2 | Annual Report 2023, Observe Medical ASA
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Contents
Contents.................................................................................................................................................. 2
Observe Medical in brief ....................................................................................................................... 3
Highlights 2023 ...................................................................................................................................... 4
Key figures .............................................................................................................................................. 5
Letter from the CEO ............................................................................................................................... 6
About the Observe Medical Portfolio ................................................................................................... 8
Board of Directors’ Report 2023 ......................................................................................................... 11
Declaration in Accordance with §5-5 of the Securities Trading Act ................................................. 23
Management and Board of Directors ................................................................................................. 24
Corporate Governance ........................................................................................................................ 26
Sustainability Report ............................................................................................................................ 37
Consolidated Financial Statements 2023 ........................................................................................... 47
Explanatory Notes to the Consolidated Financial Statements 2023 ................................................ 54
Parent Company Observe Medical ASA Annual Financial Statements 2023 ................................... 86
Auditor’s report .................................................................................................................................. 104
Alternative Performance Measures (APMs) ...................................................................................... 110
3 | Annual Report 2023, Observe Medical ASA
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Observe Medical in brief
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 seeking distribution opportuntinities and 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 consists of Sippi®, a CE marked digitalized
system for urine measurement, the UnoMeter™ portfolio consisting of manual urine
measurement products and solutions for measuring intra-abdominal pressure, and the
Biim ultrasound probe, which is a unique, wireless and pocketable ultrasound probe, that
can scan patients and review images in seconds.
For further descriptions of the products see section “About Observe Medical portfolio”.
4 | Annual Report 2023, Observe Medical ASA
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Highlights 2023
Jan
Jun
CE certification for UnoMeter™ 500
Attained CE certification for UnoMeter™ 500 under the EU’s Medical Device Regulation
UnoMeter™ agreement signed
Signed agreement with Convatec to acquire the trademarks and other intellectual property
rights relating to the UnoMeter™ portfolio
Sep
Oct
First shipment of UnoMeter™ 500
First shipment of UnoMeter™ 500 products to distributors in Poland and Spain. Secured
significant framework agreement: Awarded onto the NHS Supply Chain (NHSSC) Framework
with UnoMeter™ 500 in UK
Delivery of additional 20 Biim Ultrasound probes to Fresenius
Nov
Expanding distribution network
+ 20 countries covering approx. 55% of the historic Convatec sales of the UnoMeter™ portfolio.
LOI signed with Vingmed for exclusive Nordic distribution of UnoMeter™
Carried out a share capital increase - Rights Issue
The Company aimed to raise between minimum NOK 18 million and maximum NOK 55 million
in gross proceeds in the Rights Issue. The total gross proceeds from the Rights Issue were NOK
35.7 million, of which NOK 21.5 million was settled by way of cash payment and NOK 14.1
million was settled by way of set-off against the shareholder loans
Dec
Recruitment of new CCO
In January 2023, Jørgen Mann was appointed as the Company’s Chief Commercial Officer. He
brings more than 20 years of experience in sales and senior management roles from leading
global medtech companies in Europe such as Unomedical, Getinge Group, Smith&Nephew and
Fresenius Medical Care
Addressing liquidity challenges
Initiated short term cost-saving measures, including temporary layoff of staff. Moreover, the
Company engaged in constructive dialogues with its creditors to manage short-term liquidity
Jul
Observe Medical established an integrated setup with a highly
effective and high quality manufacturing partner
A new manufacturing partnership was established with a Chinese manufacturer of medical
devices. After intensive work to integrate our quality measures and product design, UnoMeter™
500 was launched in October 2023 with manufacturing on this platform
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Key figures
Observe Medical had operating revenues of NOK 27.9 million in 2023, an
increase of NOK 8.4 million YoY and a gross result of NOK 9.3 million, an increase
of NOK 4.1 million YoY.
EBITDA growth by NOK 8.4 million YoY mainly driven by sales of UnoMeter™
products and lower OPEX.
Net finance negative of NOK 9.1 million (NOK 8.4 million in 2022) mainly
consisting of net interest expenses of NOK 6.6 million, net currency effect of NOK
4.3 million and a net income of NOK 1.8 million related to changes in consideration
on contingent liabilities.
Result for 2023 is negative NOK 60.3 million (negative NOK 50.7 million in 2022).
Observe Medical had an equity of NOK 115.6 million at December 31, 2023. In
December 2023 Observe Medical has issued 137,193,548 new shares in
connection with the Rights issue for gross proceeds of NOK 35.7 million. Expenses
related to the capital increase amounts to NOK 5.0 million.
(Amounts in NOK thousand, expect EPS,
equity ratio and number of employees)
2023
Revenue
27,942
Gross result
9,287
EBITDA before non-recurring items*
-34,330
EBITDA
-37,693
EBIT
-51,263
Net finance
-9,082
Result
-60,345
EPS
-1.05
Equity
115,606
Total balance
253,537
Equity ratio
45.6%
Number of FTE’s at 31 December
9
* Non-recurring expenses in 2023 is primarily related to UnoMeter™ tooling project that was discontinued and the
Ferrari L. acquisition process. In 2022 non-recurring expenses was related to expenses in connection with the
acquisition of Biim Ultrasound AS, and severance pay to former CEO and CTO.
Note that consolidation of Biim Ultrasound is part of the Group from March 2022
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Letter from the CEO
2023 has been a transformative year for Observe Medical as we expand globally and
strengthen our position in the market. The acquisition of the UnoMeter™ and Abdo-
Pressure™ portfolio from Convatec was pivotal, aligning with our goal to be a leading
player in the global urine measurement market. With initial UnoMeter™ 500 shipments in
October and achieving production levels comparable to Convatec's historical output for
the UnoMeter™ 500 product, we are poised to meet international demand. By year's end,
we had received orders from over 20 countries, highlighting our growing global market
presence. Our primary focus moving forward is to accelerate production and successfully
bringing the UnoMeter™ Safeti Plus product to the market. This will further expedite the
commercial pathway for our own digital and automated urine meter product, Sippi®.
During the late parts of 2023, the Company conducted a strategic review of the Nordic
distribution operations with the intention to assess the relevance of the business for the
Group. The platform was initially established to test and launch our own branded
products. Given the expansion of our global distribution capabilities, which now fulfill our
initial testing and pre-launch needs, the business has become less crucial for our core
operations. Consequently, we have decided to transfer the business to Vingmed, which
alignes with the establishment of the distribution partnership agreement with Vingmed
for the UnoMeter
TM
portfolio in the Nordic region. The planning for this transfer started in
late 2023 and the transfer is expected to be finalized during H1 2024.
Our partnership with Fresenius remains strong, highlighted by our recent delivery of 20
Biim ultrasound probes in November. To date, we have successfully delivered a total of
285 ultrasound probes to Fresenius, reinforcing our ongoing collaboration. Fresenius has
spent more than 1.5 years on educational and training support for approximately 265 of
its educational dialysis clinics, which has been necessary and needed to optimize the use
of the Biim technology amongst key personnel. The intention is to secure that Fresenius is
ready for a broader implementation for use of the Biim ultrasound probe in all their
approximately 2,700 dialysis clinics in the US. In parrallell, we evaluate various strategic
options for the Biim project based on, among other, the outcome of the progressing
discussions with Fresenius and the financial resources available to Observe Medical.
To secure the commercial efforts for our workstreams, we completed a Rights issue in
December 2023, which aimed to raise between minimum NOK 18 million and maximum
NOK 55 million in gross proceeds. We managed to raise NOK 35.7 million (21.5 million in
cash), which will be used to cover the working capital needs in relation to the ramp up of
production and sale of the UnoMeter™ portfolio.
As we navigate these challenging yet exciting times, we've seen some changes within our
leadership in the beginning of 2024. I took on the role of interim CEO following Rune
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Nystad's shift to Chief Development Officer, and Johan Fagerli stepped up as Interim
CFO. I am confident that this leadership team will effectively continue leading our global
commercial efforts alongside our growing portfolio of products.
Despite some challenges, 2023 was a year full of great achievements and opportunities. I
am thankful for the Observe Medical team who faced every challenge head-on, and to our
shareholders for their ongoing support. Our ambition and goals for the future remains
unchanged, and I look forward to updating you all soon.
Jørgen Mann
Interim CEO
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About the Observe Medical Portfolio
Observe Medical has a portfolio of medtech devices and disposables within Urine
measurement, measuring of intra-abdominal pressure and Ultrasound. In addition, the
Company aim to be a preferred sales and commercialization platform for medtech
companies, both through targeted M&A and distribution opportunities.
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.
UnoMeter
TM
– The Manual Urine Measurement system and intra-
abdominal pressure measurement solution.
Observe Medical introduced in 2023 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 a preferred supplier in this segment which 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. It 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 2,700 dialysis clinics in the US. As of year end
2023, a total of 285 ultrasound probes have been delivered to Fresenius educational
clinics.
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Board of Directors’ Report 2023
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. The Group aims to add value to the benefit of patients, healthcare
professionals and hospitals through improved patient welfare, health economics and data
accuracy. Observe Medical ASA is the parent company of its wholly owned subsidiaries,
Observe Medical AB, Observe Medical ApS, Observe Medical Nordic AB, Observe
Medical AS and Biim Ultrasound AS. Biim Ultrasound Oy and Biim Ultrasound Inc are fully
owned subsidiaries of Biim Ultrasound AS.
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) , which
has developed and commercialized a wireless pocketable ultrasound device approved by
the Food and Drug Administration (FDA). Observe Medical has an agreement with
Fresenius Medical Care with an aim to fully roll-out of the Biim ultrasound probe in their
approximately 2,700 dialysis clinics in the US. Until now a total of 285 Fresenius clinics
have received Biim ultrasound probes. Fresenius is working with a KPI study to support a
final investment decision for full scale implementation in their dialyses clinics, which is a
more time-consuming process than previously anticipated. Consequently, the Company
is advancing discussions with Fresenius Medical Care to expedite a final investment
decision.
The Company will evaluate various strategic options for the Biim ultrasound probe based
on among other the outcome of these discussions and the financial resources available to
Observe Medical. Consequently, no assurance can at this stage be given that the
Company will pursue continued product development and ramp up of sales activities for
this product.
Sippi® is 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 September 2023, the Group acquired the trademarks and other intellectual property
rights of the UnoMeter™ portfolio from Convatec Group Plc. The portfolio consist of
products such as UnoMeter™ Safeti™ Plus, UnoMeter™ 500 and UnoMeter™ Abdo-
Pressure™, which are market leading products within routine or post-operative drainage,
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collection and measurement of urine output from patients. The product range is
complementary to Observe Medical’s digital and automated urine meter, Sippi® and is an
important step to take the position as global leader within urine measurement.
In December 2023, the Group completed a Rights Issue. The Company aimed to raise
between minimum NOK 18 million and maximum NOK 55 million in gross proceeds in the
Rights Issue. The total gross proceeds from the Rights Issue were NOK 35,670,322.48, of
which NOK 21,525,405.98 was settled by way of cash payment and NOK 14,144,916.50
was settled by way of set-off against shareholder loans (as further described in the minutes
from the extraordinary general meeting held by the Company on 22 November 2023).
The Rights Issue raised net cash proceeds of approximately NOK 16 million.
The Rights Issue was accordingly subscribed by approximately 65% of the maximum gross
proceeds. The proceeds from the Rights Issue will cover the working capital needs in
relation to the ramp up of production and sale of the UnoMeter™ portfolio. Observe
Medical is fully focused and committed to the ramp up of the production capacity and the
continuous commercial progress for the UnoMeter portfolio.
In a remarkably short span of time, the Company has achieved a production capacity
equivalent to Convatec's historical levels for the UnoMeter™ 500 product, which is a
testament to Observe Medical's rapid progress and dedication to meeting market
demands.
Moreover, the UnoMeter™ portfolio is experiencing rapid commercial expansion, having
secured orders from a total count of +20 countries by the end of 2023. The favorable
clinical evaluations contribute positively to the reputation of the UnoMeter™ products,
demonstrating confidence in their continued success across diverse markets.
Furthermore, Observe Medical is actively engaged in ongoing initiatives aimed at
accelerating production and successfully bringing the UnoMeter™ Safeti Plus product to
the market.
Summary of the Financial Results
The Group had operating revenues of NOK 27.9 million in 2023 compared to NOK 19.5
million in 2022 . The gross result was NOK 9.3 million, compared to NOK 5.2 million in
2022.
In 2023, EBITDA before non-recurring items was negative NOK 34.3 million compared to
negative NOK 45.1 million in 2022. The increase in EBITDA is primarily driven by sales of
the UnoMeter™ portfolio from fourth quarter in 2023, and lower operational expenses.
Non-recurring expenses of NOK 3.4 million in 2023 is primarily related to the UnoMeter™
tooling project that was discontinued and the Ferrari L. acquisition process. Non-recurring
items at NOK 3.1 million in 2022 was expenses in connection with the Biim acquisition and
expenses related to organisational changes.
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Depreciation and amortization increased from NOK 10.9 million in 2022 to NOK 13.6
million in 2023. The increase is mainly related to depreciation and amortization from Biim
Ultrasound in the period from March to year end.
The company had net financial expenses of NOK 9.1 million (NOK 8.4 million in 2022)
mainly consisting of net interest expenses of NOK 6.6 million, net currency effect of NOK
4.3 million and a net income of NOK 1.8 million related to changes in consideration on
contingent liabilities.of In 2022, net financial items came in at NOK 8.4 million and was
mainly related to change in estimated fair value of contingent consideration.
As a result, the Group had a loss after tax of NOK 60.4 million in 2023, compared to a loss
of NOK 50.8 million in 2022.
Earnings per share was negative NOK 1.05, compared to negative NOK 1.08 in 2022.
Financial Position
The Group had assets of NOK 253.5 million at December 31, 2023, compared to NOK
215.8 million at December 31, 2022. The book value of fixed assets were NOK 226.3
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 and the purchase
of the UnoMeter™ portfolio in 2023.
The Group has carried out impairment tests to test the value of goodwill and intangible
assets without identifying need for impairment of booked values. Note that the Group has
ongoing 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 a
material uncertainty with regards to the going concern assumption. In case of a situation
where adequate sources of funds may not be available, the value of assets can be lower
than presented in the financial statements. However, this is not reflected in the valuation
of the assets, as the annual accounts are based on the assumption of going concern.
At year-end 2023, the Group had current assets of NOK 27.2 million, mainly related to
trade receivables, inventories and bank deposits. In 2022, the Group had current assets
of NOK 28.9 million.
The Group had equity of NOK 115.6 million at December 31, 2023, compared to NOK
138.3 million at December 31, 2022. The change is from the result for the period partly
offset by the net proceeds from the rights issue in the fourth quarter 2023.
On December 31, 2023, the Group had total non-current liabilities of NOK 77.0 million
compared to NOK 5.3 million one year before. The increase are due to increased interest
bearing loan, change in classification of from current liabilities and payment instalment for
14 | Annual Report 2023, Observe Medical ASA
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the UnoMeter™ portfolio. This is partly offset by 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.
Total current liabilities at December 31, 2023, amounted to NOK 60.9 million, compared
to NOK 72.2 million at December 31, 2022.
Cash Flow
At the end of 2023, the Group had NOK 13.7 million in cash, stable from NOK 13.6 million
at the end of 2022.
Cash flow from operating activities was negative NOK 24.5 million in 2023, compared to
negative NOK 51.3 million in 2022. Change is mainly driven by result before tax, partly
offset by increased depreciation and amortization, and change in working capital in 2023.
The Group used NOK 7.6 million for investing activities in 2023, a reduction from NOK
58.4 million in 2022. The decrease is related to the cash settlement of NOK 54 million in
connection with the Biim Ultrasound acquisition in 2022.
In 2023, net cash flow from financing activities were NOK 31.7 million due to the net
proceeds of NOK 28.5 million from the rights issue, a NOK 5.0 million loan from
Navamedic ASA, partly offset by interest from converted loans and other lease liabilities.
In 2022, net cash flow from financing activities was NOK 120.9 million and related to the
net proceeds from the rights issue of NOK 155.6 million partly offset by repayment of
interest-bearing loan of NOK 33.3 million.
Financing
In December 2023, the Group completed a Rights Issue. A total of 137,193,548 Offer
Shares were allocated, whereas 82,790,023 Offer Shares were subscribed by way of cash
settlement of the subscription amount and 54,403,525 Offer Shares were subscribed by
way of set-off against the shareholder loans (as further described in the minutes from the
extraordinary general meeting held by the Company on 22 November 2023). A total of
112,544,558 Offer Shares were allocated based on valid subscriptions from investors with
granted and/or acquired subscription rights, 21,070,275 Offer Shares were allocated to
subscribers who have exercised their subscription rights and over-subscribed, on a pro
rata basis based on the number of subscription rights exercised by such subscriber, and
3,578,715 Offer Shares were allocated to subscribers without subscription rights.
Approximately 53% of the subscription rights granted in the Rights Issue were exercised.
The Group's principal source of liquidity will be net cash flows generated from sales in
addition to cash generated from financing, including both equity and debt. Consequently,
any shortfall of cash generated from operations 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, 2023, Observe Medical ASA had 2,128 shareholders and a total of
190,685,204 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 2023.
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.
Rank Name Number of shares Ownership %
1 INGERØ REITEN INVESTMENT COMPANY A 37 384 437 19,61 %
2 JPB AS 16 314 944 8,56 %
3 ELI AS 11 013 298 5,78 %
4 RO, LARS 6 000 000 3,15 %
5 GINNY INVEST AS 5 500 000 2,88 %
6 BJØRNTVEDT, VEGARD 5 024 141 2,63 %
7 SILVERCOIN INDUSTRIES AS 4 948 437 2,60 %
8 NAVAMEDIC ASA 4 222 727 2,21 %
9 SKÅLVOLD EIENDOM AS 3 849 199 2,02 %
10 LAPAS AS 3 468 311 1,82 %
11 BJØRNTVEDT, HARALD 3 200 121 1,68 %
12 Nordnet Bank AB 2 492 692 1,31 %
13 TAJ HOLDING AS 2 481 496 1,30 %
14 CAM AS 2 383 162 1,25 %
15 PHILIP HOLDING AS 2 380 000 1,25 %
16 WANGESTAD, ANDREAS 2 380 000 1,25 %
17 MP PENSJON PK 2 362 305 1,24 %
18 KRISTIANSEN, DAGFINN HELGE 2 150 000 1,13 %
19 SÆTHER, HERMOD ATLE 2 085 108 1,09 %
20 KUBERA AS 2 065 144 1,08 %
21 QUICK ISLAND INVEST AS 2 000 000 1,05 %
22 GUNERIUS PETTERSEN AS 2 000 000 1,05 %
Other 64 979 682 34,08 %
Total number of shares 190 685 204 100,00 %
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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 2023.
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. 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.
The UnoMeter™ portfolio has been market leading in Europe and in several other
countries, but as Convatec Group Plc has withdrawn from the market, there is a risk for
competing product launches and organisations with better ability to penetrate the market
faster and build market share.
The main operational risk short term for Biim relates to the continued roll-out and degree
of adoption of the product in Fresenius Medical Care’s 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 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.
Geo-political factors, such as the Russian invasion of Ukraine and the war in the Middle-
East, has resulted in a rapidly evolving geo-political situation and introduced a new set of
challenges with respect to maintaining business continuity. These events are disrupting
global supply chains which can impact our suppliers’ ability to access materials in time,
which in turn could lead to lack of components and delay the production of devices.
Moreover, the geo-political situation could also create challenges related to logistics and
shipment delays. Consequently, this could result in reduced revenue potential and gross
margin for Observe Medical’s products.
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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.
Trade receivables are continuously monitored, and the risk of incurring losses is generally
regarded as low. The Group also has a factoring agreement with a third party to further
reduce the risk of incurring losses on receivables.
The global situation has become increasingly unstable due to ongoing wars and conflicts,
creating widespread challenges. These issues are significantly affecting raw material
supply, logistics, and transportation. Additionally, this instability is contributing to
heightened uncertainty in financial markets and driving inflation rates higher worldwide.
The Group evaluates climate related risks connected to its operations and important parts
of the value chain. Rapid climate changes may impact the Group’s financial estimates,
access to market, cost of materials, transportation and taxes. The Company currently sees
limited risk and the monitoring of these risks is going to continue in the future.
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.
There is a risk that adequate sources of funds may not be available, or available at
acceptable terms and conditions, when needed.
Organisation
The Group had 12 employees at the end of 2023, where of 3 was temporary laid off. At
the end of the year 4 employees are employed in Sweden, 4 in Norway, 1 in Finland, 2 in
Denmark and 1 in USA.
Due to the Group’s financial situation, the Group has taken necessary steps to reduce
costs. As a result, temporary lay-offs and downsizing was done with effect from second
half of 2023.
Subsequent of year end, QA/RA director Jenny Wennerberg and CTO Carsten Bøgh left
the company in January 2024. At February 29, 2024 Jørgen Mann was appointed interim
CEO as Rune Nystad stepped down as CEO and into the role as Chief Development
Officer (CDO). At March 21, 2024 CFO Per Arne Nygård left the company and Johan M.
Fagerli was appointed interim CFO from March 21. QA/RA function is on short term
planned covered by consultancy and CTO function is covered by the CDO.
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.
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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. The Company is for the reporting year
outside of scope of the Act as the revenues are below MNOK 70 and the number of
employees are below 50 FTE.
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, but have naturally been impacted by
the Group’s downsizing to reduce costs. Sick leave was 0.8% in 2023, compared to 2.8%
in 2022. 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 end of 2023, 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. In total, there
were twelve employees in the Group at December 31, 2023, three women and nine men.
In 2022 there was seventeen employees in the Group, five women and twelve 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
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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.
The Group had no serious incidents with personal injury or absence in 2023. Neither was
any damage to property nor equipment reported.
The Directors’ and management liability insurance
The Company has 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 2023. Going forward, the Group will need to raise more equity, issue debt
instruments or divest assets to fund further development of ongoing business.
The Group has communicated that there is an ongoing process related to the Biim project
where various strategic alternatives are being assessed, including advanced discussions
with Fresenius Medical Care about the next step towards a final investment decision.
Consequently, no assurance can at this stage be given that the Company will pursue
continued product development and ramp up of sales activities for the Biim ultrasound
product.
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 a material uncertainty
with regards of the going concern assumption.
In case of a situation where adequate sources of funds may not be available, the value of
assets can be lower than presented in the financial statements. However this is not
reflected in the valuation of the assets, as the annual accounts are based on the
assumption of going concern.
Reference is made to note 3 Financial Risk management for further information on liquidity
risk.
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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, Observe Medical AS 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 2023, Observe Medical ASA had revenues of NOK 2.6 million related to invoiced
services and expenses to subsidiaries. The Company had operating expenses of NOK 21.1
million which mainly consists of employee benefit expenses of NOK 9.0 million and other
operating expenses of NOK 12.0 million which includes NOK 3.4 million in non-recurring
expenses.
Employee benefit expenses consists of three employees, as well as fees to the Board of
Directors and Audit Committee, and option expenses.
EBIT was in 2023 negative at NOK 19.1 million, compared to negative NOK 18.9 million in
2022.
The company had net financial expenses of NOK 8.5 million mainly consisting of net
interest expenses of NOK 6.8 million, net currency effect of NOK 3.5 million and a net
income of NOK 1.8 million related to changes in consideration on contingent liabilities. In
2022, net financial income were NOK 5.3 million.
The result for 2023 was negative NOK 27.6 million, compared to negative NOK 13.6
million in 2022.
Allocation of Result for the Year 2023
The result for the period in the parent company was negative NOK 27.6 million. The Board
of Directors proposes that the loss for the year should be covered by a transfer from other
equity.
Outlook
2023 has been a pivotal year for Observe Medical as we continue to expand our influence
in the global medtech landscape. This year, we successfully acquired the UnoMeter™
portfolio from Convatec, enhancing our product offerings and market reach. The
UnoMeter™ portfolio of manual urimeters will significantly strengthen Observe Medical’s
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distribution network, revenues, profit and cashflows from operations as well as accelerate
the roll-out of Sippi® through the expanded global distribution network.
This year, we achieved a major milestone with the CE certification of UnoMeter™ 500 and
the initial shipments of these products to our customers. As we look ahead to 2024,
Observe Medical remains commitment to deliver high-quality products to our customers.
We have now expanded our reach to over 25 countries, and we are dedicated to
extending our global reach even further, as well as enhancing our product offerings. An
important milestone for 2024 is launching the UnoMeter™ Safeti+ to the market, an
initiative that aligns with our commitment to increase profitability and deliver high-quality
medical solutions across the globe.
Our partnership with Fresenius Medical Care continues to strengthen, and we are
optimistic that 2024 will be a critical year, potentially seeing Fresenius making their final
investment decision regarding the a full roll-out of Biim probes to all their clinics in the US.
We are actively collaborating with Fresenius to expedite this decision, working closely to
ensure the best outcomes for Observe Medical as we await the completion of their KPI
study. In parallel to our ongoing collaboration with Fresenius, we are diligently exploring
other strategic alternatives for the Biim project. This proactive approach ensures that we
are well-prepared to adapt and advance our strategic objectives, regardless of the
outcome of the current studies and negotiations.
Looking ahead, we remain committed to continue our commercial efforts and strengthen
our product offering. Our focus will be on maximizing the reach and impact of our
expanded product portfolio, ensuring that our products meet the evolving needs of our
customers while diligently striving to deliver value to our shareholders.
Subsequent events
At February 29, the Group announced that Rune Nystad will step down as CEO in Observe
Medical and that Jørgen Mann, the Chief Commercial Officer ("CCO"), will step in as the
interim CEO. Mr. Nystad will transition into the role as Chief Development Officer ("CDO")
of the Company.
At March 21, the Group announced that Per Arne Nygård has resigned from his position
as CFO to pursue opportunities outside the Company. Johan M. Fagerli, Finance
Manager, assumed the responsibilities of Interim CFO with immediate effect.
At April 18, Observe Medical announced that it will transfer its Nordic distribution
operations to Vingmed, following a strategic review. The Company assessed the relevance
of the business, originally established as a platform for testing and launching its branded
products. Given the expansion of our global distribution capabilities, which now fulfill our
initial testing and pre-launch needs, the business is becoming less crucial to our core
operations. Consequently, the Group have decided to seek more suitable ownership of
the Nordic operations going forward.
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The Board of Directors and CEO of Observe Medical ASA
Oslo, April 26, 2024
Terje Bakken Kathrine Gamborg Andreassen
Chair of the Board Board member
Sanna Rydberg Line Tønnessen
Board member Board member
Eskild Endrerud Jørgen Mann
Board member Interim CEO
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Declaration in Accordance with §5-5 of
the Securities Trading Act
We confirm that the financial statements for 2023 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 26, 2024
Terje Bakken Kathrine Gamborg Andreassen
Chair of the Board Board member
Sanna Rydberg Line Tønnessen
Board member Board member
Eskild Endrerud Jørgen Mann
Board member Interim CEO
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Management and Board of Directors
Management team
Jørgen Mann | Interim Chief Executive Officer
Appointed Interim CEO from February 29, 2024. 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.
Johan M. Fagerli | Interim Chief Financial Officer
Appointed Interim CFO from March 21, 2024. 20 years-experience from various
roles within financial management, business controlling and accounting across
multiple industries such as real estate, road construction and telecom. Mr. Fagerli
joined Observe Medical in 2021 and holds a degree in economics and business
administration (siviløkonom) from Nord University Business School.
Rune Nystad | Chief Development Officer
More than 20 years of experience from global medtech and industrial technology
from the Nordics, US, Germany, Ireland and Hong Kong, including Boston Scientific.
Founder and CEO in Biim Ultrasound AS and joined Observe Medical as CEO in
March 2022 after Observe Medical’s acquisition of Biim Ultrasound AS.
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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 is engaged in a range of Reiten &
Co’s investments has a strong analytical and corporate finance background. 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). Line also sits on the Board of Directors of Vow Green
Metals AS.
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, 2023, the Group had a consolidated equity of NOK 115.6 million,
corresponding to an equity ratio of 45.6%.
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 May 26, 2023 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 2,782 thousand in order to finance further growth
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for the Company. The shareholders’ pre-emptive rights under §10-4 of the Public Limited
Liability Companies Act could under both authorizations be set aside when utilized by the
board. The authorizations described above had a term until the Annual General Meeting
in 2024, but in no event later than June 30, 2024.
As of December 31, 2023 the Company had 1,143,955 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.
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.
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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
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.
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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
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. Thirty
two board meetings were held in 2023. 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,
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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.
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, 2023 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, 2023, 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, 2023, the M&A committee consisted of the following board
members:
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• 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
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.
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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
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
35 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
investor community, including the company’s shareholders. Information to the stock
market is published in the form of annual and interim reports, press releases, stock
exchange announcements and investor presentations. All information considered relevant
and significant for valuing the company’s shares will be distributed and published in
English via Oslo Børs disclosure system, www.newsweb.no, and via the Group’s website
www.observemedical.com simultaneously. Observe Medical holds public presentations in
connection with the announcement of quarterly and annual financial results. The
presentations are also available as live presentations via the internet. Presentation material
is made available via Oslo Børs’ news site www.newsweb.no and
www.observemedical.com. Observe Medical gives weight to maintaining an open and
ongoing dialogue with the investor community. Reporting of financial and other
information shall be timely and accurate. The main purpose of this information presents a
complete picture of the Group’s financial results and position as well as articulating the
Group’s long-term goals and potential, including its strategy, value drivers and important
risk factors. The Group publishes a financial calendar every year with an overview of the
dates of important events, including the general meeting, publication of interim reports
and presentations. This calendar is made available as a stock exchange announcement
and on the Group’s website as soon as it has been approved by the board.
Takeovers
In the event of a takeover bid being made for the company, the board will follow the
overriding principle of equality 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.
36 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
The Board of Directors and CEO of Observe Medical ASA
Oslo, April 26, 2024
Terje Bakken Kathrine Gamborg Andreassen
Chair of the Board Board member
Sanna Rydberg Line Tønnessen
Board member Board member
Eskild Endrerud Jørgen Mann
Board member Interim CEO
37 | Annual Report 2023, 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 2023 to 31
December 2023.
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 Interim CEO
Jørgen Mann or Interim CFO Johan
Fagerli.
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 September 2023, Observe Medical
finalized the acquisiton of the trademarks
and other intellectual property rights
relating to state-of-the-art urine
measurement products known as the
UnoMeter™ and Abdo-Pressure™
products. The Transaction is a significant
38 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
step forward for Observe Medical as it
expands its product portfolio and
strengthens its position in the market.
In addition, the Company has a broad
distribution portfolio of medtech devices
and disposables, mainly within Urine
measurement, Anesthesiology/ICUs and
wound care. This product portfolio from
well-established suppliers in medical
technology and wound care is sold
through an experienced sales team. 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
39 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
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 distriubutors,
hospitals and other health institutions in
the Nordics, selected markets in Europe
and globally. 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
Employees
Investors /
shareholders
Government
/ regulatory
authorities
Customers /
Patients
Suppliers
Academia
and life
science
community
Corporate governance and
sustainability approach
Observe Medical considers good
corporate governance to be a
prerequisite for value creation and
trustworthiness, and for access to capital.
In order to secure strong and sustainable
corporate governance, it is important that
Observe Medical ensures good and
healthy business practices, reliable
financial reporting and an environment of
compliance with legislation and
regulations across the Group.
Observe Medical has governance
documents setting out principles for how
business should be conducted. These
apply to all group entities. Observe
Medical is subject to annual corporate
governance reporting requirements
under section 3-3b of the Norwegian
Accounting Act and the Norwegian Code
of Practice for Corporate Governance
(NUES recommendations), cf. section 7
on the continuing obligations of stock
exchange listed companies.
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
2023
For 2023, 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.
In 2023 the working environment has
been heavily impacted by temporary lay-
offs and cost reduction activities leading
to downsizing of the workforce.
At December 31 2023, 4 employees are
employed in Sweden, 4 in Norway, 1 in
Finland, 2 in Denmark and 1 in USA.
41 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Observe Medical’s employees
At 31 Dec 2023
At 31 Dec 2022
Men 
Women 
Total 
Men 
Women 
Total 
Total employees (headcount)
9
3
12
11
6
17
Full-time equivalents (FTE’s)
7
2
9
11
6
17
Temporary laid off
2
1
3
0
0
0
Table 2: Observe Medical’s employees
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 2023, 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.
Observe Medical had a labour turnover
rate of 33% (18% in 2022). However,
looking at turnover rate with a relaive low
workforce count, the rate is subject to
large variations. Note that the Group in
second half of 2023 initiated cost
reduction activities where downsizing of
the workforce was one of the nesseceary
measures.
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
Observe Medical’s employee turnover
2023
2021
Labour turnover rate
   18%
18%
Total turnover (no. of employees)
6
3
42 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
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 2023.
The company will increase its focus on
gender balance in senior positions going
forward. The company is further
committed to equal pay for the same
work and performance regardless of
gender.
Table 4: Observe Medical’s workforce by age and gender
Decent and safe working conditions are
essential for a healthy workforce that can
contribute to successful business
operations and growth. Working in an
office environment or remotely with sales
without any inhouse production, the
company is 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 2023. Nor was
there any damage to property or
equipment reported. The registered
absence rate for sickness was 0.8%
compared to 2.8% in 2022.
Observe Medical’s health and safety data
2022
2021
Sick leave per cent
   0.8%
2.8%
Accident frequency rate
0
0
Accident severity rate
0
0
Table 5: Health and safety data
Share of Observe Medical’s workforce
pr 31.12 by age and gender
Men 
Women 
<30 year
of age
30-50
years of
age
>50 years
of age
Organisation
9 (75%)
3 (25%)
0
10
5
Group Management team
   2
(100%)
0 (0%)
0
0
2
Board of Directors
2 (40%)
3 (60%)
0
2
3
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.
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 UnoMeter™
portfolio, the exposure to new suppliers
and partners have increased significantly.
Observe Medical has distributors as
partners for foreign markets, which are
mainly located in Europe, but also Asia,
South America and USA. Manufacturing
partners are currently in China, Italy and
USA.
In general, Observe Medical operates in
countries which are considered low to
medium 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 Russia or Belarus.
There were zero reported incidents of
corruption or public legal cases
regarding corruption in 2023. Observe
Medical has not experienced any
breaches of its policies or guidelines by
Goals for 2024
• Seek gender balance in senior
positions
• Complete Employee Handbooks for
the Group
• Establish an external whistleblowing
channel
44 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
suppliers in 2023, 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.
This will be followed up in the coming
year.
Goals for 2024
• 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
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. With the
UnoMeter™ portfolio and a new
manufacturing partner in Asia, the
Group’s environmental impact increases
with both disposable units and emissions
from transportation.
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
Observe Medical is aware that
production partners in Asia will increase
the emissions from transportation,
compared to production in Europe.
Production in Europe may be an
alternative in the future.
At the end of 2023 Observe Medical had
3 company cars, where of 2 EV’s.
The Group has reduced 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
45 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
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.
Observe Medicals´s digital urine meter
Sippi® will contribute positively to reduce
plastic waste compared to manual urine
meters.
Goals for 2024
• Observe Medical will further work to
understand how to reduce our
environmental footprints, direct and
indirect
• Establish a Group Environmental
Policy with guidelines that outlines
how to improve environmental
performance
Product safety
Product safety is fundamental to Observe
Medical and is part of the company’s
license to operate. Risk management is
applied within the group to ensure only
products with acceptable risks are placed
on the market. The most likely health and
safety hazards are related to human error
when using the products, and the
company therefore works continuously
with usability.
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 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
46 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
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.
47 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Consolidated Financial Statements 2023
48 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Contents ....................................................................................................................................................
Consolidated Statement of Comprehensive Income ........................................................................ 49
Consolidated Statement of Financial Position ................................................................................... 50
Consolidated Statement of Changes in Equity .................................................................................. 52
Consolidated Cash Flow Statement .................................................................................................... 53
Explanatory Notes to the Consolidated Financial Statements 2023 ................................................ 54
Note 1 – General Information .......................................................................................................... 54
Note 2 – Basis for Preparation and material Accounting Policies ................................................. 55
Note 3 – Financial Risk Management .............................................................................................. 60
Note 4 – Significant Judgements in the Application of Group Accounting Policies and Accounting
Estimates ........................................................................................................................................... 63
Note 5 – Segment Information and Revenue from Contracts with Customers ............................ 64
Note 6 – Tangible Assets and Lease ............................................................................................... 65
Note 7 – Intangible Assets ............................................................................................................... 67
Note 8 – Financial Items ................................................................................................................... 69
Note 9 – Cost of Materials ................................................................................................................ 69
Note 10 – Trade Receivables and Other Receivables .................................................................... 70
Note 11 – Inventories ....................................................................................................................... 70
Note 12 – Financial Instruments ...................................................................................................... 70
Note 13 – Contingent Consideration .............................................................................................. 73
Note 14 – Taxes ................................................................................................................................ 74
Note 15 – Other Operating Expenses ............................................................................................. 76
Note 16 – Payroll Expenses .............................................................................................................. 77
Note 17 – Remuneration to Corporate Management and Board of Directors ............................. 77
Note 18 – Share Options .................................................................................................................. 80
Note 19 – Earnings per Share .......................................................................................................... 81
Note 20 – Related Parties ................................................................................................................. 81
Note 21 – Research and Development ........................................................................................... 82
Note 22 – Shareholder Information ................................................................................................. 83
Note 23 –Business Combinations .................................................................................................... 84
Note 24 –Subsequent event ............................................................................................................ 85
49 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Observe Medical Group
Consolidated Statement of Comprehensive Income
Amounts in NOK thousand Note FY 2023 FY 2022
Operating revenues 5 27 942 19 521
Cost of materials 9 18 655 14 344
Gross result 9 287 5 177
Employee benefit expenses 16, 17, 18 25 964 28 521
Other operating expenses 15, 21 21 016 24 868
Operating expenses 46 980 53 389
Operating result before depreciation and amortisation (EBITDA) -37 693 -48 212
Depreciation and amortisation 6, 7 13 570 10 931
Operating result (EBIT) -51 263 -59 143
Financial income and expenses
Financial income 8 7 523 19 122
Financial expenses 8, 13 16 605 10 704
Net financial items (9 082) 8 418
Result before tax -60 345 -50 725
Income tax expense 14 17 76
Result for the period -60 362 -50 801
Result for the period attributable to:
Equity holders of the parent company -60 362 -50 801
Other comprehensive income that may be reclassified
subsequently to profit or loss
Currency translations differences 7 244 -2 504
Total comprehensive income/loss for the period -53 118 -53 305
Total comprehensive income attributable to:
Equity holders of the parent company -53 118 -53 305
Basic earnings per share (NOK per share) 19 -1.05 -1.08
Diluted earnings per share (NOK per share) 19 -1.05 -1.08
50 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Observe Medical Group
Consolidated Statement of Financial Position
Amounts in NOK thousand
Note At 31 December 2023 At 31 December 2022
ASSETS
Non-current assets
Goodwill 7 102 314 99 961
Intangible assets 7 122 012 82 767
Tangible assets 6 1 957 4 152
Other non current assets 32 0
Total non-current assets 226 315 186 880
Current assets
Trade receivables 10, 12 3 117 4 731
Inventories 11
6 890
8 117
Other receivables and prepaid expenses 10 3 539 2 443
Cash and cash equivalients 12 13 676 13 641
Total current assets 27 222 28 932
Total assets 253 537 215 812
EQUITY AND LIABILITIES
Share capital 49 578 13 908
Other equity 66 028
124 398
Total equity 115 606 138 306
Non-current liabilities
Contingent consideration 12, 13 1 560 3 365
Non-current interest bearing liabilities 12 50 027 946
Other non-current liabilities 6, 12 25 461 965
Total non-current liabilities 77 048 5 276
Current liabilities
Trade payables
12
17 847 8 610
Current tax liabilities 14 0 51
VAT and other public taxes and duties payables
10 574 6 074
Current interest bearing debt
12, 20
4 477 44 802
Other current liabilities
12, 6
27 985 12 693
Total current liabilities 60 883 72 230
Total liabilities 12 137 931 77 506
Total equity and liabilities 253 537 215 812
51 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
The Board of Directors and CEO of Observe Medical ASA
Oslo, April 26, 2024
Terje Bakken Kathrine Gamborg Andreassen
Chair of the Board Board member
Sanna Rydberg Line Tønnessen
Board member Board member
Eskild Endrerud Jørgen Mann
Board member Interim CEO
52 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Observe Medical Group
Consolidated Statement of Changes in Equity
During 2023 Observe Medical ASA has issued 137 193 548 new shares for gross proceeds
of NOK 35 670 thousand. Net proceeds after cost of share issue of NOK 4 980 thousand
and settlement against debt of NOK 2 239 thousand was NOK 28 451 thousand.
See note 22 for further information about movement in share capital / number of shares,
note 18 share options.
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 2022 5 097 87 065 11 800 103 963 -108 691 -9 394 -14 122
Share issue 8 811 196 635 - 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
Issued capital
Share
premium
Other paid in
equity
Total paid-in
capital
Retained
earnings
Translation
differences
Total
Equity as at 1 January 2023 13 908 283 700 11 800 309 409 -159 205 -11 898 138 306
Share issue 35 670 -5 730 - 29 940 - - 29 940
Options - - - - 478 - 478
Result for the period - - - - -60 362 - -60 362
Translation differences - - - - - 7 244 7 244
Equity as at 31 December 2023 49 578 277 970 11 800 339 349 -219 089 -4 654 115 606
Attributable to the equity holders of the parent
53 | Annual Report 2023, Observe Medical ASA
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Observe Medical Group
Consolidated Cash Flow Statement
Amounts in NOK thousand Note 2023 2022
Cash flow from operating activities
Result before tax -60 345 -50 725
Tax paid 14 36 -142
Depreciation and impairment 6,7 13 570 10 931
Gain(-)/ loss from sale of fixed asset 0 -320
Interest expenses and change FV contingent consideration
with no cash effect
13 7 374 -6 628
Change in inventories 11 1 227 -294
Change in trade receivables and other receivables 10 515 -1 908
Change trade account payables and other current liabilities 12 13 168 -2 249
Net cash flow from operating activities -24 455 -51 334
Cash flow from investing activities
Sale of tangible and intangible assets 6,7 392 559
Purchase of tangible and intangible assets 6,7 -8 018 -4 927
Net cash effect of business combination 23 0 -54 002
Net cash flow from investing activities -7 626 -58 370
Cash flow from financing activities
Net change interest bearing debt 12 4 932 -19 404
Net change bank overdrafts 12 0 -13 863
Net proceeds from share issue 22 28 451 155 597
Payments of lease liabilities 6, 12 -1 643 -1 390
Net cash flow from financing activities 31 740 120 940
Currency translation differences 377 -460
Changes in cash 36 10 777
Cash and cash equivalients as at 1 January 12 13 641 2 864
Cash and cash equivalients end of period 12 13 676 13 641
54 | Annual Report 2023, Observe Medical ASA
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Explanatory Notes to the Consolidated
Financial Statements 2023
Note 1 – General Information
Observe Medical ASA is a Norwegian public listed company located in Norway and whose
shares are public traded on Euronext Expand Oslo. Its head office is located in Dronning
Eufemias gate 16, 0191 Oslo, Norway.
The consolidated financial statements for Observe Medical ASA (“OM group” or “the
Group”), including notes, for the year 2023 were approved by the Board of Directors of
Observe Medical ASA on April 26, 2024 and will be proposed to the Annual General
Meeting on May 24, 2024.
The Group’s activities are described in the Board of Director’s report.
The Group has focus on measures to reduce its environmental footprint. Climate-related
development may have impact on the business, such as increased cost of production and
transportation as a result of measures to reduce carbon emission, from disposable units
and UnoMeter™ portfolio in particular.
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. The Company is for the reporting year
outside of scope of the Act as the revenues are below MNOK 70 and the number of
employees are below 50 FTE.
Going Concern assumption and Liquidity
The annual accounts are based on the going concern assumption. Reference is made to
the next paragraph and the Board of Directors’ report for further details.
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 2023. Going forward, the Group will need to raise more equity, issue
debt instruments or divest assets to fund further development of ongoing business.
The Group has communicated that the net proceeds from the rights issue were not
sufficient to cover the working capital requirements for continued product development
and operation of the ultrasound business, Biim Ultrasound AS. There is in an ongoing
55 | Annual Report 2023, Observe Medical ASA
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process where various strategic alternatives are being assessed, including advanced
discussions with Fresenius Medical Care about the next step towards a final investment
decision.
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.
Note 2 – Basis for Preparation and material Accounting Policies
The basis for preparation and most important accounting policies used in the preparation
of the consolidated financial statements are described below. The basis and policies are
applied consistently in all of the periods presented, unless the description states
otherwise.
The Group’s financial statements have been prepared based on historical cost, with the
exception of contingent consideration which is recognized at fair value through profit or
loss.
The consolidated annual financial statements of the Group have been prepared in
accordance with International Financial Reporting Standards (IFRS® Accounting
Standards) as issued by the International Accounting Standards Board (IASB) which have
been adopted by the Eu, and Norwegian disclosure requirements listed in the Norwegian
Accounting Act.
Preparing financial statements in accordance with IFRS requires the use of estimates.
Furthermore, applying the Group’s accounting policies requires the management team to
use its judgment. Areas that involve a high degree of estimation and a high degree of
complexity, or areas where assumptions and estimates are significant for the Group’s
financial statements, are described in Note 4.
Changes to Accounting Policies and Disclosures
The accounting policies applied are the same for all periods presented.
Amendments to accounting policies Amendments to IAS 1 Presentation of financial
statements and IFRS Practice Statement 2 Making Materiality Judgements came into force
on 1 January 2023. As a result, the description of Observe Medical’s accounting policies
is somewhat shorter, as emphasis has been placed on disclosing important policy choices
made by Observe Medical. General or generic information has been deleted from the
disclosure of policies in the notes. The group has otherwise made no changes in
56 | Annual Report 2023, Observe Medical ASA
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presentation or accounting policies nor applied any new standards that materially affect
its financial reporting or comparisons with previous periods.
Revisions to standards and interpretations that did not come into force for the Group for
the period that ended December 31, 2023 are evaluated and are expected to not have
any significant effect for the Group.
Basis of Combination and Consolidation
Companies that have been controlled by Observe Medical ASA, have been fully combined
and consolidated for all periods presented for the purpose of these financial statements
(“subsidiaries“).
Control exists when an entity is exposed, or has rights, to variable returns from its
involvement with the investee and is able to affect those returns by exercising power over
the investee. Power means existing rights that provide the investor with the ability to direct
relevant activities, i.e. the activities that significantly affect the investee’s returns. There are
no non-controlling interests for the periods presented.
Intra-group income, expenses, and balances are eliminated in preparing the Groups
financial statements.
Segment Information
The Group has only one operating segment, consistent with the reporting to the chief
operating decision maker, consisting of the CEO and the Board of Directors.
Translation of Foreign Currency
Functional currency and presentation currency
The consolidated financial statements are presented in Norwegian kroner. Foreign
companies that are part of the Group and have different functional currencies are
converted to Norwegian kroner. Translation differences are included in the total
comprehensive income
Intangible Assets and Goodwill
Recognition and measurement
Expenditure on research activities is recognized in profit or loss as incurred.
Development expenditure is capitalized only if the expenditure can be measured reliably,
the product or process is technically and commercially feasible, future economic benefits
are probable and the Group intends to and has sufficient resources to complete
development and to use or sell the asset. Otherwise, it is recognized in profit or loss as
57 | Annual Report 2023, Observe Medical ASA
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incurred. Subsequent to initial recognition, development expenditure is measured at cost
less accumulated amortization and any accumulated impairment losses.
Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated
impairment losses.
Other intangible assets, including customer relationships, patents and trademarks, that
are acquired by the Group and have finite useful lives are measured at cost less
accumulated amortization and any accumulated impairment losses.
Subsequent expenditure
Subsequent expenditure is capitalized only when it increases the future economic benefits
embodied in the specific asset to which it relates. All other expenditure, including
expenditure on internally generated goodwill and brands, is recognized in profit or loss
as incurred.
Amortization
Amortization is calculated to write off the cost of intangible assets less their estimated
residual values using the straight-line method over their estimated useful lives and is
generally recognized in profit or loss. Goodwill is not amortized.
Amortization methods, useful lives and residual values are reviewed at each reporting
date and adjusted if appropriate.
Technology assets
The Group capitalises costs for product development projects. Initial capitalisation of
costs is based on management’s judgement that technological and economic feasibility is
confirmed, usually when a product development project has reached a defined milestone
according to an established project management model. In determining the amounts to
be capitalised, management makes assumptions regarding the expected future cash
generation of the asset, discount rates to be applied and the expected period of benefits.
For the year 2023, capitalised expenditures is related to product and production setup of the
UnoMeter™ portfolio.
Impairment of Non-Financial Assets
Tangible assets and intangible assets with finite useful lives are assessed for impairment
when there are indications of impairment.
An impairment amounting to the difference between the carrying value and recoverable
amount is recognized through profit or loss. The recoverable amount is the highest of
value in use and fair value less cost of disposal.
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When assessing possible impairment, assets are grouped at the lowest level that
generates cash inflows that are largely independent of cash inflows from other assets or
groups of assets. The Group currently has only one cash generating unit.
Goodwill is not amortized, but tested at least annually for impairment.
Inventories
Inventories are measured at the lower of cost and at net realizable value. To determine
cost the company using the first-in, first-out method (FIFO). Net realizable value is the
estimated selling price and the estimated costs necessary to make the sale.
Financial Assets
The company has financial assets in the category of amortized cost, which primarily consist
of short-term receivables and bank deposits. Accounts receivables are initially measured
at the transaction price. Other financial assets are initially recognized at fair value in
addition to transaction costs and then at amortized cost using the effective interest
method adjusted for impairment.
The company uses historical figures to calculate provision for expected credit losses on
trade receivables. A significant proportion of the customers are public
customers/healthcare institutions and hospitals, and historical the company have
immaterial credit losses for the periods presented, no credit losses have been realized
and no provisions for expected credit losses have been recognized.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and bank deposits, with a maximum of three
months’ original duration.
Financial Liabilities
Financial liabilities include:
a) Financial liabilities at fair value through profit or loss: Contingent consideration
from acquisition; and
b) Financial liabilities at amortized cost: primarily interest-bearing debt to
Navamedic ASA, Business Finland and instalments to Convatec regarding to
aquirement of UnoMeter
TM
, in addition to payables.
Income Tax
The tax expense consists of tax payable and deferred tax.
59 | Annual Report 2023, Observe Medical ASA
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The Group has historically operated with significant losses for tax and accounting
purposes. The Group has operations, and tax losses carried forward, in Norway, Denmark
and Sweden. So far, the Group has had no basis for recognition of net deferred tax assets
according to IAS 12 Income taxes. For all periods presented, the Group has reported zero
net deferred tax assets or income tax expense.
Deferred tax assets and deferred tax is offset if there is a legally enforceable right to offset
assets in the event of tax payable against liabilities in the event of tax payable, and the
deferred tax assets and deferred tax relate to income tax that is imposed by the same tax
authority for either the same taxable enterprise or different taxable enterprises that intend
to settle liabilities and assets in the event of tax payable net. At the acquisition of Observe
Medical International AB in 2015, deferred tax asset was recognized on tax losses carried
forward in the same amount as deferred tax liability recognized on the fair value
adjustments of the technology intangible assets, with net zero deferred tax recognized. In
subsequent periods, the deferred tax asset has been reduced in line with the reduced
deferred tax liability on the intangible assets.
Pensions
The Group has entered into a mandatory defined-contribution pension scheme for all
employees. The contributions are recognized as payroll expenses as the obligation to pay
contributions accrue.
Revenue Recognition
Revenue from contracts with customers is recognised at the point of time when control of
the goods or services are transferred to the customer at an amount that reflects the
consideration to which the Group expects to be entitled in exchange for those goods or
services.
Invoices are issued upon delivery of the goods with payment terms of typically 30 days.
No significant performance obligations according to IFRS 15.119.
Leases
The Group recognized right of use assets and lease liabilities for leases, except for
agreements with a lease period of less than one year or where the value of the underlying
asset is low. Depreciation, impairment, and interest expenses must be recognized in the
consolidated statement of comprehensive income. For lease contracts for which the lease
term is less than one year or where the value of the underlying asset is low the lease
payments are recognized as an expense on a straight-line basis over the lease period.
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Share Options
The fair value of options granted to member of management is recognized as employee
benefit expense with a corresponding increase in equity for equity settled awards. The
total amount to be expensed is determined by reference to the fair value of the options
granted. The total expense is recognized over the vesting period. Social security
contributions payable in connection with an option grant are treated as cash-settled
transactions and expensed as employee benefit expenses.
Note 3 – Financial Risk Management
Financial Risk Factors
The Group’s operations expose it to various types of financial risk: market risk (including
currency risk, interest risk, and price risk), credit risk, and liquidity risk.
Market Risk
The Group is exposed to market risk. The Group believes that such risk primarily arises in
relation to the future sales of the Group’s products, measured in terms of both price and
volume. Factors that can influence market risk include increased competition, instructions
to reduce prices from the authorities, and competition from existing and future medtech
companies. The risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market prices. Market risk comprises three types of risk:
currency risk, interest rate risk and other price risk.
It is important that The Group is able to establish and keep it’s UnoMeter™ products in
the market that Convatec left behind when withdrawing from the hospital care market and
focusing on chronic care markets. Increased competition may lead to reduced revenue
potential and gross margin for Observe Medical’s products.
Following any liquidity risk, if by any case The Group is unable to fulfill the terms of the
contract related to the purchase of UnoMeter™ from Convatec, including payment of the
contracted instalments, there is a risk that Observe Medical will have to suspend it’s sales
under the UnoMeter™ brand.
Operational Risk
Geo-political factors, such as the Russian invasion of Ukraine and the war in the Middle-
East, 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 in the
Middle East as well as implications after the Covid-19 pandemic. These events are
disrupting global supply chains which can impact our suppliers’ ability to access materials
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in time, which in turn could lead to lack of components and delay the production of
devices. Moreover, the geo-political situation could also create challenges related to
logistics and delay in shipments. Consequently, this could lead to reduced revenue
potential and gross margin for Observe Medical’s products.
Rapid geo-political changes may impact both access to market, transportation and taxes.
The company is following the situation closely, and is aware that production in Asia
increase the risk exposure.
There is a risk that key personnel may leave the Company and interrupt business
continuity. Operational riks also includes errors that may occur at contracted suppliers and
manufacturers of the Group’s products, and Observe Medical has processes in place to
mitigate these risks.
Climate Risk
The Group evaluates climate related risks connected to its operations and important parts
of the value chain. Rapid climate changes may impact the Group’s financial estimates,
access to market, cost of materials, transportation and taxes. The Company currently sees
limited risk and the monitoring of these risks is going to continue in the future.
Currency Risk
For the periods presented, currency risk has primarily been related to payables and
receivables within the Observe Medical group and related parties. The Payroll and
operating expenses are generally incurred in the currency of the country in which the
individual company is registered (NOK, SEK, DKK, EUR and USD). There is a currency risk
related to funding of the companies in USA and Finland where operating expenses is
incurred in USD and EUR and no income. A sensitivity analysis of the effect of a potential
change in NOK/USD and NOK/EUR of +/- 10% shows that the impact on result before tax
in 2023 would be +/- NOK 200 thousand against USD and +/- NOK 150 thousand against
EUR.
Going forward, it is expected that revenues will be generated in both the functional
currency of the selling entity and in foreign currencies. This may also apply to cost of
materials. For the UnoMeter™ portfolio the cost of goods sold are primarily in USD, and
a majority of the revenues are currently in EUR. Future growth in sales the next months
and years, will increase the exposure towards foreign currency, primarily USD/EUR. The
Group has so far not adopted specific currency hedging strategies in relation to its
operations.
Credit Risk
The Group has for the periods presented had insignificant credit risk. The company’s
customers are mainly largely public enterprises and larger distributors that represent a
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low credit risk. In second half of 2023, The Group entered into an agreement on the
purchase of receivables with Avida. This agreement both reduces the credit risk, but also
improves the Group’s working capital.
Liquidity Risk
Liquidity risk is the risk that the Group will not be able to settle its financial obligations as
they fall due. The Group has mainly used equity financing in order to meet liquidity
requirements relating to financial obligations, covering operational losses and
investments. The Group’s financial liabilities as at 31 December 2023 were NOK 136.4
million and 24.7 million are mature within 12 months from balance sheet date.
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 2023. Going forward, the Group will need to raise more equity, issue debt
instruments or divest assets to fund further development of ongoing projects and future
operations. In case of a situation where funds may not be available in the amount needed,
the value of assets can be lower than presented in the financial statements. However this
is not reflected in the valuation of the assets, as the annual accounts are based on the
assumption of going concern.
Reference is also made to the Board of Directors’ report.
Variable Interest Rate Risk
The Group’s variable interest rate risk is limited as interest bearing liabilities to Navamedic
ASA and Business Finland has a fixed interest rate. The liability towards Convatec Plc. from
the purchase of the UnoMeter™ portfolio are in USD. The Group has currently limited
bank deposits and change in variable interest rate will have limited effect. The Group has
not hedged its interest rate exposure.
Management of Capital
The Group has so far not had any expressed goals or requirements in relation to
management of capital. Focus in the short term will be to ensure continued operations to
further develop and commercialize UnoMeter™ Safeti plus, UnoMeter™ Safeti Max,
Sippi® and the Biim ultrasound probe. In the longer term, goals will include securing
returns for its owners, and to maintain an optimal capital structure in order to reduce
capital expenses. So far, the Group has not had any debt with financial covenant
restrictions.
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Note 4 – Significant Judgements in the Application of Group
Accounting Policies and Accounting Estimates
The preparation of financial statements in accordance with IFRS requires that
management make assessments, estimates and assumptions that impact reported
amounts for revenues, expenses, assets and liabilities and presentation of contingent
liabilities at the end of the reporting period. The key assumptions concerning the future
and other key sources of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are described below. The Group based its
assumptions and estimates on parameters available when the consolidated financial
statements were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or circumstances arising that
are beyond the control of the Group. Such changes are reflected in the assumptions when
they occur.
Business combinations
Estimations that management have made as part of the application of the entity’s
accounting policies and that have the most significant impact on the amounts recognized
in the financial statements are related to the acquisition of OMI AB in 2015, Sylak AB in
2020, and Biim Ultrasound AS in 2022, purchase of UnoMeter
TM
in 2023 in addition to
further capitalization of costs for development of the technology assets.
As part of the business combination, the management has based their judgments on
assumptions and made estimates of the fair values of assets and liabilities acquired, as
well as the fair value of the contingent consideration. These assumptions and estimates at
the acquisition date affects the classification and carrying amounts in the balance sheet
and subsequent amortization, depreciation, change in fair value through profit or loss for
contingent consideration and potential for impairment charges.
R&D
Capitalization of further development costs requires documentation that all criteria for
capitalization of own development still are met, including that sufficient resources are
available to complete the development and management’s expectations and estimates of
future economic benefits to be generated by the assets.
Impairment of goodwill
Sources of estimation uncertainty with a significant risk of a material adjustment to the
carrying amount in the following period relates primarily to the measurement of goodwill,
technology assets, and contingent consideration, and recognition of deferred tax assets.
64 | Annual Report 2023, Observe Medical ASA
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Management has used estimates and assumptions in the determination of the
amortization period for intangible assets, the assessment of impairment indicators and
impairment tests. These are affected by management’s expectations and estimates of
future economic benefits to be realized by the Group. See notes 2 and 7 for further
information.
The Group has so far not been able to demonstrate convincing evidence of future taxable
profits to be able to recognize net deferred tax assets on its tax losses carried forward
according to IAS 12.
Note 5 – Segment Information and Revenue from Contracts with
Customers
The Group is organized into one business unit based on its products and services, and has
one reportable segment.
For more information about our products, see section about the Observe Medical
portfolio in the annual report.
Overview of revenue per product group
Revenue per product group
Amounts in NOK thousand 2023 2022Urine Measurement8 284 139Ultrasound1 207 5 051Nordic Portfolio 15 589 13 725Other 2 862 606Total 27 942 19 521
Revenue per geographic market
Amounts in NOK thousand 2023 2022Norway781 962Sweden15 130 13 369USA1 207 5 051Other European countries 10 824 139Total 27 942 19 521
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Note 6 – Tangible Assets and Lease
Right-of-use
As at December 31, 2023, the Group has lease contracts for four cars and office in Seattle. In addition, the group has short
term leases that are not recognized as right-of-use assets related to offices in Sweden and Norway.
Amounts in NOK thousand Right-of-use Other SumAcquisition cost 1 January 2022 1 450 2 495 3 945Additions 969 1 403 2 372Additions from aquisition of companies 2 257 449 2 707Disposals -2 000 -1 481 -3 481Currency translation differences -128 4 -124Acquisition cost 31 December 2022 2 549 2 870 5 419Acquisition cost 1 January 2023 2 549 2 870 5 419Additions 0 42 42Disposals -1 592 0 -1 592Currency translation differences 78 5 83Acquisition cost 31 December 2023 1 035 2 917 3 952Accumulated depreciation 1 January 2022 469 2 096 2 565Depreciation for the year 1 433 297 1 730Disposals -2 000 -1 095 -3 095Currency translation differences 52 16 68Accumulated depreciation 31 December 2022 -46 1 314 1 268Accumulated depreciation 1 January 2023 -46 1 314 1 268Depreciation for the year 1 543 430 1 973Disposals -1 200 0 -1 200Currency translation differences -24 -22 -46Accumulated depreciation 31 December 2023 273 1 722 1 995Carrying value 1 January 2022 981 400 1 381Additions 969 1 403 2 372Additions from aquisition of companies 2 257 449 2 707Disposals 0 -386 -386Depreciation -1 433 -297 -1 730Translation differences -180 -12 -192Carrying value 31 December 2022 2 595 1 557 4 152Carrying value 1 January 2023 2 595 1 557 4 152Additions 0 42 42Disposals -392 0 -392Depreciation -1 543 -430 -1 973Translation differences 102 26 128Carrying value 31 December 2023 762 1 195 1 957
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Lease Liability 2023 2022As at 1 January 2 643 993Additions 0 969Additions from aquisition of companies 0 2 257Disposal -392 -147Lease payments in the period -1 643 -1 514Interest cost 81 123Currency translation differences 103 -40Closing liability at 31 December 792 2 643Current 656 1 678Non-current 136 965792 2 643
Amounts in NOK thousand 2023 2022Depreciation expense of right-of-use assets 1 543 1 433Interest expense on lease liabilities 81 123Expense relating to short-term leases (included in other operating expenses) 1 736 2 459Total amount recocnised in result for the period 3 360 4 015Undiscounted Lease Liabilities and Maturity of Cash OutflowAmounts in NOK thousand 2023 2022Due within 1 year 837 1 878Due between 1 year and 3 years 197 1 012Total 1 035 2 890
Effect of leases Contract on the Statement of Comprehensive Income
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Note 7 – Intangible Assets
Goodwill relates to the acquisition of Observe Medical International AB (OMI AB) in 2015,
Sylak AB in 2020 and Biim in 2022, see note 23 Business combination. Technology
assets/patent relates to the Sippi® patents and Biim, and from 2023 the UnoMeter
TM
purchase of USD 4,195 million and product/production setup of the product portfolio.
Technology development relates to capitalized external expenses.
Technology assets / Technology Amounts in NOK thousand GoodwillPatentdevelopmentSumAcquisition cost 1 January 2022 33 870 31 416 12 002 77 288Additions 0 0 3 524 3 524Additions from aquisition of companies67 106 67 662 0 134 768Currency translation differences -1 015 -219 -108 -1 343Acquisition cost 31 December 2022 99 961 98 859 15 418 214 238Acquisition cost 1 January 2023 99 961 98 859 15 418 214 238Additions 0 49 099 421 49 520Currency translation differences 2 353 5 336 207 7 896Acquisition cost 31 December 2023 102 314 153 294 16 046 271 654Accumulated amortization 1 January 2022 0 16 283 5 807 22 090Amortization for the year 0 7 240 1 961 9 201Currency translation differences 0 164 54 219Accumulated amortization 31 December 2022 0 23 687 7 822 31 509Accumulated amortization 1 January 2023 0 23 687 7 822 31 509Amortization for the year 0 8 864 2 734 11 598Currency translation differences 0 4 073 149 4 221Accumulated amortization 31 December 2023 0 36 623 10 705 47 328Carrying value 1 January 202233 870 15 134 6 195 55 198Additions0 0 3 524 3 524Additions from aquisition of companies67 106 67 662 0 134 768Amortization 0 -7 240 -1 961 -9 201Reclassification0 0 0 0Translation differences-1 015 -384 -163 -1 561Carrying value 31 December 202299 961 75 172 7 595 182 728Carrying value 1 January 202399 961 75 172 7 595 182 728Additions 0 49 099 421 49 520Amortization 0 -8 864 -2 734 -11 598Translation differences2 353 1 263 58 3 675Carrying value 31 December 2023102 314 116 671 5 341 224 326Useful life Indefinite 10 year 5 year
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Impairment Test for Cash Generating Units that Contain Goodwill
Through the impairment test of goodwill, the carrying value of the total group is tested for
impairment. The recoverable amount has been estimated based on value in use as
described below.
The value in use of the cash generating units was calculated on the basis of discounted
future cash flows. The assessment at December 31, 2023 was based on a forecast for 2024
and estimates for subsequent periods. The managements assumptions of future growth
are unchanged from the calculation at December 31, 2022 for Sippi® and the Biim probe.
In 2023 the company has prioritized the production and roll-out of the UnoMeter™
portfolio, and with the current financial and organizational resources, the Sippi® is
planned to be rolled out in a larger scale when the UnoMeter™ products are established
on the global market. For ultrasound, the contract with Fresenius Medical Care is of
significant importance, but the trials and decision making has taken longer time than
Observe Medical expected. The still ongoing KPI-study has shown that Fresenius Medical
Care experience positive progress leading to a documented cost reduction effect.
In general there is material uncertainty related to the amount of revenue and when it will
be generated. The growth rate is based on a realistic roll-out of the products.
The assessment is based on the book value of the goodwill at 31.12.2023 compared to
the estimated value calculated on the basis of discounted future cash flows. Key
assumptions for assessing the future performance of the the Group’s cash generating units
is the future revenue and EBITDA, annual growth, the terminal value and WACC. Sippi®
(urine measurement) and Biim (ultrasound) is considered to be most sensitive to changes
in these assumptions.
Managements estimates for 2024-2031 is used, with an annual average revenue growth
of 31%, after which it is assumed a long term 2% growth. A discount rate post-tax of 12%
was used to discount future cash flows. The resulting EBITDA margin is, on average, 40%.
Uncertainty exists associated with the estimates used to determine future cash flows and
the discount rate used to calculate the value in use. Conducted sensitivity analyses of the
key parameters shows a reasonable headroom for changes in key parameters. A decrease
in revenue by 30%, the calculated value in use at December 31, 2023 would decrease by
58%, but still exceed the carrying value.
The book value of the Sippi® technology is low compared with future revenue potential.
Substantial deviations in future revenue forecasts would be of direct significance in
measuring the value of intangible assets, as well as the estimated fair value of the
contingent consideration.
The assessment is done based on the assumption of sufficient funding. In case of a
situation where funds may not be available in the amount needed, the value of assets can
be lower than presented in the financial statements.
With reference to the Board of Directors report, the Company will evaluate various
strategic options for the Biim ultrasound probe based on among other the outcome of
69 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
strategic discussions and the financial resources available to Observe Medical.
Consequently, no assurance can at this stage be given that the Company will pursue
continued product development and ramp up of sales activities for this product. The
valuation of Biim Ultrasound is based on an assumption that this process succeeds.
As none of the goodwill is impaired, the book value of Sippi® and Biim is based on the
PPA.
Based on the management assessment, assumptions and expectations applied in
business cases and future plans it is the company’s opinion that the cash generating units
justify their capitalised value as at 31 December 2023.
Note 8 – Financial Items
Note 9 – Cost of Materials
Write-down is mainly related to inventory of Sippi® disposable unit due to expiry date.
Financial income 2023 2022Interest income 64 283Change contingent consideration (note 13) 1 978 10 026Currency gain 5 481 7 981Other financial income 0 832Total 7 523 19 122
Amounts in NOK thousand
Interest expenses 6 649 3 818Change contingent consideration (note 13) 173 361Currency loss 9 758 6 345Other financial expenses 25 180Total 16 605 10 704Net financial items -9 082 8 418
Financial expenses 2023 2022
Amounts in NOK thousand 2023 2022Cost of materials for resale 18 291 12 003Write-down 365 2 341Total cost of materials 18 656 14 344
70 | Annual Report 2023, Observe Medical ASA
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Note 10 – Trade Receivables and Other Receivables
Trade receivables > 3 months is mainly related to Biim parts supplied to manufacturer, partly offsetting trade
payables and other debt against the same manufacturer.
Note 11 – Inventories
Note 12 – Financial Instruments
Amounts in NOK thousand 2023 2022Trade receivables 3 117 4 731 Other receivables 3 539 2 443 Total 6 656 7 174
Due date profile for trade receivables2023 2022Not due 1 045 4 436 0-3 months 256 > 3 months 1 814 295 Total 3 115 4 731
Amounts in NOK thousand 2023 2022Raw materials and extra parts (at cost) 2 113 3 379Finished goods (at lower of cost and net realisable value) 8 403 8 323Write-down -3 626 -3 585Total 6 890 8 117
Financial liabilities as at 31 December 20233-12 1-2 3-4 Carrying 0-3 months2-3 years> 4 years TotalAmounts in NOK millionmonthsyearsyearsvalueBank overdraftLeasing liabilities 0.5 0.4 0.2 0.1 1.2 0.8Contingent consideration upon acquisitions 2.3 2.3 1.6Payables loan to Navamedic group 51.1 51.1 49.1Other non-current interest bearing liabilities 0.0 0.1 0.1 0.1 0.1 0.6 1.0 0.9Other non-current liabilities 25.3 25.3 25.3Trade account payables 10.8 7.0 17.8 17.8Other current liabilities 15.9 2.5 18.3 18.3Other current interest bearing liabilities 4.5 4.5 4.5Total 31.7 10.0 76.7 0.2 0.1 2.9 121.6 118.4
Financial liabilities as at 31 December 20223-12 1-2 3-4 Carrying 0-3 months2-3 years> 4 years TotalAmounts in NOK millionmonthsyearsyearsvalueBank overdraftLeasing liabilities 0,5 1,4 0,8 0,2 2,9 2,6Contingent consideration upon acquisitions 0,1 5,2 5,3 3,4Non-current interest bearing liabilities 0,0 0,1 0,1 0,1 0,1 0,7 1,1 0,9Trade account payables 8,6 8,6 8,6Other current liabilities 1,4 1,4 1,4Payables loan to Navamedic group 43,3 43,3 40,6Other current interest bearing liabilities 4,2 4,2 4,2Total 13,3 46,2 0,9 0,3 0,2 5,9 66,8 61,8
71 | Annual Report 2023, Observe Medical ASA
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On October 1, 2019, Observe Medical ASA, as the borrower, entered into a loan
agreement with Navamedic, as the lender, for a loan of an aggregate amount of NOK
32,000 thousand (the “Bond Loan”).
The Bond Loan consists of the two following facilities:
• A subordinated convertible term loan facility in the amount of NOK 19,000
thousand (the “Facility A”); and
• A subordinated convertible term loan facility in the amount of NOK 13,000
thousand (the “Liquidity Facility”).
The facilities given under the Bond Loan constitute direct, unsecured and fully
subordinated obligations of the company, and rank at least pari passu with all other
existing and future unsecured and subordinated obligations of the company, other than
in respect of any obligations preferred by mandatory provisions of applicable law and rank
ahead of all amounts payable in respect of the share capital of the company.
Both the facilities are fully drawn as of December 31, 2023.
Each loan facility given under the Bond Loan accrues 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.
On September 6, 2023, Observe Medical ASA as the borrower, entered into a loan
agreement with Navamedic ASA, as the lender, for a loan facility of an aggregate amount
of NOK 5,000 thousand. Maturity date is set to 31 January 2025. The Loan shall accrue
interest at 3 month NIBOR + 6% (percentage points) per annum. The maximum principal
amount has been made available as of 31 December 2023.
Contingent consideration from acquisitions has been discounted by an interest rate of
12% per annum as of December 31, 2023.
None of the liabilities are secured by security or assets pledged as of December 31 for the
years presented.
Other current interest bearing liabilities includes a delayed payment to the Business
Finland of NOK 4,476 thousand. Althougt it seems clear that an application for deferred
payment will be granted, the amount it presented as overdue.
In September 2023 an agreement of a short term payment deferral was made with several
vendors on the terms of 12 month deferral with 10% interest (approximately NOK 5
million). Other payment defferals (approximately NOK 2 million) are due in H1 2024.
72 | Annual Report 2023, Observe Medical ASA
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1) Contingent consideration arose in connection with the acquisition of Observe
Medical International AB in 2015, see section below. The item is level 3 on the fair
value measurement hierarchy.
2) The carrying value equals maximum credit risk.
3) The carrying value is regarded as a reasonable approximation of fair value.
4) Other non-current interest bearing debt and MNOK 15.9 of other liabilities are
deffer payments regarding acquisition of UnoMeter™
Additional information about the change in financial liabilities arising from financing
activities.
Classification of financial assets and liabilities as at 31 December 2023
13,7
5,0
0,8
49,1
4,5
Measured at Fair value through Amounts in NOK millionamortised costprofit or lossTotalAssetsCash and cash equivalients 13,7Trade receivables and other receivables 5,02) and 3)Total financial assets 18,718,7
LiabilitiesLease liabilities 0,81)1,61,6Contingent consideration upon acquisitions Payables loan to Navamedic group 49,1Other non-current interest bearing liabilities0,90,9 4)Other non-current liabilities25,325,3 4)Trade account payables and other liabilities36,136,1Other current interest bearing liabilities 4,53)Total financial liabilities 116,81,6118,4
Classification of financial assets and liabilities as at 31 December 2022
13,6
5,3
Liabilities
2,6
40,6
10,0
4,2
Lease liabilities 2,61)3,43,4Contingent consideration upon acquisitions Non-current interest bearing liabilities0,90,9Payables loan to Navamedic group 40,6Trade account payables and other liabilities 10,0Other current interest bearing liabilities 4,23)Total financial liabilities 58,43,461,8
Measured at Fair value through Amounts in NOK millionamortised costprofit or lossTotalAssetsCash and cash equivalients 13,6Trade receivables and other receivables 5,32) and 3)Total financial assets 18,918,9
Bank loans Overdraft Loans from Navamedic Contingent Lease liabilities Other TotalfacilityGroupconsideration upon acquisitionsAmounts in NOK millionCarrying value 1 January 2023 1.0 40.6 3.4 2.6 47.6Cash flow -0.1 5.0 -1.6 3.3Change in liability do to aquisitionChange in liability with no cash effect 3.5 -1.8 -0.1 2.2 3.8Carrying value 31 December 2023 0.9 49.1 1.6 0.8 54.6
73 | Annual Report 2023, Observe Medical ASA
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Changes in loans from Navamedic ASA without cash effect relates to accrued interest.
Changes in contingent considerations without cash effects relates to estimated changes
in fair value of contingent consideration (which include calculated interest). Other without
cash effects relates to interest payable converted to shares.
Note 13 – Contingent Consideration
Background
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 12.5%.
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
Bank loans Overdraft Loans from Navamedic Contingent Lease liabilities Other TotalfacilityGroup and Ingerø consideration upon Reiten Invest. Comp.acquisitionsAmounts in NOK millionCarrying value 1 January 2022 6.5 48.0 13.0 1.0 68.5Cash flow 5.1 -13.9 -24.4 -1.5 -34.7Change in liability do to aquisition 7.4 13.9 2.3 23.6Change in liability with no cash effect -4.1 3.1 -9.6 0.8 -9.8Carrying value 31 December 2022 1.0 40.6 3.4 2.6 47.6
74 | Annual Report 2023, Observe Medical ASA
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Change in contingent consideration
Amounts in NOK thousand Estimated fair value 31 December 2021 13 031 Change in estimated fair value in 2022 -9 666 Estimated fair value 31 December 2022 3 365 Change in estimated fair value in 2023 -1 805 Estimated fair value 31 December 2023 1 560
Change in estimated fair value, which includes calculated interest, is recognized through
profit or loss.
The change in fair value 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.
Note 14 – Taxes
2023 2022Current tax 17 76Deferred tax 0 0Tax expense/income recognised 17 76
Income tax
Amounts in NOK thousand Tax rate 2023 2022Result before tax -60 345 -50 725Expected income taxes, 22 of result before tax 13 276 11 159Differences in tax rates -128 -287Norway, permanent differenses 22 % 0 3 244Sweden, permanent differenses 20.6 % 2 305 -3 440Denmark, permanent differenses 22 % -2 299 -2 087Finland, permanent differenses 20 % 17 6US, permanent differenses 21.0 % -160 60Tax expense before not recognised tax assets 13 011 8 656Norway, change in deferred tax assets not recognised 22 % -10 591 -9 705Denmark, change in deferred tax assets not recognised 22 % 1 860 1 816Sweden, change in deferred tax assets not recognised 20.6% -4 297 -843Total taxes -17 -76Effective tax rate 0.0 % -0.2 %
75 | Annual Report 2023, Observe Medical ASA
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Basis for Deferred Tax Liabilities and Tax Assets (-)
Change in Deferred Tax Assets and Deferred Tax Liabilities Effect of Foreign Recognised in acquistion and currency profit and loss equity exchange Amounts in NOK thousand 01.01.2023 during the year transactions differences 31.12.2023 Intangible assets 6 698 710 170 7 579 Other 4 078 1 704 19 5 801 Tax losses carried forward -80 213 -15 425 -1 975 -97 613 Gross tax liabilities / assets (-) -69 437 -13 011 -1 786 -84 234 Deferred tax assets not recognised 69 437 13 011 1 786 84 234 Tax liabilities/assets (-) recognised 0 0 0 0 0
Temporary Temporary Temporary differences differences differences 2023NorwaySwedenDenmarkTotal 2023Amounts in NOK thousandIntangible assets 24 886 10 212 0 35 098Other 24 992 0 1 372 26 364Total temporary differences 49 878 10 212 1 372 61 462Tax losses carried forward -282 603 -83 698 -82 723 -449 024Basis for temporary differences -232 725 -73 486 -81 351 -387 562Unrecognised temporary differences 232 725 73 486 81 351 387 562Total recognised temporary differences 0 0 0 0Tax rate 22 % 20.6 % 22 %Recognised deferred tax liabilities and tax assets (-) 0 0 0 0
Temporary Temporary Temporary differences differences differences 2022NorwaySwedenDenmarkTotal 2022Amounts in NOK thousandIntangible assets 20 052 11 100 0 31 152Other 17 247 0 1 287 18 534Total temporary differences 37 299 11 100 1 287 49 686Tax losses carried forward -221 901 -60 246 -86 291 -368 438Basis for temporary differences -184 602 -49 146 -85 004 -318 752Unrecognised temporary differences 184 602 49 146 85 004 318 752Total recognised temporary differences 0 0 0 0Tax rate 22 % 20.60 % 22 %Recognised deferred tax liabilities and tax assets (-) 0 0 0 0
76 | Annual Report 2023, Observe Medical ASA
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Effect of Foreign Recognised in acquistion and currency profit and loss equity exchange Amounts in NOK thousand 01.01.2022 during the year transactions differences 31.12.2022 Intangible assets 2 703 496 3 578 -79 6 698 Other -39 504 3 610 3 4 078 Tax losses carried forward -39 118 -9 654 -30 810 -631 -80 213 Gross tax liabilities / assets (-) -36 453 -8 655 -23 622 -707 -69 437 Deferred tax assets not recognised 29 997 8 655 23 622 707 69 437 Tax liabilities/assets (-) recognised -6 456 0 0 0 0
Use of Tax Losses Carried Forward
There is not any expiring date of the use of tax losses carried forward.
Note 15 – Other Operating Expenses
Amounts in NOK thousand
2023 2022 Consultants 4 775 6 713 Audit Services 2 691 3 089 Legal and professional fees 2 412 2 647 Expense relating to short-term leases 1 736 2 459 Accounting and financial services 2 431 1 774 IT expenses 1 519 1 253 Travel expenses 1 046 862 Advertising expenses 108 302 Other operating expenses 4 298 5 769 Total 21 016 24 868
Auditor
Amounts in NOK thousand
Fees paid 2023 2022 Statutory audit services 2 653 2 664 Other services 288 425 Total 2 941 3 089
NOK 38 thousand is paid to EY for tax advisory. An additional NOK 250 thousand of other servces is paid to
EY for services related to the righs issue, and booked against equity. Fees to auditors are reported excluding
VAT.
77 | Annual Report 2023, Observe Medical ASA
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Note 16 – Payroll Expenses
Amounts in NOK thousand
2023 2022 Salaries 18 172 19 661 Remuneration to the Board and Nomination Committee 1 320 1 865 Employer's tax 3 592 3 973 Share options for employees 478 287 Pension expenses – defined-contribution scheme 2 193 2 394 Other payroll expenses 209 341 Total 25 964 28 521 Average number of full-time equivalents 15.3 17.5
Due to the Group’s financial situation the Company has taken necessary steps to reduce costs. As a result,
temporary lay-offs and downsizing was done with effect from second half of 2023. At 31 December the Group
had 9 FTE´s.
See Note 18 for further information about the share options.
Note 17 – Remuneration to Corporate Management and Board of
Directors
In accordance with the Norwegian public Limited Companies Act §6-16 a, the board of
directors prepares a separate statement related to the determination of salary and other
benefits for the corporate management. This report can be found on the Company’s web
page observemedical.com.
The total remuneration to the corporate management consists of basic salary (main
element), bonus, benefits in-kind and pension schemes, but varies from person to person.
The Group’s Chief Executive Officer determines the remunerations to other management
in agreement with the Chair of the Board of Directors. The total remuneration is
determined based on the need to offer competitive terms and reflect the responsibility for
the CEO and other members of the management team. The total remuneration shall not
be market leading but should ensure that Observe Medical attracts and retains senior
executives with the desired skills and experience. The basic salary is subject to an annual
evaluation and is determined based on general salary levels in the labor market.
The Group appointed appointed a new Interim CEO February 29, 2024 and new Interim
CFO at March 21, 2024. Please refer to note 24, subsequent events for furter information.
Notice of Termination and Severance Payment for the CEO
Both parties may terminate CEO’s employment agreement by giving a six months’ notice
period.
78 | Annual Report 2023, Observe Medical ASA
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If the CEO’s employment is terminated by the Company subject to prior notice, the CEO
shall be entitled to severance pay equivalent to six times the monthly base salary which
the CEO had at the expiry of the employment.
Share Options
Refer to note 19 for information about share options to the Corporate Management team.
Loans to employees
As at 31.12.2023, there are no loans to employees.
Pension
The Group has defined contribution pension schemes.
The CEO has a defined contribution pension scheme within the requirement of the law in
Norway.
Remuneration to the Group Management
1) 517,521 shares owned by US Holding AS who is 100% owned by Rune Nystad
1) Appointed as CEO at March 28, 2022. Salary in the table is for the periode March 28 - December 31, 2022.
2) 132,906 shares owned by US Holding AS who is 100% owned by Rune Nystad. 3) Björn Larsson departed
as CEO at March 28, 2022. Mr. Larsson was entitled to salary during the 6 months’ notice period in addition
to 6 months’ severance pay. 4) Salary are paid in SEK and converted to NOK
2023Other Option Amounts in NOK thousandSalarybenefitsBonus PensionexpensesOptions Shares1)CEORune Nystad 2 325 60 100 172 452 1 000 000 517 521CFO Per Arne Nygård 1 640 94 500 172 26 143 955 668 921Total 3 965 154 600 344 478 1 143 955 1 186 442
2022
Other Option Amounts in NOK thousandSalarybenefitsBonus PensionexpensesOptions Shares1)2)CEORune Nystad 1 781 118 800 124 67 1 000 000 172 099CFO Per Arne Nygård 1 636 94 810 158 256 143 955 218 9213)4)CEOBjörn Larsson1 407 486 415 -37 47 984 17 000Total 4 824 698 1 610 697 286 1 191 939 408 020
79 | Annual Report 2023, Observe Medical ASA
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Remuneration to the Board of Directors
2023
Amounts in NOK thousand, except number of sharesShares owned by Other Share related Function NameBoard feefeeoptionsSharespartiesLoansChair Terje Bakken 300 41 607 1642)Board member Kathrine G. Andreassen 225 1 019 3604 222 727Board member Sanna Rydberg 2254)6)Board member Eskild Endrerud 25511 013 2985)7)Board member Line Tønnessen 265432 692Total 1 270 12 465 350 45 829 891
1)
Terje Bakken is partner in Ingerø Reiten Investment Company AS who owns 37,384,437 shares in Observe Medical ASA
1)
Terje Bakken is Chair in Navamedic ASA who owns 4,222,727 shares in Observe Medical ASA
2)
All shares owned by Soleglad Invest AS who is 100% owned by Kathrine Gamborg Andreassen
3)
Kathrine Gamborg Andreassen is CEO in Navamedic ASA who own 4,222,727 shares in Observe Medical ASA
4)
Includes NOK 30 thousand in fee as member of the Audit Committee
5)
Includes NOK 40 thousand in fee as Chair of the Audit Committee.
6)
All shares owned by ELI AS, controlled by Eskild Endrerud
7)
Line Tønnessen owns 432,692 shares in Observe Medical ASA
2022
Amounts in NOK thousand, except number of shares
Board Other Shares owned by Function Namefeefee Sharesrelated partiesLoans4)1)Chair Terje Bakken 29513 876 4074)6)2)3)Board member Kathrine G. Andreassen 220150586 6684 222 7276)Board member Sanna Rydberg 200 605)7)8)Board member Thomas Grunfeld 23050214 000 8 000Total 945 712 600 668 18 107 1341)Terje Bakken is partner in Ingerø Reiten Investment Company AS who owns 9,653,680 shares in Observe Medical ASA
1)
Terje Bakken is Chair in Navamedic ASA who owns 4,222,727 shares in Observe Medical ASA
2)
All shares owned by Soleglad Invest AS who is 100% owned by Kathrine Gamborg Andreassen
3)
Kathrine Gamborg Andreassen is CEO in Navamedic ASA who own 4,222,727 shares in Observe Medical ASA
4)
Includes NOK 20 thousand in fee as member of the Audit Committee
5)
Includes NOK 30 thousand in fee as Chair of the Audit Committee
6)
Fee for work in the due diligence processes in connection with the acquisition of Biim Ultrasound AS
7)
TNOK 150 in fee for due diligence work and TNOK 352 in fee for acting av chief medical officer to end of March 2022
8)
All shares owned by Trude Holm, the wife of primary insider Thomas Grünfeld
80 | Annual Report 2023, Observe Medical ASA
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Note 18 – Share Options
CEO share Options
As part of a long-term incentive plan, CEO Rune Nystad was on November 11, 2022
granted 1 000 000 options.
The options have been granted with an exercise price of NOK 4.5 per option share. The
options will be vested in three tranches, whereby each tranche comprising 1/3 of the
options will vest on the first, second and third anniversary of the grant date, respectively.
The options have been granted without consideration and each option will upon exercise
give the right to acquire one share in the Company. Any shares acquired upon exercise
will be subject to a 12 months' lock-up period from the date received by the option holder,
and all options will expire and lapse if not exercised within 11 November 2026.
CFO share options
In 2021, Per Arne Nygård was granted 120,000 options and each option, when exercised,
will give the right to acquire one share in Observe Medical ASA. The options are granted
without consideration.
The options are granted vest over a 2 year period, with 2/3 on the date of signing of the
option agreement, 1/6 after 12 months and 1/6 after 24 months. The option shares have
a 12 month lock-up period tied to them. Options that have not been exercised will lapse
3.5 years after grant date.
The option agreement regulates the adjustments in strike price in the event that a rights
issue or repair issue is conducted by the Company. If such events the exercise price shall
be reduced to reflect the dilutive effect of the share issue. On the basis of the above, the
options have been granted with an exercise price of NOK 8.29, which reflects the volume
weighted average share trading price of the Company's shares the 10 trading days prior
to 1 March 2020 and recalculated to NOK 6.63 on basis of the rights issue in first quarter
2022. Furthermore, 4/6 of the options vested upon grant, while the remaining 2/6 vest
with 50% on 1 March 2022 and 1 March 2023, respectively.
The option agreement regulates the adjustments in the event that a rights issue or repair
issue is conducted by the Company. If such events the option scheme shall be adjusted to
reflect the dilutive effect of the share issue.
Total option expenses for the company in 2023 are NOK 478 thousand.
81 | Annual Report 2023, Observe Medical ASA
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Note 19 – Earnings per Share
See note 22 for an overview of movements in number of shares, See note 18 for a
description of share options. The potential shares due to shareoptions are expected to
have no dilutive effects for the OM group as the net result for 2023 and 2022 were
negative.
Note 20 – Related Parties
Transactions and shared costs have historically been charged from the parent Company
to its subsidiary.
In addition to Group companies, the group's related parties are:
Key management personnel, close members of the family of a person and entities that are
controlled or jointly controlled by any of these. Key management personnel are defined
as the Board of Directors and the group management.
There were no transactions with key management personnel in 2022 and 2023 besides
remuneration explained in Note 17 and 18. Members of the board was in 2022 paid a total
of NOK thousand 310 for consultancy services related to DD processes in 2021.
Share optionsShare options Share Exercise End of held at Share Share options Name and SpecificatioPerformanVesting Exercise price of Award dateholding the options options awardee positionn of plance perioddateperiodthe share periodbeginning awardedvestedand and dateof the unvestedyear11.11.22 – 11.11.23 – 11.11.2022 11.11.2023 11.11.20234.5 333 333 0 333 333 011.11.2311.11.26Rune Nystad11.11.22 – 11.11.24 – ESOP 202211.11.2022 11.11.2024 11.11.20244.5 333 333 0 0 333 333 (CEO)11.11.2411.11.2611.11.22 – 11.11.25 – 11.11.2022 11.11.2025 11.11.20254.5 333 334 0 0 333 334 11.11.2511.11.26Total 1 000 000 0 333 333 666 66716.11.21 – 16.11.21 - 16.11.2021 16.11.2021 16.11.20216.63 95 971 0 95 971 016.11.2101.03.24Per Arne 16.11.21 – 01.03.22 - 16.11.2021 01.03.2022 01.03.20226.63 23 992 0 23 992 0NygårdESOP 202101.03.2201.03.24(CFO)16.11.21 – 01.03.23 - 16.11.2021 01.03.2023 01.03.20236.63 23 992 0 23 992 001.03.2301.03.24Total 143 955 0 143 955 0Total for the 1 143 955 0 477 288 666 667Company
Earnings per share:2023 2022Net result for the year, company's shareholders -60 362 -50 801Average number of shares 57 626 256 47 185 178Basic-/Diluted earnings per share (NOK per share) -1.05 -1.08
Amounts in NOK thousand
82 | Annual Report 2023, Observe Medical ASA
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In 2023 Observe Medical ASA entered into a strategic advisory agreement with and Reiten
& Co AS that Reiten & Co shall, alone or with external advisors, act as a project manager,
prepare valuations and act as a strategic and financial advisor to ensure a suitable
transaction structure from a strategical and financial point of view in relation to the
Convatec transaction, the Right Issue and relevant capital markets activities. Reiten & Co
has the right to a fixed remuneration up to a total amount of NOK thousand 2,250. Incurred
amount as at 31 December 2023 was NOK thousand 1,500. The fee is payable when the
Board (excluding Reiten & Co representatives) deems liquidity sufficient.
Transactions and balances within the Group are eliminated in the financial statements and
are not disclosed in this note.
Transaction and Balances with related parties includes transactions with Navamedic ASA,
Ingerø Reiten Investment Company AS and ELI AS.
Finance expenses are interest on interest bearing loans towards Navamedic ASA (TNOK 3,534), and on
interest bearing converted loans from Ingerø Reiten Investment Company (TNOK 657), ELI AS (TNOK 190),
JPB AS (TNOK 282), MP Pensjon (TNOK 65), Kubera AS (TNOK 65), Sålvold Eiendom AS (TNOK 52) and
Harding Invest AS (TNOK 52). Incurred liabilities towards Reiten & Co of TNOK 1,500 for strategic advisory.
Note 21 – Research and Development
Observe Medical performs research and development activities as part of the
development of Sippi and Biim products, as well as product and production set-up of the
UnoMeter™ portfolio. Capitalized research and development expenses are carried out as
projects. In total it is estimated that there has been research and development
expenditures of NOK 5.9 million in 2023 (NOK 4.2 million), of which NOK 4.6 million (NOK
2.5 million) is capitalized and NOK 1.2 million (NOK 1.7 million) is expensed as operating
expenses. Expenses consist of estimated internal employee expenses related to project
management and monitoring of the company’s research and development activities, as
well as not capitalized external expenses.
Transactions and balances with related parties
Amounts in NOK thousand 2023 2022Finance expenses 4 897 3 681Liabilities 50 649 40 615
83 | Annual Report 2023, Observe Medical ASA
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Note 22 – Shareholder Information
The following table shows shareholders owning 1% or more of Observe Medical ASA as
at December 31, 2023:
Total number of shares are 190,685,204 with par value per share of NOK 0.26. All shares
that are part of the parent company's share capital belong to the same share class with
the same rights.
There were no number of treasury shares (own shares) at the end of 2023 and 2022.
Movement in number of shares
Rank Name Number of shares Ownership % 1 INGERØ REITEN INVESTMENT COMPANY A 37 384 437 19,61 %2 JPB AS 16 314 944 8,56 %3 ELI AS 11 013 298 5,78 %4 RO, LARS 6 000 000 3,15 %5 GINNY INVEST AS 5 500 000 2,88 %6 BJØRNTVEDT, VEGARD 5 024 141 2,63 %7 SILVERCOIN INDUSTRIES AS 4 948 437 2,60 %8 NAVAMEDIC ASA 4 222 727 2,21 %9 SKÅLVOLD EIENDOM AS 3 849 199 2,02 %10 LAPAS AS 3 468 311 1,82 %11 BJØRNTVEDT, HARALD 3 200 121 1,68 %12 Nordnet Bank AB 2 492 692 1,31 %13 TAJ HOLDING AS 2 481 496 1,30 %14 CAM AS 2 383 162 1,25 %15 PHILIP HOLDING AS 2 380 000 1,25 %16 WANGESTAD, ANDREAS 2 380 000 1,25 %17 MP PENSJON PK 2 362 305 1,24 %18 KRISTIANSEN, DAGFINN HELGE 2 150 000 1,13 %19 SÆTHER, HERMOD ATLE 2 085 108 1,09 %20 KUBERA AS 2 065 144 1,08 %21 QUICK ISLAND INVEST AS 2 000 000 1,05 %22 GUNERIUS PETTERSEN AS 2 000 000 1,05 %Other 64 979 682 34,08 %Total number of shares 190 685 204 100,00 %
1 January 2022 19 605 457March 2022, Rights issue 25 714 286March 2022, Consideration shares 8 171 91331 December 2022 53 491 6561 January 2023 53 491 656December 2023, Rights issue 137 193 54831 December 2023 190 685 204
84 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
During 2023, Observe Medical ASA has issued 137,193,548 new shares in connection with
the Rights issue for gross proceeds of NOK 35,670 thousand. Expenses related to the
capital increase amount to NOK 4,980 thousand.
Note 23 –Business Combinations
Acquisitions in 2023
There has been none business combination during 2023.
Acquisitions in 2022
Acquisition of Biim Ultrasound AS
On March 8, 2022, Observe Medical ASA acquired 100 per cent of the shares in Biim
Ultrasound AS. The transaction valued Biim Ultrasound at approximately NOK 185 million,
representing an enterprise value of approximately NOK 209 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 approximately NOK 54.2 million. Fair value of the
8,171,913 consideration shares at NOK 49.8 million.
External transaction related costs at NOK 5.6 million have been expensed as part of other
operating expenses.
Biim Ultrasound is an international medical ultrasound technology company. Biim
Ultrasound has developed a unique, wireless and pocketable ultrasound probe, Biim, that
can scan patients and review images in seconds. The objective of Biim is to enhance
healthcare personnel decision-making and improve patient outcomes. Biim's technology
is patented, and the device received 510 (k) clearance from the US Food and Drug
Administration (FDA) in 2018. Biim is approved for ultrasound imaging of the human body
and is specifically used to guide needle and catheter insertions for dialysis and vascular
access procedures.
A partner agreement with Fresenius Medical Care, the leading provider of kidney care
services in the US, is in place, whereby Biim is intended to be used across Fresenius'
dialysis centres in the US.
Biim Ultrasound AS had total revenues at NOK 6.8 million in 2021.
The company has been consolidated as part of Observe Medical Group from 1 March
2022 and has generated operating revenues of NOK 6.5 million and EBIT of negative NOK
7.6 million since the acquisition. If the company had been owned 100 per cent from 1
January 2022 it would have had an additional impact on the operating revenue of NOK
0.1 million and EBIT of negative NOK 5.4 million. Recognised goodwill of NOK 67.1
million.
85 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
None of the goodwill recognised is deductible for income tax purposes.
Note 24 –Subsequent event
In January, he Group communicated that the net proceeds from the rights issue were not
sufficient to improve the working capital needs for the continued product development
and ramp up of sales activities for the ultrasound business, Biim Ultrasound AS. An
ongoing project will evaluate various strategic options for the Biim ultrasound probe
based on among other the outcome of discussions with Fresenius Medical Care and the
financial resources available to Observe Medical.
At February 29, the Group announced that Rune Nystad will step down as CEO in
Observe Medical and that Jørgen Mann, the Chief Commercial Officer ("CCO"), will step
in as the interim CEO. Mr. Nystad will transition into the role as Chief Development
Officer ("CDO") of the Company.
At March 21, the Group announced that Per Arne Nygård has resigned from his position
as CFO to pursue opportunities outside the Company. Johan M. Fagerli, Finance
Manager, assumed the responsibilities of Interim CFO with immediate effect.
At April 18, Observe Medical announced that it will transfer its Nordic distribution
operations to Vingmed, following a strategic review. The Company assessed the
relevance of the business, originally established as a platform for testing and launching
its branded products. Given the expansion of our global distribution capabilities, which
now fulfill our initial testing and pre-launch needs, the business is becoming less crucial
to our core operations. Consequently, the Group have decided to seek more suitable
ownership of the Nordic operations going forward.
Amounts in NOK thousand Carrying amount Excess value Fair valueFixed assets 2 707 0 2 707Inventories 810 0 810Other receivables 208 0 208Cash 0 0 0Long term liabilities -15 141 0 -15 141Current liabilities -19 501 0 -19 501Total indentifiable net assets -30 918 0 -30 918Technology and customer relationships 51 639 16 023 67 662Goodwill 67 106 67 106Total recognised 20 722 83 129 103 850Shares issued, at fair value 49 849Cash 54 002Total consideration 103 850Paid in cash 54 002Cash received 0Net decrease/(increase) in cash 54 002
Assets aquired and liabilities assumed
86 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Parent Company Observe Medical ASA
Annual Financial Statements 2023
ECIT
87 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Contents
Income statement ............................................................................................................................. 88
Balance Sheet ................................................................................................................................... 89
Balance Sheet ................................................................................................................................... 90
Cash Flow Statement ....................................................................................................................... 93
General ............................................................................................................................................. 94
Note 1 – Accounting Policies ........................................................................................................... 94
Note 2 – Salary Expenses ................................................................................................................. 97
Note 3 – Bank Deposits .................................................................................................................... 97
Note 4 – Non-Current Liabilities ...................................................................................................... 97
Note 5 –Current Liabilities ............................................................................................................... 98
Note 6 – Current assets .................................................................................................................... 99
Note 7 – Loans to Group Companies ............................................................................................ 100
Note 8 – Financial Income and Expenses ..................................................................................... 100
Note 9 – Other Operating Expenses ............................................................................................. 100
Note 10 – Subsidiaries ................................................................................................................... 101
Note 11 – Related Parties ............................................................................................................... 101
Note 12 – Non-current assets ........................................................................................................ 102
Note 13 – Taxes .............................................................................................................................. 102
88 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Observe Medical ASA
Income statement
Amounts in NOK thousand
Note
2023
2022
Operating revenues
11
2,514
1,470
Other operating revenues
77
4
Total operating revenues
2,591
1,474
Cost of goods sold
73
0
Personnel expenses
2
9,004
10,374
Other operating expenses
2,9
12,049
9,761
Operating expenses
21,126
20,135
Operating result before depreciation and
amortization (EBITDA)
-18,535
-18,661
Depreciation and amortization
12
589
289
Operating result (EBIT)
-19,124
-18,950
Financial income and expenses
Interest income from group companies
8,11
2,916
1,651
Financial income
8
1,979
11,676
Interest expense to group companies
8,11
-3,718
-4,051
Interest expenses
8
-5,986
-3,400
Financial expenses
8
-3,645
-531
Net financial items
-8,454
-5,345
Result before tax
-27,578
-13,604
Income tax expense
13
0
0
Result for the period
-27,578
-13,604
Brought forward
Transferred to other equity
27,578
13,604
Net brought forward
-27,578
-13,604
89 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Observe Medical ASA
Balance Sheet
Amounts in NOK thousand
Note
31.12.2023
31.12.2022
ASSETS
Property, Plant and Equipment
Equipment and other movables
12
1,380
2,488
Non-current assets
Investments in subsidiaries
10
401,039
400,988
Loans to subsidiaries
7
50,118
34,653
Total non-current financial assets
451,156
435,641
Total non-current assets
452,536
438,129
Current assets
Receivables from group companies
6
970
86
Other receivables and prepaid expenses
6
591
1,993
Bank deposits
3
12,297
8,822
Total current assets
13,858
10,900
Total assets
466,395
449,029
90 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Observe Medical ASA
Balance Sheet
Amounts in NOK thousand
EQUITY AND LIABILITIES
Share capital
49,578
13,908
Share premium
331,475
380,650
Other paid-in equity
0
0
Total paid-in equity
381,053
394,558
Other equity
1,830
-42,092
Uncovered loss
-27,755
0
Total equity
355,305
352,466
Non-current liabilities
Liabilities to financial institutions
4,9,10,11
878
946
Contingent consideration
4
1,560
3,365
Non-current liabilities to group companies
4,11
49,876
45,631
Interest bearing non-current liabilities
49,149
Total non-current liabilities
101,463
49,942
Current liabilities
Liabilities to financial institutions
0
0
Trade payables
5,11
5,330
2,917
Public duties payable
5
707
457
Interest-bearing current liabilities
0
40,615
Other current liabilities
5
3,590
2,651
Total current liabilities
9,627
46,639
Total liabilities
110,340
96,564
91 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
The Board of Directors and CEO of Observe Medical ASA
Oslo, April 26, 2024
Terje Bakken Kathrine Gamborg Andreassen
Chair of the Board Board member
Sanna Rydberg Line Tønnessen
Board member Board member
Eskild Endrerud Jørgen Mann
Board member Interim CEO
92 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Observe Medical ASA
Equity
Amounts in NOK thousand
Share
capital
Share
premiu
m
Other
paid-in
equity
Total
paid-in
capital
Retained
earnings
Total
Equity as at January 1,2023
13,908
337,205
1,352
352,466
0
352,466
Registered capital
35,670
35,670
35,670
Registered capital cost
-5,730
-5,730
-5,730
Cost of employee options
478
478
478
Net result for the period
-27,579
-27,579
-27,579
Equity as at December 31, 2023
49,578
303,896
1,830
355,305
0
355,305
Share capital:
NOK thousand
Shares
Par
price
Share capital January 1, 2023
13,908
53,491,656
0.26
Changes
35,670
137,193,548
0.26
Share capital December 31, 2023
49,578
190,685,204
026
Refer to Note 23 in the Observe Medical group’s consolidated financial statement 2023 for shareholders’
information.
93 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Observe Medical ASA
Cash Flow Statement
Amounts in NOK thousand
Note
2023
2022
Cash flow from operating activities
Result before tax
-27,579
-13,604
Depreciation
589
289
Interest expenses and change in contingent
consideration not paid
8,11
-1,804
-6,657
Interest income from group companies not paid
8,11
0
0
Change in trade receivables and other receivables
6
-247
1,746
Change trade payables and other current liabilities
3,617
-1,403
Net cash flow from operating activities
-25,424
-19,630
Cash flow from investment activities
Payments on the purchase of equipment
518
-2,401
Payment for shares in subsidiaries
-50
-54,002
Net cash flow used in investment activities
468
-56,403
Cash flow from financing activities
Net changes liabilities to financial institutions
0
-6,509
Paid in new share capital
31,168
155,597
Repayment share capital
0
0
Change interest bearing loan
8,466
-9,459
Net change interest bearing debt to group
companies
-11,202
-55,280
Net cash flow from financing activities
28,432
84,348
Exchange rate fluctuations
0
0
Changes in cash
3,476
8,315
Bank deposits as at January 1
8,822
507
Bank deposits end of period
3
12,297
8,822
94 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Explanatory Notes to the Annual
Financial Statements 2023
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
95 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
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 is for the reporting year outside of scope of the Act as the revenues are
below MNOK 70 and the number of employees are below 50 FTE.
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.
96 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
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.
97 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Note 2 – Salary Expenses
Amounts in NOK thousand
2023
2022
Salaries
5,458
5,423
CEO cost invoiced from subsidiary
0
2,128
Fees to Board of Directors
1,320
1,265
Employment taxes
1,177
710
Pension insurance
526
328
Other benefits
523
520
Total salary expenses
9,004
10,374
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.
Share option expenses of TNOK 478 for 2023 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 2023 for further information related to the share options.
Auditor
Audit fees expensed for 2023 amounts to NOK 2,006 thousand. NOK 38 thousand is paid
to EY for tax advisory. An additional NOK 250 thousand of other servces is paid to EY for
services related to the righs issue, and booked against equity. Fees to auditors are
reported excluding VAT.
Note 3 – Bank Deposits
NOK 949 thousand of the bank deposits was restricted as at December 31, 2023 (tax
withholding account). There are no significant restrictions on transferring cash within the
group.
Note 4 – Non-Current Liabilities
Amounts in NOK thousand
2023
2022
Liabilities to financial institutions
878
946
Contingent consideration
1,560
3,365
Interest bearing debt to Observe Medical AB
49,876
45,613
Interest bearing debt to Navamedic ASA
1)
43,864
0
Loan Navamedic
1)
5,285
0
Total non-current liabilities
101,463
49,942
98 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Note 5 –Current Liabilities
Amounts in NOK thousand
2023
2022
Liabilities to financial institutions
0
0
Trade payables
5,330
2,971
Public duties payable
707
457
Interest bearing debt to Navamedic ASA
1)
0
40,614
Other liabilities
3,590
2,651
Total non-current liabilities
9,627
46,639
1
Loan from Navamedic ASA reclassified to non-current. Increase from 2022 to 2023 is due to accured interest
and an additional loan of NOK 5,000 thousand.
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 NOK
32,000 thousand (the “Bond Loan”).
The Bond Loan consists of the two following facilities:
• A subordinated convertible term loan facility in the amount of NOK 19,000
thousand (the “Facility A”); and
• A subordinated convertible term loan facility in the amount of NOK 13,000
thousand (the “Liquidity Facility”).
The facilities given under the Bond Loan constitute direct, unsecured and fully
subordinated obligations of the company, and rank at least pari passu with all other
existing and future unsecured and subordinated obligations of the company, other than
in respect of any obligations preferred by mandatory provisions of applicable law and rank
ahead of all amounts payable in respect of the share capital of the company.
Both the facilities are fully drawn as of December 31, 2023.
Each loan facility given under the Bond Loan accrues 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.
On September 6, 2023, Observe Medical ASA as the borrower, entered into a loan
agreement with Navamedic ASA, as the lender, for a loan facility of an aggregate amount
of NOK 5,000 thousand. Maturity date is set to 31 January 2025. The Loan shall accrue
interest at 3 month NIBOR + 6% (percentage points) per annum. The maximum principal
amount has been made available as of 31 December 2023.
99 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
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 2023 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.
Note 6 – Current assets
Amounts in NOK thousand
2023
2022
Other short-term receivables
591
1,993
Receivables from group companies
970
86
Bank deposits
12,297
8,822
Total receivables
13,858
10,900
100 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Note 7 – Loans to Group Companies
Amounts in NOK thousand
2023
2022
Observe Medical APS
Biim Ultrasound AS
2,831
39,469
720
33,932
Observe Medical AS
7,819
0
Total loans to group companies
50,118
34,653
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
2023
2022
Interest income from group companies
2,916
1,651
Net currency gain
0
1,647
Change in contingent consideration
1,979
10,028
Total financial income
4,895
13,327
Financial expenses
2023
2022
Interest expenses
5,986
3,400
Interest expenses to group companies
3,718
4,051
Net currency loss
3,472
0
Discounting effect contingent
consideration
173
360
Other financial cost
0
170
Total financial expenses
13,350
7,982
Net financial income(+)/expenses (-)
-8,454
5,345
Note 9 – Other Operating Expenses
Amounts in NOK thousand
2023
2022
Audit services
2,006
2,071
Accounting and financial services
506
505
Consultants
2,772
894
IT expenses
651
579
Legal and professional fees
2,121
2,242
Other operating expenses
1,628
1,466
Stock exchange expenses
545
805
Travel expenses
237
262
Other group services
1,583
937
Total other operating expenses
12,049
9,761
101 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Note 10 – Subsidiaries
Amounts in NOK thousand
Business office
Ownership
share
Carrying amount
December 31, 2023
Observe Medical AB
Gothenburg, Sweden
100%
123,011
Observe Medical ApS
Herlev, Denmark
100%
80,247
Observe Medical AS
Oslo, Norway
100%
50
Observe Medical Nordic AB
Biim Ultrasound AS
2)
Gothenburg, Sweden
Oslo, Norway
100%
100%
8,729
189,002
Total
401,038
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
3,534
0
49,149
Ingerø Reiten Investment
Company AS
2)
0
0
0
657
0
0
Reiten & Co AS
0
0
0
0
0
750
Eli AS
0
0
0
190
0
0
JPB AS
0
0
0
282
0
0
MP Pensjon
0
0
0
65
0
0
Kubera AS
0
0
0
65
0
0
Skålvold Eiendom AS
0
0
0
52
0
0
Harding Invest AS
0
0
0
52
0
0
Observe Medical AB
1,115
1,851
0
3,718
0
49,876
Observe Medical ApS
67
1,395
164
5
2,942
0
Observe Medical Nordic AB
217
0
0
0
0
0
Biim Ultrasound AS
1115
0
2,752
0
40,479
0
Total
2,514
3,246
2,916
8,620
43,421
99,775
1)
Navamedic ASA owned 2.21% of all shares in Observe Medical ASA as of 31 December 2023.
2)
Ingerø
Reiten Investment Company AS owned 19.61% of all shares in Observe Medical ASA as of 31 December 2023.
Incurred liabilities towards Reiten & Co of TNOK 750 for strategic advisory in 2023 (total of TNOK 1,500 in the
Group).
102 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Note 12 – Non-current assets
Intangible
assets
Plant
and machinery
Fixtures
and fittings
Total
Purchase cost as of 01.01.23
1,153
1,225
506
2,884
Inflow purchased fixed assets
115
115
Outflow thus year
633
633
Acquisition cost 31.12.23
635
1,225
506
2,366
Accumulated depreciation 31.12.23
176
368
442
985
Book value 31.12.23
459
858
64
1,380
This year's ordinary depreciations
176
245
169
589
Economic life
3 years
5 years
3 years
Note 13 – Taxes
Amounts in NOK thousand
2023
2022
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
2023
2022
Result before income tax
-27,579
-13,604
Non-deductible expenses
1
-14,729
Changes in temporary differences
16
-124
Total taxable income
-27,562
-28,458
Expected income tax expenses, 22%
-6,064
-2,992
Specification of Tax Effect to Temporary Differences
Non-current assets
145
161
Current assets
0
0
Liabilities and provisions
0
0
Non-recognized tax asset
0
0
Tax losses carried forward
-89,169
-61,607
Not included in the deferred tax calculation
89,024
61,446
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
103 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
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.
104 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
Auditor’s report
105 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
106 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
107 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
108 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
109 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
110 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
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 2023
At 31 December 2022
Total shareholders equity
115,606
138,306
Total assets
253,537
215,812
Equity ratio
45.6%
64.1%
111 | Annual Report 2023, Observe Medical ASA
__________________________________________________________________________________________________
MEDTECH THAT MATTERS
IR Contacts
Jørgen Mann, Interim CEO Johan M. Fagerli, Interim CFO
+45 40 86 75 58 +47 95 81 27 65
jorgen.mann@observemedical.com johan.fagerli@observemedical.com
Address
Observe Medical ASA
Dronning Eufemias gate 16
0191 OSLO
Norway
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