The Board bears ultimate responsibility for risk assessment. The Company annually evaluates risks and seeks to maintain a high awareness of risks among employees. Identified risk areas are mainly financial reporting, operational risks and legal risks.


Significant risks and uncertainties

Clinical trials

Since 2012, Episurf Medical runs a clinical study on humans. If the study would result in unexpected or negative results, this can have a negative impact on the company. This study revolves around the implementation of tests on humans for the Episealer® Condyle Solo, where the main study parameters are pain and function. If the study would result in unforeseen or negative results, this may have a negative impact on Episurf Medical.

Regulatory Approvals

To be able to market and sell medical technology products, permits /approvals must be obtained and registration must take place with the relevant authorities in each respective market. Episurf Medical cannot guarantee that such permits/approvals are obtained to the extent necessary to achieve profitability or to meet the objectives for the future.

Market Acceptance

Market acceptance of Episurf Medical’s products depends of several factors. Episurf Medical’s products include new technology that has not previously been used and has to compete with more established treatments currently accepted as industry standard. The Company’s products may require changes to the established practice in the medical community, which takes time to change. The Company cannot guarantee the outcome of any study. Reports of lack of efficacy unsuccessful results when using its products may affect the sales of Episurf Medicals products adversely or result in sales being lower than expected or completely absent.


The generation of new intellectual property and the ongoing maintenance of current IP are key activities which ensure that Episurf’s proprietary, existing technologies and future innovations are well protected. In total Episurf has approximately 100 patents and patent applications world wide, distributed over more than 20 patent families.


Episurf Medical has a small organization and therefore the company is collaborating with several different partners in order to maintain a high level of flexibility and access to the right expertise and skills. Episurf Medical is dependent on continued close cooperation with current and future partners including researchers, technical consultants, distributors, clinical trial managers and subcontractors in terms of production. There are no guarantees that current and future business partners will fulfill their obligations in a successful manner or that partners with the right expertise and competence are available, which may delay or hinder the development of the products.

Key People

Episurf Medical is highly dependent on key personnel. There is a risk that the Company’s operations could be adversely affected if these individuals leave the company or for any other reason are unable to fulfill their duties. There is also a risk that the board, senior management or key personnel through the wrong decision could adversely affect the company.

Financial Risks

The Group’s activities expose it to various types of financial risks such as market, liquidity and credit risks. Market risks primarily consist of interest rate risk and currency risk. It is the Company’s board that is ultimately responsible for exposure, management and follow-up of the Group’s financial risks. The Board establishes the framework for exposure, management and follow-up of financial risks and these frames are evaluated and revised annually. The Board has the possibility to decide on a temporary departure from the established framework. For further information, see Note 3.


Financial risk management

3.1 Financial risk factors

Through its activities, the Group is exposed to various financial risks: market risk (certain foreign exchange risk), credit risk and liquidity risk. The Group’s overall risk management policy is focused on minimising the potential adverse effects on the Group’s financial results. The identified risks consist mainly of a certain foreign exchange risk resulting from foreign trade. Risk management is handled by the CEO in consultation with the finance department, based on guidelines established by the Board. The CEO, in consultation with the finance department, identifies, evaluates a

a) Market Risk

Foreign exchange risk

The Group is exposed to foreign exchange risk arising from exposures to different currencies, primarily relating to transactions in the EU. Episurf Medical AB’s (publ) presentation currency is Swedish kronor (SEK), which is also the functional currency of the Parent Company and the Swedish subsidiaries in the Group. The financial statements of foreign subsidiaries are presented in local currency and are translated to SEK in the consolidated financial statements. The balance sheets of foreign subsidiaries are translated to SEK at the closing day rate of exchange and all items in the income statement are translated at the average rate during the year. Any translation differences thus arising are recognised in consolidated financial statements in other comprehensive income for the period, net of tax.

b) Credit Risk

Credit risk is managed at the group level. Credit risk arises through cash and cash equivalents, deposits in banks and financial institutions and credit exposures to the Group’s customers, including outstanding receivables and contractual transactions. The maximum credit exposure consists of the book value of the exposed assets. At present the Group’s credit risk is assessed to be limited, since most of the financial assets consist of cash and cash equivalents in major Swedish credit institutions.

c) Liquidity Risk

At 31 December 2017 the Group had liquidity of TSEK 71,279 (42,300). Episurf Medical announced and conducted a rights issue in the beginning of 2017 which was subscribed to approximately 91.5% and raised approximately 109,5 MSEK prior to transaction costs. As of December 31, 2017, the group had SEK 71.3 in cash and cash equivalents. To assure financing of continued operations, a financing agreement with European Select Growth Opportunities Fund was entered into in February 2018 which provides the company with access to SEK 70 million over a 36 month period. The agreement is subject to final approval by the Annual General Meeting of the shareholders in April 2018. During 2018, management estimate that expenses for market initiatives in the USA will result in increased expenses while costs in the European operations will decrease. Management further estimate that the financing provided through the financing agreement entered into on February 22, 2018 is key for the market initiatives in the USA of which the approval by the Annual General Meeting is a prerequisite. Based on the access to funding provided by the agreement, the Board estimates that financing is adequate for the foreseeable future. In case the financing agreement is not approved by the shareholders, the Board and Managing Director estimate that the current funds will be adequate to finance operations during the following 12 months, however, the group will not be able to implement the market initiatives in the USA as currently planned. Future undiscounted cash flows correspond to the book values of the liabilities. There were no interest-bearing liabilities at 31 December 2017.

Capital Risk Management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure in order to reduce the cost of capital. The Group is entirely funded through equity. The equity ratio at 31 December 2017 was 91,7 per cent (80.8).

Fair value

The Group has no financial assets or liabilities that are measured at fair value. The carrying amount of assets and liabilities in the balance sheet, which falls within the scope of disclosures in accordance with IFRS 13, is assessed to correspond closely to fair value.