country
2 | Annual Report 2021, Observe Medical ASA
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Contents
We are Observe Medical ....................................................................................................................... 3
Highlights 2021 ...................................................................................................................................... 4
Key Figures ............................................................................................................................................. 5
About Observe Medical Portfolio ......................................................................................................... 8
Executive Management and Board of Directors ................................................................................ 26
Corporate Governance ........................................................................................................................ 27
Sustainability Report ............................................................................................................................ 38
Consolidated Financial Statements 2021 ........................................................................................... 49
Explanatory Notes to the Consolidated Financial Statements 2021 ................................................ 55
Parent Company Observe Medical ASA Annual Financial Statements 2021 ................................... 86
Declaration in Accordance with §5-5 of the Securities Trading Act ............................................... 103
Auditor’s Report ................................................................................................................................. 104
Alternative Performance Measures (APMs) ...................................................................................... 110
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We are Observe Medical
Observe Medical is a Nordic medtech company that develops, markets and sells innovative
medtech products for the global market. The Company is committed to improving patient
welfare and patient outcomes, improving clinical data accuracy and promoting positive health
economics.
The Company seeks to drive growth by leveraging its expertise in sales and commercialization
of its broad portfolio of medical technology products, mainly in urine measurement,
ultrasound, anesthesiology/ICUs, surgery and wound care, in combination with targeted M&A.
The Company is headquartered in Os lo , Norw ay , with wholly-owned subsidiaries in Narvik,
Norway, Gothenburg in Sweden, Oulu in Finland and Seattle in the US. In addition, Observe
Medical has a distributor and partner network internationally.
Sippi® a CE marked system for urine measurement, which offers a unique, effective, and
innovative solution for automated and connected urine monitoring and infection management
at the hospital intensive care units (ICUs), wards and home care. The system incorporates
SippSense® and SippCoat®, technologies that alert for and hinder biofilm formation, which
can lead to urinary infections. Urinary tract infections are the number one hospital acquired
complication for patients, and their treatment is a considerable burden to hospital staff and
budgets.
During 2021, the commercialization of Sippi® has been a key focus area for the company and
specifically the clinical roll-out in the Nordics and in selected European markets. The Group
has strong global patent protection for Sippi® proprietary technology and has further
strengthen it with new patents in India, China, and Brazil during 2021.
In March 2022, Observe Medical acquired Biim Ultrasound AS, a Company that has developed
a unique, wireless and pocketable ultrasound probe, Biim, that can scan patients and review
images in seconds. The objective of Biim is to enhance healthcare personnel decision-making
and improve patient outcomes. Biim's technology is patented, and the device received 510 (k)
clearance from the US Food and Drug Administration (FDA) in 2018. Biim is approved for
ultrasound imaging of the human body and is specifically used to guide needle and catheter
insertions for dialysis and vascular access procedures.
A partner agreement with Fresenius Kidney Care, a leading provider of kidney care services
in the US with approximately 2,500 clinics, is already in place whereby Biim is intended to be
used across Fresenius' dialysis centers in the US. In April 2022, Biim completed phase 1,
delivering 260 devices to Fresenius’s training clinics in the US, and is now ready for the next
phase in the partner agreement with Fresenius Kidney Care.
In addition, the Company has a broad distribution portfolio of medtech devices and
disposables, mainly within Urine measurement, Anesthesiology/ICUs and wound care. This
product portfolio from well-established suppliers in medical technology and wound care is
through an experienced sales team and contributes to accelerating the clinical rollout of the
proprietary products by enabling access to target customers. Our medtech distribution
portfolio is mainly distributed in the Swedish market with the potential to expand to the rest
of the Nordic region.
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Highlights 2021
Significant organic growth for the Nordic distribution portfolio
The Company reports total revenues of NOK 24 million compared to NOK 15.5 million
in comparable pro forma figures for 2020, representing organic growth of 55%
Signed distribution agreement with Skamex (Poland) for the roll-out of Sippi®
in the Polish and the Romanian market
At June 30, 2021, Observe Medical announced that it had entered into a distribution
agreement with Skamex (Poland) for the roll-out of Sippi® in the Polish and the
Romanian market. Skamex is one of the leading distributors of medical equipment in
Poland and Romania, two significant markets with together over 6.800 ICU beds.
Nye Karolinska Sjukhuset initiates new studies to broaden the clinical scope
of use for Sippi®
In 2021, Nya Karolinska Hospital in Stockholm, Sweden, initiated a study to evaluate
Sippi® for early detection of AKI (Acute Kidney Injury), and the Hospital has completed
the recruitment of 60 patients by the end of 2021. AKI affects more than 50% of patients
in ICU departments and represents a significant clinical burden to patients and
healthcare systems. Sippi® potential positive effect on early detection of AIK is thus
driving significant health economic value of Sippi®.
Subsequent events
Acquired and completed the acquisition of Biim Ultrasound AS
On January 14, 2022, Observe Medical announced the acquisition of Biim Ultrasound
AS, an international medical ultrasound technology company, and its unique, wireless,
and pocketable ultrasound probe, Biim. The acquisition significantly strengthened and
broadened Observe Medical’s distribution network in the US market and expanded the
product portfolio.
The Company carried out a share capital increase by way of a Rights Issue
In February 2022, the board of directors approved a fully underwritten Rights Issue to
raise gross proceeds of NOK 180 million in connection with the Company’s acquisition
of Biim Ultrasound AS. The proceeds were used to partly finance the cash portion of
the acquisition of Biim Ultrasound AS.
Rune Nystad was appointed Chief Executive Officer of Observe Medical
Bringing broad experience from the US medtech industry, Nystad was appointed CEO
in March 2022. His previous role was CEO of Biim Ultrasound.
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Key Figures
• Observe Medical had operating revenues of NOK 24,042 thousand (2,961)
in 2021 and a gross result of NOK 9,518 thousand (986). The change is
mainly due to the acquisition of the Nordic distribution portfolio, which is
consolidated as at November 1, 2020.
• EBITDA decreased in 2021 mainly due to higher operating expenses
related to increased headcount, execution of the go-to market strategy, and
transaction cost of NOK 4,619 thousand related to the acquisition of Biim
Ultrasound AS.
• Net finance income of NOK 10,223 thousand (-8,782) are mainly related to
change in the contingent consideration liability and the net currency gain
that more than offset the interest expenses of borrowings for the year.
• Result for 2021 is negative NOK 26,321 thousand (-36,868).
• Observe Medical had an equity of NOK -14,122 thousand at December 31,
2021. In March 2022 the Company completed a Rights Issue of NOK
180,000 thousand and issued 8,171,913 consideration shares in connection
with the Biim Ultrasound acquisition. These transactions significantly
increases the Company’s equity and which secure financing of the execution
of the Company’s strategy.
(Amounts in NOK thousand, expect EPS, equity ratio and
number of employees)
2021
2020
Revenue
24,042
2,961
Gross result
9,518
986
EBITDA before non-recurring items*
-28,462
-23,711
EBITDA
-33,081
-24,923
EBIT
-36,544
-28,087
Net finance
10,223
-8,782
Result
-26,321
-36,868
EPS
-1.34
-2.22
Equity
-14,122
20,349
Total balance
71,738
87,733
Equity ratio
-20%
23.2%
Number of employees
14
11
* Non-recurring expenses in 2021 is related to expenses in connection with the acquisition of Biim
Ultrasound AS, and in 2020 the expenses was related to acquisition of the Nordic distribution
portfolio.
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Letter from the CEO
Positioning the company for global growth
I am pleased to comment on Observe Medical’s recent achievements and provide an
overview of the way forward as part of this Annual Report, the first since my appointment as
Chief Executive Officer in March 2022. I am grateful for the opportunity and look forward to
working closely with the team to strengthen the Company’s position as a Nordic medtech
player with global reach.
We have gone through a transformational period over the last few months, so I would like
to take this opportunity to focus on the way forward. We are surrounded by solid
fundamentals, and I believe we are well-positioned to deliver on our potential. We have a
strong portfolio of proprietary medtech products available globally, an international and
dedicated team, and the drive to succeed. We are also supported by dedicated owners who
take an active part in the development of the Company.
The transformational acquisition of Biim Ultrasound AS in January was a defining moment
for the Company, demonstrating our commitment to improving patient welfare and patient
outcomes, improving clinical data accuracy, and promoting positive health economics. As
the prior Founder and CEO of Biim Ultrasound, I am confident Observe Medical will benefit
and capitalise from the many synergies between the two companies.
As part of the acquisition, Observe Medical strengthened its product portfolio with the
addition of a unique and patented, wireless, and pocketable ultrasound probe that can scan
patients and review images in seconds from a smart device. Shortly before the acquisition,
Biim Ultrasound had signed a significant partnership agreement with Fresenius Kidney Care
to deliver probes to hundreds of its educational dialysis clinics in the US. Excitingly, the roll-
out of Biim is well underway, and a total of 260 probes have already been delivered.
Fresenius has more than 2 500 dialysis clinics in the USA, which are targeted to introduce
ultrasound devices. Fresenius has also signalled interest in using Biim across additional
applications, and we look forward to exploring this partnership further.
Beyond the acquisition, Observe Medical also made significant progress with Sippi®, our
automated digital urine meter. Having agreed on the pathway forward for Sippi® in the US
market with the US Food and Drug Administration, we expect Sippi® to be released in the
fourth quarter of 2022. This would be followed by a market entry and launch with a selected
partner by the first quarter of 2023.
In Europe, we have already experienced a successful pre-launch in Poland, and a full launch
of the system will soon take place. In addition to the European roll-out, we have seen the
Sippi® system be evaluated for early detection of increased risk of acute kidney injury at the
Nya Karolinska Sjukhuset in Sweden. The data from this study is currently being analysed,
and we look forward to updating the market once the analysis is complete.
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During the first quarter of 2022, we also announced that we had received Medical Device
Regulation (MDR) for the Sippi® Disposable Unit, ensuring continued market access for this
part of the unit in Europe after 2024. The team is also in the process of obtaining MDR
Certification for the Sippi® Base Unit, which is currently certified under MDD until 2024.
Our Nordic sales and distribution portfolio has had strong tailwinds and good sales
numbers. This part of the business is continuing its expansion, and we have added a surgery
product range to our distribution. This entity has great business potential in all Nordic
countries for the years ahead.
We have an exciting road ahead, and I look forward to embarking on this journey alongside
our dedicated and highly valued team. I would also like to thank the team for their patience
as we go through the integration process and merge our strengths. Our shareholders have
also exhibited strong backing for the combined business, and I am grateful for the
continued support. Our strategy for growth is clear. With commercial focus, time and
precision, we will succeed. I look forward to providing further updates as we continue to
move forward.
Rune Nystad
CEO
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About Observe Medical Portfolio
Observe Medical has a broad portfolio of medtech devices and disposables, mainly
within Urine measurement, Anesthesiology/ICUs and wound care and aimed at ICUs and
other wards at hospitals as well as towards primary care and homecare settings
Observe Medical’s main product, Sippi® is a proprietary, patented, CE marked Digital,
Automated Urine Measurement System for urine monitoring, currently in
commercialization phase globally. Our Nordic medtech portfolio is, except Sippi®,
supplied by well-established manufacturers of innovative medical technology and
wound care products and mainly distributed in the Swedish market with the potential to
expand to the rest of the Nordic region.
In the Nordics, our portfolio is sold through our experienced Nordic sales team,
including tender management, and in the rest of the world through an expanding
distributor network.
Sippi® - The Digital, Automated Urine Measurement System
One can hardly imagine a space in modern society more packed with technology than
an intensive care unit (ICU) at a hospital. Pulse and blood pressure are measured
automatically with data delivered in real-time to the patient monitoring systems, and
intravenous delivery of drugs and fluids are also digitized.
One important parameter, hourly urine volume output, called hourly diuresis, from
patients, is however still recorded and calculated in an old-fashioned manner. Every
hour, healthcare professionals at hospital ICUs and wards and in home care must break
off their tasks to manually handle the hourly diuresis routine. The manual procedure
consumes time, creates stress and is a source of error.
Addressing Three Major Challenges for the Healthcare System
Observe Medical’s Sippi® system brings urine measurement at hospitals up to today’s
standards by measuring and capturing data digitally and fully automated.
Sippi® addresses Catheter Associated Urinary Tract Infections (CAUTI), which is the most
common hospital acquired infection and a frequently experienced complication for
catheterized patients. Sippi® thereby contributes to minimizing risk to patients and
reducing costs for healthcare personnel and facilities, resulting from extended stays and
treatment initiatives.
Equally important, Sippi® provides patient data accuracy unattainable with other
technologies – and saves significant time and effort for healthcare professionals.
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Connected to the Patient Monitoring System
Observe Medical is currently commercializing the second generation and wireless
version of the Sippi® base unit. Sippi® BLE 2.0 features a wireless Bluetooth connectivity
enabling direct communication with patient monitoring systems (PMDS). With the
unique wireless version, the last manual step is eliminated, and urine production can
automatically be integrated into the patient journal system in the same way as pulse,
blood pressure, temperature, infusion and other parameters are integrated today.
The base unit is linked to the disposable unit, which consists of a measuring chamber
connected to the base unit where the sensors are located, and a urine bag for collecting
the urine. To avoid infections, it is essential to prevent biofilm from reaching critical
levels and migrating upwards in the urinary catheter. The SippSense® system caters to
this. SippSense® is a sensor that can record whether there is biofilm on the inside of the
measuring chamber and warn if critical amounts are reached. Moreover, the system
features SippCoat®, which is a solution that inhibits the growth of biofilm. In the base
unit, there is a capsule with silicone oil that inhibits biofilm. In use, the capsule is
dissolved and forms a layer within the collection chamber which hinders the formation of
biofilm. The sensors and measurement technology, SippSense®, as well as SippCoat®,
are covered by patents.
SippSense™
Alert for biofilm
– replace bag
SippCoat™
Biofilm prevention
Disposable unit
Base unit
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Building Clinical Evidence
Observe Medical is working closely with clinics in order to gather experience and
evidence of the performance and benefits of Sippi®.
For example, Jan van der Linden, professor at Karolinska University Hospital in
Stockholm, has, together with other researchers, published two studies showing that
Sippi® is superior to analogue systems in accuracy, nurses’ workload and satisfaction.
In January 2021, a doctoral (PhD) thesis from Karolinska Institute, Stockholm, Sweden,
was published, demonstrating multiple clinical benefits of the Sippi® automated digital
urine meter and the potential paradigm shift in clinical practice of urine measurement.
The PhD thesis ‘Evaluation of an automatic urinometer including use of silicone oil to
decrease biofilm formation due to proteinuria, hemoglobinuria and bacterial growth’ is
written by Dr. Martin Slettengren and was dissertated at Dept. of Molecular Medicine
and Surgery, Karolinska Institute in Stockholm.
The thesis shows that the Sippi automatic diuresis measurement system is clearly more
appreciated by ward personnel than current manual systems, as it saves them time, is
ergonomically superior, and measures diuresis as correct as or better than the manual
systems. Accurate monitoring of diuresis is key to detecting emerging kidney failure and
fluid balance distortions. The ability to monitor trends in diuresis in more detail,
combined with the superior usability of the Sippi system, is highlighted in the publication
as an important step in improving patient safety in this respect.
Dr. Slettengren’s study also shows that silicone oil (Sippcoat®) reduces the growth of
microbial biofilm formation as well as biofilm coating from albumin and free
hemoglobin. The study demonstrates that Sippcoat® improves the performance of the
Sippi device substantially and enables it to function for patients with ongoing urinary
tract infection, albuminuria and hemoglobinuria. Finally, the study mentions that the
Sippi detection system (SippSense®) may provide new information for early warning of
kidney disease, which could be an indicator of the need for clinical preventive actions.
Jan van der Linden, professor at Karolinska University Hospital in Stockholm, has,
together with other researchers, published two studies showing that Sippi® is superior to
analogue systems in accuracy, nurses’ workload and satisfaction. A published study
addresses SippCoat® effectiveness in hindering the most common bacteria growth,
including multi-resistant stems.
In 2021, Nya Karolinska Hospital in Stockholm, Sweden, initiated a study to evaluate Sippi®
for early detection of AKI (Acute Kidney Injury) and the Hospital has completed the
recruitment of 60 patients at the end of 2021. AKI is affecting more than 50% of patients
in ICU departments and represents a significant clinical burden to patients and healthcare
systems. Sippi® potential positive effect on early detection of AIK is thus driving significant
health economic value of Sippi®
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Additional Applications of the Technology
The published preclinical data, together with clinical findings, supports that SippCoat®
represents a good opportunity in fighting biofilm formation and potentially bacteria
growth within fluid handling systems in general, with emerging laboratory and patient
data supporting the efficacy of the technology. The SippCoat® encapsulated technology
is already included as part of the Sippi® system. The same capsule can also be sold as
original equipment to other suppliers of urine and body fluid bags.
Observe Medical is developing a separate market strategy for SippCoat® and the
disposable SippBag and will pursue alternative options for urine collection. The SippBag
can be used for all catheterized patients, in hospitals, or in homecare and can follow the
patient in all clinical settings with no need for disconnection.
Market Potential
The ambition of Observe Medical is to continue the roll-out of Sippi® to clinics with a
focus on the Nordics and selected European countries during 2021. The pace of the roll-
out will be dependent on the progress of the COVID-19 situation in hospitals.
Subsequently, the roll-out will proceed to a full European launch as well as preparations
for launches in North America and the Asia Pacific.
The company considers the market potential for Sippi® to be in the range of 0.5 million
base units and around 20 million disposable units per year. A preliminary estimate of the
value of this market is around NOK 4 billion per year globally.
The potential roll-out of SippBag as a standalone product will be planned based on
learnings from the ongoing launch of the Sippi® BLE system. This could, according to
preliminary company estimates, represent a market of 500 million bags per year, or
more than NOK 20 billion.
Biim wireless pocketable ultrasound device
At March 8, 2022, Observe Medical ASA acquired
Biim Ultrasound AS (“Biim or Biim Ultrasound”).
Biim has developed and sells a wireless pocketable
ultrasound device which has been approved by the
FDA since 2018. istorically ultrasound has been
underutilized, despite its clinical value. Ultrasound
has been expensive and served by large ultrasound
devices in hospitals and not designed to be mobile
solutions that is easy to bring and use in and outside
the hospitals.
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Biim's wireless pocketable ultrasound device is a cost efficient and small handheld
wireless device that makes the technology available where its needed.
Biim offers nurses and medical staff an easy to use ultrasound device at low cost for them
to ensure accuracy and quality in the treatment of their patients. The customers of Biim
Group benefit from the device being intuitive, pocketable, flexible and cost efficient.
Biim has extensive R&D conducted since 2014, and a recent agreement with Fresenius
with an aim to roll-out Biim Ultrasound probe in their dialysis clinics has been a major
important milestone.
The Biim Ultrasound system consists of an ultrasound probe and an App for display of
the ultrasound image and/or video. The App can be downloaded from App Store and
Google Play onto a tablet, pc or a phone. The wireless communication between the
probe and the device for display is done via a Wifi connection. Both the probe and the
display device each have a Wifi chip for a closed system connection to be established
during operation. The system is typically used at the bedside but also in non-hospitals
settings such as nursing homes, ambulances and in homes. The entire system is
designed to display anatomy and needle insertions in the range of 0 to 4 cm.
The main procedures are IV; PICC (Midline), CVC and dialysis procedures for graft and
fistula view during procedures. The probe consists of many small plastic parts and
electrical parts. The main circuit board has sufficient capacity to send, receive and
process image data. It is operated by a chargeable battery.
The probe also consists of several wireless
functions in order for the operator to keep the
device in a sterile field with the display device
outside of the sterile field established for a
specific procedure. This has several advantages
compared to most devices which have a cable
between the probe and the display device,
which is considered more cumbersome. Some of
the App's functions are zoom, changing the
depth of view, storing/sending data,
measurements of length, circumference and
annotations. The customer can also purchase
additional batteries, probe holders, gel, sterile
sheets and a rack to store the entire system. Biim
offers most of these articles.
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Market overview
The dialysis market opens a huge potential for Biim's wireless pocketable ultrasound
device. (1): Over time, the Company believes that Biim's wireless pocketable ultrasound
device will become the standard of care, thus, the estimated number of wireless
pocketable ultrasound device/probes are higher for the global market size estimate.
Furthermore, Biim has identified an untapped potential to distribute its product in
adjacent market segments.
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The Nordic Portfolio
Observe Medical Nordic portfolio consists of medtech devices and disposables, from
well-known international suppliers of products within Urine measurement,
Anesthesiology/ICUs and wound care and aimed at ICUs and other wards at hospitals as
well as towards primary care and homecare settings, thus synergistic with Sippi® target
customers. Below is a summary of the products within each category
In addition to Sippi®, the urine measurement
range consist of several products like urine
temperature catheters fixating devices to use in
combination with urine catheters
Respiratory tubes, blood and fluid warming
devices, Central Venous catheters (CVK),
pupillometers and many more
Wound care range comprises wound dressings
of various types and sizes, including a unique
range of products with manuka honey, well
known for the efficient antimicrobial and wound
healing promoting characteristics as well as a
range of high-quality skin punches.
Anaesthesia / ICU
Wound Care
Urine measurement
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Board of Directors’ Report 2021
Introduction
Observe Medical (the Group) is a medtech group developing and commercializing
medical technology products on a global market through a global distributors and
partners network and a direct sales operation in the Nordic. The Group aims to add value
to the benefit of patients, healthcare professionals and hospitals through improved
patient welfare, health economics and data accuracy. With headquarters in Oslo, Norway,
Observe Medical is building a portfolio of medtech products through M&A as well as
organic growth.
In March 2022, the Group acquired Biim Ultrasound AS (Biim or Biim Ultrasound) for a
total consideration of NOK 185 million. Biim has developed and sells a wireless
pocketable ultrasound device which has been approved by the FDA since 2018.
After the Biim acquisition, the Group has offices in Gothenburg (Sweden), Oulu (Finland),
Seattle (US), in addition to the headquarters in Oslo (Norway), and we currently have two
proprietary system in our global portfolio;
Sippi® a CE marked system for urine measurement, which offers a unique, effective, and
innovative solution for automated and connected urine monitoring and infection
management at the hospital intensive care units (ICUs), wards and home care. The system
incorporates SippSense® and SippCoat®, technologies that alert for and hinder biofilm
formation, which can lead to urinary infections. During 2021, the commercialization of
Sippi® has been a key focus area for the company and specifically the clinical roll-out in
the Nordics and in selected European markets. The Group has strong global patent
protection for Sippi® proprietary technology and has further strengthen it with new
patents in India, China, and Brazil during 2021.
The Biim Ultrasound system consists of an ultrasound probe and an App for display of the
ultrasound image and/or video. The App can be downloaded from App Store and Google
Play onto a tablet, pc or a phone. The wireless communication between the probe and the
device for display is done via a Wifi connection. Both the probe and the display device
each have a Wifi chip for a closed system connection to be established during operation.
The system is typically used at the bedside but also in non-hospitals settings such as
nursing homes, ambulances and in homes.
In the Nordic region, the Nordic distribution portfolio had organic growth in sales revenue
at 55%, to NOK 24 million, compared to proforma figures from 2020. The Group has
communicated a strategy to further grow and expand in the Nordic with a long-term
ambition of NOK 100 million in revenues.
In February 2022, the Group strengthened its financial position with a rights issue of NOK
180 million (Rights Issue). Net proceeds from the Rights Issue will be used for the cash
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settlement of NOK 50 million related to the acquisition of Biim Ultrasound AS,
commercialization and growth initiatives for Sippi® and Biim ultrasound probe, and
repayment of current interest-bearing debt, in addition to general corporate purposes.
Medical International AB (merged into Observe Medical AB in January 2022), Observe
Medical AB, Observe Medical ApS, Observe Medical Nordic AB, Biim Ultrasound AS. Biim
Ultrasound Oy and Biim Ultrasound Inc is fully owned subsidiaries of Biim Ultrasound AS.
Summary of the Financial Results
The Group had operating revenues of NOK 24,042 thousand in 2021 compared to NOK
2,961 thousand in 2020. The gross result was NOK 9,519 thousand, compared to NOK
986 thousand in 2020. The Nordic distribution portfolio was acquired at the end of
October 2020, and the increase in revenues and gross results is due to reported revenues
for full year 2021 and further strong organic growth.
In 2021, EBITDA before non-recurring items was negative NOK 28,462 thousand
compared to negative NOK 23,711 thousand in 2020. The decrease in EBITDA compared
to last year was mainly due to increased average headcount and employee benefit
expenses and reflects the Group’s strategy to strengthen sales efforts. Non-recurring items
at NOK 4,619 thousand in 2021 was expenses in connection with the Biim acquisition and
in 2020, NOK 1,212 thousand related to the Sylak AB acquisition.
Depreciation and amortization increased from NOK 3,163 thousand in 2020 to NOK 3,463
thousand in 2021. The increase is mainly related to increased depreciation of lease
liabilities due to IFRS 16.
Net finance income was NOK 10,223 thousand and was mainly related to a change in
estimated fair value of contingent consideration as a result of the likelihood of discounted
milestone payments in the purchase agreement of Observe Medical International AB in
2015. In addition, the net currency gain more than offset the increased interest expenses
due to increased interest-bearing debt. In 2020, net finance expenses came in at NOK
8,782 thousand related to the interest of borrowings and change of contingent
consideration that more than offset net currency gain.
As a result, the Group had a loss of NOK 26,321 thousand in 2021, compared to a loss of
NOK 36,868 thousand in 2020.
Earnings per share was negative NOK 1.34, compared to negative NOK 2.22 in 2020.
Financial Position
The Group had assets of NOK 71,738 thousand at December 31, 2021, compared to NOK
87,733 thousand at December 31, 2020. The book value of fixed assets was NOK 56,579
thousand and consists mainly of goodwill related to the acquisition of Observe Medical
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International AB in 2015 and goodwill from the acquisition of Sylak AB in 2020, as well as
the Sippi® related technologies and patents.
The company has carried out impairment tests to test goodwill and intangible assets
without identifying any need for impairment of booked values.
At year-end 2021, the Group had current assets of NOK 15,159 thousand, mainly related
to inventories and prepaid expenses related to the Rights Issue that is completed in 2022.
In 2020, the Group had current assets of NOK 29,797 thousand.
The Group had equity of negative NOK 14,122 thousand at December 31, 2021,
compared to NOK 20,349 thousand at December 31, 2020. The decrease is mainly due to
the negative result in 2021.
On March 7, 2022, the Company announced that the share capital increase pertaining to
the Rights Issue with a total of 25,714,286 new shares each with a nominal value of NOK
0.26 was registered in the Norwegian Register of Business Enterprises (Nw:
Foretaksregisteret). The subscription price per share was NOK 7.00, and the total gross
proceeds from the Rights Issue was NOK 180 million. The Rights Issue has significantly
increased the Group’s equity.
On December 21, 2021, the Group had total non-current liabilities of NOK 13,581
thousand compared to NOK 57,449 thousand one year before. The decrease is mainly
related to reclassification to current liabilities of interest-bearing loan from Navamedic
ASA and change in the estimated fair value of contingent consideration as a result of a
change in the likelihood of discounted milestone payments in the purchase agreement of
Observe Medical International AB in 2015.
Total current liabilities at December 31, 2021, amounted to NOK 72,279 thousand,
compared to NOK 9,935 thousand at December 31, 2020. The increase is mainly related
to reclassification from non-current liabilities of interest-bearing loan from Navamedic
ASA, loan agreement with Ingerø Reiten Investment Company AS and credit facility in
Danske Bank.
Cash Flow
At the end of 2021, the Group had NOK 2,864 thousand in cash, a decrease from NOK
18,945 thousand at the end of 2020.
Cash flow from operating activities was negative NOK 22,126 thousand in 2021,
compared to negative NOK 21,641 thousand in 2020. Change in result before tax is mainly
offset by a change in interest expenses and change fair value contingent consideration
with no cash effect due to change in estimated fair value of contingent consideration as a
result of the likelihood of discounted milestone payments in the purchase agreement of
Observe Medical International AB in 2015.
The Group used NOK 4,886 thousand for investing activities in 2021, down from NOK
8,077 thousand in 2020. The decrease is related to the net cash effect of the acquisition
18 | Annual Report 2021, Observe Medical ASA
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of Sylak AB in October 2020, which more than offset the increased investment in
intangible and tangible assets in 2021.
In 2021, net cash flow from financing activities was NOK 16,079 thousand due to the loan
agreement with Ingerø Reiten Investment Company AS and credit facility in Danske Bank
In 2020, net cash flow from financing activities was NOK 48,169 thousand and related to
net proceeds from rights issue completed in July 2020 and increased interest-bearing
debt.
Financing
The Group is in the roll-out phase of its proprietary products Sippi® and Biim ultrasound
probe, and in order to be able to continue the roll-out of the products in the global market,
the Group will continue to focus and invest in sales channels, sales resources and business
development going forward.
In addition, the Nordic distribution portfolio is expected to grow and generate positive
cash flow going forward.
In connection with the demerger from Navamedic ASA in 2019, Observe Medical ASA (as
the borrower) entered into a loan agreement with Navamedic ASA (as the lender) at NOK
32,000 thousand. In June 2021 the Group entered into a short-term interest-bearing loan
agreement with Ingerø Reiten Investment Company AS at NOK 10,000 thousand and in
November 2021 a credit facility in Danske Bank which were drawn with NOK 6,509 at
December 31, 2021.
Net proceeds from the Rights Issue in March 2022 has been used for the cash settlement
of NOK 50 million related to the acquisition of Biim Ultrasound AS, and will be used for
further commercialization and growth initiatives for Sippi® and Biim ultrasound probe and
repayment of current interest-bearing debt in addition to general corporate purposes.
The Group's principal source of liquidity will be net cash flows generated from sales in
addition to cash generated from financing, equity, and debt. Consequently, any shortfall
of cash generated from operations management will have to be covered through
additional financing. See further details under sections “Financial Risk” and “Going
concern”.
19 | Annual Report 2021, Observe Medical ASA
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Shareholders
As of December 31, 2021, Observe Medical ASA had 1,224 shareholders and a total of
19,605,457 shares with a par value of 0.26. The following table shows shareholders
owning 1 per cent or more of Observe Medical ASA shares as of 31 December 2021.
Corporate Governance
On February 26, 2021, the board of directors adopted a corporate governance regime
based on, and in all material aspects in compliance with the Norwegian Corporate
Governance Code, October 17, 2018, and the Market Abuse Regulation (MAR) which
entered into force in Norway from March 1, 2021. The corporate governance regime was
applicable from March 1, 2021.
For further information about corporate governance, see the dedicated section on
corporate governance in this annual report.
Risk Factors
Observe Medical faces risks both of operational and financial nature, which are outlined
below and further described in Note 3 in the consolidated financial statements 2021.
Operational Risk
Observe Medical operates in the market for medical technology and is exposed to the risk
factors which are considered common in this market. As a result of the acquisition of Sylak
AB in 2020, and the acquisition of Biim Ultrasound AS in March 2022. Observe Medical
No Name Number of shares Ownership %
1 NAVAMEDIC ASA 4 222 727 21.54 %
2
INGERØ REITEN INV. COMPANY AS
3 939 394 20.09 %
3 LARS RO 1 500 000 7.65 %
4 UBS SWITZERLAND AG 1 420 522 7.25 %
5 ARTAL AS 897 407 4.58 %
6 ALPINE CAPITAL AS 650 000 3.32 %
7 SOLEGLAD INVEST AS 586 668 2.99 %
7 NORDA ASA 516 570 2.63 %
9
TRANBERGKOLLEN INVEST AS
500 000 2.55 %
10 LEIKERANE AS 466 666 2.38 %
11 LAPAS AS 336 924 1.72 %
12 MP PENSJON PK 262 025 1.34 %
13
KRAEBER VERWALTUNG GMBH
214 850 1.10 %
OTHER 4 091 704 20.87 %
Total number of shares 19 605 457 100.00 %
20 | Annual Report 2021, Observe Medical ASA
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has a broad product portfolio within medtech products. For the acquired Nordic
distribution portfolio, Observe Medical has distributions rights in Sweden and with the
possibility to expand to rest of the Nordic region.
Observe Medical as developed and owns Sippi®, with supporting products Sippi® Base
unit, SippBag disposable units and related technologies SippLink™ SippSense®,
SippCoat® and SippBridge. From 2022, the company also owns the Biim ultrasound probe
and the App for display of the ultrasound image and/or video. Hence, the market for these
products and the Group’s ability to commercialize the products will be important for the
Group’s revenues, profitability, liquidity and financial position.
Even though Observe Medical emphasizes investments in continuous product
development and an efficient strategy for commercialization of the current product
portfolio, there is a risk of competing product launches with better product features or
with better ability to penetrate the market and build market share. Increased competition
may also lead to reduced pricing potential for Observe Medical’s products.
As with all clinical studies, there is a risk that the results will be less favorable than
anticipated. This also applies to the initiated AKI related indication investigations. There
is a risk that an unfavorable outcome of these studies will impact the ability to add new
claims, and thus the expanded clinical value of the Sippi product. This may again impact
the potential profits from the Sippi product.
The COVID-19 pandemic has significantly delayed the planned roll-out of Sippi® which
was set to start in 2020. Therefore, Observe Medical’s Sippi® product is still in an early
stage in terms of roll-out into hospitals, and the technology is daily use in only a limited
number of intensive care units (ICUs). There is a risk of malfunction of the technology when
used over long time and in complex technological environments in ICUs, which could lead
to delays in roll-outs and expenses related to redesign.
The main operational risk short term for Biim relates to the continued roll-out and degree
of adoption of the product in dialysis clinics in the US.
The Group has distributors and partners as sales channels for foreign markets. The Group
is dependent on those distributors' ability to perform and operate in these markets.
Furthermore, there is a risk that these companies go out of business, which could lead to
delays in the commercialization. The Group also faces a risk in upscaling production,
where product performance can differ.
The Russian invasion of Ukraine has resulted in a rapidly evolving geo-political situation
and introduced a new set of challenges with respect to maintaining business continuity.
The war in Ukraine and the Covid-19 pandemic are disrupting global supply chains which
can impact our suppliers’ ability to access material in time. This could in turn lead to lack
of electronic components and delay the production of devices and revenues from sales.
The Group has taken comprehensive measures to protect its brands and related
intellectual property rights, which are important to its continued success. If, however, the
Group fails to successfully protect its intellectual property rights for any reason, or if any
21 | Annual Report 2021, Observe Medical ASA
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third party misappropriates, dilutes, or infringes its intellectual property, the value of its
brands may be harmed, which could have an adverse effect on its business, results of
operations or financial condition.
As a distributor, the Group depends on having distributor agreements with the suppliers.
There is a risk associated with re-negotiating of agreements with suppliers to keep the
distribution rights and not get significantly weakened terms.
Financial Risk
Financial risk mainly consists of interest, currency, credit, and liquidity risk. Observe
Medical continuously monitors these factors and works actively to manage related risks.
Based on updated cash flow forecasts for next 12 months, the Group will with available
liquidity and cash flow from operations have sufficient liquidity to execute its
commercialization and growth strategy, or for other purposes.
The economic impact of the COVID-19 outbreak have impact on the Group’s liquidity risk
in terms of risk of further delays in forecasted revenues compared by original budgets.
The impacts of the COVID-19 outbreak are dependent upon the extent and duration of
the outbreak. If markets served by the Group are impacted further and/or do not recover
as expected, the Group’s liquidity risk will increase further.
Organization
The Group had 14 employees at the end of 2021. The number of employees has increased
by three from 2020 to strengthen our competence within QA/RA, sales, and finance. 12
employees are employed in Sweden and 2 in Norway.
In 2020, Observe Medical entered into a bargaining agreement (“Kollektivavtal”) with
IKEM, an industry and employers’ organization representing chemical and innovation
companies in Sweden. Through the bargaining agreement, Observe Medical’s employees
in Sweden have good pension and insurance schemes, as well as secured and well-
documented employments rights. In accordance with the Public Limited Companies Act,
the board has prepared a statement of salary and other remuneration to senior executive
employees, included in Note 18.
The Board of Directors appointed Rune Nystad as Chief Executive Officer (CEO) of
Observe Medical ASA from March 28, 2022. Rune Nystad succeeded Björn Larsson, who
headed the Company since December 2019.
Corporate Social Responsibility
Corporate social responsibility (CSR) means to run the business in a responsible and
sustainable manner over time and in a way that contributes to a positive, trust-based
relationship between the Group, the Group’s stakeholders, and society as a whole. For
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further information about corporate social responsibility, see the Environment, Social and
Governance report as part of this Annual Report.
Research and Development
The Group has a strong global patent situation for Sippi® with a focus on its three
technologies: (i) Measuring volume via contactless sensors, (ii) SippSense®, measuring
sensor degradation and hence biofilm onset, (iii) SippCoat®, the use of silicone oil as
bacterial growth prevention properties in both urology and other bodily fluid systems and
SippLink® enabling the wireless connection to hospital PDMS (Patient Data Management
System). The Group has currently approved patents in five patent families for a number of
regions, with broad global coverage. Observe Medical ASA's subsidiary Observe Medical
ApS is the registered owner of all the Group's patents.
In the financial statements, the accounting principles set out in IAS 38 have been used to
recognize research and development expenditures. Expenditures for the development of
SippBag® disposable units, wireless connection to PDMS, and related functionality have
been capitalized in the statement of financial position. Development activities are normally
performed on projects that are outsourced to external parties. Such development
expenditures together with expenditures related to patent registration, are the only
development expenditures that have been capitalized in the statement of financial
position. Internal expenditures have not been capitalized as all the requirements set out
in IAS 38.57 were not satisfied.
Work Environment, Gender Equality and Discrimination
The working environment is generally satisfactory. Sick leave was 0.6% in 2021, compared
to 3.0% in 2020. The Group works continuously to protect and improve health and safety
in the business. Observe Medical is committed to being a responsible employer who does
not discriminate and who considers all employees equal in terms of career opportunities
and rights, regardless of gender, ethnicity, ability to function, religion, sexual orientation,
or other similar characteristics of a person. The Group follows the Norwegian Equality and
Anti-discrimination Act, which aims to promote gender equality and prevent
discrimination. The Group is working actively to encourage the act’s purpose within our
business. Included in the activities are recruiting, salary and working conditions,
development opportunities and protection against harassment.
The Group has a zero-tolerance for discrimination and employees are encouraged to
report discriminating practices or other concerns regarding the working environment to
the nearest line manager, the CEO, or to an external HR adviser.
The Group's leadership consisted of four members in end 2021, one woman and three
men. The company focuses on gender equality and diversity in the organization and will
work to ensure that this is also reflected in the management team in the future. Totally,
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there were 14 employees in the Group at December 31, 2021, 8 women and 6 men. In
2020 there was 11 employees in the Group, 6 women and 5 men.
The Group aims to strengthen the competence of its employees to maintain a position as
an attractive employer and an innovative and trusted supplier of medical technology
products to the benefit of patients, healthcare professionals and hospitals. Through
recruitment, the company seeks to employ people with high competence within all areas
of its business.
Of the 4 members of the Board of Directors are 2 women and 2 men.
The Group had no serious incidents with personal injury or absence in 2021. Neither was
any damage to property nor equipment reported.
Going Concern
As discussed in the section Financial Risk, the Group currently is in the phase of
commercialization of Sippi®. The COVID-19 situation has improved, but there are still
challenges for the healthcare system, and healthcare providers in handling COVID-19.
This provides constraints to the launch efforts for Sippi®, with some of the sales projects
being slowed down or stalled.
By April 2022, Biim Ultrasound had delivered approximately 260 Biim ultrasound probes,
thereby successfully completing the first phase of the roll-out to Fresenius training clinics.
The Group is now ready for the second phase in the roll-out to Fresenius’s dialysis clinics
in the US.
At this stage, the Group expects increased revenues from sales from the product portfolio.
In addition to increased revenues from sales, the main source of liquidity is cash generated
from the completed Rights Issue.
Based on updated cash flow forecasts for the next 12 months, the Group will have
sufficient liquidity to execute its strategy.
Accordingly, the board of directors confirms that the Financial Statements have been
prepared under the assumption that the Group is a going concern and that this
assumption is appropriate at the date of the accounts.
Parent Company
of the shares in its subsidiaries Observe Medical International AB, Observe Medical ApS,
Observe Medical AB and Observe Medical Nordic AB. After the acquisition of Biim
Ultrasound AS in March 2022, Observe Medical ASA also owns 100% of the shares in Biim
Ultrasound AS.
The Company will support its subsidiaries with financing, as well as some common
functions and services.
24 | Annual Report 2021, Observe Medical ASA
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The assets of the Company are mainly related to shares in the subsidiaries.
In 2021, Observe Medical ASA had revenues of NOK 1,493 thousand compared to NOK
806 thousand in 2020 related to invoiced services and expenses to subsidiaries. The
Company had operating expenses of NOK 18,807 thousand which mainly consists of
personnel benefit expenses of NOK 8,725 thousand and other operating expenses of
NOK 10,082 thousand which includes NOK 4,619 thousand in non-recurring M&A
expenses.
In addition to personnel benefit expenses for one full-time employee, the total personnel
benefit expenses include invoiced expenses for the CEO who is employed in Observe
Medical AB, fees to the Board of Directors and Audit Committee, and option expenses. In
2020, operating expenses was NOK 11,160 thousand. EBIT was negative at NOK 17,421
thousand, compared to negative NOK 10,354 thousand in 2020.
The company had a finance income of NOK 5,177 thousand which consists of finance
income related to change in contingent consideration and currency gain that more than
offset interest expenses to group companies and interest expenses on other interest-
bearing debt. In 2020, finance expenses were NOK 4,823 thousand. Finance expenses
were mainly related to changes in contingent consideration and interest expenses on loan
from Navamedic ASA, which more than offset interest income from loan to group
companies and currency gain
The result for 2021 was negative NOK 12,224 thousand, compared to negative NOK
15,178 thousand in 2020.
Allocation of Result for the Year 2021
The result for the period in the parent company was negative NOK 12,244 thousand. The
Board of Directors proposes that the loss for the year should be covered by a transfer from
other equity.
Outlook
Observe Medical is a global medtech group, an attractive platform for building a portfolio
of products through M&A as well as by organic growth.
The Biim Acquisition is in line with the Group's core strategy to be a platform for growth
both to offer innovative products for the purpose of patient welfare, health economics and
data accuracy, and to create a global distributor and partner network for the sale of the
Group's proprietary products.
Biim’s agreement with Fresenius to deliver approximately 2,500 wireless pocketable
ultrasound devices to dialysis centers in the US is accelerating the Group’s commercial
strategy in the US. The acquisition will further accelerate the Group’s global presence
through an expanding distributor and partner network.
25 | Annual Report 2021, Observe Medical ASA
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With the acquisition of Biim Ultrasound, the Group has two proprietary products in the
market: the Sippi® system and the Biim ultrasound probe. Both products have a patented,
unique and innovative technology and the potential to be the new standard of care.
The Sippi® system and the Biim ultrasound probe are currently in roll-out in Europe and
the US, respectively. Both products have significant global market potential. The Group
has strong competence and experience in bringing medtech products to the global
market. It is the view of the Board of Directors that the company is well-positioned to
continue development in line with its strategy and ambitions.
In addition, the Nordic distribution portfolio has potential for further growth by adding
more products to the portfolio and expanding sales to the rest of the Nordic region.
As the Covid-19 situation at hospitals seemed to be improving at the beginning of 2022,
the Group is operating at full capacity and according to plan, focusing particularly on the
Biim ultrasound probe roll-out in the US and roll-out of Sippi® in Europe, and aiming for
the launch of Sippi® in the US in the first quarter of 2023.
The Board of Directors and CEO of Observe Medical ASA
Oslo, April 28, 2022
26 | Annual Report 2021, Observe Medical ASA
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Executive Management and Board of Directors
Executive Management
Rune Nystad | Chief Executive Officer
More than 20 years of experience from global medtech and industrial technology from
the Nordics, US, Germany, Ireland and Hong Kong, including Boston Scientific. Founder
and CEO in Biim Ultrasound AS and joined Observe Medical as CEO in March 2022 after
Observe Medical’s acquisition of Biim Ultrasound AS.
Per Arne Nygård | Chief Financial Officer
Broad experience from finance functions in various industries. The last 12 years in listed
companies as Veidekke and Multiconsult. Joined Observe Medical as CFO from
December 2019.
Board of Directors
Terje Bakken | Chair of the Board
Terje is a partner at Reiten & Co. He has solid investor experience through leading and
implementing various strategic and operational value-based processes, across different
industries, combined with considerable financial transaction and finance experience.
Terje holds a Master of Science in Financial Economics and Bachelor of Business and
Administration degrees from BI Norwegian Business School. Terje currently is the Chair
of the Board of Directors of Navamedic ASA, QuestBack Group AS and Tivian Inc.
Kathrine Gamborg Andreassen | Board Member
Kathrine is the CEO of Navamedic (since 2019) and was chair of the board of Navamedic
from June 2018). She has extensive experience from sales, marketing and management
of Fmcg and healthcare products. She held the position of CEO at Weifa ASA until the
company was acquired by Karo Pharma AB in November 2017. Ms Gamborg Andreassen
holds an MSc in Business Strategy & Marketing from the University of Wisconsin, Madison
and a Bachelor of Business and Administration from Oslo School of Business.
Sanna Kristina Maria Rydberg | Board Member
Sanna is the CEO of Arcoma Group AB, a position she has held since 2020. Her previous
work experience includes Managing Director in Eurofins BioPharma Sweden and Head of
Healthcare Europe North in The Linde Group. Sanna has extensive experience from
management, sales & marketing, and production of pharmaceuticals, medical devices
and healthcare. Sanna holds a B.Sc in Chemistry from the University of Uppsala.
Thomas Grünfeld | Board Member
Chief Executive Officer of Labrida since 2012. Faculty board member (external) at
OsloMet University since 2016. Medical degree, with vast experience from the medical
industry, management and consulting.
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27 | Annual Report 2021, Observe Medical ASA
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Corporate Governance
Observe Medical ASA considers good corporate governance to be a prerequisite for
value creation and trustworthiness, and for access to capital. In order to secure strong and
sustainable corporate governance, it is important that Observe Medical ASA ensures good
and healthy business practices, reliable financial reporting and an environment of
compliance with legislation and regulations across the Group.
Observe Medical ASA has governance documents setting out principles for how its
business should be conducted. These apply to all group entities. References to certain
more specific policies are included in this corporate governance policy.
Observe Medical is subject to annual corporate governance reporting requirements
under section 3-3b of the Norwegian Accounting Act and the Norwegian Code of Practice
for Corporate Governance, cf. section 4.4 on the continuing obligations for issuers of
shares pursuant to Oslo Rule Book II - Issuer Rules. The Accounting Act may be found (in
Norwegian) at www.lovdata.no. The Norwegian Code of Practice for Corporate
Governance, which was last revised on October 14, 2021, may be found at www.nues.no
(the "Corporate Governance Code"). The annual statement on corporate governance for
2021 was approved by the board of directors on April 28, 2022 and follows below.
Implementation and Reporting on Corporate Governance
The board of directors is committed to build a sound and trust-based relationship
between Observe Medical ASA and the company’s shareholders, the capital market
participants, and other stakeholders. The Group’s overall principles for corporate
governance is approved by the board of directors and can be found at
www.observemedical.com/investor-relations/. The Group complies with the Corporate
Governance Code. The board of directors’ annual statement on how Observe Medical has
implemented the Corporate Governance Code is set out below. The presentation covers
each section of the Corporate Governance Code, and deviations from the code, if any, are
specified under the relevant section.
Business
The operations of the company and its subsidiaries shall be conducted in a sustainable
manner and in compliance with the business objective set forth in Observe Medical ASA's
articles of association, which shall be stated in the company's annual report together with
the Group's primary objectives and strategies. The Group's objectives, strategies and risk
profiles are evaluated annually by the board of directors. The company's business
objective reads as follows: "The company's objective is to develop, produce, market and
28 | Annual Report 2021, Observe Medical ASA
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sell medical technical equipment and related products, provide connected consulting
services and invest in related business.”
Equity and Dividends
Equity
The board of directors is responsible for ensuring that the group is adequately capitalized
relative to the risk and scope of operations and that the capital requirements set forth in
laws and regulations are met.
The company shall have an equity capital at a level appropriate to its objectives, strategy
and risk profile. The board of directors shall continuously monitor the Group's capital
situation and shall immediately take adequate steps if the company's equity or liquidity is
less than adequate.
As of December 31, 2021, the Group had a consolidated equity of NOK -14.1 million,
corresponding to an equity ratio of -20%.
On January 14, 2022 the board of directors of the company resolved to propose that the
company carried out a share capital increase by way of a fully underwritten rights issue, to
raise gross proceeds of NOK 180 million (the "Rights Issue"). The Rights Issue was
approved by the Extraordinary General Meeting on February 4, 2022 and the share capital
increase was registered in the Norwegian Register of Business Enterprises (Nw.
Foretaksregisteret) on March 7, 2022. As a result of the completed Rights Issue, the board
of directors consider that the Group has a capital structure that is appropriate for its
objectives, strategy and risk profile.
Dividend Policy
The Group is focusing on the development and commercialization of medical technology
products and the company does not anticipate paying any cash dividend until sustainable
profitability is achieved.
Authorizations to the Board of Directors
Any authorization granted to the board of directors to increase the company's share
capital or to purchase treasury shares shall be restricted to defined purposes. When the
general meeting is to pass resolutions on such authorizations to the board of directors for
different purposes, each authorization shall be considered and resolved separately by the
general meeting. Authorizations granted to the board of directors to increase the share
capital or purchase treasury shares shall be limited in time and shall in no event last longer
than two years. However, it is recommended that an authorization to increase the share
capital or purchase of treasury shares does not last longer than until the company's next
annual general meeting.
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The Annual General Meeting held on May 21, 2021 authorized the board of directors
pursuant to section 10-14 of the Public Limited Liability Companies Act to increase the
company's share capital by up to NOK 500 thousand in one or more share issues. The
authorization could only be used to issue shares in connection with the group's share
incentive programs. In addition the board of directors was granted an authorization to
increase the share capital up to NOK 1,020 thousand in order to finance further growth
for the Company. The shareholders' pre-emptive rights under §10-4 of the Public Limited
Liability Companies Act could under both authorizations be set aside when utilized by the
board. The authorizations described above had a term until the Annual General Meeting
in 2022, but in no event later than June 30, 2022, but were replaced by a new authorization
granted by the Extraordinary General Meeting held on February 4, 2022 as further
described below.
On February 4, 2022, an Extraordinary General Meeting of the company, authorized the
board of directors pursuant to §10-14 (1) of the Public Limited Liability Companies Act to
increase the company's share capital by up to NOK 2,124,697.38. The authorization could
only be used to issue consideration shares to the sellers in connection with the company's
acquisition of Biim Ultrasound AS ("Biim"). The shareholders' pre-emptive rights under
§10-4 of the Public Limited Liability Companies Act could be set aside when utilized by
the board. The authorization comprised share capital increases against contribution in
kind and the right to incur specific obligations on behalf of the Company under section
10-2 of the Norwegian Public Limited Companies Act. The authorization was further
conditional on the company completing the Rights Issue. The authorization was used in
full when the company completed the acquisition of Biim.
As of December 31, 2021 the Company had 180,000 options issued and outstanding,
which includes the options granted to the Company's CEO in January, 2020 and options
granted to the Company’s CFO in November 2021.
Equal Treatment of Shareholders and Transactions with Related Parties
The company has only one class of shares. Each share in the company carries one vote,
and all shares carry equal rights, including the right to participate in general meetings. All
shareholders shall be treated on an equal basis, unless there is just cause for treating them
differently. In the event of an increase in share capital through issuance of new shares, a
decision to deviate from existing shareholders' pre-emptive rights to subscribe for shares
shall be justified. Where the board of directors resolves to issue shares and deviate from
the pre-emptive rights of existing shareholders pursuant to an authorization granted to
the board of directors by the general meeting, the justification will be publicly disclosed
in a stock exchange announcement issued in connection with the share issuance.
Any transactions in treasury shares carried out by the company shall be carried out on the
exchange where the company's shares are listed, and in any case at the prevailing stock
exchange price. In the event that there is limited liquidity in the company's shares, the
company will consider other ways to ensure equal treatment of shareholders. Any
30 | Annual Report 2021, Observe Medical ASA
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transaction in treasury shares by the company is subject to applicable reporting
requirements.
In the event of transactions that are considered to be material between the company and
its shareholders, a shareholder's parent company, members of the board of directors,
executive management or close associates to any such party, the board of directors shall
arrange for an independent third-party valuation. This will, however, not apply for
transactions that are subject to the approval of the general meeting pursuant to the
provisions in the Norwegian Public Limited Liability Companies Act. Independent
valuations shall also be procured for transactions between companies within the Group if
any of the companies involved have minority shareholders.
Shares and Negotiability
Each share in the company carries one vote. The company's shares are freely transferrable
and the articles of association do not impose any restriction on the transfer of shares.
There are no restrictions on owning, trading or voting for shares in the Company other
than as described in mandatory law.
General Meetings
Notice, Registration and Participation
The board ensures that its shareholders can attend and participate in the general meeting.
For shareholders who are not able to be present at the general meeting, the company
shall facilitate electronic participation unless the board of directors finds that it has
reasonable cause to refuse such electronic participation. The annual general meeting shall
take place prior to 30 June each year. The Group’s financial calendar is published via Oslo
Børs and in the investor relations section of the Group’s website. The notice and
supporting information of the general meeting, will be sufficiently detailed,
comprehensive and specific to allow shareholders to form a view on all matters to be
considered at the meeting. The notice will be published and sent to the company's
shareholders with a known address no later than 21 days prior to the meeting to ensure
that all shareholders may form a view on all matters to be considered at the meeting. The
annual general meeting shall consider the following matters:
1. Approval of the annual accounts and annual report, including any proposal
from the board regarding dividends or other distributions.
2. Other matters which pursuant to law or the articles of association shall be
considered by the general meeting.
The board of directors may decide that shareholders who want to participate in the
general meeting must notify the company thereof within a specific deadline that cannot
expire earlier than three days prior to the general meeting.
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Proxy Form, Advance Voting and Voting
The shareholders may cast their votes in writing, including through electronic
communication, in a period prior to the general meeting. The board of directors may
establish specific guidelines for such advance voting. It must be stated in the notice of the
general meeting which guidelines have been set. Documents concerning matters to be
considered at the general meeting may be made available on the company’s website. This
is also applicable for documents that by law shall be included in or attached to the notice.
In case documents are made available in such manner, the statutory requirements for
distribution to shareholders shall not be applicable. A shareholder still has the right to
receive documents concerning matters to be considered at the general meeting upon
request.
Chairing Meeting, Elections etc.
General meetings have to date been and is currently planned to be chaired by the
chairperson of the board, and this particularly applies for the general meetings held in
2020 and 2021 with the applicable restrictions on physical general meetings due to the
restrictions caused by the outbreak of covid-19. The chairperson of the board and chief
executive officer are required to attend the general meeting. The chairperson of the
nomination committee is encouraged to attend those general meetings where the
election and remuneration of directors and members of the nomination committee are to
be considered. The company’s auditor is not physically present at the Annual General
Meeting, but is available by phone or video conference to answer questions. Shareholders
are able to vote on each individual matter on the agenda for the general meeting,
including on each individual candidate nominated for election. Shareholders who cannot
attend the meeting in person are given the opportunity to vote through advanced
electronical voting and through proxy. The company prepares the proxy form in such way
that it enables shareholders to vote on each individual matter and nominates the
chairperson of the board of directors to act as a proxy for the shareholders. Minutes from
general meetings are published as soon as practicable via the stock exchange’s reporting
system (www. newsweb.no, ticker code: OBSRV) and in the investor relations section of
the Group’s website.
Deviations: The entire board of directors have normally not participated at the general
meetings because the matters that have been on the agenda have not previously required
this, however the chairperson of the board is always present at general meetings to answer
questions from the shareholders on behalf of the board of directors. Furthermore, the
chairperson of the board of directors has to date chaired the general meetings. The board
of directors finds this solution appropriate, but will consider this arrangement if requested
by the shareholders in future general meetings or if deemed appropriate on a case-by-
case basis.
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Nomination Committee
The company has a nomination committee, and the nomination committee is stipulated in
the company's articles of association. The general meeting has resolved guidelines for the
duties of the nomination committee. The nomination committee currently comprise two
members, as resolved by the general meeting, and all members of the nomination
committee are independent of the board of directors and the management. The
nomination committee's duties include nomination of candidates to the board of directors
and the nomination committee, including the chairpersons. The nomination committee
also submit proposals on board remuneration and remuneration to the members of the
nomination committee. The term of the members of the nomination committee shall be
two years at a time unless the general meeting decides otherwise in connection with the
election. The current members of the nomination committee are Bård Brath Ingerø (chair)
and Grete Hogstad. No directors or members of executive management are represented
in the nomination committee.
Board of Directors: Composition and Independence
Pursuant to the articles of association, the board of directors may comprise three to seven
members. The board currently has four shareholder-elected directors. The board
members and the chairperson of the board are currently elected by the general meeting
based on a proposal from the nomination committee. The composition of the board is
intended to secure the interests of the shareholders in general, while the directors also
collectively possess a broad business and management background as well as in-depth
sector understanding and expertise in investment, financing and capital markets.
Consideration is also given to the board’s ability to make independent judgements of the
business in general and of the individual matters presented by the executive
management.
Consideration has also been given to gender representation and independence of
directors from the company and its management. The board of directors does not
include executive personnel. All shareholder-elected directors are independent of the
Group’s executive management, the majority of the board members are independent
from the company's significant business relations and at least two of the members of the
board are independent of the company's main shareholders. Details on background,
experience and independence of the board members are presented on the Group’s
website. Fifteen board meetings were held in 2021. Each board member’s attendance at
board meetings is recorded by the company. The shareholding of each board member
can be found in Note 18 to the consolidated financial statements.
The Work of The Board of Directors
The board has the ultimate responsibility for the management of the company and for
supervising its day-to-day management and activities in general. This includes developing
the company’s strategy and monitoring its implementation. In addition, the board
33 | Annual Report 2021, Observe Medical ASA
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exercises supervision responsibilities to ensure that the company manages its business
and assets and carries out risk management in a prudent and satisfactory manner. The
board is responsible for the appointment of the CEO. The board has an annual plan for its
work.
In accordance with the provisions of Norwegian company law, the terms of reference for
the board are set out in a formal mandate that includes specific rules and guidelines on
the work of the Board and decision making, including how the board of directors and
executive management shall handle agreements with related parties. The chairperson of
the board is responsible for ensuring that the work of the board is carried out in an
effective and proper manner in accordance with legislation. The board issues a mandate
for the work of the CEO. There is a clear division of responsibilities between the board
and the CEO. The CEO is responsible for the operational management of the company.
The board holds regular meetings and a strategy meeting each year. Extraordinary board
meetings are held as and when required, to consider matters that cannot wait until the
next regular meeting. In addition, the board has appointed three sub-committees
composed of board members to work on matters in these areas. The board has
established and stipulated instructions for these committees.
The Company have established a Board of Directors and management insurance that
covers members of the board, committees and the Company’s management. The
insurance applies worldwide excluding the US and Canada, but after the acquisition of
Biim Ultrasound AS the insurance will be changed so it applies worldwide including the
US and Canada. The insurance covers the Insured's liability for property damage due to
claims made against the insured during the insurance period as a result of an alleged
liability-related act or omission.
Audit Committee
The audit committee is appointed by the board. Its main responsibilities are to supervise
the company’s systems for internal control, to ensure that the auditor is independent and
that the interim and annual accounts give a fair and true representation of the company’s
financial results and financial condition in accordance with generally accepted accounting
principles. The audit committee receives reports on the work of the external auditor and
the results of the audit. Also, the audit committee meets regularly and can have meetings
with the auditor where no member of the executive management is present.
As per December 31, 2021 the audit committee consisted of the following board
members:
• Thomas Grünfeld, Chair
• Terje Bakken
• Kathrine Gamborg Andreassen
Compensation Committee
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The compensation committee makes proposals to the board on the employment terms,
as well as conditions and total remuneration of the CEO and other executive personnel.
As per December 31, 2021, the compensation committee consisted of the following board
members:
• Terje Bakken
• Kathrine Gamborg Andreassen
Merger & Acquisitions (M&A) Committee
The M&A committee is appointed by the board. Its main responsibilities is to address M&A
opportunities as well as supervise and support the management in such processes. The
M&A committee secures M&A activities to support the Group’s strategy for further
development and growth of the Group.
As per December 31, 2021, the M&A committee consisted of the following board
members:
• Kathrine Gamborg Andreassen, Chair
• Terje Bakken
Risk Management and Internal Control
The board ensures that the company has sound risk management and an internal control
system that is appropriate to its activities. The risk management and internal control
systems in Observe Medical are based on its corporate values and principles for
sustainability. The board reviews the company’s internal control system and the main areas
of risk annually. Observe Medical management conducts the day-to-day follow-up of
financial management and reporting. Management reports to the audit committee that
conducts a review of the quarterly and annual presentation and reports before
publication. The audit committee assess the integrity of Observe Medical’s accounts. It
also inquiries into, on behalf of the board, and assess issues related to financial review and
internal control, and the external audit of Observe Medical’s accounts. The board ensures
that Observe Medical is capable of producing reliable annual reports and that the external
auditor’s recommendations are given thorough consideration. A description of the
company’s financial risk management objectives and policies are included in Note 3 to the
financial accounts.
Financial Reporting
The Group has processes and routines for internal control over financial reporting. The
main principles are transparency, segregation of duties, analytical controls and systematic
and thorough management reviews. Management prepares periodic reports on business
and operational developments to the board, which are discussed at board meetings.
These reports are based on the results of the review process and include status of key
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performance indicators, update of market developments, operational issues, financial
results and highlights of organizational issues. Financial position and results are followed
up in monthly accounting reports, compared to prior year, budgets and forecasts.
Reporting also includes non-financial key performance indicators. In addition,
management prepares a forecast of financial trends, showing profits and cash flow
development. The interim reports and annual financial statements are reviewed by the
audit committee in advance of consideration and discussion in the board. Financial risk
management and internal control are also addressed by the board’s audit committee. The
latter reviews the external auditor’s findings and assessments after the interim and annual
financial audits. Significant issues in the auditor’s report, if any, are also reviewed by the
entire board.
Remuneration of the Board of Directors
The remuneration to the board of directors are determined by the general meeting
following proposals from the nomination committee. The remuneration payable to the
board of directors is meant to reflect the board’s responsibility, expertise, time
commitment and the complexity of the business.
The remuneration to the board of directors is not linked to the company's performance
and no directors have been awarded share options or any other form of incentive-based
remuneration, in their role as directors.
An overview of shares owned by the directors and their close associates is included in
Note 18 to the consolidated financial statement.
Members of the board of directors and/or companies with which they are associated with
should not take on specific assignments for the company in addition to their appointment
as a member of the board. If they do nonetheless take on such assignments this must be
disclosed to the board of directors and any remuneration for such additional duties shall
be approved by the board.
Remuneration of Executive Personnel
The board has a remuneration committee. Its main responsibilities are evaluation and
advice to the board of directors relating to remuneration strategy, main principles and
systems for the total remuneration (including bonus) to the CEO and other members of
the Group executive management. The CEO normally participates in the meetings, unless
the committee discusses issues relating to the CEO.
The annual general meeting in 2021 approved guidelines for determination of salary and
other remuneration to the executive personnel of the company in accordance with the
Public Limited Liability Act section 6-16 a, cf. section 5-6 (3). The guidelines are available
at the company's website
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Performance-related remuneration of the executive personnel in the form of share
options, bonus programs or similar arrangements are linked to value creation for
shareholders or the Group's earnings performance over time. Such arrangements,
including share option arrangements, are implemented to incentivise performance and
are based on quantifiable factors over which the employee in question can have influence.
All performance-based remuneration to the Group's leading personnel is be subject to an
absolute limit.
Information and Communication
The board has established guidelines for investor communication. Observe Medical’s
communication with the capital markets is based on the principles of transparency, full
disclosure and equality. The CEO and CFO are responsible for the main dialogue with the
investor community, including the company’s shareholders. Information to the stock
market is published in the form of annual and interim reports, press releases, stock
exchange announcements and investor presentations. All information considered relevant
and significant for valuing the company’s shares will be distributed and published in
English via Oslo Børs disclosure system, www.newsweb.no, and via the Group’s website
www.observemedical.com simultaneously. Observe Medical holds public presentations in
connection with the announcement of quarterly and annual financial results. The
presentations are also available as live presentations via the internet. Presentation material
is made available via Oslo Børs’ news site www.newsweb.no and
www.observemedical.com. Observe Medical gives weight to maintaining an open and
ongoing dialogue with the investor community. Reporting of financial and other
information shall be timely and accurate. The main purpose of this information presents a
complete picture of the Group’s financial results and position as well as articulating the
Group’s long-term goals and potential, including its strategy, value drivers and important
risk factors. The Group publishes a financial calendar every year with an overview of the
dates of important events, including the general meeting, publication of interim reports
and presentations. This calendar is made available as a stock exchange announcement
and on the Group’s website as soon as it has been approved by the board.
Takeovers
In the event of a takeover bid being made for the company, the board will follow the
overriding principle of equality of treatment for all shareholders and will seek to ensure
that the Group’s business activities are not disrupted unnecessarily. The board will strive
to ensure that shareholders are given sufficient information and time to form a view of the
offer. The board will not seek to prevent any takeover bid unless it believes that the
interests of the Group and the shareholders justify such actions. The board will not
exercise mandates or pass any resolutions with the intention of obstructing any takeover
bid unless this is approved by the general meeting following the announcement of the
bid. If a takeover bid is made, the board will issue a statement in accordance with statutory
requirements and the recommendations in the Corporate Governance Code. Any
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transaction that is in effect a significant disposal of the Group’s activities will be submitted
to the general meeting for its approval.
Auditor
The company's external auditor, KPMG, annually presents its overall plan for the audit of
the Group for the audit committee’s consideration. The board reports annually to the
annual general meeting on the external auditor’s total fees, and informs on the split
between audit and non-audit services. The annual general meeting approves the auditor’s
fees for the company.
The Board of Directors and CEO of Observe Medical ASA
Oslo, April 28, 2022
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Sustainability Report
About this report
It is of key importance to Observe Medical to operate our business in a sustainable manner
and it is a perquisite for the company’s long-term results to understand the impact on
environment, society and stakeholders. This sustainability report applies to the reporting
period 1 January 2021 to 31 December 2021.
In March 2022, Observe Medical acquired Biim Ultrasound AS a Company that has
developed a unique, wireless and pocketable ultrasound probe. Except for the
description as part of “About Observe Medical”, Biim Ultrasound is not included in this
sustainability report.
The report is inspired by Oslo Børs’ guidelines for sustainability reporting (Euronext
guidelines).
The Observe Medical sustainability report has been reviewed and approved by Observe
Medical’s Board of Directors. The claims and data in this report have not been audited by
a third party.
For information about this report and its content, please contact CEO Rune Nystad or CFO
Per Arne Nygård.
About Observe Medical
Observe Medical is the legal manufacturer of Sippi®, a proprietary, CE marked automated
system for urine measurement. Sippi® offers a unique, effective and innovative solution
for urine monitoring at the hospital intensive care units (ICUs), wards and homecare.
With Sippi, the company’s focus is on increasing quality assured patient data for clinical
decisions and addressing the challenge of hospital acquired infection in healthcare
facilities worldwide. In addition, the system replaces a manual time-consuming system and
increase the clinical capacity. Urinary tract infections are the number one hospital acquired
complication for patients, and their treatment is a considerable burden to hospital staff
and budgets. Overall, approximately 3.8 million Europeans are infected every year from
healthcare acquired infections of all types.
In March 2022 Observe Medical acquired Biim Ultrasound AS, a Company that has
developed a unique, wireless and pocketable ultrasound probe, Biim, that can scan
39 | Annual Report 2021, Observe Medical ASA
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patients and review images in seconds. The objective of Biim is to enhance healthcare
personnel decision-making and improve patient outcomes. Biim's technology is patented,
and the device received 510 (k) clearance from the US Food and Drug Administration
(FDA) in 2018. Biim is approved for ultrasound imaging of the human body and is
specifically used to guide needle and catheter insertions for dialysis and vascular access
procedures.
In addition, the Company has a broad distribution portfolio of medtech devices and
disposables, mainly within Urine measurement, Anesthesiology/ICUs and wound care.
This product portfolio from well-established suppliers in medical technology and wound
care is sold through an experienced sales team and contributes to accelerate the clinical
rollout of the proprietary products by enabling access to target customers. Our medtech
distribution portfolio is mainly distributed in the Swedish market with potential to expand
to rest of the Nordic region.
Observe Medical’s intent is to continually grow the company’s platform and portfolio to
improving patient welfare and patient outcomes, improving clinical data accuracy and
promoting positive health economics., through ongoing R&D and acquisition strategies
in line with the company’s goals and vision.
Observe Medical is listed on Euronext Oslo under the ticker OBSRV.
Figure 1: Observe Medical’s supply chain illustrated
Observe Medical is headquartered in Oslo, Norway, with development, quality, regulatory
and commercial operations in Gothenburg, Sweden. The company’s market focus is on
40 | Annual Report 2021, Observe Medical ASA
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the Nordic and selected European markets. The company has [14] employees, of which
[8] are women and [6] are men.
Locations
Employees
Oslo, Norway
2
Gothenburg, Sweden
12
Table 1: Employees by location
Stakeholders
• Employees: Observe Medical’s employees are directly affected by the company’s
internal policies and activities and directly affect the company through their
performance and actions.
• Investors/shareholders: Observe Medical’s investors and shareholders are primary
stakeholders and directly affect the company’s priorities and strategic direction.
Observe Medical’s economic and business performance may affect the priorities of
investors and shareholders.
• Government / regulatory authorities: Government and regulatory authorities affect
the company’s operating conditions directly and indirectly.
• Customers / patients: Observe Medical’s customers consists of hospitals and other
health institutions in the Nordics and selected markets in Europe. Customers are
directly affected by Observe Medical’s product offering, and the product’s quality and
safety. Customers directly affect the company economically and customer
expectations also impact Observe Medical’s sustainability priorities.
• Suppliers: Suppliers directly affect Observe Medical through the quality and pricing
of the company’s product and services. Observe Medical’s suppliers are economically
affected by the company and their responsibilities are indirectly affected by Observe
Medical’s focus on responsible business practice and the expectations placed on
them.
• Academia and life science community: Observe Medical is dependent on research
and scientific evidence from academics and the life science community to grow the
company’s product portfolio and to deliver products of high quality which are safe for
patients to use.
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Figure 2: Observe Medical’s stakeholders
Corporate governance and sustainability approach
Observe Medical considers good corporate governance to be a prerequisite for value
creation and trustworthiness, and for access to capital. In order to secure strong and
sustainable corporate governance, it is important that Observe Medical ensures good and
healthy business practices, reliable financial reporting and an environment of compliance
with legislation and regulations across the Group.
Observe Medical has governance documents setting out principles for how business
should be conducted. These apply to all group entities. Observe Medical is subject to
annual corporate governance reporting requirements under section 3-3b of the
Norwegian Accounting Act and the Norwegian Code of Practice for Corporate
Governance (NUES recommendations), cf. section 7 on the continuing obligations of stock
exchange listed companies.
In addition to the company’s core goal of saving lives and improving health, environmental
and social considerations are an integral part of Observe Medical’s business operations.
Observe Medical’s Board of Directors (‘the Board’) bears the ultimate responsibility for the
company’s sustainability approach and the sustainability report is discussed and approved
by the Board. Executive Management in addition to Observe Medical’s quality manager is
responsible for the follow-up of the company’s sustainability efforts on a day-to-day basis.
Employees
Investors /
shareholders
Government /
regulatory
authorities
Customers /
Patients
Suppliers
Academia
and life
science
community
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Reporting themes and topics for 2021
For 2021, Observe Medical is reporting on the following sustainability topics:
• Working environment
• Business ethics, including supply chain management
• Environmental impact
• Product safety
The following chapters will discuss each of the overarching sustainability topics and their
relevance to Observe Medical, including an explanation of why the topic in considered
important, as well as the company’s performance today and future goals and KPIs.
Working environment
Investing in the working environment and making sure that Observe Medical’s employees
thrive and succeed is essential for the company’s business success and for future value
creation. A good working environment is therefore key for the company and its
stakeholders. Observe Medical can have both a direct and indirect impact on the working
environment through its policies, agreements and by engaging with employees.
Observe Medical’s workforce
2020
2021
Men
Women
Total
Men
Women
Total
Total workforce
5
6
11
6
8
14
Total workforce full-time employees
5
3
8
6
8
14
Total workforce part-time employees
0
0
0
0
0
0
Number of non-permanent employees
0
3
3
0
0
0
Table 2: Observe Medical’s workforce
The company follows the applicable legislation on employee rights in the countries it
operates, including the Norwegian Working Environment Act (Arbeidsmiljøloven) and the
Swedish Work Environment Act (Arbetsmiljölagen). The overall responsibility for the
working environment and health and safety lies with the CEO. The company does not yet
have an employee handbook, but this is currently under development and will be
completed and distributed to all employees in third quarter 2022.
In 2021, 80% of the company’s employees operated under a collective bargaining
agreement (“Kollektivavtal”) with IKEM, an industry and employers’ organisation
representing chemical and innovation companies in Sweden. Through the bargaining
agreement, Observe Medical’s employees have access to good pension and insurance
schemes, as well as secured and well documented rights concerning for instance parental
leave. The company does not yet carry out employee surveys, however, ensuring a
43 | Annual Report 2021, Observe Medical ASA
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systematic approach to measuring employee engagement and wellbeing is a focus area
for the company going forward.
Most of the company’s employees have a background in the healthcare industry, including
nurses, technical experts and engineers. All employees have access to internal and
external training for development within their field of expertise, the company’s products
and applicable laws and regulations within the business.
Keeping employee turnover at a minimum is important to the company. In 2021, Observe
Medical saw an decrease in the labour turnover rate of 13% (27% in 2020), however, since
there are only 14 employees working for Observe Medical, the employee turnover rate is
subject to large variation.
Table 3: Employee turnover
Equal opportunity and gender equality are considered important success factors for
Observe Medical. The company follows the Norwegian Equality and Anti-discrimination
Act, which aims to promote gender equality and prevent discrimination on the basis of
gender, ethnicity, age, religion or other similar characteristics of a person. The company
has a zero tolerance for discrimination and employees are encouraged to report
discriminating practices or other concerns regarding the working environment to the
nearest line manager, the CEO, or to an external HR adviser. Observe Medical does not
have an external whistle blowing channel as of today but is looking to establish this in
2022. The company experienced zero reported incidents of discrimination in 2021.
The share of female employees was 57% in 2021 (55% in 2020), and women’s average
base salary in relation to men’s was 57% (53% in 2020). The company will increase its focus
on gender balance in senior positions going forward. The company is further committed
to equal pay for the same work and performance regardless of gender.
Table 4: Observe Medical’s workforce by age and gender
Decent and safe working conditions are essential for a healthy workforce that can
contribute to successful business operations and growth. Working in an office
environment or remotely with sales without any inhouse production, the company is
Observe Medical’s employee turnover
2021
2020
Labour turnover rate
13%
27%
Total turnover (no. of employees)
2
3
Share of Observe Medical’s
workforce by age and gender
Men
Women
<30 year
of age
30-50
years of
age
>50 years
of age
Organisation
6 (43%)
8 (57%)
0
9
5
Board of Directors
2 (50%)
2 (50%)
4
Management team group
2 (100%)
0 (0%)
1
1
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mainly exposed to risks relating to the psychological wellbeing of employees and physical
risks related to for instance sedentary work.
The Covid-19 situation has had a significant impact on all aspects of society, and
specifically the healthcare system and patients. Observe Medical practiced a ‘working
from home policy’, in line with government regulations and recommendations.
There were no serious work-related injuries or incidents among Observe Medical
employees in 2021. The absence rate for sickness was 0.6% in 2021.
Observe Medical’s health and safety data
2020
2021
Sick leave per cent
3%
0.6%
Accident frequency rate
0
0
Accident severity rate
0
0
Table 5: Health and safety data
Identified targets for 2022
• Seek gender balance in senior positions
• Establish and carry out regular employee surveys
• Complete the Employee Handbook
• Establish an external whistleblowing channel
Observe Medical is committed to be a responsible employer and is in a process of
establishing several HR related processes and guidelines expected to be in place during
2022. The company is in the process of further developing its recruitment strategy to focus
on age and gender balance for the specific departments that are recruiting.
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Business ethics, and supply chain management
As a medical device company, ensuring good corporate governance and strong ethical
practices is essential for Observe Medical. Being part of a global value chain, Observe
Medical is exposed to ethical risks through its business operations, and the company
therefore actively strives to ensure good and healthy business practices.
The CEO bears the ultimate responsibility for business ethics and anti-corruption in
Observe Medical. The Board ensures that the company has sound risk management and
an internal control system that is appropriate to its activities and is further responsible for
reviewing the company’s internal control system and the main areas of business ethics risk
annually.
CSR policy and code of conduct for suppliers is implemented for Observe Medical Nordic
AB. Group wide policies and code of conduct is under development.
Observe Medical has a zero tolerance for corruption and the company’s anti-corruption
policy explains which criteria all employees are required to comply with. Any potential
misconduct can be reported directly to any member of the Corporate Management Team
or directly to any member of the Board. Observe Medical is not part of any external
initiatives or collaborations on corruption prevention.
Observe Medical is dependent on its distributors and those distributors' ability to perform
and operate in key markets. Observe Medical relies on third-party suppliers for production
and distribution and is thereby directly and indirectly exposed to risks and opportunities
in its supply chain. In 2021 the Group has mainly operated in the Nordic countries, with
most of its customers in Sweden, and distributes several products sourced both within and
outside the EU. Observe Medical has distributors as partners for foreign markets, which
are mainly located in Europe.
In general, Observe Medical operates in countries which are considered low risk in terms
of corruption, according to the Corruption Perception Index. Still, all suppliers are
screened using criteria related to business ethics prior to entering new contracts and the
Group is also looking to establish an annual risk assessment of third parties and specific
markets.
There were zero reported incidents of corruption or public legal cases regarding
corruption in 2021. Observe Medical has not experienced any breaches of its policies or
guidelines by suppliers in 2021, and the company has not terminated or discontinued any
contracts with suppliers or business partners due to breaches in the reporting period.
Identified targets for 2022
• Establish a Group wide CSR Policy / Code of Conduct
• Establish a Group wide supplier Code of Conduct
• Provide further training on insider information regulations to employees
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Environmental impact
Actively managing the environmental footprint of its business operations is important to
Observe Medical, the company’s stakeholders and is beneficial to reduce operating costs
and sustain the company’s ability to operate in the long-term. The main environmental
challenges for the medical device industry in general are through use of disposable
materials, equipment and/or packaging, and through the use of chemicals to meet
sterilization requirements.
The main environmental impacts from Observe Medical’s business operations are related
to waste generated from its products (such as disposable units) and packaging,
production of purchased goods and products, transportation of goods and products (by
truck, boat or plane from Europe, Asia and the US to storage facilities and customers), as
well as employee business travels.
The Group complies with all applicable environmental laws and regulations. Observe
Medical Nordic has an environmental management system with an environmental policy.
Going forward, the company will focus on reducing energy consumption, emissions and
waste from its own operation and its products, and to offer products that can reduce the
total waste from the health sector.
Energy
As Observe Medical has shared offices in Oslo and Gothenburg, with all related costs
included, including electricity, Observe Medical does not report indirect CO2 emissions
related to purchased electricity.
Emissions
According to Observe Medical’s company car policy, only electric or plug-in hybrid cars
may be chosen as a company car. Vehicles that run on fossil fuels must be approved by
the group management. At the end of 2021 Observe Medical had 5 company cars, where
of 3 EV’s and 2 hybrid.
Business travel by plane was limited also in 2021 due to Covid-19.
Materials and waste
The use of non-sustainable materials is a main concern in the medical device industry, and
a much-debated topic is the extensive use of Polyvinyl Chloride (PVC). Observe Medical
always seeks to use environmentally friendly materials in its products and together with
the customers and suppliers find good alternatives within the regulatory requirements.
As a company selling medical devices, Observe Medical must comply with strict
requirements for product packaging, especially for products which are required to remain
sterile. Naturally, the packaging becomes waste for the company’s customers.
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All hospitals where Observe Medical’s products are being used are required to follow
strict requirements for handling waste, which ensures the proper waste management of
the packaging according to law. The company reports the number of electrical
components that are distributed to the market monthly through El-Kretsen.
Waste from our in-house operations is relatively limited and we follow strict recycling
routines at all locations. As Observe Medical has shared office space in Oslo and
Gothenburg, with shared waste management, we do not report the amount of waste
disposal.
Identified targets for 2022
• Observe Medical will further work to understand how to reduce our
environmental footprints, direct and indirect
• Establish a Group Environmental Policy with guidelines that outlines how to
improve environmental performance
Product safety
Product safety is fundamental to Observe Medical and is part of the company’s license to
operate. Risk management is applied within the group to ensure only products with
acceptable risks are placed on the market. The most likely health and safety hazards are
related to human error when using the products, and the company therefore works
continuously with usability. Observe Medical’s product, Sippi, is still in an early stage in
terms of roll outs into hospitals, and the technology is tested in only a limited number of
intensive care units (ICUs).
To ensure safe and high-quality products, the company has in 2021 recruited a Quality
Assurance and Regulatory Affairs (QA/RA) director that has the overall responsibility for
product safety. The QA/RA director is further responsible for ensuring that Observe
Medical’s products are of high quality and that they comply with rules and regulations for
medical devices in the markets where the products are launched, including Swedish and
Norwegian regulations.
Observe Medical AB’s Quality Management System (QMS) covers development,
manufacturing and sales of medical devices and has been designed to fulfil the
requirements in the Medical Devices Directive (MDD), Medical Device Regulation (MDR),
applicable parts of 21 CFR, including but not limited to Part 820 (QSR), and EN ISO
13485:2016. The QMS at Observe Medical holds a Certificate of Registration on that the
QMS has been registered by Intertek (0413) as conforming to the requirements of SS-EN
ISO 13485:2016. The certified scope is; “Developing, manufacturing and sales of medical
device systems for managing and measuring of body fluid”.
Observe Medical AB has established its own Quality Manual which describes the overall
structure, content and purpose of the company’s Quality Management System (QMS), as
well as Quality Objectives with clear responsibilities. Additionally, the company’s Risk
48 | Annual Report 2021, Observe Medical ASA
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Policy outlines criteria for determining product risk acceptability towards patients and
users. Observe Medical Nordic has also implemented a quality policy, which clearly states
that the company shall meet regulatory requirements and applicable laws, regulations and
guidelines and that our products shall be delivered at the right time, in the right place and
with promised quality. The company will in 2022 work to compile and establish a joint
quality management system and policies for the entire Group.
Ensuring high quality products and processes is a prerequisite for the Group’s
contribution to value creation and for ensuring the trust of its stakeholders. Observe
Medical’s overarching goal is to comply with the industry code of conduct in all markets,
and standards relating to risk management, such as the ISO 14971 standard for Medical
Devices. The company conducts quality checks on a regular basis, all products are CE-
marked, and products developed by Observe Medical AB has been verified and validated
prior to launch and is manufactured according to established requirements to achieve
high quality and product safety.
As part of requirements in MDD, MDR and ISO13485 complaints and non-conformities are
registered and analysed (including corrective and preventive actions and verification and
validation of these actions. In order to identify potential product quality or safety issues,
Observe Medical has an active post market surveillance process which is compliant with
MDR and ISO13485, including issue handling, and an ISO 14971 compliant risk
management process.
In 2021, there were no quality and/or safety incidents that led to any market actions or
need for reporting to health authorities
In 2021 Observe Medical applied for MDR conformity assessment of The Sippi® system,
Observe Medical's proprietary automated digital urine meter. In January and February
2022 Observe Medical´s Notified Body, Intertek (identification number 2862), performed
the MDR audits (stage 1 and 2) resulting in no identified non-conformities. As a result,
Observe Medical has received the EC certificate, listing Sippi Disposable Unit ™. This
demonstrates that our Quality Management System is compliant with EU Regulation
2017/745 for Medical Devices, Annex IX Chapter I and II.
In the coming months, we continue the MDR journey with focus on getting Sippi Base Unit
™ MDR compliant and getting EC certification. Observe Medical is continuously
evaluating the clinical use of Sippi® and currently improving the user experience of Sippi
by improved functionality and an update of the display design.
Identified targets for 2022
• Complete transition to Medical Device Regulation (MDR)
• Establish a joint Quality Management System (QMS) with relevant
policies/manuals for the entire Group
49 | Annual Report 2021, Observe Medical ASA
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Consolidated Financial Statements 2021
Contents
50 | Annual Report 2021, Observe Medical ASA
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Contents
Consolidated Financial Statements 2021 ........................................................................................... 49
Consolidated Statement of Comprehensive Income ........................................................................ 51
Consolidated Statement of Financial Position ................................................................................... 52
Consolidated Statement of Changes in Equity .................................................................................. 53
Consolidated Cash Flow Statement .................................................................................................... 54
Explanatory Notes to the Consolidated Financial Statements 2021 ................................................ 55
Note 1 – General Information .......................................................................................................... 55
Note 2 – Basis for Preparation and Summary of the Most Significant Accounting Policies ........ 56
Note 3 – Financial Risk Management .............................................................................................. 61
Note 4 – Significant Judgements in the Application of Group Accounting Policies and Accounting
Estimates ........................................................................................................................................... 62
Note 5 – Segment Information and Revenue from Contracts with Customers ............................ 63
Note 6 – Tangible Assets ................................................................................................................. 66
Note 7 – Intangible Assets ............................................................................................................... 67
Note 8 – Lease .................................................................................................................................. 69
Note 9 – Financial Items ................................................................................................................... 70
Note 10 – Cost of Materials .............................................................................................................. 70
Note 11 – Trade Receivables and Other Receivables .................................................................... 71
Note 12 – Inventories ....................................................................................................................... 71
Note 13 – Financial Instruments ...................................................................................................... 71
Note 14 – Contingent Consideration .............................................................................................. 74
Note 15 – Taxes ................................................................................................................................ 75
Note 16 – Other Operating Expenses ............................................................................................. 77
Note 17 – Payroll Expenses .............................................................................................................. 77
Note 18 – Remuneration to Corporate Management and Board of Directors ............................. 78
Note 19 – Share Options .................................................................................................................. 80
Note 20 – Earnings per Share .......................................................................................................... 81
Note 21 – Related Parties ................................................................................................................. 81
Note 22 – Research and Development ........................................................................................... 82
Note 23 – Shareholder Information ................................................................................................. 82
Note 24 –Subsequent event ............................................................................................................ 84
51 | Annual Report 2021, Observe Medical ASA
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Observe Medical Group
Consolidated Statement of Comprehensive Income
Amounts in NOK thousand Note FY 2021 FY 2020
Operating revenues 24 042 2 961
Cost of materials 10 14 524 1 975
Gross result 9 518 986
Employee benefit expenses 17, 18, 19 19 013 10 891
Other operating expenses 16, 22 23 586 15 018
Operating expenses 42 599 25 910
Operating result before depreciation and amortisation (EBITDA) -33 081 -24 923
Depreciation and amortisation 6, 7, 8 3 463 3 163
Operating result (EBIT) -36 544 -28 087
Financial income and expenses
Financial income 9 15 711 3 853
Financial expenses 9, 14 5 488 12 635
Net financial items 10 223 (8 782 )
Result before tax -26 321 -36 868
Income tax expense 15 0 0
Result for the period -26 321 -36 868
Other comprehensive income that may be reclassified
subsequently to profit or loss
Currency translations differences -9 064 1 131
Total comprehensive income/loss for the period -35 385 -35 737
Earnings per share (NOK per share) 20 -1.34 -2.22
52 | Annual Report 2021, Observe Medical ASA
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Observe Medical Group
Consolidated Statement of Financial Position
The Board of Directors and CEO of Observe Medical ASA
Oslo, April 28, 2022
Amounts in NOK thousand
Note At 31 December 2021 At 31 December 2020
ASSETS
Non-current assets
Goodwill 7 33 870 36 268
Intangible assets 7 21 328 20 965
Tangible assets 6, 8 1 381 703
Total non-current assets 56 579 57 936
Current assets
Trade receivables 11 1 348 1 460
Inventories 12
Other receivables and prepaid expenses 11 3 934 1 730
Bank deposits 13 2 864 18 945
Total current assets 15 159 29 797
Total assets 71 738 87 733
EQUITY AND LIABILITIES
Total equity -14 122 20 349
Non-current liabilities
Non-current lease liabilities 8 550 260
Contingent consideration 14 13 031 22 368
Non-current interest bearing liabilities 13 0 34 821
Total non-current liabilities 13 581 57 449
Current liabilities
Bank overdraft 6 509 0
Trade payables
13
VAT and other public taxes and duties payables
13
Other current liabilities
13, 8
Total current liabilities 72 279 9 935
Total liabilities 85 860 67 384
Total equity and liabilities 71 738 87 733
53 | Annual Report 2021, Observe Medical ASA
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Observe Medical Group
Consolidated Statement of Changes in Equity
During 2020 the OM ASA has issued 4 537 784 new shares for gross proceeds of NOK 46,362
thousand. Expenses related to the capital increase amount to NOK 4,970 thousand.
See note 23 for further information about movement in share capital / number of shares and note
19 share options.
Amounts in NOK thousand Share capital
Share
premium
Other paid in
equity
Total paid-in
capital
Retained
earnings
Translation
differences
Total
Equity as at 1 January 2020 3 918 46 852 11 800 62 570 -46 568 -1 461 14 542
Share issue 1 180 40 212 - 41 392 - - 41 392
Options - - - - 152 - 152
Result for the period - - - - -36 868 - -36 868
Translation differences - - - - - 1 131 1 131
Equity as at 31 December 2020 5 097 87 065 11 800 103 963 -83 284 -330 20 349
Share capital
Share
premium
Other paid in
equity
Total paid-in
capital
Retained
earnings
Translation
differences
Total
Equity as at 1 January 2021 5 097 87 065 11 800 103 963 -83 284 -330 20 349
Share issue - - - - - - -
Options - - - - 913 - 913
Result for the period - - - - -26 321 - -26 321
Translation differences - - - - - -9 064 -9 064
Equity as at 31 December 2021 5 097 87 065 11 800 103 963 -108 691 -9 394 -14 122
54 | Annual Report 2021, Observe Medical ASA
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Observe Medical Group
Consolidated Cash Flow Statement
Amounts in NOK thousand Note 2021 2020
Cash flow from operating activities
Result before tax -26 321 -36 868
Tax paid
15 -192 0
Depreciation and impairment 6,7,8 3 463 3 163
Gain(-)/ loss from sale of fixed asset -6 0
Interest expenses and change FV contingent consideration
with no cash effect
14 -6 144 8 684
Change in inventories 12 145 -1 844
Change in trade receivables and other receivables 11 -2 103 -829
Change trade account payables and other current liabilities 13 9 031 6 053
Net cash flow from operating activities -22 126 -21 641
Cash flow from investing activities
Purchase of tangible and intangible assets 6,7,8 -4 886 -1 239
Net cash effect of business combination 24 0 -6 838
Net cash flow from investing activities -4 886 -8 077
Cash flow from financing activities
Net change interest bearing debt 13 10 000 6 901
Net change bank overdrafts 13 6 509 0
Net proceeds from share issue 0 41 392
Payments of lease liabilities 8 -429 -124
Net cash flow from financing activities 16 079 48 169
Currency translation differences -5 149 9
Changes in cash -16 081 18 460
Bank deposits as at 1 January 13 18 945 485
Bank deposits end of period 13 2 864 18 945
55 | Annual Report 2021, Observe Medical ASA
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Explanatory Notes to the Consolidated
Financial Statements 2021
Note 1 – General Information
Observe Medical ASA is a Norwegian pu bli c l ist ed co mpa ny located in Norway and whose shares
are public traded on Euronext Expand Oslo. Its head office is located in Dronning Eufemias gate
16, 0191 Oslo, Norway.
The Group currently is in phase of its commercialization and development process of the next
generation urine meter, Sippi®. Sippi® was previous owned by Observe Medical International AB
which was acquired in August 2015. The acquisition has an earn-out obligation to the sellers of
Observe Medical International AB presented in the Financial Statements as "contingent
consideration".
Observe Medical’s strategy is to continually grow the platform and product portfolio through R&D
and M&A strategies. After the acquisition of Sylak AB in October 2020, Observe Medical is also a
distributor in the Nordic market of well-established medtech products.
The consolidated financial statements for Observe Medical ASA (“OM group” or “the Group”),
including notes, for the year 2021 were approved by the Board of Directors of Observe Medical
ASA on April 28, 2022 and will be proposed to the Annual General Meeting on June 2, 2022.
Going Concern and Liquidity
These financial statements have been prepared on the assumption that the Group is a going
concern, and the board confirms that the basis for this assumption is present. The board based its
opinion on the future prospects and potential of the Sippi® product family, the Nordic distribution
portfolio, the newly acquired Biim ultrasound probe, and the Group’s available liquidity financing.
Sippi® puts the Group well on the way towards achieving fully automated, digital urine measuring
systems, which represent significant, long-term earnings potential for the Group. In March 2022
the Group acquired Biim Ultrasound AS (Biim) for a total estimated acquisition consideration of
NOK 185 million. The acquisition consideration was financed through issue of 8,171,913 new
shares in Observe Medical and cash settlement of NOK 50 million. Biim is a Norwegian company
with presence in Narvik (Norway), Oulu (Finland) and Seattle (US) and is in roll-out in US with their
innovative handheld ultrasound probe. Biim has currently completed phase 1 in the roll-out to
Fresenius’s dialysis training clinics and has delivered appr. 260 Biim probes to Fresenius. The
product represents significant short-term and long-term earnings potential for the Group. The
Nordic distribution portfolio had a significant organic growth in 2021 with 55% compared to pro-
forma figures 2020. The Group’s strategy is to further develop the Nordic distribution portfolio and
expect it will provide a growing positive cashflow going forward. In addition, the Group in February
2022 completed a Rights Issue with gross proceeds of NOK 180 million, this will together with cash
generated from operations be basis for financing of the operations and further growth initiatives
in line with the strategy.
See separate section in note 3 Financial risk management for further information.
56 | Annual Report 2021, Observe Medical ASA
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Note 2 – Basis for Preparation and Summary of the Most Significant
Accounting Policies
The basis for preparation and most important accounting policies used in the preparation of the
consolidated financial statements are described below. The basis and policies are applied
consistently in all of the periods presented, unless the description states otherwise.
The Group's financial statements have been prepared based on historical cost, with the exception
of contingent consideration which is recognized at fair value through profit or loss.
Preparing financial statements in accordance with IFRS requires the use of estimates. Furthermore,
applying the Group's accounting policies requires the management team to use its judgment.
Areas that involve a high degree of estimation and a high degree of complexity, or areas where
assumptions and estimates are significant for the Group’s financial statements, are described in
Note 4.
Changes to Accounting Policies and Disclosures
The accounting policies applied are the same for all periods presented. New or revised accounting
standards implemented as of January 1, 2021 have no impact on the Group’s accounting policies.
Revisions to standards and interpretations that did not come into force for the Group for the period
that ended December 31, 2021 are evaluated and are expected to not have any significant effect
for the Group.
Basis of Combination and Consolidation
Companies that have been controlled by Observe Medical ASA, have been fully combined and
consolidated for all periods presented for the purpose of these financial statements
("subsidiaries").
Control exists when an entity is exposed, or has rights, to variable returns from its involvement with
the investee and is able to affect those returns by exercising power over the investee. Power means
existing rights that provide the investor with the ability to direct relevant activities, i.e. the activities
that significantly affect the investee's returns. There are no non-controlling interests for the periods
presented.
Intra-group income, expenses, and balances are eliminated in preparing the Group's financial
statements.
Segment Information
The Group has only one operating segment, consistent with the reporting to the CEO and the
Board.
Translation of Foreign Currency
a) Functional currency and presentation currency
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The financial statements of an individual entity are measured using the currency of the primary
economic environment in which the entity operates (functional currency). The functional currency
of Observe Medical International AB, Observe Medical AB and Observe Medical Nordic AB is SEK,
Observe Medical ApS, DKK and for Observe Medical ASA NOK. The consolidated financial
statements are presented in NOK.
b) Transactions and balance sheet items
Transactions in foreign currency are translated to the functional currency using the exchange rate
at the date of the transaction. Currency gains and losses that arise at settlement and translation of
monetary items in foreign currency at the exchange rate on the balance sheet date are recognized
through profit or loss. Currency gains and losses are presented net as financial income or financial
expenses.
c) Group companies
The financial statements of group companies with functional currencies different from the
presentation currency are translated in the following way:
a) Assets and liabilities, including goodwill and fair value adjustments, are translated using
the exchange rate on the reporting date.
b) Income statements are translated using the average exchange rate for the year
c) Translation differences are recognized in other comprehensive income and specified in
equity as a separate item
Intangible Assets and Goodwill
Recognition and measurement
Expenditure on research activities is recognized in profit or loss as incurred.
Development expenditure is capitalized only if the expenditure can be measured reliably, the
product or process is technically and commercially feasible, future economic benefits are probable
and the Group intends to and has sufficient resources to complete development and to use or sell
the asset. Otherwise, it is recognized in profit or loss as incurred. Subsequent to initial recognition,
development expenditure is measured at cost less accumulated amortization and any accumulated
impairment losses.
Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated
impairment losses.
Other intangible assets, including customer relationships, patents and trademarks, that are
acquired by the Group and have finite useful lives are measured at cost less accumulated
amortization and any accumulated impairment losses.
Subsequent expenditure
Subsequent expenditure is capitalized only when it increases the future economic benefits
embodied in the specific asset to which it relates. All other expenditure, including expenditure on
internally generated goodwill and brands, is recognized in profit or loss as incurred.
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Amortization
Amortization is calculated to write off the cost of intangible assets less their estimated residual
values using the straight-line method over their estimated useful lives and is generally recognized
in profit or loss. Goodwill is not amortized.
Amortization methods, useful lives and residual values are reviewed at each reporting date and
adjusted if appropriate.
Technology assets
The fair value of patented and unpatented technology associated with Sippi® was estimated at the
acquisition of Observe Medical International AB (OMI AB) in 2015. This was estimated based on
the estimated annual revenue from Sippi® over a period of 20 years, discounted by 18.3%. The
revenue was based on estimates of market size, estimated market share and expected sales prices,
and was consistent with the calculation of contingent consideration for the acquisition of OMI AB.
The technology asset is amortized on a straight-line basis over 10 years. The shorter period than
the one used to estimate fair value upon acquisition was justified by the risk of technological
obsolescence. IAS 38 states that uncertainty justifies estimating the useful life of an intangible asset
on a prudent basis, but it does not justify choosing a life that is unrealistically short. The
amortization method used shall reflect the pattern in which the asset's future economic benefits
are expected to be consumed by the entity, and normally this cannot be based on expected
revenue. If that pattern cannot be determined reliably, the straight-line method shall be used.
Subsequent to the acquisition in 2015, the Group has capitalized some further costs related to the
development of Sippi®, as well as patent registration costs. Expenditures for the development of
SippbagTM® bags, wireless connection to PDMS and related functionality have been capitalized
as assets. Development activities are normally performed in projects that are outsourced to
external parties. Such development expenditures together with expenditures related to patent
registration are the only development expenditures that historically have been capitalized. Internal
expenditures have not been capitalized as all the requirements set out in IAS 38.57 historically were
not satisfied.
The Group is now in an important roll-out phase for the next generation Sippi® (Sippi®BLE) and the
Group's related investments to the development of this product have in all material respect already
been incurred. During the roll-out phase, the investments will mainly be related to connectivity to
PDMS systems and if necessary smaller adjustments to meet regulatory requirements in the new
Medical Device Regulation (MDR).
Impairment of Non-Financial Assets
Tangible assets and intangible assets with finite useful lives are assessed for impairment when there
are indications of impairment.
An impairment amounting to the difference between the carrying value and recoverable amount
is recognized through profit or loss. The recoverable amount is the highest of value in use and fair
value less cost of disposal.
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When assessing possible impairment, assets are grouped at the lowest level that generates cash
inflows that are largely independent of cash inflows from other assets or groups of assets. The
Group currently has only one cash generating unit.
Goodwill is not amortized, but tested at least annually for impairment.
Inventories
Inventories are measured at the lowest of acquisition cost and net realizable value. Acquisition cost
is calculated using the first-in, first-out method (FIFO). Net realizable value is the estimated selling
price and the estimated costs necessary to make the sale.
Financial Assets
The company has financial assets in the category of amortized cost, which primarily consist of short-
term receivables and bank deposits. Accounts receivables are initially measured at the transaction
price. Other financial assets are initially recognized at fair value in addition to transaction costs and
then at amortized cost using the effective interest method adjusted for impairment.
For the periods presented, no credit losses have been realized and no provisions for expected
credit losses have been recognized.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and bank deposits, with a maximum of three months'
original duration.
Financial Liabilities
Financial liabilities include:
a) Financial liabilities at fair value through profit or loss: Contingent consideration from
acquisition; and
b) financial liabilities at amortized cost: primarily interest-bearing debt to Navamedic ASA,
Ingerø Reiten Investment Company AS and credit facility from Danske Bank in addition to
payables.
Income Tax
The tax expense consists of tax payable and deferred tax.
The Group has historically operated with significant losses for tax and accounting purposes. The
Group has operations, and tax losses carried forward, in Norway, Denmark and Sweden. So far, the
Group has had no basis for recognition of net deferred tax assets according to IAS 12 Income taxes.
For all periods presented, the Group has reported zero net deferred tax assets or income tax
expense.
Deferred tax assets and deferred tax is offset if there is a legally enforceable right to offset assets
in the event of tax payable against liabilities in the event of tax payable, and the deferred tax assets
and deferred tax relate to income tax that is imposed by the same tax authority for either the same
60 | Annual Report 2021, Observe Medical ASA
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taxable enterprise or different taxable enterprises that intend to settle liabilities and assets in the
event of tax payable net. At the acquisition of Observe Medical International AB in 2015, deferred
tax asset was recognized on tax losses carried forward in the same amount as deferred tax liability
recognized on the fair value adjustments of the technology intangible assets, with net zero deferred
tax recognized. In subsequent periods, the deferred tax asset has been reduced in line with the
reduced deferred tax liability on the intangible assets.
Pensions
The Group has entered into a mandatory defined-contribution pension scheme for all employees.
The contributions are recognized as payroll expenses as the obligation to pay contributions accrue.
Revenue Recognition
Revenue from contracts with customers
The Group is in the process of commercialization of its digital urine meters for use in intensive care
wards in hospitals, in the Nordic region and other selected European countries. The Group has
established its sales and distribution model for its digital urine meters. The model will be further
developed in line with the expansion of the business.
In addition, the Group is a distributor of ICU/anaesthesia products in the Swedish market. The
Group recognizes revenue from sale of goods from the Nordic distribution portfolio at the point in
time when the control of goods is transferred to the customer at an amount that reflects the
consideration to which the Group expects to be entitled in exchange for those goods. Revenue is
generally recognised on delivery of the goods. The effects of variable consideration or existence
of significant financing components are immaterial.
The Group has for the periods presented significant growth in sales and revenues, mainly from the
Nordic distribution portfolio. Further information on revenue recognition or disclosures according
to IFRS 15 is consequently not relevant for these financial statements.
Leases
The Group recognized right of use assets and lease liabilities for leases, except for agreements
with a lease period of less than one year or where the value of the underlying asset is low.
Depreciation, impairment, and interest expenses must be recognized in the consolidated
statement of comprehensive income. For lease contracts for which the lease term is less than one
year or where the value of the underlying asset is low the lease payments are recognized as an
expense on a straight-line basis over the lease period.
Share Options
The fair value of options granted to member of management is recognized as employee benefit
expense with a corresponding increase in equity for equity settled awards. The total amount to be
expensed is determined by reference to the fair value of the options granted. The total expense is
recognized over the vesting period. Social security contributions payable in connection with an
option grant are treated as cash-settled transactions and expensed as employee benefit expenses.
61 | Annual Report 2021, Observe Medical ASA
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Note 3 – Financial Risk Management
Financial Risk Factors
The Group's operations expose it to various types of financial risk: market risk (including currency
risk, interest risk, and price risk), credit risk, and liquidity risk.
Market and Operational Risk
The Group is exposed to market risk. The Group believes that such risk primarily arises in relation
to the future sales of the Group's products, measured in terms of both price and volume. Factors
that can influence market risk include increased competition, instructions to reduce prices from the
authorities, and competition from existing and future medtech companies.
Due to the pandemic and the Ukraine crisis, the world is experiencing challenges both in terms of
raw material supply and in the transportation of goods. The company is following the situation
closely, but the situation may lead to delays in deliveries.
For the periods presented, currency risk has primarily been related to payables and receivables
within the OM group and related parties.
Going forward, it is expected that revenues will be generated in both the functional currency of the
selling entity and in foreign currencies. This may also apply to cost of materials. The Group has so
far not adopted specific currency hedging strategies in relation to its operations.
Credit Risk
The Group has for the periods presented had insignificant credit risk.
Liquidity Risk and Going Concern
These financial statements have been prepared on the assumption that the Group is a going
concern. The opinion I based on the future prospects and potential of the Sippi® product family,
the Nordic distribution portfolio, the newly acquired Biim ultrasound probe, in addition to the
Group’s available liquidity financing. Sippi® puts the Group well on the way towards achieving fully
automated, digital urine measuring systems, which represent significant, long-term earnings
potential for the Group. In March 2022 the Group acquired Biim Ultrasound AS (Biim) for a total
estimated acquisition consideration of NOK 185 million. The acquisition consideration was
financed through issue of 8,171,913 new shares in Observe Medical and cash settlement of NOK
50 million. Biim is a Norwegian company with presens in Narvik (Norway), Oulu (Finland) and
Seattle (US) and is in roll-out in the US with their innovative handheld ultrasound probe. Biim has
now completed phase 1 in the roll-out to Fresenius’s dialysis training clinics and has delivered appr.
260 Biim probes to Fresenius. The product represents significant short-term and long-term
earnings potential for the Group. In addition, the Group in February 2022 completed a Rights Issue
with gross proceeds of NOK 180 million, this will together with cash generated from operations be
the basis for financing of the operations and further growth initiatives in line with the strategy.
Management performs on a regular basis cash-flow projections to evaluate whether it will be in a
position to cover the liquidity needs for the next 12-month period. In developing estimates of
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future cash flows, the management makes assumptions about revenue and revenue growth, cost
of materials, payroll and operating expenses, capital expenditure, loan repayments and interest
charges. The assumptions applied are based on historical experience and future expectations.
Based on updated cash flow forecasts for next 12 months, the Group expect that it will be in a
position to cover the liquidity needs for the next 12 months. If the Group experience delays in the
forecasted revenues the management and the board of directors have identified initiatives to
reduce spending and to improve the efficiency of the Group’s operations.
Variable Interest Rate Risk
The Group’s variable interest rate risk is limited as interest bearing liabilities to Navamedic ASA has
a fixed interest rate, and interest-bearing liabilities to Ingerø Reiten Investment Company AS and
Danske Bank are current debt with due dates before date of signing of the financial statement for
2021. The Group has limited bank deposits and change in variable interest rate will have limited
effect. The Group has not hedged its interest rate exposure.
Management of Capital
The Group has so far not had any expressed goals or requirements in relation to management of
capital. Focus in the short term will be to ensure continued operations to further develop and
commercialize Sippi® and Biim ultrasound probe. In the longer term, goals will include securing
returns for its owners, and to maintain an optimal capital structure in order to reduce capital
expenses. So far, the Group has not had any debt with financial covenant restrictions.
Note 4 – Significant Judgements in the Application of Group
Accounting Policies and Accounting Estimates
The preparation of financial statements in accordance with IFRS requires that management make
assessments, estimates and assumptions that impact reported amounts for revenues, expenses,
assets and liabilities and presentation of contingent liabilities at the end of the reporting period.
Judgements that management have made as part of the application of the entity's accounting
policies and that have the most significant impact on the amounts recognized in the financial
statements are related to the acquisition of OMI AB in 2015, Sylak AB in 2020, and further
capitalization of costs for development of the technology assets.
As part of the business combination, the management has performed judgments and made
estimates of the fair values of assets and liabilities acquired, as well as the fair value of the
contingent consideration. These estimates and judgements at the acquisition date affects the
classification and carrying amounts in the balance sheet and subsequent amortization,
depreciation, change in fair value through profit or loss for contingent consideration and potential
for impairment charges.
Capitalization of further development costs requires documentation that all criteria for
capitalization of own development still are met, including that sufficient resources are available to
complete the development and management's expectations and estimates of future economic
benefits to be generated by the assets.
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Sources of estimation uncertainty with a significant risk of a material adjustment to the carrying
amount in the following period relates primarily to the measurement of goodwill, technology
assets, and contingent consideration, and recognition of deferred tax assets.
Management has used estimates and assumptions in the determination of the amortization period
for intangible assets, the assessment of impairment indicators and impairment tests. These are
affected by management's expectations and estimates of future economic benefits to be realized
by the Group. See notes 2 and 7 for further information.
The Group has so far not been able to demonstrate convincing evidence of future taxable profits
to be able to recognize net deferred tax assets on its tax losses carried forward according to IAS
12, see also Note 2.
Note 5 – Segment Information and Revenue from Contracts with
Customers
The Group currently has only one segment, the Medtech business.
Medtech Business
The Group is the owner of product rights (the Sippi®
product family) to a product with global potential.
Observe Medical has developed an automated,
digital urine meter that saves healthcare personnel
time. Compared with current methods, Sippi®
represents a clear improvement and may enhance
accuracy for hospitals and patient safety. Sippi® has
been under development since 2009 and has been
approved for use in hospitals in Europe and the
USA.
Sippi® has the potential to become a global
category leader within urine measuring systems
with our wireless, digital and fully integrated
product family.
Sippi® is the only digital urine measuring system
that can automatically deliver data to electronic
patient journal systems, an important innovation within what is now a completely manual task in
the health service. Automating the urine measuring process will allow hospitals and other parts of
the health service to streamline patient care where urine measuring is required and can thereby
free up resources for other needs the patient may have. Trials carried out in clinics confirm that the
Sippi® system is more accurate than manual measuring methods, is safer for patients, and frees up
hospital staff's time.
In 2019, Observe Medical introduced wireless transmission to patient journal systems to accelerate
the interest being shown in Sippi®. A number of leading hospitals in Europe and the Nordic region
have expressed their interest in testing and implementing Sippi® with wireless data transfer.
64 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Observe Medical has also developed SippCoat®, an innovative technology that hampers the
formation of biofilms in urine collection and drainage systems.
Biofilm formation is the main cause of bacterial growth in medical devices and the consequent
urinary tract infections. The silicone oil in SippCoat® helps prevent bacteria migrating to the
bladder from a urine bag via the tube system.
Sippi® puts Observe Medical well on the way towards achieving fully automated, digital urine
measuring systems, which would represent significant, long-term earnings potential for the Group.
The Group's goal is to establish Sippi® as a global niche leader. This will be done by building a
network of distributors and partners in key markets and utilizing the Group's relationships with
hospitals throughout the Nordic market.
The negative results for the periods presented are due to the development and roll out of the
advanced Sippi® urine measuring system and Sippi® product family, which have the potential to
become global category leaders in the digital monitoring of seriously ill patients' fluid balance.
In October 2020 Observe Medical acquired Sylak AB (now Observe Medical Nordic AB), a Swedish
distributor of well-established medtech products in the Nordic region. Observe Medical Nordic
have a product portfolio highly complementary and synergistic to Sippi® in the product group
Anesthesia/ICU and Wound care, in addition to Urine measurement.
In March 2022 the Group acquired Biim Ultrasound AS and their patented Biim Ultrasound probe.
This is a handheld device currently in commercial sale in the US. The Group will have revenues
from sale of the Biim ultrasound probe from March 2022.
Overview of revenue per product group
Amounts in NOK thousand
Revenue per product group 2021 2020
Urine Measurement - Sippi® 122 -
Urine Measurement - Other products 700 219
Anaesthesia / ICU 19 835 2 295
Wound Care 2 280 447
Other 1 105 -
Total 24 042 2 961
Amounts in NOK thousand
Revenue per geographic market 2021 2020
Norway 815 85
Sweden 22 976 2 763
Other European countries 251 113
Total 24 042 2 961
65 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
* Business assets, goodwill and intangible assets is distributed based on the country in which the
legal entity in the Group that owns the assets is located.
Amounts in NOK thousand
Tangible assets, goodwill and intangible assets by country*
2021 2020
Sweden 54 980 56 023
Denmark 1 223 1 913
Norway 376 0
Total 56 579 57 936
66 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Note 6 – Tangible Assets
See note 8 for description of IFRS 16 and lease contracts.
Amounts in NOK thousand
Acquisition cost 1 January 2020 2 356
Additions 680
Disposals -456
Currency translation differences 248
Acquisition cost 31 December 2020 2 829
Acquisition cost 1 January 2021 2 829
Additions 1 611
Disposals -357
Currency translation differences -138
Acquisition cost 31 December 2021 3 945
Accumulated depreciation 1 January 2020 2 017
Depreciation for the year 162
Disposals -268
Currency translation differences 215
Accumulated depreciation 31 December 2020 2 126
Accumulated depreciation 1 January 2021 2 126
Depreciation for the year 549
Disposals -22
Currency translation differences -88
Accumulated depreciation 31 December 2021 2 565
Carrying value 1 January 2020
339
Additions
680
Disposals -188
Depreciation
-162
Translation differences
33
Carrying value 31 December 2020
703
Carrying value 1 January 2021
703
Additions
1 611
Disposals -334
Depreciation
-549
Translation differences
-50
Carrying value 31 December 2021
1 381
67 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Note 7 – Intangible Assets
Goodwill relates to the acquisition of Observe Medical International AB (OMI AB) in 2015 and
acquisition in 2020 relates to Sylak AB, see note 24 Business combination. Technology
assets/patent relates to the Sippi® patent, and technology development relates to capitalized
external expenses for further development of the Sippi® technology. Carrying value of assets under
construction as at December 31, 2021 was NOK 3.87million.
Impairment Test for Cash Generating Unit that Contain Goodwill
Goodwill is allocated to the Medtech business. Through the impairment test of goodwill, the
carrying value of the total group is effectively tested for impairment. The share price indicates that
the fair value materially exceeded the carrying value of equity at December 31, 2021. The
recoverable amount has also been estimated based on value in use as described below.
Amounts in NOK thousand Goodwill
Technology
assets /
Patent
Technology
development
Sum
Acquisition cost 1 January 2020 30 333 28 841 8 284 67 458
Aquisitions 2 815 2 815
Additions 867 867
Currency translation differences 3 120 2 864 764 6 748
Acquisition cost 31 December 2020 36 268 31 705 9 915 77 888
Acquisition cost 1 January 2021 36 268 31 705 9 915 77 888
Additions 104 4 564 4 668
Currency translation differences -2 398 -392 -2 477 -5 267
Acquisition cost 31 December 2021 33 870 31 416 12 002 77 288
Accumulated amortization 1 January 2020 12 933 3 194 16 127
Amortization for the year 1 723 1 278 3 001
Currency translation differences 1 226 300 1 526
Accumulated amortization 31 December 2020 15 882 4 773 20 655
Accumulated amortization 1 January 2021 15 882 4 773 20 655
Amortization for the year 717 2 197 2 914
Currency translation differences -316 -1 163 -1 479
Accumulated amortization 31 December 2021 16 283 5 807 22 090
Carrying value 1 January 2020
30 333 15 908 5 089 51 331
Aquisitions
2 815 2 815
Additions
867 867
Amortization
-1 723 -1 278 -3 001
Translation differences
3 120 1 638 464 5 222
Carrying value 31 December 2020
36 268 15 823 5 142 57 233
Carrying value 1 January 2021
36 268 15 823 5 142 57 233
Additions 104 4 564 4 668
Amortization
-717 -2 197 -2 914
Translation differences
-2 398 -76 -1 314 -3 789
Carrying value 31 December 2021
33 870 15 134 6 195 55 198
Useful life Indefinite 10 year 5 year
68 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
The value in use of the cash generating unit was calculated on the basis of discounted future cash
flows. The calculation at December 31, 2021 was based on a forecast for 2022 and estimates for
subsequent periods. The amount of revenue and when it will be generated is especially uncertain.
A discount rate after tax of 11.2% was used to discount future cash flows. The impairment test at
year-end 2021 concluded that there was no need to impair goodwill or other intangible or tangible
assets related to the Medtech business.
Uncertainty exists associated with the estimates used to determine future cash flows and the
discount rate used to calculate the value in use. An increase in the discount rate with 1 percentage
point, the calculated value in use at December 31, 2021 would decrease by 13.2%, but still exceed
the carrying value. A decrease in EBITDA margin with 1 percentage point, the calculated value in
use at December 31, 2021 would decrease by 3%, but still exceed the carrying value.
The value of the goodwill and intangible assets is dependent on the development of Sippi®
technology. The book value of the technology is low compared with potential revenue from the
product. At year-end 2021, the Group estimated that revenue from sales of OM’s products will be
realized at a later stage than what was assumed when OMI AB was acquired in 2015. Compared
with 2020 estimated short time cash flow has decreased, which have led to an decreased
contingent consideration liability at December 31, 2021. Substantial deviations in future revenue
would be of direct significance in measuring the value of intangible assets, as well as the estimated
fair value of the contingent consideration.
69 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Note 8 – Lease
As at December 31, 2021, the Group has lease contracts for four cars (two cars as at December 31.
2020). In addition, the group has short term leases that are not recognized as right-of-use assets
related to office buildings in Sweden and Norway.
Amounts in NOK thousand
Right of use assets Cars
Opening cost at 1 January 2020 474
Additions 398
Disposal -456
Currency translation differences 46
Closing cost at 31 December 2020 462
Right of use assets
Opening cost at 1 January 2021 462
Additions 1 393
Disposals -357
Currency translation differences -49
Closing cost at 31 December 2021 1 450
Opening depreciation at 1 January 2020 197
Depreciation in the period 120
Disposals -268
Currency translation differences 2
Accumulated depreciation at 31 December 2020 50
Opening depreciation at 1 January 2021 50
Depreciation in the period 446
Disposals -22
Currency translation differences -5
Accumulated depreciation at 31 December 2021 469
Right of use assets at 31 December 2020 412
Right of use assets at 31 December 2021 981
Lease Liability 2021 2020
As at 1 January 396 279
Additions 1 393 398
Disposal -323 -189
Lease payments in the period -481 -125
Interest cost 52 6
Currency translation differences -44 28
Closing liability at 31 December 993 396
Due < 1 year 443 136
Due > 1 year 550 260
70 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Effect of IFRS 16 on Statement of Comprehensive Income
Undiscounted Lease Liabilities and Maturity of Cash Outflow
Note 9 – Financial Items
Note 10 – Cost of Materials
Write-down in 2021, of NOK 141 thousand, is related to inventories of the first version of the Sippi®
Base Unit. This version has not functionality for connection to the hospitals PDMS (patient data
management system) and the Company has decided to write-off the value of these devices.
Amounts in NOK thousand 2021 2020
Depreciation expense of right-of-use assets 446 120
Interest expense on lease liabilities 52 6
Expense relating to short-term leases (included in other operating expenses) 1 498 549
Total amount recocnised in result for the period 1 996 675
Amounts in NOK thousand 2021 2020
Due within 1 year 443 150
Due between 1 year and 3 years 550 271
Total 993 421
Note 9 Financial items
Amounts in NOK thousand
Financial income 2021 2020
Change contingent consideration 10 432
Currency gain 5 279 3 853
Total 15 711 3 853
Financial expenses 2020 2020
Interest expenses 3 326 2 531
Change contingent consideration 1 095 9 970
Currency loss 639
Other financial expenses 428 134
Total 5 488 12 635
Net financial items 10 223 -8 782
Amounts in NOK thousand 2021 2020
Cost of materials for resale 14 383 1 965
Write-down 141 10
Total cost of materials 14 524 1 975
71 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Note 11 – Trade Receivables and Other Receivables
NOK 275 thousand of trade receivables were due at December 31, 2021.
Note 12 – Inventories
Note 13 – Financial Instruments
NOK 561 thousand of the bank deposits was restricted as at December 31, 2021 (NOK 121
thousand at December 31, 2020). There are no significant restrictions on transferring cash within
the group.
At December 31, 2021 the Group had drawn NOK 6,509 thousand from the credit facility the Group
had in Danske Bank. Total limit at the credit facility was NOK 10 million and the Company has
Amounts in NOK thousand 2021 2020
Trade receivables 1 348 1 460
Other receivables 3 934 1 730
Total 5 282 3 190
Amounts in NOK thousand 2021 2020
Goods for sale 7 150 7 661
Write-down -137 0
Total 7 013 7 661
Financial liabilities as at 31 December 2021
Amounts in NOK million
0-3 months
3-12
months
1-2
years
2-3 years
3-4
years
> 4 years Total
Carrying
value
Bank overdraft 6,5 6,5 6,5
Leasing liabilities 0,1 0,3 0,3 0,2 1,0 1,0
Contingent consideration upon acquisitions 16,2 16,2 13,0
Trade account payables 6,2 6,2 6,2
Public duties, tax deductions, etc. 3,7 3,7 3,7
Other current liabilities 6,2 1,2 7,4 7,4
Payables loan to Ingerø Reiten Invest. Comp. 10,4 10,4 10,4
Payables loan to Navamedic group 37,6 37,6 37,6
Total 16,3 56,1 16,5 0,2 89,1 85,9
Financial liabilities as at 31 December 2020
Amounts in NOK million
0-3 months
3-12
months
1-2
years
2-3 years
3-4
years
> 4 years Total
Carrying
value
Leasing liabilities 0,0 0,1 0,1 0,1 0,4 0,4
Contingent consideration upon acquisitions 2,3 27,9 30,2 22,4
Trade account payables 3,8 3,8 3,8
Public duties, tax deductions, etc. 2,3 2,3 2,3
Other current liabilities 2,8 0,8 3,6 3,6
Payables loan to Navamedic group 39,9 39,9 34,8
Total 9,0 0,9 42,3 28,0 80,2 67,4
72 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
repaid and terminated this facility in first quarter 2022. As at December 31, 2021 debt financing
has been provided by Navamedic ASA and Ingerø Reiten Investment Company AS
On October 1, 2019, Observe Medical ASA, as the borrower, entered into a loan agreement with
Navamedic, as the lender, for a loan of an aggregate amount of NOK 32,000 thousand (the "Bond
Loan").
The Bond Loan consists of the two following facilities:
• A subordinated convertible term loan facility in the amount of NOK 19,000 thousand (the
"Facility A"); and
• A subordinated convertible term loan facility in the amount of NOK 13,000 thousand (the
"Liquidity Facility").
The facilities given under the Bond Loan constitute direct, unsecured and fully subordinated
obligations of the company, and rank at least pari passu with all other existing and future unsecured
and subordinated obligations of the company, other than in respect of any obligations preferred
by mandatory provisions of applicable law and rank ahead of all amounts payable in respect of the
share capital of the company.
The Facility A was made available to the company on October 1, 2019, while the Liquidity Facility
was paid in portion in the first 8 months after listing. The facility is fully drawn as at December 31,
2021.
Each loan facility given under the Bond Loan accrue interest at a fixed interest rate of 8.00% per
annum. Accrued interest shall on the last day of the three months' interest period be capitalized
and added to the aggregate principal amount of the loans outstanding under the Bond Loan.
The company shall 36 months after October 1, 2019 repay to Navamedic ASA the aggregate
amount of each loan then outstanding together will all accrued but unpaid interest. The company
may at any time prepay any loan outstanding in part or in full. Any amount repaid or prepaid may
not be re-borrowed. The option to settle a fixed rate loan is an embedded derivative that has not
been separated and measured at fair value as it is Deemed to be immaterial as at December 31,
2021.
Contingent consideration from acquisitions has been discounted by an interest rate of 9.6 % per
annum as at December 31, 2021 and 9.6% per annum as at December 31, 2020.
None of the liabilities are secured by security or assets pledged as at December 31 for the years
presented.
73 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
1) Contingent consideration arose in connection with the acquisition of Observe Medical
International AB in 2015, see section below. The item is level 3 on the fair value
measurement hierarchy.
2) The carrying value equals maximum credit risk.
3) The carrying value is regarded as a reasonable approximation of fair value.
Additional information about the change in financial liabilities arising from financing activities.
Classification of financial assets and liabilities as at 31 December 2021
Amounts in NOK million
Total
Assets
Bank deposits 2,9
Trade receivables and other receivables 1,8
Total financial assets
2) and 3)
4,7
Liabilities
Liabilities to financial institutions
Lease liabilities 1,0
Contingent consideration upon acquisitions
1)
13,0
Non-current interest bearing liabilities 48,0
Trade account payables and other liabilities 13,5
Total financial liabilities
3)
75,5
62,5
13,0
13,0
48,0
13,5
Measured at
amortised cost
Fair value
through profit or
2,9
1,8
4,7
1,0
Classification of financial assets and liabilities as at 31 December 2020
Amounts in NOK million
Total
Assets
Bank deposits 18,9
Trade receivables and other receivables 1,5
Total financial assets
2) and 3)
20,4
Liabilities
Liabilities to financial institutions
Lease liabilities 0,4
Contingent consideration upon acquisitions
1)
22,4
Non-current interest bearing liabilities 34,8
Trade account payables and other liabilities 6,8
Total financial liabilities
3)
64,4
34,8
6,8
42,1
22,4
0,4
22,4
18,9
1,5
20,4
Measured at
Fair value
Amounts in NOK million
Credit institutions
incl. overdraft facility
Loans from Navamedic
Group and Ingerø
Reiten Invest. Comp.
Contingent consideration
upon acquisitions
Lease liabilities
Total
Carrying value 1 January 2021 34,8 22,4 0,4 57,6
Cash flow 6,5 10,0 -0,8 15,7
Change in liability with no cash effect 3,2 -9,4 1,4 -4,8
Carrying value 31 December 2021 6,5 48,0 13,0 1,0 68,5
Amounts in NOK million
Credit institutions
incl. overdraft facility
Loans from Navamedic
Group
Contingent consideration
upon acquisitions
Lease liabilities
Total
Carrying value 1 January 2020 25,4 12,4 0,3 38,1
Cash flow 6,9 -0,1 6,8
Change in liability with no cash effect 2,5 10,0 0,2 12,7
Carrying value 31 December 2020 34,8 22,4 0,4 57,6
74 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Changes in loans from Navamedic ASA without cash effect relates to accrued interest. Changes in
contingent considerations without cash effects relates to estimated changes in fair value of
contingent consideration (which include calculated interest). The Company entered into a current
loan agreement with Ingerø Reiten Investment Company in June 2021.Total loan was NOK 10
million and changes in loan without cash effect is related to accrued not paid interest. In November
2021, the Company entered into a credit-facility of NOK 10 million with Danske Bank. As of
December 21, 2021 the Company had drawn NOK 6,509 thousand of the credit-facility.
Note 14 – Contingent Consideration
Acquisition of Observe Medical
On August 4, 2015, Navamedic ASA acquired all of the shares and votes in Observe Medical
International AB (OMI AB). The purchase price was NOK 60.6 million including a contingent
consideration valued at NOK 25.6 million at the acquisition date. The contingent consideration
depends on the revenues from sales of the Sippi® product over a number of years. The fair value
of the contingent consideration involves discounting expected future payments. Discounting is
based on a discount rate of 9.6%.
The maximum contingent consideration is calculated as follows:
• For the period 2016-2023, a royalty may be paid to the former shareholders of OMI AB,
based on the following: A royalty of 7% based on annual revenue from sales of the Sippi®
product in excess of NOK 7.5 million, increasing to a 15% royalty for annual revenue in
excess of NOK 100 million.
• In addition to this, six milestone payments may be made to the former shareholders of
OMI AB based on set sales targets for the product. These sales targets must be achieved
by the end of 2023, with the last by the end of 2026. Total potential milestone payments
cannot exceed NOK 125 million, in addition to royalties mentioned above. The six
potential milestone payments will be triggered as follows:
a) NOK 6 million of accumulated revenue in excess of NOK 50 million
b) Plus, NOK 6 million of accumulated revenue in excess of NOK 75 million
c) Plus, NOK 6 million of accumulated revenue in excess of NOK 100 million
d) Plus, NOK 13 million of accumulated revenue in excess of NOK 300 million
e) Plus, NOK 34 million of accumulated revenue in excess of NOK 600 million
f) Plus, NOK 60 million of accumulated revenue in excess of NOK 900 million
Change in estimated fair value, which includes calculated interest, is recognized through profit or
loss.
Amounts in NOK thousand
Estimated fair value 31 December 2019 12 398
Change in estimated fair value in 2020 9 970
Estimated fair value 31 December 2020 22 368
Change in estimated fair value in 2021 -9 337
Estimated fair value 31 December 2021 13 031
75 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
The change in fair value in 2021 is due to updated estimate related to when the sales of OM’s
products will be realized. The potential revenue and expected realizations remain unchanged but
have been postponed due to effects of Covid-19.
The change in fair value in 2020 is due to decreased discount rate due to decreased risk related to
the cash flow and increased estimated cash flows. The decreased discount rate from 18.3% to 9.6%
in 2020 gives an increased fair value of approximately NOK 6 million.
Sensitivity as at December 31, 2021: A 1 percentage point reduction in the discount rate would
increase the estimated present value by NOK 0.3 million and a 10% reduction in revenue would
decrease the estimated present value by NOK 5.2 million. The relative high decrease is due to the
fact that reduces sale will result in breach of achieving milestone.
Note 15 – Taxes
Income tax
2021 2020
Current tax 0 0
Deferred tax 0 0
Tax expense/income recognised 0 0
76 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Basis for Deferred Tax Liabilities and Tax Assets (-)
Change in Deferred Tax Assets and Deferred Tax Liabilities
2021
Temporary
differences
Norway
Temporary
differences
Sweden
Temporary
differences
Denmark
Total 2021
Amounts in NOK thousand
Intangible assets 13 123 13 123
Other 37 -227 -190
Total temporary differences 37 12 896 0 12 933
Tax losses carried forward -33 149 -59 373 -89 065 -181 587
Basis for temporary differences -33 112 -46 477 -89 065 -168 654
Unrecognised temporary differences 33 112 46 477 89 065 168 654
Total recognised temporary differences 0 0 0 0
Tax rate 22 % 20,60 % 22 %
Recognised deferred tax liabilities and tax assets (-) 0 0 0 0
2020
Temporary
differences
Norway
Temporary
differences
Sweden
Temporary
differences
Denmark
Total 2020
Amounts in NOK thousand
Intangible assets 15 823 -7 554 8 269
Total temporary differences 0 15 823 -7 554 8 269
Tax losses carried forward -12 446 -49 421 -84 893 -146 760
Basis for temporary differences -12 446 -33 598 -92 447 -138 491
Unrecognised temporary differences 12 446 33 598 92 447 138 491
Total recognised temporary differences 0 0 0 0
Tax rate 22 % 20,60 % 22 %
Recognised deferred tax liabilities and tax assets (-) 0 0 0 0
Amounts in NOK thousand 01.01.2020
Recognised in
profit and loss
during the year
Effect of
acquistion and
equity
transactions
Foreign
currency
exchange
differences
31.12.2020
Intangible assets 2 008 -601 191 1 598
Tax losses carried forward -23 408 -4 875 -1 624 -1 689 -31 595
Gross tax liabilities / assets (-) -21 400 -5 476 -1 624 -1 498 -29 997
Deferred tax assets not recognised 21 400 5 476 1 624 1 498 29 997
Tax liabilities/assets (-) recognised
77 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Use of Tax Losses Carried Forward
There is not any expiring date of the use of tax losses carried forward.
Note 16 – Other Operating Expenses
The company has incurred non-recurring transaction cost related to the acquisition of Biim
Ultrasound AS of NOK 4.619 thousand in 2021 and in the table above this cost is part of the external
services expenses.
Fees to auditors are reported excluding VAT. KPMG is group auditor.
Note 17 – Payroll Expenses
See Note 19 for further information about the share options.
Amounts in NOK thousand
2021 2020
External services 16 867 11 479
Travel expenses 864 618
Advertising expenses 702 665
Other operating expenses 5 153 2 256
Total 23 586 15 018
Auditor
Amounts in NOK thousand
Fees paid 2021 2020
Statutory audit services 1 662 1 289
Other services 691 269
Total 2 353 1 559
Amounts in NOK thousand
2021 2020
Salaries 11 047 6 083
Remuneration to the Board and Nomination Committee 895 828
Employer's tax 3 950 2 101
Share options for employees 913 152
Pension expenses – defined-contribution scheme 1 727 742
Other payroll expenses 481 984
Total 19 013 10 891
Average number of full-time equivalents 10 7
78 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Note 18 – Remuneration to Corporate Management and Board of
Directors
In accordance with the Norwegian public Limited Companies Act §6-16 a, the board of directors
prepares a separate statement related to the determination of salary and other benefits for the
corporate management.
The total remuneration to the corporate management consists of basic salary (main element),
bonus, benefits in-kind and pension schemes, but varies from person to person. The Group’s Chief
Executive Officer determines the remunerations to other management in agreement with the Chair
of the Board of Directors. The total remuneration is determined based on the need to offer
competitive terms and reflect the responsibility for the CEO and other members of the
management team. The total remuneration shall not be market leading but should ensure that
Observe Medical attracts and retains senior executives with the desired skills and experience. The
basic salary is subject to an annual evaluation and is determined based on general salary levels in
the labor market.
The Group appointed new CEO at March 28, 2022. The information in this note applies to the CEO
who held the position in 2021, unless otherwise is stated.
Notice of Termination and Severance Payment for the CEO
Both parties may terminate CEO’s employment agreement by giving a six months’ notice period.
If the CEO’s employment is terminated by the Company subject to prior notice, the CEO shall be
entitled to severance pay equivalent to six times the monthly base salary which the CEO had at the
expiry of the employment.
Share Options
Refer to note 19 for information about share options to the Corporate Management team.
Loans to employees
As at 31.12.2021, there are no loans to employees.
Pension
The Group has defined contribution pension schemes.
Up to the change of CEO on March 28, 2022 the CEO had an occupational pension insurance
scheme where the company paid premium calculated as 4.5% of paid base salary up to the amount
to 7.5 income basic amounts (one basic amount is SEK 66.800) and 30% of paid salary components
(basic and variable salary) which exceed an amount equivalent to 7.5 income basic amounts.
Income base amount is a set amount by the Swedish Pensions Authorities which is the basis for
calculating the highest pensionable income. The amount is calculated annually on the basis of a
relationship between the current income index and the index from 2005.
79 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
The new CEO has a defined contribution pension scheme within the requirement of the law in
Norway.
Remuneration to the Group Management
2021
Amounts in NOK thousand
Salary
Other
benefits
Bonus Pension
Option
expenses
Options Shares
CEO
Björn Larsson
1)
1 636 76 751 485 46 60 000 17 000
CFO Per Arne Nygård 1 588 104 750 182 867 120 000 18 921
Total 3 224 180 1 501 667 913 180 000 35 921
1)
Salary are paid in SEK and converted to NOK
2020
Amounts in NOK thousand, except options and shares
Salary
Other
benefits
Bonus Pension
Option
expenses
Options Shares
CEO Björn Larsson 1 328 168 268 152 120 000 17 000
CFO Per Arne Nygård 1 272 88 119 18 921
Total 2 600 256 387 152 120 000 35 921
80 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Remuneration to the Board of Directors
In addition, board member Thomas Grunfeld have acted as Chief Medical Officer (CMO) on a
consultancy agreement. This agreement is based on hourly fee per hour worked with an hourly rate
at NOK 1,500. The agreement has been approved by the board of directors and in total in 2021 it
has been paid NOK 1,187 thousand in fees to Thomas Grunfeld based on the consultancy
agreement.
Note 19 – Share Options
CEO Granted Employee Share Options
As part of a long-term incentive plan, the CEO was on January 9, 2020 granted 60,000 series A
options and 60,000 series B options. Each option, when exercised, will give the right to acquire
one share in Observe Medical ASA. The options are granted without consideration. The series A
options vest over a 3-year period, with 1/3 after 12 months, 1/3 after 24 months and the last third
after 36 months. The series A option shares have a 12-month lock-up period tied to them. Options
2021
Amounts in NOK thousand, except number of shares
Function Name
Board
fee
Shares
Shares owned by
related parties
Loans
Chair Terje Bakken 270
4)
8 162 121
1)
Board member Kathrine G. Andreassen 195
4)
586 668
2)
4 222 727
3)
Board member Thomas Grunfeld 205
5)
Board member Kristin Nyberg 175
Total 845 586 668 12 384 848
1)
Terje Bakken is partner in Ingerø Reiten Investment Company AS who owns 3,939,394 shares in Observe Medical ASA
1)
Terje Bakken is Chair in Navamedic ASA who owns 4,222,727 shares in Observe Medical ASA
2)
All shares owned by Soleglad Invest AS who is 100% owned by Kathrine Gamborg Andreassen
3)
Kathrine Gamborg Andreassen is CEO in Navamedic ASA who own 4,222,727 shares in Observe Medical ASA
4)
Includes NOK 20 thousand in fee as member of the Audit Committee
5)
Includes NOK 30 thousand in fee as Chair of the Audit Committee
2020
Amounts in NOK thousand, except number of shares
Function Name
Board
fee
Shares
Shares owned by
related parties
Loans
Chair Terje Bakken 263 8 162 121
1)
Board member Kathrine G. Andreassen 188 586 668
2)
4 222 727
3)
Board member Thomas Grunfeld 151
Board member Kristin Nyberg 175
Total 777 586 668 12 384 848
1)
Terje Bakken is partner in Ingerø Reiten Investment Company AS who owns 3,939,394 shares in Observe Medical ASA
1)
Terje Bakken is Chair in Navamedic ASA who owns 4,222,727 shares in Observe Medical ASA
2)
All shares owned by Soleglad Invest AS who is 100% owned by Kathrine Gamborg Andreassen
3)
Kathrine Gamborg Andreassen is CEO in Navamedic ASA who own 4,222,727 shares in Observe Medical ASA
81 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
that have not been exercised will lapse 3.5 years after grant date. The series B options are granted
vest on the date of the option agreement. The series B option shares have no vesting period and a
24-month lock-up period tied to them. Series B options was not exercised and lapsed as of 1
January 2021. The strike price for the options is NOK 11.09 and calculated as the average price
the last 10 trading days before signing of the option agreement.
CFO granted 120,000 share options
Per Arne Nygård was engaged as interim CFO of the group as a consultant on 10 December 2019,
and was permanently employed as CFO of the group effective 1 March 2020. In connection with
entering into the employment agreement in 2020, it was agreed that Per Arne Nygård would be
granted options on such terms and conditions with respect to vesting period and exercise price,
as if they had been awarded on 1 March 2020.
On the basis of the above, the options have been granted with an exercise price of NOK 8.29,
which reflects the volume weighted average share trading price of the Company's shares the 10
trading days prior to 1 March 2020. Furthermore, 4/6 of the options vested upon grant, while the
remaining 2/6 vest with 50% on 1 March 2022 and 1 March 2023, respectively.
The options have been granted without consideration and each option will upon exercise give the
right to acquire one share in the Company. Any shares acquired upon exercise will be subject to a
12 months' lock-up period from the date received by the option holder, and all options will expire
and lapse if not exercised within 1 March 2024.
Note 20 – Earnings per Share
See note 23 for an overview of movements in number of shares, See note 19 for a description of
share options. No dilutive effects for the OM group have been calculated because of the net result
for 2021 and 2020 were negative.
Note 21 – Related Parties
Transactions and shared costs have historically been charged from the parent Company to its
subsidiary
In addition to Group companies, the group's related parties are:
Key management personnel, close members of the family of a person and entities that are
controlled or jointly controlled by any of these. Key management personnel are defined as the
Board of Directors and the group management.
Amounts in NOK thousand
Earnings per share:
2021 2020
Net result for the year, company's shareholders -26 321 -36 868
Average number of shares 19 605 457 16 574 701
Earnings per share (NOK per share) -1,34 -2,22
82 | Annual Report 2021, Observe Medical ASA
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There were no transactions with key management personnel in 2021 and 2020 besides
remuneration and issue of options explained in Note 18.
Transactions and balances within the Group are eliminated in the financial statements and are not
disclosed in this note.
Transaction and Balances with related parties includes transactions with Navamedic ASA and
Ingerø Reiten Investment Company AS.
Expenses is primarily fee to cover costs and activities as finance and logistics support. Finance
expense is interest on interest bearing loan towards Navamedic ASA and Ingerø Reiten Investment
Company.
Note 22 – Research and Development
Observe Medical performs research and development activities as part of the development of the
Sippi products. Capitalized research and development expenses are carried out as projects. In total
it is estimated that there has been research and development expenditures of NOK 4.6 million in
2021 (NOK 1.1 million), of which NOK 4.1 million (NOK 0.3 million) is capitalized and NOK 0.5
million (NOK 0.8 million) is expensed as operating expenses. Expenses consist of estimated
internal employee expenses related to project management and monitoring of the company’s
research and development activities, as well as not capitalized external expenses.
Note 23 – Shareholder Information
The following table shows shareholders owning 1% or more of Observe Medical ASA as at
December 31, 2021:
Amounts in NOK thousand 2021 2020
Revenues
Expenses 241
Finance income
Finance expenses 3 191 2 506
Group contributions received
Receivables
Liabilities 48 012 34 821
83 | Annual Report 2021, Observe Medical ASA
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Total number of shares are 19,605,457 with par value per share of NOK 0.26. All shares that are
part of the parent company's share capital belong to the same share class with the same rights.
There were no number of treasury shares (own shares) at the end of 2021 and 2020.
At the annual General Meeting held on 21 May 2021 the General Meeting resolved to grant the
Board of Directors:
(i) an authorisation to increase the Company's share capital by up to NOK 500,000
(approx. 9.8% of the Company's share capital at the date of the General Meeting) in
order to increase the Company's share capital in connection with option and
investment programmes; and
(ii) an authorisation to increase the Company's share capital by up to NOK 1,020,000
(approximately 20% of the Company's share capital at the date of the General Meeting)
in order to finance further growth of the Company. The authorisations are valid until
the annual General Meeting in 2022, but no longer than to and including 30 June 2022.
Further, at an extraordinary General Meeting held on 4 February 2022, the General meeting
resolved to grant the Board of Directors an authorisation to increase the Company's share capital
by up to NOK 2,124,697.38 in order for the Board to issue the Consideration Shares upon
Completion of the Biim SPA. The authorisation was subject to the Company completing the Rights
Issue (see Section 14.1 "The Rights Issue"), which shall be considered completed upon the
registration of the share capital increase pertaining to the Rights Issue in the Norwegian Register
of Business Enterprises. The authorisation shall not be registered in the Norwegian Register of
Business Enterprises prior to the share capital increase pertaining to the Rights Issue is registered
in the Norwegian Register of Business Enterprises. From the time of registration in the Norwegian
Register of Business Enterprises, this authorisation replaces the previous authorisations to increase
the share capital in the Company by up to NOK 1,020,000 and NOK 500,000, respectively, given
to the board of directors at the Company's annual general meeting held on 21 May 2021. The
authorisation is valid until the Company's annual general meeting in 2022, but no longer than to
and including 30 June 2022. For all authorisations, the Board of Directors have been authorised to
No Name Number of shares Ownership %
1 NAVAMEDIC ASA 4 222 727 21.54 %
2
INGERØ REITEN INV. COMPANY AS
3 939 394 20.09 %
3 LARS RO 1 500 000 7.65 %
4 UBS SWITZERLAND AG 1 420 522 7.25 %
5 ARTAL AS 897 407 4.58 %
6 ALPINE CAPITAL AS 650 000 3.32 %
7 SOLEGLAD INVEST AS 586 668 2.99 %
7 NORDA ASA 516 570 2.63 %
9
TRANBERGKOLLEN INVEST AS
500 000 2.55 %
10 LEIKERANE AS 466 666 2.38 %
11 LAPAS AS 336 924 1.72 %
12 MP PENSJON PK 262 025 1.34 %
13
KRAEBER VERWALTUNG GMBH
214 850 1.10 %
OTHER 4 091 704 20.87 %
Total number of shares 19 605 457 100.00 %
84 | Annual Report 2021, Observe Medical ASA
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deviate from the shareholders' pre-emptive right to the new Shares in accordance with section 10-
4 of the Norwegian Public Limited Companies Act. Furthermore, the authorisations to increase the
share capital in order to finance further growth and to issue the Consideration Shares comprises
share capital increases against contribution in kind and the right to incur specific obligations on
behalf of the Company, cf. section 10-2 of the Norwegian Public Limited Companies Act, and share
capital increases in connection with mergers pursuant to section 13-5 of the Norwegian Public
Limited Companies Act.
Movement in number of shares
During 2020, OM ASA has issued 4 537 784 new shares for gross proceeds of NOK 46,363
thousand. Expenses related to the capital increase amount to NOK 4,970 thousand.
Note 24 –Subsequent event
Rights Issue
On March 7, 2022 the Company announced that the share capital increase pertaining the Rights
Issue with a total of 25,714,286 new shares each with a nominal value of NOK 0.26 was registered
in the Norwegian Register of Business Enterprises (Nw: Foretaksregisteret)., Subscription price per
share of NOK 7.00, and a total gross proceeds from the Rights Issue is NOK 180 million.
Net proceeds from the Rights Issue will be used for the cash settlement of NOK 50 million related
to the acquisition of Biim Ultrasound AS, commercialization and growth initiatives for Sippi® and
Biim ultrasound probe, and repayment of current interest-bearing debt in addition to general
corporate purposes.
Acquisition of Biim Ultrasound AS
Biim Ultrasound AS ("Biim Ultrasound") was acquired in March 2022. The transaction, with
estimated acquisition consideration of NOK 185 million, financed through a combination of
8,171,913 consideration shares issued by the Company at a price of NOK 16.52 per share, and
cash settlement of NOK 50 million.
Biim Ultrasound has developed a unique, wireless and pocketable ultrasound probe, Biim, that can
scan patients and review images in seconds. The objective of Biim is to enhance healthcare
personnel decision-making and improve patient outcomes. Biim Ultrasound's US network is also
expected to further drive the pace of the global commercial roll-out of Sippi®, accelerating the
current roll-out in Europe and drive an earlier US market entry.
Movement in number of shares
31 December 2019 15 067 673
January 2020, share options 275 000
July 2020, capital increase 4 090 909
August 2020, share options 171 875
31 December 2020 19 605 457
31 December 2021 19 605 457
85 | Annual Report 2021, Observe Medical ASA
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A partner agreement with Fresenius Kidney Care, the leading provider of kidney care services in
the US, is already in place, whereby Biim is intended to be used across Fresenius' dialysis centres
in the US.
As the purchase price allocation and the initial accounting for the business combination is
incomplete, no proforma numbers are available.
Following the Rights Issue and issuance of the consideration shares by registration of the share
capital increase with the Norwegian Register of Business Enterprises (Nw. Foretaksregisteret), the
share capital of Observe Medical is NOK 13,907,830.56, divided into 53,491,656 shares, each with
a nominal value of NOK 0.26.
Rune Nystad appointed CEO of Observe Medical ASA
The Board of Directors appointed Rune Nystad as Chief Executive Officer (CEO) of Observe
Medical ASA from March 28, 2022. Rune Nystad succeed Björn Larsson who has headed the
Company since December 2019.
Björn Larsson is entitled to 6 months’ severance pay.
The Russian invasion of Ukraine
The Russian invasion of Ukraine has resulted in a rapidly evolving geo-political situation and
introduced a new set of challenges with respect to maintaining business continuity. In order to
mitigate the potential impact on the company’s operation particularly in respect of potential
interruptions of supply chains, Observe Medical is monitoring the situation closely.
The company has close contact with both suppliers and carriers to, as far as possible, secure the
supply chain. The company has a special focus on the global situation related to the lack of
components to electronic equipment.
86 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Parent Company Observe Medical ASA
Annual Financial Statements 2021
87 | Annual Report 2021, Observe Medical ASA
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Contents
Income statement ............................................................................................................................. 88
Balance Sheet ................................................................................................................................... 89
Balance Sheet ................................................................................................................................... 90
Equity ................................................................................................................................................ 91
Cash Flow Statement ....................................................................................................................... 92
General ............................................................................................................................................. 93
Note 1 – Accounting Policies ........................................................................................................... 94
Note 2 – Salary Expenses ................................................................................................................. 96
Note 3 – Bank Deposits .................................................................................................................... 96
Note 4 – Non-Current Liabilities ...................................................................................................... 97
Note 5 –Current Liabilities ............................................................................................................... 97
Note 6 – Current assets .................................................................................................................... 99
Note 7 – Loans to Group Companies .............................................................................................. 99
Note 8 – Financial Income and Expenses ..................................................................................... 100
Note 9 – Other Operating Expenses ............................................................................................. 100
Note 10 – Subsidiaries ................................................................................................................... 100
Note 11 – Related Parties ............................................................................................................... 101
Note 12 – Non-current assets ........................................................................................................ 101
Note 13 – Taxes .............................................................................................................................. 102
88 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Observe Medical ASA
Income statement
Amounts in NOK thousand
Note
2021
2020
Operating revenues
11
1,493
806
Total operating revenues
1,493
806
Personnel expenses
2
8,725
5,495
Other operating expenses
2,9
10,082
5,665
Operating expenses
18,807
11,160
Operating result before depreciation and
amortization (EBITDA)
-17,314
-10,354
Depreciation and amortization
12
107
0
Operating result (EBIT)
-17,421
-10,354
Financial income and expenses
Interest income from group companies
8,11
337
4,050
Financial income
8
15,053
3,820
Interest expense to group companies
8,11
5,537
84
Interest expenses
8
3,203
2,506
Financial expenses
8
1,472
10,102
Net financial items
5,177
-4,823
Result before tax
-12,244
-15,178
Income tax expense
13
0
0
Result for the period
-12,244
-15,178
Brought forward
Transferred from other equity
12,244
15,178
Net brought forward
-12,244
-15,178
89 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Observe Medical ASA
Balance Sheet
Amounts in NOK thousand
Note
31.12.2021
31.12.2020
ASSETS
Property, Plant and Equipment
Equipment and other movables
12
376
0
Non-current assets
Investments in subsidiaries
10
211,986
207,984
Loans to subsidiaries
7
0
3,944
Total non-current financial assets
211,986
211,928
Total non-current assets
212,362
211,928
Current assets
Receivables from group companies
6
974
0
Other receivables and prepaid expenses
6
2,844
336
Bank deposits
3
507
14,327
Total current assets
4,325
14,663
Total assets
216,686
226,591
90 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Observe Medical ASA
Balance Sheet
Amounts in NOK thousand
EQUITY AND LIABILITIES
Share capital
5,097
5,097
Share premium
86,278
86,278
Other paid-in equity
13,652
12,739
Total paid-in equity
105,028
104,115
Other equity
-29,841
-17,598
Total equity
75,187
86,517
Non-current liabilities
Contingent consideration
4
13,031
22,368
Non-current liabilities to group companies
11
66,240
80,931
Non-current interest-bearing liabilities
4,11
0
34,821
Total non-current liabilities
79,271
138,120
Current liabilities
Liabilities to financial institutions
6,509
0
Trade payables
11
2,020
501
Public duties payable
5
668
166
Interest-bearing current liabilities
5
48,012
0
Other current liabilities
5
5,019
1,288
Total current liabilities
62,228
1,954
Total liabilities
141,499
140,074
Total equity and liabilities
216,686
226,591
The Board of Directors and CEO of Observe Medical ASA
Oslo, April 28, 2022
91 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Observe Medical ASA
Equity
Amounts in NOK thousand
Share
capital
Share
premium
Other paid-
in equity
Total paid-in
capital
Retained
earnings
Total
Equity as at
January
1,2021
5,097
86,278
12,739
104,115
-17,598
86,517
Accrued cost
options
913
913
913
Net result for
the period
-12,244
-12,244
Equity as at
December 31,
2021
5,097
86,278
13,652
105,028
-29,841
75,187
Share capital:
NOK thousand
Shares
Par price
Share capital January 1, 2021
5,097
19,605,457
0.26
Changes
0
0
0
Share capital December 31, 2021
5,097
19,605,457
0,26
Refer to Note 23 in the Observe Medical group’s consolidated financial statement 2021 for shareholders’
information.
92 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Observe Medical ASA
Cash Flow Statement
Amounts in NOK thousand
Note
2021
2020
Cash flow from operating activities
Result before tax
-12,244
-15,178
Depreciation
107
0
Interest expenses and change in contingent
consideration not paid
8,11
-9,337
6,675
Interest income from group companies not paid
8, 11
Change in trade receivables and other receivables
6
-2,865
-96
Change trade payables and other current liabilities
7,923
1,077
Net cash flow from operating activities
-16,416
-7,522
Cash flow from investment activities
Payments on the purchase of equipment
-483
0
Payment for shares in subsidiaries
-8,759
Net cash flow used in investment activities
-483
-8,759
Cash flow from financing activities
Liabilities to financial institutions
6,509
0
Paid in new share capital
913
41,392
Repayment share capital
0
0
Change interest bearing debt
10,405
6,902
Net change interest bearing debt to group
companies
-14,748
-17,881
Net cash flow from financing activities
3,079
30,413
Exchange rate fluctuations
0
0
Changes in cash
-13,820
14,132
Bank deposits as at January 1
14,327
195
Bank deposits end of period
3
507
14,327
93 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Explanatory Notes to the Annual
Financial Statements 2021
General
Observe Medical ASA is a Norwegian public listed company incorporated on June 13, 2019 to own
and manage the Observe Medical business.
Observe Medical ASA was listed on Euronext Expand (previously Oslo Axess) on November 4,
2019. Observe Medical ASA holds 100% of all shares in its subsidiary Observe Medical
International AB, Observe Medical AB, Observe Medical Nordic AB and Observe Medical ApS.
Observe Medical ASA provides financing to entities in the Group.
The financial statements for Observe Medical ASA have been prepared in accordance with the
Norwegian Accounting Act and generally accepted accounting principles in Norway (NGAAP).
Preparation of financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses as well as disclosures of
contingencies. Actual results may differ from estimates.
The consolidated financial statements of the Group have been prepared in accordance with IFRS.
The Company’s accounting principles are similar to the accounting principles for the Group unless
otherwise noted. Financial statement disclosures for the Company that are substantially different
from the disclosures for the Group are shown below. See notes to the consolidated financial
statements.
Observe Medical ASA is registered and based in Norway. Its head office is located in Dronning
Eufemias gate 16, 0191 Oslo, Norway.
.94 | Annual Report 2021, Observe Medical ASA
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Note 1 – Accounting Policies
Shares in Subsidiaries
Shares in subsidiary are presented according to the cost method. Dividends and group
contribution will be recognized in the financial statement when these are proposed by the
subsidiary. Shares in subsidiaries are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may exceed the fair value of the investment.
Indications may be operating losses or adverse market conditions. If it is considered probable that
the fair value is below Observe Medical’s carrying value, the investment is impaired. The
impairment will be reversed if the impairment situation is no longer present.
Foreign Currency Transactions
The functional currency of Observe Medical ASA is Norwegian kroner (NOK). Transactions in
currencies other than the functional currency are recorded at the exchange rate at the date of
transaction. Monetary items denominated in foreign currencies are translated at the exchange rate
at the balance sheet date. Realized and unrealized currency gains and losses on transactions, assets
and liabilities, denominated in a currency other than the functional currency are included in
Financial income and expenses.
Revenue
Revenue stem from sale of administrative services to subsidiaries. These are recognized when the
services are delivered. Interest income is recognized in the income statement as it is accrued.
Receivables
Trade receivables and short-term intercompany receivables are recognized at nominal value, less
the accrual for expected losses of receivables. The accrual for losses is based on an individual
assessment of each receivable.
Cash Deposits
Cash deposits include bank deposits as at end of the reporting period. The cash held by Observe
Medical ASA reflects that most external bank deposits are channeled through the group financing
agreement.
Payables
Trade payables and short-term intercompany payables are recognized at nominal value.
.95 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Financial Assets and Liabilities
Financial assets are initially recognized in the balance sheet at fair value (cost) and subsequently at
the lower of cost or fair value. Financial liabilities are initially recognized in the balance sheet at fair
value (cost) and subsequently at amortized cost.
Expenses
Expenses are recognized in the financial statement in the period when the services or materials are
consumed.
Income Taxes
Income tax expense represents the sum of the tax currently payable and deferred tax. The tax
payable is based on taxable profit for the year.
Deferred tax is calculated on the basis of tax-reducing and tax increasing temporary differences
that exist between accounting and tax values, and the tax loss carried forward at the end of the
accounting year. Tax-increasing and tax-reducing temporary differences that reverse or may
reverse in the same period are set off and entered net. The net deferred tax receivable is entered
on the balance sheet to the extent that it is likely that it can be utilized. Changes resulting from
amendments and revisions in tax laws and tax rates are recognized when the new tax laws or rates
are adopted.
Classification and valuation of fixed assets
Fixed assets consist of assets intended for long-term ownership and use. Fixed assets are valued
at acquisition cost less depreciation and write-downs. Long-term liabilities are entered on the
balance sheet at the nominal amount at the time of the transaction.
Plant and equipment is capitalized and appreciated over the economic lifetime of the asset.
Significant items of plant and equipment that consist of several material components with different
lifetimes are broken down in order to establish different depreciation periods for the different
components. Direct maintenance of plant and equipment is expensed on an ongoing basis under
operating costs, while additions or improvements are added to the asset’s cost price and
depreciated in line with the asset. Plant and equipment is written down to the recoverable amount
in the event of a fall in value that is not expected to be temporary. The recoverable amount is the
higher of the net sales value and the value in use. Value in use is the present value of future cash
flows related to the asset. The write-down is reversed when the basis for the write-down is no longer
present.
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Note 2 – Salary Expenses
Amounts in NOK thousand
2021
2020
Salaries
2,533
1,424
CEO cost invoiced from subsidiary
3,146
2,018
Fees to Board of Directors and
Nomination Committee
895
828
Employment taxes
838
521
Pension insurance
207
119
Other benefits
1,106
585
Total salary expenses
8,725
5,495
At year end the company had 2 employees. The company has a contribution pension scheme that
meets the requirement of the Norwegian Act of Mandatory Occupational Pension.
The chief executive is employed by the fully owned subsidiary, Observe Medical AB and is hired to
Observe Medical ASA. CEO costs including expenses and bonus payment to Observe Medical ASA
according to principles for internal transactions. For renumeration to the group management,
please refer to the consolidated financial statement note 18.
Share option expenses of TNOK 913 for 2021 are included in “Other Benefits”. The company is
liable for the social security tax, and it is expensed over the estimated vesting period. See Note 18
and 19 in the Observe Medical group’s consolidated financial statement 2021 for further
information related to the share options.
Auditor
Audit fees expensed for 2021 amounts to NOK 966 thousand ex VAT. Fees for other assurance
services amounts to NOK 691 thousand.
Note 3 – Bank Deposits
Funds standing on the tax deduction account (restricted funds) are NOK 507 thousand.
.97 | Annual Report 2021, Observe Medical ASA
__________________________________________________________________________________________________
Note 4 – Non-Current Liabilities
Amounts in NOK thousand
2021
2020
Contingent consideration
13,030
22,368
Interest bearing debt to Observe Medical Int. AB
1)
66,240
80,931
Interest bearing debt to Navamedic ASA
2)
0
34,821
Total non-current liabilities
79,271
138,120
1
Included accrued, not paid interest as at 31.12.2021 of TNOK 5,536.
2)
Maturity date of the loan is in October 2022 and the loan has been classified at current interest-bearing debt
at 31 December 2021. New loan agreement is signed in 2022.
Note 5 –Current Liabilities
Amounts in NOK thousand
2021
2020
Liabilities to financial institutions
6,509
0
Trade payables
2,020
501
Public duties payable
668
166
Interest bearing debt to Navamedic ASA
1)
37,606
0
Loan Ingerø Reiten Investment Company
2)
10,405
0
Other liabilities
5,019
1,288
Total non-current liabilities
62,228
1,954
1)
Included accrued, not paid interest as at 31.12.2021 of TNOK 2,786.
2)
Included accrued, not paid interest as at 31.12.2021 of TNOK 405.
Loan Agreement with Navamedic ASA
On October 1, 2019, Observe Medical ASA, as the borrower, entered into a loan agreement with
Navamedic, as the lender, for a loan of an aggregate amount of TNOK 32,000 (the "Bond Loan").
The Bond Loan consists of the two following facilities:
- A subordinated convertible term loan facility to refinance existing loan
agreement in the amount of TNOK 19,000 (the "Facility A"); and
- A subordinated convertible term loan facility in the amount of TNOK
13,000 (the "Liquidity Facility").
The facilities given under the Bond Loan constitute direct, unsecured and fully subordinated
obligations of the company, and rank at least pari passu with all other existing and future unsecured
and subordinated obligations of the company, other than in respect of any obligations preferred
by mandatory provisions of applicable law, and rank ahead of all amounts payable in respect of
the share capital of the company.
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The Facility A was to refinance existing loan to Navamedic ASA on October 1, 2019 while the
Liquidity Facility was paid in portion in the first 8 months after listing. The facility is fully drawn as
at December 31, 2021.
Each loan facility given under the Bond Loan accrue interest at a fixed interest rate of 8.00% per
annum. Accrued interest shall on the last day of the three months' interest period be capitalized
and added to the aggregate principal amount of the loans outstanding under the Bond Loan.
The company shall 36 months after October 1, 2019 repay to Navamedic ASA the aggregate
amount of each loan then outstanding together will all accrued but unpaid interest. The company
may at any time prepay any loan outstanding in part or in full. Any amount repaid or prepaid may
not be re-borrowed.
Contingent Consideration
On August 4, 2015, Navamedic ASA acquired all of the shares and votes in Observe Medical
International AB (OMI AB). The purchase price was NOK 60.6 million including a contingent
consideration valued at NOK 25.6 million at the acquisition date. The contingent consideration
depends on the revenues from sales of the Sippi® product over a number of years. The fair value
of the contingent consideration involves discounting expected future payments. Discounting is
based on a discount rate of 9.6% as at December 31, 2021.
The maximum contingent consideration is calculated as follows:
• For the period 2016-2023, a royalty may be paid to the former shareholders of OMI AB,
based on the following: A royalty of 7% based on annual revenue from sales of the Sippi®
product in excess of NOK 7.5 million, increasing to a 15% royalty for annual revenue in
excess of NOK 100 million.
• In addition to this, six milestone payments may be made to the former shareholders of
OMI AB based on set sales targets for the product. These sales targets must be achieved
by the end of 2023, with the last by the end of 2026. Total potential milestone payments
cannot exceed NOK 125 million, in addition to royalties mentioned above.
The six potential milestone payments will be triggered as follows:
a) NOK 6 million of accumulated revenue in excess of NOK 50 million
b) Plus, NOK 6 million of accumulated revenue in excess of NOK 75 million
c) Plus, NOK 6 million of accumulated revenue in excess of NOK 100 million
d) Plus, NOK 13 million of accumulated revenue in excess of NOK 300 million
e) Plus, NOK 34 million of accumulated revenue in excess of NOK 600 million
f) Plus, NOK 60 million of accumulated revenue in excess of NOK 900 million
Change in estimated fair value, which includes calculated interest, is recognized through profit or
loss.
The change in fair value in 2021 is due to updated estimate related to when the sales of OM’s
products will be realized. The potential revenue and expected realizations remain unchanged but
have been postponed due to effects of Covid-19.
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The change in fair value in 2020 is due to decreased discount rate due to decreased risk related
to the cash flow and increased estimated cash flows. The decreased discount rate from 18.3% to
9.6% in 2020 gives an increased fair value of approximately NOK 6 million.
Sensitivity as at December 31, 2021: A 1 percentage point reduction in the discount rate would
increase the estimated present value by NOK 0.3 million and a 10% reduction in revenue would
decrease the estimated present value by NOK 5.2 million. The relative high decrease is due to the
fact that reduces sale will result in breach of achieving milestone.
Note 6 – Current assets
Amounts in NOK thousand
2021
2020
Other short-term receivables*
2,586
292
Receivables from group companies
974
0
Total receivables
3,560
292
*In connection with the Rights Issue completed in February 2022, the cost related to the Rights issue has been
capitalized under other short-term receivables, TNOK 1 520. When the Rights Issue was completed in March
2022 the transaction cost was reclassified from short-term receivables to equity.
Note 7 – Loans to Group Companies
Amounts in NOK thousand
2021
2020
Observe Medical Nordic AB
0
3,944
Total loans to group companies
0
3,944
All group internal loans has a fixed interest rate of 8.00% per annum. Accrued interest shall monthly
be capitalized and added to the aggregate principal amount of the loans outstanding under the
loan agreement.
In December 2021 Observe Medical ASA converted TNOK 4,002 to equity in Observe Medical
Nordic AB.
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Note 8 – Financial Income and Expenses
Amounts in NOK thousand
2021
2020
Interest income from group companies
337
4,050
Net currency gain
4,621
3,820
Other interest income
10,432
0
Total financial income
15,390
7,870
Financial expenses
2021
2020
Interest expenses
3,203
2,506
Interest expenses to group companies
5,537
84
Net currency loss
0
0
Change in contingent consideration
1,095
9,970
Other financial cost
377
133
Total financial expenses
10,212
12,693
Net financial income(+)/expenses (-)
-5,177
-4,823
Note 9 – Other Operating Expenses
Amounts in NOK thousand
2021
2020
Audit and other assurance services
1,096
1,002
Administrative consultants
4,070
2,557
Administrative services from Navamedic ASA
133
57
Accounting and financial consultant services
385
699
Fees to Oslo Børs
218
88
Other fees and operating expenses
4,180
1,261
Total other operating expenses
10,082
5,665
Observe Medical ASA completed the acquisition of Biim Ultrasound AS at 8 March 2022. In 2021
total NOK 4,619 thousand was expensed as other operating expenses in connection with this
process.
Note 10 – Subsidiaries
Amounts in NOK thousand
Business office
Ownership
share
Carrying amount
December 31, 2021
Observe Medical AB
Gothenburg, Sweden
100 %
64,042
Observe Medical ApS
Herlev, Denmark
100 %
80,247
Observe Medical International AB
1)
Gothenburg, Sweden
100 %
58,970
Observe Medical Nordic AB
2)
Gothenburg, Sweden
100 %
8,729
Total
211,986
1)
Observe Medical International AB merged in January 2022 with Observe Medical AB.
.101 | Annual Report 2021, Observe Medical ASA
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2)
In December 2021 Observe Medical ASA converted TNOK 4,002 to equity in Observe Medical Nordic AB.
Biim Ultrasound AS was acquired at March 8, 2022. The transaction, with estimated acquisition consideration
of NOK 185 million, financed through a combination of 8,171,913 consideration shares issued by the
Company at a price of NOK 16.52 per share, and cash settlement of NOK 50 million.
Biim Ultrasound has developed a unique, wireless and pocketable ultrasound probe, Biim, that can scan
patients and review images in seconds. The objective of Biim is to enhance healthcare personnel decision-
making and improve patient outcomes. Biim Ultrasound's US network is also expected to further drive the
pace of the global commercial roll-out of Sippi®, accelerating the current roll-out in Europe and drive an
earlier US market entry.
A partner agreement with Fresenius Kidney Care, the leading provider of kidney care services in the US, is
already in place, whereby Biim is intended to be used across Fresenius' dialysis centres in the US.
Note 11 – Related Parties
Amounts in NOK thousand
Income
Operating
expenses
Financial
income
Financial
expenses
Receivables
Liabilities
Navamedic ASA
1)
2,786
37,606
Ingerø Reiten Investment
Company AS
2)
405
10,405
Navamedic Medtech AB
Observe Medical AB
852
3,146
33
922
Observe Medical
International AB
72
667
66,240
Observe Medical ApS
82
2
1
14
Observe Medical
Nordic AB
487
335
228
39
Total
1,493
3,146
337
4,120
974
114,252
1)
Navamedic ASA owned 21.54% of all shares in Observe Medical ASA as of 31 December 2021.
2)
Ingerø Reiten Investment Company AS owned 20.09% of all shares in Observe Medical ASA as of 31
December 2021.
Note 12 – Non-current assets
Amounts in NOK thousand
Fixtures and
fittings
Total
Purchased fixed assets
483
483
Accumulated depreciation 31.12.2021
107
107
Book value 31.12.2021
376
376
Economic life 3 years
.102 | Annual Report 2021, Observe Medical ASA
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Note 13 – Taxes
Amounts in NOK thousand
2021
2020
Income tax payable
0
0
Changes in deferred tax
0
0
Income tax expenses
0
0
Reconciliation from Nominal to Actual Tax Rate
Amounts in NOK thousand
2021
2020
Result before income tax
-12,244
-15,178
Non-deductible expenses
-8,423
5,152
Changes in temporary differences
-37
0
Total taxable income
-20,704
-10,025
Expected income tax expenses, 22%
-2,252
-2,206
Specification of Tax Effect to Temporary Differences
Non-current assets
37
0
Current assets
0
0
Liabilities and provisions
0
0
Non-recognized tax asset
0
0
Tax losses carried forward
-33,149
-12,445
Deferred tax assets/liabilities in the balance sheet
0
0
Reconciliation of Deferred Tax Assets in the Balance Sheet
Deferred tax assets January 1
0
0
Change in deferred taxes recognized in income statement
0
0
Observe Medical ASA is the holding company in Observe Medical group and has no income-
generating activities other than group services and financing of group companies, as well as some
consultancy services to related parties. In order to capitalize deferred tax assets, the company must
prove taxable income through earnings in future years or through realistic tax adjustments that
enable the benefit to be utilized. The Group has no other companies in Norway.
Since the company expects losses in the coming years, the company considers that the conditions
for capitalizing deferred tax assets not have been fulfilled.
.103 | Annual Report 2021, Observe Medical ASA
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Declaration in Accordance with §5-5 of
the Securities Trading Act
We confirm that the financial statements for 2021 have, to the best of our knowledge, been
prepared in accordance with applicable accounting standards and give a true and fair view of the
assets, liabilities, financial position and profit or loss of the company and the Group as a whole. The
Board of Directors’ report includes a fair review of the development and performance of the
business and the position of the company and the Group as a whole, together with a description
of the principal risks and uncertainties that they face.
The Board of Directors and CEO of Observe Medical ASA
Oslo, April 28, 2022
24032
0255 Oslo, Norway
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Auditor’s Report
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Alternative Performance Measures (APMs)
Observe Medical uses alternative performance measures for periodic and annual financial
reporting in order to provide a better understanding of the Group’s underlying financial
performance.
Gross result: Operating revenues less direct cost of materials as cost price,
transportation and warehouse cost of materials for sale.
EBIT: Earnings before net financial items, results from associates and joint
ventures and income tax.
EBITDA: Earnings before interest, taxes, depreciation and amortization.
EBITDA before
non-recurring items: EBITDA of the Company before any extraordinary or unusual one-
time non-recurring expenses or other charges as reflected in the
Company's audited consolidated financial statements for the year
Operating expenses: Employee benefit expenses plus other operating expenses.
Earnings per Share (EPS): Profit divided by number of outstanding shares
Number of employees/
workforce: Number of employees comprise all staff on payroll including both
full time and part time employees and employees on temporarily
leave (paid and unpaid)
Employee turnover %: Number of employees who have leave the organization in
percentage of total number of employees.
Absence rate for illness: Number of hours: Number of hours of sick leave as percentage of
the total number of possible hours worked
Equity ratio: Total shareholders` equity in percentage of total assets
Equity ratio
Amounts in NOK thousand
At 31 December 2021
At 31 December 2020
Total shareholders equity
-14,122
20,349
Total assets
70,738
87,733
Equity ratio
-20.0%
23.2%
.111 | Annual Report 2021, Observe Medical ASA
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MEDTECH THAT MATTERS
IR Contacts
Rune Nystad, CEO Per Arne Nygård, CFO
+47 91 62 46 83 +47 41 10 43 45
rune.nystad@observemedical.com perarne.nygard@observemedical.com
Address