2 | Annual Report 2022, Observe Medical ASA
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Contents
Contents.................................................................................................................................................. 2
We are Observe Medical ....................................................................................................................... 3
Highlights 2022 ...................................................................................................................................... 4
Key figures .............................................................................................................................................. 5
Letter from the CEO……………………………………………………………………………………………6
About the Observe Medical Portfolio ................................................................................................... 8
Board of Directors’ Report 2022 ......................................................................................................... 11
Declaration in Accordance with §5-5 of the Securities Trading Act ................................................. 23
Executive Management and Board of Directors ................................................................................ 24
Corporate Governance ........................................................................................................................ 26
Sustainability Report ............................................................................................................................ 36
Consolidated Financial Statements 2022 ........................................................................................... 46
Explanatory Notes to the Consolidated Financial Statements 2022 ................................................ 52
Parent Company Observe Medical ASA Annual Financial Statements 2022 ................................... 84
Auditor's Report…………………………………………………………………………………………......102
Alternative Performance Measures (APMs) ...................................................................................... 109
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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. Observe Medical is committed to
improving patient welfare and patient outcomes, improving clinical data accuracy and
promoting positive health economics.
Observe Medical 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 Group is headquartered in Oslo, Norway, with wholly-owned subsidiaries in Narvik,
Norway, Gothenburg in Sweden, Copenhagen in Denmark, Oulu in Finland and Seattle in
the US. In addition, Observe Medical has a distributor and partner network internationally.
The current portfolio of proprietary products consist of Sippi®, a CE marked system for
urine measurement, and Biim ultrasound probe, which is a unique, wireless and
pocketable ultrasound probe, that can scan patients and review images in seconds. In
addition, the Company has a broad distribution portfolio of medtech devices and
disposables, mainly within Urine measurement, Anesthesiology/ICUs and wound care.
For further descriptions of the products see section “About Observe Medical portfolio”.
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Highlights 2022
Biim Ultrasound AS acquisition and financing of the transaction
In March 2022, Observe Medical completed 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 Company completed a fully underwritten Rights Issue and raised
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 in addition to commercialization and growth
initiatives for Sippi® and Biim, repayment of due interest-bearing debt and general
corporate purposes.
Completed delivery phase 1 of ultrasound probes to Fresenius Medical Care
in the US and partnership for next step on track
In first half year 2022, the Group delivered 120 Biim ultrasound probes to Fresenius
Medical Care (‘Fresenius’) in the US, completing the delivery of a total of 265
ultrasound probes in the first phase of the delivery as planned, and currently working
closely with Fresenius Medical Care to get ready for the next phase.
Recruitment of key personnel in 2022:
Rune Nystad appointed as Chief Executive Officer (CEO)
Bringing broad experience from the US medtech industry, Nystad was
appointed CEO in March 2022. His previous role was CEO of Biim Ultrasound.
Carsten Bøgh appointed as Chief Technology Officer (CTO)
More than 20 years experience from industrial and global medtech. Previous
experience from senior roles at Fresenius and Oticon.
Entered into an exclusivity agreement with the intention to acquire the
UnoMeter
TM
product portfolio
In October the Company entered into en exclusivity agreement with the intention to
acquire the UnoMeter
TM
portfolio from Convatec Group Plc. The portfolio consist of
products such as Unometer
TM
Safeti
TM
Plus, Unometer
TM
500 and UnoMeter
TM
Abdo-
Pressure
TM
, market leading products within routine or post-operative drainage,
collection and measurement of urine output from patients. The product range is
complementary to Observe Medical’s digital and automated urine meter, Sippi®
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Key figures
Observe Medical had operating revenues of NOK 19.5 million (24 million) in 2022
and a gross result of NOK 5.2 million (9.5 million). The change is mainly due to loss
of Covid-19 related revenues in 2021 that more than offset revenues from Biim
ultrasound probe sales in 2022.
EBITDA decreased in 2022 mainly due to increased operating expenses as a result
of consolidation of Biim Ultrasound as part of the Group from March 2022.
Net finance income of NOK 8.4 million (10.2 million) are mainly related to change
in the contingent consideration liability and the net currency gain that more than
offset the interest expenses of interest-bearing debt.
Result for 2022 is negative NOK 50.7 million (negative 26.3 million).
Observe Medical had an equity of NOK 138.3 million at December 31, 2022. In
March 2022 the Company completed a Rights Issue of NOK 180 million and issued
8,171,913 consideration shares in connection with the Biim Ultrasound acquisition.
These transactions significantly increased the Company’s equity.
(Amounts in NOK thousand, expect EPS,
equity ratio and number of employees)
2022
2021
Revenue
19,521
24,042
Gross result
5,177
9,518
EBITDA before non-recurring items*
-44,933
-28,462
EBITDA
-48,012
-33,081
EBIT
-59,143
-36,544
Net finance
8,418
10,223
Result
-50,725
-26,321
EPS
-1.08
-1.34
Equity
138,306
-14,122
Total balance
215,812
71,738
Equity ratio
64%
-20%
Number of employees
17
14
* Non-recurring expenses in 2022 is related to expenses in connection with the acquisition of Biim Ultrasound
AS, and severance pay to CEO and CTO. In 2021 the expenses was related to acquisition of Biim.
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Letter from the CEO
In 2022, Observe Medical explored several paths to broaden our product portfolio and
build capacity for growth. It started with the acquisition of Biim Ultrasound in March, which
broadened our distribution network in the US and added to our medtech portfolio. The
acquisition also came with a signed agreement with Fresenius Medical Care, and it has
been exciting to witness the relationship with one of the world leading kidney care
providers develop throughout the year. The initial batches of ultrasound probes were
delivered in the first half of 2022, adding up to 265 systems across the same number of
treatment clinics. We are now working with management to ramp up for the next phase,
a process spearheaded by a dedicated business unit of Fresenius with our support.
In the months that followed, we actively sought out synergistic opportunities and came
across the prospect of acquiring Convatec’s UnoMeter
TM
portfolio, which consists of
several market-leading products within routine urine measurement systems. With an
exclusivity agreement with Convatec signed in October, with the aim of acquiring the
portfolio, we have worked diligently to arrange for manufacturing and developed an
excellent relationship with hundreds of customers and distributors of the Convatec
UnoMeter™ portfolio in more than 50 countries worldwide. This will further accelerate the
commercial pathway for our own digital and automated urine meter product, Sippi®.
With the objective of securing production capacity for our expanding range of products,
we also signed an exclusivity agreement to acquire Ferrari L., an Italian manufacturer of
medical and surgical equipment, in December 2022. Recently, we decided to discontinue
the acquisition process as a result of having identified more cost-efficient manufacturing
alternatives. We may still decide to work with Ferrari L. as a supplier.
To support all these projects, we also secured several key hires in 2022. In September,
Carsten Bøgh joined Observe Medical as Chief Technology Officer and Jørgen Mann
joined as Chief Commercial Officer at the start of 2023.
With a strong leadership team in place, we have strengthened our relationships with
potential distributors who, in 2023, have been on the receiving end of Letters of Intent,
which have started to convert into signed contracts. The level of engagement from
distributors has been encouraging and we are now in the process of accelerating our sales
efforts with the expectation of the first delivery of products to take place by the summer
of 2023.
All these workstreams require additional capital, and in March 2023, as an interim
financing step, we announced that we had entered into loan agreements with some of our
largest shareholders. We are grateful to have such strong support and commitment from
our owners, which will support our short-term action plan. To see through our long-term
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action plan, we will require additional funding and are in the process of considering
potential finance providers and investors to support future growth.
Overall, despite the challenges we have encountered in 2022, it has been a year of
exciting opportunities. I am grateful to the team at Observe Medical, who have met each
challenge and opportunity without hesitation and to our shareholders, who have
supported us along the way.
Our ambition for the longer term remains unchanged, and I look forward to keeping you
all updated in the coming period.
Rune Nystad
CEO
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About the Observe Medical Portfolio
Observe Medical has a portfolio of medtech devices and disposables within Urine
measurement, Ultrasound, Anesthesiology/ICUs and wound care.
Sippi® - The Digital, Automated Urine Measurement 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® provides patient data accuracy and saves significant time and effort for healthcare
professionals.
Manual Urine Measurement system
Observe Medical has in 2023 introduced a manual urine measurement system to a
broad global distribution network. The manual system is an important step for Observe
Medical to be established as an preferred supplier in this segment. This will create a
unique market access channel for our existing portfolio and will catapult Sippi® to the
market.
SippSense™
Alert for biofilm
– replace bag
SippCoat™
Biofilm prevention
Disposable unit
Base unit
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Biim wireless pocketable ultrasound device
Biim Ultrasound probe is a wireless pocketable ultrasound device. This is a unique, cost
efficient and small handheld wireless device that makes the technology available where
its needed.
The Biim Ultrasound system consists of an ultrasound probe and an App for display of the
ultrasound image and/or video.
Biim offers nurses and medical staff an easy to use ultrasound device which ensure
accuracy and quality in the treatment of their patients.
Biim has an agreement with Fresenius Medical Care with an aim to roll-out Biim
Ultrasound probe in their approximately 3,000 dialysis clinics in the US has been a major
important milestone. As of year end 2022, a total of 265 Fresenius clinics has received
Biim Ultrasound probes.
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. The portfolio of products are aimed at ICUs and
other wards at hospitals as well as towards primary care and
homecare settings, thus synergistic with Sippi® target
customers.
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Board of Directors’ Report 2022
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 Food and Drug
Administration (FDA) since 2018.
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.
After the Biim acquisition, the Group has offices in Gothenburg (Sweden), Oulu (Finland),
Seattle (US), Narvik (Norway), in addition to the headquarters in Oslo (Norway), and we
currently have two proprietary systems 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.
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 were used for the cash
settlement of NOK 54 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.
In October 2022, the Group entered into an exclusivity agreement with the intention to
acquire the UnoMeter™ portfolio from Convatec Group Plc. The portfolio consist of
products such as Unometer™ Safeti™ Plus, Unometer™ 500 and UnoMeter™ Abdo-
Pressure™, market leading products within routine or post-operative drainage, collection
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and measurement of urine output from patients. The product range is complementary to
Observe Medical’s digital and automated urine meter, Sippi®.
In December 2022, the Group entered into an exclusivity agreement to negotiate an
acquisition of Ferrari L., which owns and operates a production facility for medical and
surgical equipment located in Verona, Italy. Talks about this potential acquisition was
terminated in April 2023 as a result of Observe Medical having identified a more cost-
efficient manufacturer alternative for the UnoMeter™ product range.
Observe Medical ASA is the parent company of its wholly owned subsidiaries, Observe
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 are fully owned subsidiaries of Biim Ultrasound
AS.
Summary of the Financial Results
The Group had operating revenues of NOK 19.5 million in 2022 compared to NOK 24
million in 2021 . The gross result was NOK 5.2 million, compared to NOK 9.5 million in
2021. In 2021 the Nordic distribution portfolio had one single order of NOK 10 million
related to delivery of safety needles delivered to Covid-19 vaccination program. Loss of
this revenues more than offset the sales revenues from Biim Ultrasound probes in 2022.
In 2022, EBITDA before non-recurring items was negative NOK 45 million compared to
negative NOK 28.5 million in 2021. The decrease in EBITDA compared to last year is
mainly due to increased average headcount and inclusion of the Biim Ultrasound in the
Group’s consolidated financial statement from March 2022. Non-recurring items at NOK
3.1 million in 2022 was expenses in connection with the Biim acquisition and expenses
related to organisational changes. In 2021 non-recurring expenses of NOK 4.6 million
were related to the Biim Ultrasound acquisition.
Depreciation and amortization increased from NOK 3.5 million in 2021 to NOK 10.9
million in 2022. The increase is mainly related to depreciation and amortization from Biim
Ultrasound in the period from March to year end.
Net finance income was NOK 8.4 million and was mainly related to a change in estimated
contingent consideration as a result of the likelihood of discounted milestone payments
in the purchase agreement of Observe Medical International AB in 2015. The net finance
was also affected by increased interest on interest bearing debt, that more than offset the
net currency gain. In 2021, net finance expenses came in at NOK 10.2 million and was
mainly related to a change in estimated fair value of contingent consideration and net
currency gain that more than offset the increased interest expenses.
As a result, the Group had a loss after tax of NOK 50.8 million in 2022, compared to a loss
of NOK 26.3 million in 2021.
Earnings per share was negative NOK 1.08, compared to negative NOK 1.34 in 2021.
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Financial Position
The Group had assets of NOK 215.8 million at December 31, 2022, compared to NOK
71.7 million at December 31, 2021. The book value of fixed assets were NOK 186.9 million
and consists mainly of goodwill related to the acquisition of Biim Ultrasound AS in 2022,
Observe Medical International AB in 2015 and Sylak AB in 2020, as well as the
technologies and patents related to Sippi ® and Biim ultrasound probe.
The company has carried out impairment tests to test the value of goodwill and intangible
assets without identifying any need for impairment of booked values.
At year-end 2022, the Group had current assets of NOK 28.9 million, mainly related to
trade receivables, inventories and bank deposits. In 2021, the Group had current assets
of NOK 15.2 million. The increase is related to increased cash and cash eguivalients du to
the rights issue in first quarter 2022 and inclusion of Biim Ultrasound from March 2022.
The Group had equity of NOK 138.3 million at December 31, 2022, compared to negative
NOK 14.1 million at December 31, 2021. The increase is due to the net proceeds from the
rights issue in first quarter 2022 in addition to the consideration shares in connection with
the settlement of the Biim Ultrasound transaction deducted with the negative result in
2022.
On December 31, 2022, the Group had total non-current liabilities of NOK 5.2 million
compared to NOK 13.6 million one year before. The decrease is related decreased
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 that more than offset the increased non-current interest-bearing
liabilities. The increased non-current interest-bearing liabilities are related to interest
bearing loan to finance tangible asset.
Total current liabilities at December 31, 2022, amounted to NOK 72.2 million, compared
to NOK 72.3 million at December 31, 2021.
Cash Flow
At the end of 2022, the Group had NOK 13.6 million in cash, a increase from NOK 2.9
million at the end of 2021.
Cash flow from operating activities was negative NOK 51.3 million in 2022, compared to
negative NOK 22.1 million in 2021. Change in result before tax, partly offset by increased
depreciation and amortization, and negative change in working capital in 2022 is the main
changes in net cash flow from operating activities compered to 2021.
The Group used NOK 58.4 million for investing activities in 2022, up from NOK 4.9 million
in 2021. The increase is related to the cash settlement of NOK 54 million in connection
with the Biim Ultrasound acquisition.
In 2022, net cash flow from financing activities were NOK 120.9 million due to the net
proceeds of NOK 155.6 million from the rights issue partly offset by repayment of interest-
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bearing loan of NOK 33.3 million. In 2021, net cash flow from financing activities was NOK
16.1 million and related to the loan agreement with Ingerø Reiten Investment Company
AS and credit facility in Danske Bank.
Financing
In March 2022, the Company completed a share capital increase pertaining to the Rights
Issue with a total of 25,714,286 new shares. The subscription price per share was NOK
7.00, and the total gross proceeds from the Rights Issue was NOK 180 million and the net
proceeds was NOK 155.6 million. The Rights Issue significantly strengthened the Group’s
financial position.
Net proceeds from the Rights Issue has been used for the cash settlement of NOK 54
million related to the acquisition of Biim Ultrasound AS, repayment of current interest-
bearing debt, in addition to general corporate purposes.
In October 2022 the Group entered into an exclusive agreement with the intention to
acquire the rights to own, produce and sell the Unometer
TM
portfolio of urine
measurement products from Convatec Group Plc. The products Observe Medical intends
to acquire are market leading in Europe and in several other countries and have generated
annual revenues of around EUR 180 million and will contribute significantly to the Group’s
gross profit. Yearly, more than five million of these urine bags and accessories are sold
and shipped to several hundred customers and distributors in more than 50 countries
worldwide.
The Group is in the roll-out phase of its proprietary product Sippi® and an acquisition of
the Unometer
TM
portfolio wil further accelerate and strengthen the commercial pathway
for Sippi ®.
The Group has an agreement with Fresenius Medical Care in the US for implementation
of the Biim ultrasound probe at their dialyses clinics. The Group completed the delivery
of 265 probes in first half 2022, and is now working closely with Fresenius Medical Care
to get ready for the next phase. Fresenius Medical Care have ~2700 dialyses clinics in the
US. 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.
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”.
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Shareholders
As of December 31, 2022, Observe Medical ASA had 2,086 shareholders and a total of
53,491,656 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 2022.
Rank
Name
Number of shares
Ownership %
1
INGERØ REITEN INV. COMPANY AS
9 653 680
18.05 %
2
NAVAMEDIC ASA
4 222 727
7.89 %
3
RO, LARS
3 238 233
6.05 %
4
JPB AS
2 830 209
5.29 %
5
ELI AS
1)
2 178 078
4.07 %
6
MP PENSJON PK
1 701 188
3.18 %
7
UBS SWITZERLAND AG
1 457 913
2.73 %
8
BJØRNTVEDT, VEGARD
807 538
1.51 %
9
LAPAS AS
805 185
1.51 %
10
SILVERCOIN INDUSTRIES AS
624 464
1.17 %
11
NORDNET BANK AB
608 550
1.14 %
12
NORDNET LIVSFORSIKRING AS
594 902
1.11 %
13
SOLEGLAD INVEST AS
586 668
1.10 %
14
HIMALAYA TANDORI AS
560 000
1.05 %
OTHER
23 622 321
44.16 %
Total number of shares
53 491 656
100.00 %
1)
Pending transfer to each shareholders VPS account ELI AS has, since the closing af the Biim Ultrasound acquisition
in March 2022, held 433,818 shares owned by former shareholders in Biim Ultrasound AS. The transfer of the shares
took place on March 14 2023 with the result that ELI's registered shareholding in Observe Medical have been reduced
by the corresponding number of shares.
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 2022.
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. For the acquired Nordic distribution
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portfolio, Observe Medical has distributions rights in Sweden and with the possibility to
expand to rest of the Nordic region.
Observe Medical has 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.
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 or changes in the
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 implications after 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
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.
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Observe Medical entered into an exclusive agreement with the intention to acquire the
rights to own, produce and sell the Unometer
TM
portfolio of urine measurement products
from Convatec Group Plc. The products Observe Medical intends to acquire are market
leading in Europe and in several other countries and have generated annual revenues of
around EUR 180 million and will contribute significantly to the Group’s gross profit. Yearly,
more than five million of these urine bags and accessories are sold and shipped to several
hundred customers and distributors in more than 50 countries worldwide. A transaction
will also significantly strengthen the Company’s distributor network for Sippi ® and
potential Biim ultrasound probe.
There is a risk that the Company not succeed to entering av final agreement to acquire the
Unometer
TM
product portfolio and/or to produce this products. This may again impact the
potential revenue and profits forecast from the Unometer product portfolio.
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, the Group will require additional funds in order to
execute and complete its commercialization and growth strategy, and for other purposes.
The additional funding is planned to be carried out through an equity funding in mid 2023.
There is a risk that adequate sources of funds may not be available, or available at
acceptable terms and conditions, when needed.
Due to the pandemic and the Ukraine crisis, the world is experiencing challenges both in
terms of raw material supply and uncertainty across the globe with impact in the financial
markets and causes globally high inflation rates. The company is following the situation
closely.
Organisation
The Group had 17 employees at the end of 2022. The net increase of 4 employees from
2021 is mainly driven by new employees from Biim Ultrasound. 8 employees are
employed in Sweden, 5 in Norway, 2 in Finland, 1 in Denmark and 1 in USA.
The Group has established employee insurances which, as a minimum, satisfies the legal
requirement in the specific country.
In accordance with the Public Limited Companies Act, the board has prepared a statement
of salary and other remuneration to senior executive employees, as well as included the
information in Note 17.
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.
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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.
The Transparency Act shall promote companies' respect for basic human rights and
decent working conditions, and ensure the public's access to information. The Act
imposes, among other things, a duty for Observe Medical to inform and carry out due
diligence assessments which must be explained and made public. Observe Medical has
established routines and Code of Conduct that covers such due diligences on suppliers
and business relationships as part of our Quality Management System. This work is led by
the QA/RA department and is based on a risk based approach. The obligation to provide
information came into effect from 1 July 2022 and the report will be published on 30 June
2023 at the latest.
For further information about corporate social responsibility, see the Sustainability report
as part of this Annual Report.
Work Environment, Gender Equality and Discrimination
The working environment is generally satisfactory. Sick leave was 2.8% in 2022, compared
to 0,6% in 2021. 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 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 or to the CEO
The Group's leadership consisted of five members in end 2022, one woman and four 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, there
were seventeen employees in the Group at December 31, 2022, six women and eleven
men. In 2021 there was fourteen employees in the Group, eight women and six 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 five members of the Board of Directors are three women and two men.
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The Group had no serious incidents with personal injury or absence in 2022. Neither was
any damage to property nor equipment reported.
The Directors’ and management liability insurance
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. 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.
Going Concern assumption
The annual accounts are based on the going concern assumption.
Based on current forecasts and working plans, the Group’s working capital is not
sufficient to fund operations and payment of financial obligations for the next 12 months
from 31 December 2022. Going forward, the Group will need to raise more equity, issue
debt instruments or divest assets to fund further development of ongoing business.
In April 2023 the Group entered into loan agreements, to a total amount of NOK 10
million, with leading shareholders (refer to note 24 «Subsequent event» for further
information). The Group continues talks with potential financial providers and investors
to support further operations and growth with equity and debt funding, in addition to
working with alternatives to reduce funding need.
There is a risk that adequate sources of funds may not be available, or available at
acceptable terms and conditions, when needed. Therefore, there is an material
uncertainty with regards of the going concern assumption
Reference is made to note 3 Financial Risk management for further information on
liquidity risk.
Parent Company
Observe Medical ASA (the Company) is the parent company of the Group, owning 100%
of the shares in its subsidiaries Observe Medical ApS, Observe Medical AB, Observe
Medical Nordic AB and Biim Ultrasound AS.
The Company will support its subsidiaries with financing, as well as some common
functions and services.
The assets of the Company are mainly related to shares in the subsidiaries.
In 2022, Observe Medical ASA had revenues of NOK 1.5 million, the same as in in 2021,
related to invoiced services and expenses to subsidiaries. The Company had operating
expenses of NOK 20.1 million which mainly consists of personnel benefit expenses of NOK
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10.4 million and other operating expenses of NOK 9.8 million which includes NOK 3.1
million in non-recurring expenses.
Personnel benefit expenses consists of two full-time employees, CEO employeed from
April 2022, salary and expenses related to the 6 months notice period and 6 months
severance pay to previous CEO who left the Company end of March 2022. In addition fees
to the Board of Directors and Audit Committee, and option expenses. In 2021, operating
expenses was NOK 18.8 million.
EBIT was in 2022 negative at NOK 18.9 million, compared to negative NOK 17.4 million in
2021.
The company had net finance income of NOK 5.3 million which consists of finance income
related to change in contingent consideration, interest from group companies and
currency gain that more than offset interest expenses to group companies and interest
expenses on other interest-bearing debt. In 2021, net finance income were NOK 5.2
million.
The result for 2022 was negative NOK 13.6 million, compared to negative NOK 12.2
million in 2021.
Allocation of Result for the Year 2022
The result for the period in the parent company was negative NOK 13.6 million. 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 with the aim to deliver approximately 2,700 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. In second quarter 2022
the Group completed the delivery of total 265 Biim probes to Fresenius’ training clinics in
the US and is now working closely with Fresenius to prepare for the next phase with the
aim to deliver to all the Fresenius dialyses clinics in the US.
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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 October 2022 Observe Medical entered into an exclusive agreement with the intention
to acquire the rights to own, produce and sell an extensive portfolio of urine measurement
products from Convatec Group Plc, a global medical products and technologies
company. The agreed purchase price for the Unometer
TM
product portfolio is USD 4.25
million.
The Convatec product range comprises industry-recognised products and brands such as
UnoMeter™ Safeti™ Plus, UnoMeter™ 500, and UnoMeter™ Abdo-Pressure™. These
products are used for routine or post-operative drainage, collection, and measurement of
urine output from critically ill patients in hospitals and intensive care units (ICUs). The
product range is complementary to Observe Medical’s digital and automated urine meter,
Sippi®.
The products Observe Medical intends to acquire are market leading in Europe and in
several other countries and have generated annual revenues of around EUR 18 million
and will contribute significantly to the Group’s gross profit. Yearly, more than five million
of these urine bags and accessories are sold and shipped to several hundred customers
and distributors in more than 50 countries worldwide.
A transaction will significantly strengthen Observe Medical’s distribution network,
revenues, profit and cashflows from operations. The potential acquisition of the product
portfolio from Convatec is still subject to agreement between the parties on a final
acquisition agreement and completion of such agreement.
Observe Medical’s 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.
The Group is focusing particularly on the Biim ultrasound probe roll-out in the US and the
acquisition of the Unometer
TM
portfolio. An acquisition of the Unometer
TM
portfolio is
expected to accelerate the roll-out of Sippi® through the expanded distribution network.
Subsequent events
In December 2022, the Group informed that it was planning to issue a bond loan in the
first quarter of 2023 and offer new shares to investors as part of an equity raise around
mid-year 2023. In March 2023, the Group announced that it had instead, and as an
interim solution, entered into loan agreements with shareholders of the Company. The
lenders have committed to a total amount of NOK 10 million. In parallel the Company is
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continuing conversations with potential creditors and investors to support planned
growth.
The Board of Directors and CEO of Observe Medical ASA
Oslo, April 27, 2023
Terje Bakken Kathrine Gamborg Andreassen
Chair of the Board Board member
Sanna Rydberg Line Tønnessen
Board member Board member
Eskild Endrerud Rune Nystad
Board member CEO
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Declaration in Accordance with §5-5 of
the Securities Trading Act
We confirm that the financial statements for 2022 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 27, 2023
Terje Bakken Kathrine Gamborg Andreassen
Chair of the Board Board member
Sanna Rydberg Line Tønnessen
Board member Board member
Eskild Endrerud Rune Nystad
Board member CEO
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Management and Board of Directors
Management team
Rune Nystad | Chief Executive Officer
Part of Executive Management
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
Part of Executive Management
20+ years of experience from finance and accounting in various sectors with
leadership roles in several publicly listed companies, such as Veidekke and
Multiconsult. Joined Observe Medical as CFO from December 2019.
Carsten Trygve Bøgh | Chief Technology Officer
Brings more than 25 years of strategic leadership experience in medtech. He
joined from Fresenius Medical Care Global R&D in Germany, a world leading
provider of products and services for individuals with renal diseases, where he
held the role of Senior Vice President, Global Product Development.
Jørgen Mann | Chief Commercial Officer
Appointed CCO from February 2023. With nearly 20 years of experience in sales
and senior management roles from global medtech companies in Europe, he
brings highly relevant experience to Observe Medical, as the company
strengthens its commercial efforts in the market.
Jenny Wennerberg | QA & RA Director
Jenny has 20 years experience from medtech and healthcare and has held several
quality management and product development positions.
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Board of Directors
Terje Bakken | Chair of the Board
Terje is 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 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 CEO at Unilabs Sweden. Prevously CEO of Arcoma AB, and Head of
Healthcare Europe North in The Linde Group. 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.
Line Tønnessen | Board Member
Line is Investment Director at Reiten & Co. She currently sits on the Board of
Directors of Vow Green Metals AS and Grilstad Holding AS. Prior to joining Reiten,
she worked at Nordea Markets as an Equity Analyst. Line holds a Bachelor of
Business Administration from the Norwegian Business School (BI), an MBA in
Finance from the Norwegian School of Economics (NHH) and is a Certified
Financial Analyst (CFA/AFA)
Eskild Endrerud | Board Member
Eskild is Managing Partner at Arctic Investment Group and has broad investment
experience with focus on strategically building growth and financial robustness in
early-stage companies. Eskild holds board positions in Heymat AS, Lifeness AS,
Nanize AS and Care Holding AS. Holds a M.Sc. in Real Estate Development from
NMBU and a B.Sc. in Business and Entrepreneurship from BI, Norwegian Business
School.
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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
2022 was approved by the board of directors on April 27, 2023 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
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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, 2022, the Group had a consolidated equity of NOK 138.3 million,
corresponding to an equity ratio of 64.1%.
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.
The Annual General Meeting held on June 3, 2022 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 750 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 2,781 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
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board. The authorizations described above had a term until the Annual General Meeting
in 2023, but in no event later than June 30, 2023.
As of December 31, 2022 the Company had 1,191,939 options issued and outstanding,
which includes the options granted to the Company’s CEO in November, 2023 and
options granted to the Company’s CFO in November 2021 and to previous CEO in
January 2020.
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
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.
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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.
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. 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
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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. 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.
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 five 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
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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. Twenty four board meetings were held in 2022. Each board member’s
attendance at board meetings is recorded by the company. The shareholding of each
board member can be found in Note 17 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
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. 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 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. 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.
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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, 2022 the audit committee consisted of the following board
members:
• Line Tønnessen, Chair
• Eskild Endrerud
Compensation Committee
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, 2022, 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, 2022, the M&A committee consisted of the following board
members:
• Eskild Endrerud
• Line Tønnessen
• 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
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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
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 17 to the consolidated financial statement.
Members of the board of directors and/or companies which they are associated with
should not take on specific assignments for the company in addition to their appointment
34 | Annual Report 2022, Observe Medical ASA
__________________________________________________________________________________________________
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 annual general meeting in 2022 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
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
35 | Annual Report 2022, Observe Medical ASA
__________________________________________________________________________________________________
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 treatment of 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
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, EY, 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 27, 2023
Terje Bakken Kathrine Gamborg Andreassen
Chair of the Board Board member
Sanna Rydberg Line Tønnessen
Board member Board member
Eskild Endrerud Rune Nystad
Board member CEO
36 | Annual Report 2022, Observe Medical ASA
__________________________________________________________________________________________________
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 2022 to 31
December 2022.
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 (‘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 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
37 | Annual Report 2022, Observe Medical ASA
__________________________________________________________________________________________________
well-established suppliers in medical
technology and wound care is sold
through an experienced sales team. 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
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
38 | Annual Report 2022, Observe Medical ASA
__________________________________________________________________________________________________
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.
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
Employees
Investors /
shareholders
Government
/ regulatory
authorities
Customers /
Patients
Suppliers
Academia
and life
science
community
39 | Annual Report 2022, Observe Medical ASA
__________________________________________________________________________________________________
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.
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.
Reporting themes and topics for
2022
For 2022, 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
Maintaining a safe and healthy working
environment is a key priority for Observe
Medical, and the ability to attract and
retain skilled workers is critical to the
company. The company can impact the
working environment through the
guidelines, and by dialogue with the
employees. 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.
8 employees are employed in Sweden, 5
in Norway, 2 in Finland, 1 in Denmark
and 1 in USA.
Observe Medical’s workforce
At 31 Dec 2022
At 31 Dec 2021
Men
Women
Total
Men
Women
Total
Total workforce
11
6
17
6
7
13
Total workforce full-time employees
11
6
17
6
7
13
Total workforce part-time employees
0
0
0
0
0
0
Number of non-permanent employees
0
0
0
0
0
0
40 | Annual Report 2022, Observe Medical ASA
__________________________________________________________________________________________________
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.
In 2022, the employees in Sweden
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 systematic approach to
measuring employee engagement and
wellbeing is a focus area for the company
going forward. The Group has a
mandatory defined-contribution pension
scheme that meets the requirement in
each country the Group has employees.
Keeping employee turnover at a
minimum is important to the company. In
2022, Observe Medical had labour
turnover rate of 18% (13% in 2021),
however, since there are only 17
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 on the agenda as the
company grows. The company
experienced zero reported incidents of
discrimination in 2022.
The company will increase its focus on
gender balance in senior positions going
forward. The company is further
Observe Medical’s employee turnover
2022
2021
Labour turnover rate
18%
13%
Total turnover (no. of employees)
3
2
41 | Annual Report 2022, Observe Medical ASA
__________________________________________________________________________________________________
Goals for 2023
• Seek gender balance in senior
positions
• Complete Employee Handbooks for
the Group
• Establish an external whistleblowing
channel
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 mainly exposed to risks
relating to the psychological wellbeing of
employees and physical risks related to
for instance sedentary work.
There were no serious work-related
injuries or incidents among Observe
Medical employees in 2022. Nor was
there any damage to property or
equipment reported. The absence rate
for sickness was 2,8% compared with
0,6% in 2021.
Observe Medical’s health and safety data
2022
2021
Sick leave per cent
2,8%
0.6%
Accident frequency rate
0
0
Accident severity rate
0
0
Table 5: Health and safety data
Observe Medical is committed to be a
responsible employer and is in a process
of establishing several HR related
processes and guidelines. 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.
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
9 (60%)
6 (40%)
0
10
5
Group Management team
2 (100%)
0 (0%)
0
2
0
Board of Directors
2 (40%)
3 (60%)
0
2
3
42 | Annual Report 2022, Observe Medical ASA
__________________________________________________________________________________________________
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. 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. With the opportunity to
acquire the urine measurement portfolio
from Convatec Group Plc, the exposure
to new suppliers and partners will
increase significantly. Observe Medical
has distributors as partners for foreign
markets, which are mainly located in
Europe and US.
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. Observe Medical has decided
not to engage in business with
companies in Belarus or Russia.
There were zero reported incidents of
corruption or public legal cases
regarding corruption in 2022. Observe
Medical has not experienced any
breaches of its policies or guidelines by
suppliers in 2022, and the company has
not terminated or discontinued any
contracts with suppliers or business
partners due to breaches in the reporting
period.
Observe Medical has in 2022 performed
a mandatory training session on insider
information regulations to employees.
Goals for 2023
• 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 new
employees
43 | Annual Report 2022, Observe Medical ASA
__________________________________________________________________________________________________
Environmental impact
Actively managing the environmental
footprint of its business operations is
important to Observe Medical, and it will
become even more important in the
future and may impact 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.
Energy
As Observe Medical has shared offices in
Oslo, Gothenburg, Narvik, Oulu and
Seattle with all related costs included.
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 2022
Observe Medical had 5 company cars,
where of 4 EV’s and 1 hybrid.
Observe Medical reduces the travel
activity by using video conferencing
tools.
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.
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.
Goals for 2023
• Observe Medical will further work to
understand how to reduce our
44 | Annual Report 2022, Observe Medical ASA
__________________________________________________________________________________________________
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.
The Quality Assurance and Regulatory
Affairs (QA/RA) director has the overall
responsibility for product safety. The
QA/RA director is further responsible for
ensuring that Observe Medical’s
products comply with rules and
regulations for medical devices in the
markets where the products are
launched.
In 2022 Observe Medical has
implemented a digital group Quality
Management System (QMS) that covers
development, manufacturing and sales of
medical devices in all legal entities and
sites within the group, 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 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.
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
or FDA approved, 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.
45 | Annual Report 2022, Observe Medical ASA
__________________________________________________________________________________________________
Consolidated Financial
46 | Annual Report 2022, Observe Medical ASA
__________________________________________________________________________________________________
Contents
Consolidated Financial Statements 2022 ........................................................................................... 45
Consolidated Statement of Comprehensive Income ........................................................................ 47
Consolidated Statement of Financial Position ................................................................................... 48
Consolidated Statement of Changes in Equity .................................................................................. 49
Consolidated Cash Flow Statement .................................................................................................... 51
Explanatory Notes to the Consolidated Financial Statements 2022 ................................................ 52
Note 1 – General Information .......................................................................................................... 52
Note 2 – Basis for Preparation and Summary of the Most Significant Accounting Policies ........ 53
Note 3 – Financial Risk Management .............................................................................................. 58
Note 4 – Significant Judgements in the Application of Group Accounting Policies and Accounting
Estimates ........................................................................................................................................... 60
Note 5 – Segment Information and Revenue from Contracts with Customers ............................ 61
Note 6 – Tangible Assets incl. right-of-use ..................................................................................... 63
Note 7 – Intangible Assets ............................................................................................................... 65
Note 8 – Financial Items ................................................................................................................... 66
Note 9 – Cost of Materials ................................................................................................................ 67
Note 10 – Trade Receivables and Other Receivables .................................................................... 67
Note 11 – Inventories ....................................................................................................................... 67
Note 12 – Financial Instruments ...................................................................................................... 67
Note 13 – Contingent Consideration .............................................................................................. 70
Note 14 – Taxes ................................................................................................................................ 72
Note 15 – Other Operating Expenses ............................................................................................. 73
Note 16 – Payroll Expenses .............................................................................................................. 74
Note 17 – Remuneration to Corporate Management and Board of Directors ............................. 74
Note 18 – Share Options .................................................................................................................. 77
Note 19 – Earnings per Share .......................................................................................................... 79
Note 20 – Related Parties ................................................................................................................. 79
Note 21 – Research and Development ........................................................................................... 80
Note 22 – Shareholder Information ................................................................................................. 80
Note 23 –Business Combinations .................................................................................................... 82
Note 24 –Subsequent event ............................................................................................................ 83
47 | Annual Report 2022, Observe Medical ASA
__________________________________________________________________________________________________
Observe Medical Group
Consolidated Statement of Comprehensive Income
Amounts in NOK thousand Note FY 2022 FY 2021
Operating revenues 5 19 521 24 042
Cost of materials 9 14 344 14 524
Gross result 5 177 9 518
Employee benefit expenses 16, 17, 18 28 521 19 013
Other operating expenses 15, 21 24 868 23 586
Operating expenses 53 389 42 599
Operating result before depreciation and amortisation (EBITDA) -48 212 -33 081
Depreciation and amortisation 6, 7 10 931 3 463
Operating result (EBIT) -59 143 -36 544
Financial income and expenses
Financial income 8 19 122 15 711
Financial expenses 8, 13 10 704 5 488
Net financial items 8 418 10 223
Result before tax -50 725 -26 321
Income tax expense 14 76 0
Result for the period -50 801 -26 321
Other comprehensive income that may be reclassified subsequently to profit
or loss
Currency translations differences -2 504 -9 064
Total comprehensive income/loss for the period -53 305 -35 385
Basic earnings per share (NOK per share) 19 -1.08 -1.34
Diluted earnings per share (NOK per share) 19 -1.08 -1.34
48 | Annual Report 2022, Observe Medical ASA
__________________________________________________________________________________________________
Observe Medical Group
Consolidated Statement of Financial Position
Amounts in NOK thousand
Note At 31 December 2022 At 31 December 2021
ASSETS
Non-current assets
Goodwill 7 99 961 33 870
Intangible assets 7 82 767 21 328
Tangible assets 6 4 152 1 381
Total non-current assets 186 880 56 579
Current assets
Trade receivables 10, 12 4 731 1 348
Inventories 11
Other receivables and prepaid expenses 10 2 443 3 934
Cash and cash equivalients 12 13 641 2 864
Total current assets 28 932 15 159
Total assets 215 812 71 738
EQUITY AND LIABILITIES
Share capital 13 908 5 097
Other equity 124 398
-19 219
Total equity 138 306 -14 122
Non-current liabilities
Non-current lease liabilities 6 965 550
Contingent consideration 12, 13 3 365 13 031
Non-current interest bearing liabilities 12 946 0
Total non-current liabilities 5 276 13 581
Current liabilities
Bank overdraft 12 0 6509
Trade payables
12
Current tax liabilities 14 51 0
VAT and other public taxes and duties payables
Current interest bearing debt
12, 20
Other current liabilities
12, 6
Total current liabilities 72 230 72 279
Total liabilities 12 77 506 85 860
Total equity and liabilities 215 812 71 738
49 | Annual Report 2022, Observe Medical ASA
__________________________________________________________________________________________________
The Board of Directors and CEO of Observe Medical ASA
Oslo, April 27, 2023
Terje Bakken Kathrine Gamborg Andreassen
Chair of the Board Board member
Sanna Rydberg Line Tønnessen
Board member Board member
Eskild Endrerud Rune Nystad
Board member CEO
50 | Annual Report 2022, Observe Medical ASA
__________________________________________________________________________________________________
Consolidated Statement of Changes in Equity
During 2022 Observe Medical ASA has issued 33 886 199 new shares for net proceeds of NOK
205,733 thousand.
See note 22 for further information about movement in share capital / number of shares, note 18
share options and note 23 aqusitions.
Amounts in NOK thousand
Issued 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
Issued capital
Share
premium
Other paid in
equity
Total paid-in
capital
Retained
earnings
Translation
differences
Total
Equity as at 1 January 2022 5 097 87 065 11 800 103 963 -108 691 -9 394 -14 122
Share issue 8 811 196635 - 205 446 - 205 446
Options - - - - 287 - 287
Result for the period - - - - -50 801 - -50 801
Translation differences - - - - -2 504 -2 504
Equity as at 31 December 2022 13 908 283 700 11 800 309 409 -159 205 -11 898 138 306
Equity
Attributable to the equity holders of the parent
51 | Annual Report 2022, Observe Medical ASA
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Observe Medical Group
Consolidated Cash Flow Statement
Amounts in NOK thousand Note 2022 2021
Cash flow from operating activities
Result before tax -50 725 -26 321
Tax paid
14 -142 -192
Depreciation and impairment 6,7 10 931 3 463
Gain(-)/ loss from sale of fixed asset -320 -6
Interest expenses and change FV contingent consideration with no cash
effect
13 -6 628 -6 144
Change in inventories 11 -294 145
Change in trade receivables and other receivables 10 -1 908 -2 103
Change trade account payables and other current liabilities 12 -2 249 9 031
Net cash flow from operating activities -51 334 -22 126
Cash flow from investing activities
Sale of tangible and intangible assets 6,7 559 0
Purchase of tangible and intangible assets 6,7 -4 927 -4 886
Net cash effect of business combination 23 -54 002 0
Net cash flow from investing activities -58 370 -4 886
Cash flow from financing activities
Net change interest bearing debt 12 -19 404 10 000
Net change bank overdrafts 12 -13 863 6509
Net proceeds from share issue 155597 0
Payments of lease liabilities 6 -1 390 -429
Net cash flow from financing activities 120 940 16 079
Currency translation differences -460 -5 149
Changes in cash 10 777 -16 081
Cash and cash equivalients as at 1 January 12 2 864 18 945
Cash and cash equivalients end of period 12 13 641 2 864
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Parent Company Observe Medical ASA
Annual Financial Statements 2022
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Contents
Income statement ............................................................................................................................. 86
Balance Sheet ................................................................................................................................... 87
Cash Flow Statement ....................................................................................................................... 91
Explanatory Notes to the Annual Financial Statements 2022 ....................................................... 92
Note 1 – Accounting Policies ........................................................................................................... 92
Note 2 – Salary Expenses ................................................................................................................. 95
Note 3 – Bank Deposits .................................................................................................................... 95
Note 4 – Non-Current Liabilities ...................................................................................................... 96
Note 5 –Current Liabilities ............................................................................................................... 96
Note 6 – Current assets .................................................................................................................... 98
Note 7 – Loans to Group Companies .............................................................................................. 98
Note 8 – Financial Income and Expenses ....................................................................................... 98
Note 9 – Other Operating Expenses ............................................................................................... 99
Note 10 – Subsidiaries ................................................................................................................... 100
Note 11 – Related Parties ............................................................................................................... 100
Note 12 – Non-current assets ........................................................................................................ 100
Note 13 – Taxes .............................................................................................................................. 101
86 | Annual Report 2022, Observe Medical ASA
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Observe Medical ASA
Income statement
Amounts in NOK thousand
Note
2022
2021
Operating revenues
11
1,470
1,493
Other operating revenues
4
0
Total operating revenues
1,474
1,493
Personnel expenses
2
10,374
8,725
Other operating expenses
2,9
9,761
10,082
Operating expenses
20,135
18,807
Operating result before depreciation and
amortization (EBITDA)
-18,661
-17,314
Depreciation and amortization
12
289
107
Operating result (EBIT)
-18,950
-17,421
Financial income and expenses
Interest income from group companies
8,11
1,651
337
Financial income
8
11,676
15,053
Interest expense to group companies
8,11
4,051
5,537
Interest expenses
8
3,400
3,203
Financial expenses
8
531
1,472
Net financial items
5,345
5,178
Result before tax
-13,604
-12,243
Income tax expense
13
0
0
Result for the period
-13,604
-12,243
Brought forward
Transferred to other equity
13,604
12,243
Net brought forward
-13,604
-12,243
87 | Annual Report 2022, Observe Medical ASA
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Observe Medical ASA
Balance Sheet
Amounts in NOK thousand
Note
31.12.2022
31.12.2021
ASSETS
Property, Plant and Equipment
Equipment and other movables
12
2,488
376
Non-current assets
Investments in subsidiaries
10
400,988
211,986
Loans to subsidiaries
7
34,653
0
Total non-current financial assets
435,641
211,986
Total non-current assets
438,129
212,362
Current assets
Receivables from group companies
6
86
974
Other receivables and prepaid expenses
6
1,993
2,843
Bank deposits
3
8,822
507
Total current assets
10,900
4,325
Total assets
449,029
216,686
88 | Annual Report 2022, Observe Medical ASA
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Observe Medical ASA
Balance Sheet
Amounts in NOK thousand
EQUITY AND LIABILITIES
Share capital
13,908
5,097
Share premium
380,650
86,278
Other paid-in equity
0
13,652
Total paid-in equity
394,558
105,028
Other equity
-42,092
-29,841
Total equity
352,466
75,187
Non-current liabilities
Liabilities to financial institutions
9,10,11
946
0
Contingent consideration
4
3,365
13,031
Non-current liabilities to group companies
11
45,631
66,240
Total non-current liabilities
49,942
79,271
Current liabilities
Liabilities to financial institutions
0
6,509
Trade payables
11
2,917
2,020
Public duties payable
5
457
668
Interest-bearing current liabilities
5
40,615
48,012
Other current liabilities
5
2,651
5,019
Total current liabilities
46,639
62,228
Total liabilities
96,564
141,499
Total equity and liabilities
449,029
216,686
89 | Annual Report 2022, Observe Medical ASA
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The Board of Directors and CEO of Observe Medical ASA
Oslo, April 27, 2023
Terje Bakken Kathrine Gamborg Andreassen
Chair of the Board Board member
Sanna Rydberg Line Tønnessen
Board member Board member
Eskild Endrerud Rune Nystad
Board member CEO
90 | Annual Report 2022, Observe Medical ASA
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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 1,2022
5,097
86,278
13,652
105,028
-29,841
75,187
Uncovered loss to be covered by
Share premium
0
Other paid in equity capital to be
covered by Share premium
12,586
-13,652
-1,066
1,066
0
Registered capital
8,810
307,189
316,000
316,000
Registered capital cost
-25,403
-25,403
-25,403
Cost of employee options
287
2876
Net result for the period
-13,604
-13,604
Equity as at December 31, 2022
13,908
380,650
0
394,558
-42,092
352,466
Share capital:
NOK thousand
Shares
Par
price
Share capital January 1, 2022
5,097
19,605,457
0.26
Changes
8,810
33,886,279
0.26
Share capital December 31, 2022
13,908
53,491,656
0.26
Refer to Note 23 in the Observe Medical group’s consolidated financial statement 2022 for shareholders’
information.
91 | Annual Report 2022, Observe Medical ASA
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Observe Medical ASA
Cash Flow Statement
Amounts in NOK thousand
Note
2022
2021
Cash flow from operating activities
Result before tax
-13,604
-12,244
Depreciation
289
107
Interest expenses and change in contingent
consideration not paid
8,11
-6,657
-9,337
Interest income from group companies not paid
8,11
0
0
Change in trade receivables and other receivables
6
1,746
-2,865
Change trade payables and other current liabilities
-1,403
7,923
Net cash flow from operating activities
-19,630
-16,416
Cash flow from investment activities
Payments on the purchase of equipment
-2,401
-483
Payment for shares in subsidiaries
-54,002
0
Net cash flow used in investment activities
-56,403
-483
Cash flow from financing activities
Net changes liabilities to financial institutions
-6,509
6,509
Paid in new share capital
155,597
913
Repayment share capital
0
0
Change interest bearing loan
-9,459
10,405
Net change interest bearing debt to group
companies
-55,280
-14,748
Net cash flow from financing activities
84,348
3,079
Exchange rate fluctuations
0
0
Changes in cash
8,315
-13,820
Bank deposits as at January 1
507
14,327
Bank deposits end of period
3
8,822
507
92 | Annual Report 2022, Observe Medical ASA
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Explanatory Notes to the Annual
Financial Statements 2022
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 AB, Observe Medical Nordic AB, Observe Medical ApS and Biim
Ultrasound AS.
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.
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
93 | Annual Report 2022, Observe Medical ASA
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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.
Transparency Act
The company will publish a seperate report on the company`s webpage before
30.06.2023.
Payables
Trade payables and short-term intercompany payables are recognized at nominal value.
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.
94 | Annual Report 2022, Observe Medical ASA
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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.
95 | Annual Report 2022, Observe Medical ASA
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Note 2 – Salary Expenses
Amounts in NOK thousand
2022
2021
Salaries
5,423
2,533
CEO cost invoiced from subsidiary
2,128
3,146
Fees to Board of Directors and
Nomination Committee
1,265
895
Employment taxes
710
838
Pension insurance
328
207
Other benefits
520
1,106
Total salary expenses
10,374
8,725
At year end the company had 3 employees. The company has a contribution pension
scheme that meets the requirement of the Norwegian Act of Mandatory Occupational
Pension.
Former CEO Björn Larsson departed as CEO at March 28, 2023 and was entitled to salary
during the 6 months’ notice period in addition to 6 months’ severance pay. Mr. Larsson
was employed by the fully owned subsidiary, Observe Medical AB and hired to Observe
Medical ASA. CEO costs including salary and expenses 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 287 for 2022 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 2022 for further information related to the share options.
Auditor
Audit fees expensed for 2022 amounts to NOK 2,071 thousand ex VAT. Fees for other
assurance services amounts to NOK 380 thousand
Note 3 – Bank Deposits
Restricted cash (tax withholding account) are NOK 294 thousand.
96 | Annual Report 2022, Observe Medical ASA
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Note 4 – Non-Current Liabilities
Amounts in NOK thousand
2022
2021
Contingent consideration
3,365
13,030
Interest bearing debt to Observe Medical AB
45,613
66,240
Total non-current liabilities
48,978
79,271
Note 5 –Current Liabilities
Amounts in NOK thousand
2022
2021
Liabilities to financial institutions
0
6,509
Trade payables
2,971
2,020
Public duties payable
457
668
Interest bearing debt to Navamedic ASA
1)
40,614
37,606
Loan Ingerø Reiten Investment Company
0
10,405
Other liabilities
2,651
5,019
Total non-current liabilities
46,639
62,228
1
Increase in interest bearing debt from Navamedic ASA from 2021 to 2022 is due to accured interest.
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.
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, 2022.
97 | Annual Report 2022, Observe Medical ASA
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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 48 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 12% as at December
31, 2022.
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 2022 is due to updated estimate related to when the sales of
OM’s products will be realized. The revenue and market potential remain unchanged but
have been postponed.
98 | Annual Report 2022, Observe Medical ASA
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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.
Sensitivity as at December 31, 2022: A 1 percentage point reduction in the discount rate
would increase the estimated present value by NOK 0.1 million and a 10% reduction in
revenue would decrease the estimated present value by NOK 0.4 million.
Note 6 – Current assets
Amounts in NOK thousand
2022
2021
Other short-term receivables
1,993
2,586
Receivables from group companies
86
974
Total receivables
2,078
3,560
Note 7 – Loans to Group Companies
Amounts in NOK thousand
2022
2021
Observe Medical APS
Biim Ultrasound AS
720
33,932
0
0
Total loans to group companies
34,653
0
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.
Note 8 – Financial Income and Expenses
Amounts in NOK thousand
2022
2021
Interest income from group companies
1,651
337
Net currency gain
1,647
4,621
Change in contingent consideration
10,028
10,432
Total financial income
13,327
15,390
Financial expenses
2022
2021
Interest expenses
3,400
3,203
Interest expenses to group companies
4,051
5,537
Net currency loss
0
0
Discounting effect contingent
consideration
360
1,095
Other financial cost
170
377
Total financial expenses
7,982
10,212
Net financial income(+)/expenses (-)
-5,345
-5,177
99 | Annual Report 2022, Observe Medical ASA
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Note 9 – Other Operating Expenses
Amounts in NOK thousand
2022
2021
Audit services
2,071
1,096
Accounting and financial services
505
385
Consultants
894
4,070
IT expenses
579
492
Legal and professional fees
2,242
2,724
Other operating expenses
1,466
912
Stock exchange expenses
805
375
Travel expenses
262
29
Other group services
937
0
Total other operating expenses
9,761
10,082
Observe Medical ASA completed the acquisition of Biim Ultrasound AS at 8 March 2022. Incurred transaction
costs related to the acquisition of Biim Ultrasound AS of NOK 666 thousand in 2022 (4 619 thousand in 2021)
was expensed as other operating expenses.
100 | Annual Report 2022, Observe Medical ASA
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Note 10 – Subsidiaries
Amounts in NOK thousand
Business office
Ownership
share
Carrying amount
December 31, 2022
Observe Medical AB
Gothenburg, Sweden
100%
123,010
Observe Medical ApS
Herlev, Denmark
100%
80,247
Observe Medical International AB
1)
Gothenburg, Sweden
100%
0
Observe Medical Nordic AB
Biim Ultrasound AS
2)
Gothenburg, Sweden
Oslo, Norway
100%
100%
8,729
189,001
Total
400,987
1)
Observe Medical International AB merged in January 2022 with Observe Medical AB.
2)
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 54 million.
Note 11 – Related Parties
Amounts in NOK thousand
Income
Operating
expenses
Financial
income
Financial
expenses
Receivables
Liabilities
Navamedic ASA
1)
0
0
0
3.009
0
40.615
Ingerø Reiten Investment
Company AS
2)
0
0
0
276
0
0
Observe Medical AB
1.061
1.014
5.522
7.921
0
45.613
Observe Medical ApS
41
0
22
5
775
0
Observe Medical Nordic AB
367
0
0
0
31
0
Biim Ultrasound AS
0
937
1.638
0
33.933
1.172
Total
1.470
1.952
7.183
11.211
34.739
87.400
1)
Navamedic ASA owned 7.89% of all shares in Observe Medical ASA as of 31 December 2022.
2)
Ingerø Reiten Investment Company AS owned 18.05% of all shares in Observe Medical ASA as of 31
December 2022.
Note 12 – Non-current assets
Intangible
assets
Plant
and machinery
Fixtures
and fittings
Total
Purchase cost as of 01.01.22
483
483
Inflow purchased fixed assets
1,153
1,225
23
2,401
Acquisition cost 31.12.22
1,153
1,225
505
2,889
Accumulated depreciation 31.12.22
122
273
396
Book value 31.12.22
1,153
1,102
232
2,488
This year's ordinary depreciations
122
166
289
Economic life
5 year
3 year
101 | Annual Report 2022, Observe Medical ASA
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Note 13 – Taxes
Amounts in NOK thousand
2022
2021
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
2022
2021
Result before income tax
-13,604
-12,244
Non-deductible expenses
-14,729
-8,423
Changes in temporary differences
-124
-37
Total taxable income
-28,458
-20,704
Expected income tax expenses, 22%
-2,992
-2,252
Specification of Tax Effect to Temporary Differences
Non-current assets
161
37
Current assets
0
0
Liabilities and provisions
0
0
Non-recognized tax asset
0
0
Tax losses carried forward
-61,607
-33,149
Not included in the deferred tax calculation
61,446
33,112
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.
Since the company expects losses in the coming years, the company considers that the
conditions for capitalizing deferred tax assets not have been fulfilled.
102 | Annual Report 2022, Observe Medical ASA
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Report of the audit of the financial
103 | Annual Report 2022, Observe Medical ASA
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Report of the audit of the financial
statements
104 | Annual Report 2022, Observe Medical ASA
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105 | Annual Report 2022, Observe Medical ASA
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106 | Annual Report 2022, Observe Medical ASA
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107 | Annual Report 2022, Observe Medical ASA
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108 | Annual Report 2022, Observe Medical ASA
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109 | Annual Report 2022, Observe Medical ASA
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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.
Sick leave per cent: 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 2022
At 31 December 2021
Total shareholders equity
138,306
14,122
Total assets
215,812
71,738
Equity ratio
64.1%
-19.7%
110 | Annual Report 2022, 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
Observe Medical ASA
Dronning Eufemias gate 16
0191 OSLO
Norway