ENSIGHT™ – will seek to leverage interoperability with data analysis. Continued ENDEX and ENCOG were launched in 2022 and 2023 respectively, ENCODE and ENSIGHT are in development and we are working hard to accelerate our product pipeline. Currently, Enlitic’s primary focus is driving the adoption of ENDEX and ENCOG in the United States, Europe, and Australia/New Zealand. Descriptions of medical images are often mislabelled, incomplete or inaccurate and create poor data quality that adversely impacts workflows, display protocols and staffing resources. To address these challenges, ENDEX uses computer vision to analyse the gross anatomy of a medical image and determine the body part, presence of contrast and laterality. Using natural language processing, ENDEX analyses the metadata and determines modality, patient information, acquisition parameters and other relevant text-based data about the study and series. Fusing these analyses together, the inference engine can create a standardised study and series description whereby every study with the same characteristics is named the same. INPUT Series Description A Series Description B 1.0 Lung Std. Volume Figure 1: Data standardisation overview. 10 Enlitic, Inc. Annual Report 2023 ENDEX can also enrich data for research or monetisation strategies, and with data that is standardised and clinically relevant, the ability to analyse such data becomes much easier. ENDEX provides a comprehensive solution to radiology departments’ data governance issues, allowing for more efficient workflows, improved data quality, and enhanced value for research or monetisation. Enlitic has announced that it will engage in a project with RadLex, an RSNA committee, to align the ENDEX outputs to the RadLex® standards. OUTPUT ENDEX 0.5 Lung Std. Volume Non_C Similarly, every series acquired with the same acquisition parameters is labelled the same. With standardised nomenclature, PACS can automatically display studies and series consistently, thereby reducing the time radiologists would otherwise waste manually manipulating that data. Administrators of PACS may also save time otherwise spent fixing displays or rerouting data. Standardized Series Description A Standardized Series Description B Chest AXIAL C – LUNG THIN Chest AXIAL C – LUNG THIN TM Enlitic, Inc. Annual Report 2023 THE MARKET OPPORTUNITY (a) Global opportunity The emergence and growth of AI in the global healthcare IT market, and more specifically, the radiology subsector, is being driven by the application of machine learning technology in diagnostic imaging procedures, as well as the rising demand for quantitative medical imaging solutions in clinical practices. (b) Enlitic’s opportunity for ENDEX Enlitic believes the most appropriate way to represent the opportunity in the health systems and hospital market is to reference the number of healthcare providers and the relevant size of these facilities based on bed size. Only large and medium hospitals have been included within Enlitic’s calculation of the TSM for health systems and hospitals. Small hospitals have been excluded from the TSM calculation as they are subscale relative to Enlitic’s growth strategy. Due to the diversity of customer segments in the global radiology market and variety of end-user markets the Company seeks to serve, Enlitic believes the most appropriate way to represent the potential market opportunity is to establish a Total Serviceable Market (TSM) of the radiology subsector of the global healthcare IT market. This TSM specifically relates to the serviceable market for Enlitic’s core product, ENDEX, and does not include any other current or future Enlitic service offerings. Based on 12,207 large and medium hospitals and the Average ARR, Enlitic estimates a TSM for health systems and hospitals at US$3.07 billion. Table 2.1: Estimated serviceable health systems/hospital market size USA UK W. Europe ANZ Total 2,959 672 4,478 596 8,705 429 864 2,060 149 3,502 Total 3,388 1,536 6,538 745 12,207 TSM – – – – US$3.076B Medium (101499 beds) Large (500+ beds) Table 2.2: Estimate serviceable private radiology/teleradiology reading groups market size Total Private Outpatient Facilities 2,504 Teleradiology Organisations 40 Total 2,544 TSM US$641M (c) Key partnerships and customer acquisition channels In addition to sales of products made directly by Enlitic, key partnerships play a pivotal role in Enlitic’s market expansion strategies and provide access to resources such as distribution channels that contribute to driving its revenue growth. For example, Enlitic’s partnership with Marubeni has led to the distribution agreement with Clairvo Technologies, a wholly owned subsidiary of Marubeni. This partnership is expected to aid the ENDEX product expansion in Japan. Other key partnerships include healthcare technology companies (or ‘Original Equipment Manufacturers’) (OEMs) who develop PACS (technology used in healthcare to store, manage and transmit digital medical images and related patient information). Enlitic collaborates with these OEMs to integrate its AI algorithms, expanding the reach of the OEM’s diagnostic capabilities. PACS providers, AI platform vendors, data migration and data vendor companies are also included in this segment. This segment also represents a potential route to market indirectly while providing the OEM with competitive differentiation. Enlitic, Inc. Annual Report 2023 11 Industry Overview GROWTH STRATEGY Enlitic expects growth opportunities for the Company will come through the five key areas described below: 1. New customers: Enlitic is targeting to grow its underlying customer base in the short term via executing on its pipeline of customer opportunities. In doing so, the Company seeks to reach a larger pool of potential customers, expanding its serviceable market and leading to increased sales opportunities and revenue potential. Further, Enlitic aims to leverage its direct and OEM sales force to reach customers across key global markets. 12 Enlitic, Inc. Annual Report 2023 Continued 2. Increased volumes: Enlitic will seek to drive additional revenue growth through increasing volumes with its growing customer base. The Company will look to identify prospects where ENDEX or ENCOG can fulfil a further demand under an existing contract – namely data standardisation or deidentification. This targeted approach allows the Company to concentrate its resources and efforts on gaining a strong presence in the ENDEX and ENCOG markets. 3. New solutions: Enlitic seeks to create cross selling and upselling opportunities as the Company establishes relationships with customers, as well as offering complementary products or services, increasing overall sales and customer loyalty. Throughout this process, Enlitic will continuously collect feedback, analyse market trends, and improve its offerings to meet evolving customer needs. 4. Revenue sharing: Enlitic is working with customers to develop a data monetisation strategy in collaboration with healthcare providers. By standardising and deidentifying data on behalf of the customer, Enlitic expects to be positioned to broker the sale of data to those companies in need, namely AI vendors and pharmaceutical manufacturers. Building on the capabilities of ENSIGHT, Enlitic will seek to create a revenue sharing model with the customer and provide access to this RWE database to vendors. Revenue sharing models in this sector are not common but the market has shown indications of adoption of and growth in such arrangements but is still immature. 5. M&A opportunities: Enlitic will continue to monitor potential adjacent opportunities across new geographies, service capabilities and industry segments. As part of any expansion into these adjacencies, Enlitic may from time to time consider the merits of strategic bolt on opportunities to accelerate growth. Enlitic, Inc. Annual Report 2023 Leadership and Governance Lawrence B. Gozlan Non-executive Chairman Lawrence, a leading biotechnology investor and advisor, is the Life Sciences Investment Manager at Jagen Pty Ltd, an international private investment organisation. Lawrence is also th