Further investment into Morphic Medical Inc

Crystal Amber Fund (AIM: CRS) announces that as a part of its ongoing commitment to its portfolio company Morphic Medical Inc ("Morphic" or "Morphic Medical"), the Fund has today invested US$500,000 (approximately £394,000*) in Morphic Medical, taking the total invested by the Fund in Morphic Medical in the last 12 months to US$7 million (approximately £5.5 million*).

As announced on 31 July 2024, the Fund has been and continues to be the sole provider of finance to Morphic. The US$7 million invested has been provided to Morphic in the form of unsecured interest bearing loan notes convertible into ordinary shares in Morphic Medical ("CLNs") in cash instalments during 2024. The Fund anticipates providing up to an additional US$4 million in instalments as CLNs over the next few months. The investments are to provide Morphic with capital to continue to progress its commercial objectives, obtain regulatory approvals and to build up inventory ahead of anticipated sales.

The CLNs accrue interest at 7.5% per annum and are repayable on 13 January 2025, however, it is the Fund's intention to seek the conversion of the CLNs to equity, as well as the other loan notes it holds, on or before this date. The CLNs and accrued interest automatically convert to equity in Morphic upon an equity fundraising by Morphic of at least US$8 million (a "Qualifying Fundraising") at a price determined by reference to the price of the Qualifying Fundraising. An update on Morphic's funding discussions is provided below and a further announcement will be made on this and the conversion of the CLNs as appropriate.

The Fund now holds US$25.4 million of convertible loan notes in Morphic Medical with accrued interest currently standing at approximately US$2.8 million. The Fund also owns 95.3 per cent of Morphic's share capital via common shares and preferred shares, which had an audited valuation at 30 June 2024 of approximately £60 million.

Update on Morphic Medical

In recent weeks, Morphic Medical has continued to make commercial and regulatory progress. Pending CE certification, 30 German hospitals applied for NUB funding for RESET. In Germany, NUB is the reimbursement procedure for novel drugs and devices not yet included in the German healthcare billing system. In the UK, three substantial NHS Trusts have initiated the economic business case for RESET. Morphic is also in discussions with potential distributors in other European countries.

The regulatory process continues to advance in the US, EU and UK. Last month, Morphic received positive feedback following the completion of the Systems Audit at its premises in Boston, MA, USA. Prior to the final Technical Review and expected certification by an EU designated organisation, next month a site visit is scheduled at Morphic's appointed manufacturer (Medical Murray Inc.).

Of late, Morphic has attracted further interest from potential investors, including multi-billion dollar market capitalisation medical device companies and is in ongoing discussions regarding potential equity investment, as well as sales and distributions agreements. There can be no certainty as to a successful outcome of these discussions.

About Morphic Medical

Based on Morphic Medical's latest statutory accounts for the year ended 31 December 2023, Morphic had not commenced sales and made a loss before tax of US$9,124,000.

Having commissioned two independent valuation reports on Morphic, the Fund concluded that, at 30 June 2024, Morphic was valued at US$98.8 million (approximately £77 million) on a risk-adjusted basis and on a cash free, debt free basis.

*based on the foreign exchange rate of US$1.268 to £1.