More annual reports from Imricor Medical Systems Inc:
2023 Report2020 Annual Report
Chair’s Message 2
Key Achievements & Core Strategies 4
Geographic Expansion 6
Our Products 8
Timeline 10
Board of Directors 12
Executive Team 14
Operating & Financial Review 16
Directors’ Report 18
a. Remuneration Report 21
Financial Report 26
Additional Stockholder Information 49
Corporate Directory iii
2020 Annual Report
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
Imricor Medical
Systems, Inc.
Imricor Medical Systems,
Inc. (ASX:IMR) is a pioneer
and leader in developing
innovative MRI-compatible
medical devices which can be
used to carry out MRI-guided
cardiac catheter ablation
procedures. Imricor is the
first company in the world to
bring commercially viable and
safe MRI-compatible products
to the cardiac catheter
ablation market.
Headquartered in the US,
Imricor seeks to make
a meaningful impact
on patients, healthcare
professionals and healthcare
facilities around the world
by increasing the success
rates and bringing down
the overall costs of cardiac
catheter ablation procedures.
About this report
AGM Details
Imricor Medical Systems,
Inc. listed on the Australian
Securities Exchange (ASX)
and commenced trading on
30 August 2019. References
to “Imricor” or “the
Company” in this Annual
Report are references to
Imricor Medical Systems, Inc.
The information contained
in this report reflects the
results for Imricor for the year
ended 31 December 2020.
Imricor will hold its Annual
Meeting of Stockholders
on Thursday, 6 May 2021
at 9:00am, Sydney time
(Wednesday 5 May at
6:00pm US Central Daylight
Time). Due to restrictions on
travel and public gatherings
associated with the COVID-19
pandemic, this meeting will
be held as a virtual meeting.
Stockholders are encouraged
to watch and participate in
this meeting via the online
platform using a computer
at https://web.lumiagm.com
(meeting number: 305-621-
561) or a mobile device using
the Lumi AGM app which
can be downloaded from the
Apple App Store or Google
Play Store.
Further details are provided
to stockholders in Imricor’s
Notice of Annual Meeting.
“ We achieved two important milestones in 2020,
the first of these was the granting of our CE mark
approval in Europe, which was quickly followed
by the first procedures using our products in
Germany.”
1
Dear Investor,
2020 Annual Results
On behalf of the Board of Directors, it is
my pleasure to present Imricor’s Annual
Report for 2020.
This time last year, the world was
changing rapidly, due to the threat
posed by COVID-19 and the containment
measures put in place by governments
all over the world.
For Imricor, those effects were felt most
directly in the delays we experienced
to our planned roll-out of new clinical
sites and the broad suspension of non-
emergent medical procedures.
I am very proud of the way our team
has responded to the challenges placed
in front of us. We introduced a number
of important initiatives to maintain
our momentum across the business,
ensuring both Imricor and our customers
were well positioned as restrictions
began to ease. An important aspect
of our approach was the adjustments
we made to installation and training,
thereby minimizing disruption to our
activities through reduced reliance on
US in-person involvement. We were
also able to quickly adjust our business
development activities by moving our
customer outreach and education
initiatives to a virtual platform.
Importantly, we have continued to make
strong progress on our key strategic
goals of expanding both our products’
indications for use and our geographic
footprint.
A key priority for us remains the health
and wellbeing of all the members of
the Imricor team, their families and
communities. To this end, we have
maintained a number of important
initiatives and procedures in the way we
work to ensure we provide a safe and
resilient working environment for our
people.
We commenced the year in a strong
position, achieving two important
milestones. The first of these was the
granting of our CE mark certification,
which enabled Imricor to commence
selling its products in the European
Union. Effective inventory and logistics
forward planning ensured that we were
well positioned to supply our products
once this certification was received.
CE mark was quickly followed by the
first procedures using our products,
which was particularly exciting as these
were the first iCMR-guided ablation
procedures to be performed anywhere
in the world with market-approved
devices.
In April, we signed a Master Purchasing
Agreement with Sana Hospital
Group Purchasing Organisation in
Germany, which not only streamlines
the establishment of new sites, but
facilitates access to approximately
80 sites in Germany and Switzerland
that currently perform cardiac
catheter ablations. This agreement has
contributed a number of new sites to
our pipeline.
An important step in the evolution of
our business was the establishment
in July of our sales agreement with
Philips. This agreement will further
fuel our pipeline by enabling our
capital product – the Advantage-MR
EP Recorder/Stimulator System – to be
sold as part of a Philips comprehensive
iCMR lab installation package. In effect,
the agreement enables the extensive
Philips sales force to help drive lab
adoption. We also continue to work very
closely with Siemens with the aim of
establishing a similar agreement.
Due to COVID-related hospital closures
in our key markets, sales were affected
by the slower-than-expected rate of
clinical site rollout, as well as reduced
procedure volumes. In response to these
conditions, and with adequate inventory
in place, we redeployed portions of our
manufacturing workforce to product
development activities, with a focus on
building products for testing and future
clinical trials.
More recently, I am very pleased to
report that in February 2021 the first
procedures were carried out at one
of our newest sites, the Maastricht
University Medical Centre in the
Netherlands. This was followed in
early March with the commencement
of procedures at Helios Leipzig Heart
Centre in Germany. The Leipzig Heart
Centre is an Imricor Centre of Excellence
which will also provide training for new
sites as they adopt iCMR ablations. We
are very encouraged by this renewed
activity and the early signs of other
hospitals reopening across Europe.
Positioned for Growth
The size and forecast growth of the
ablation market, as well as the ability
of our technology to deliver solutions
that will expand this market, underpins
our growth strategy. This is overlaid by
the fact that we are the only company
globally to offer cardiac catheter
ablation devices for use in the MRI
environment.
While COVID-19 temporarily stalled
the launch of new labs, we have been
working to ensure that the foundations
are laid for our future success and that
Imricor is well positioned as restrictions
ease.
We have established training and
installation teams in Europe, supported
by teams based in the United States,
providing us with the capacity to
accelerate lab adoption as COVID-19
restrictions ease.
Chair’s Message
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
2
Outlook
While the effects of the pandemic have
presented us with some challenges – and
we are alert to the possibility of setbacks
in the world’s fight against COVID-19
that could impact our rollout – the
Imricor team is responding effectively to
the circumstances. The business is well
positioned, with an exciting outlook as
we work to expand our clinical sites,
indications for our products, our product
range and geographic footprint.
We continue to work closely with
customers to schedule installation and
training, in preparation to commence
procedures as COVID-19 restrictions
ease.
Our research and development pipeline
remains a clear priority to drive growth,
and our pipeline remains very strong.
Finally, our commercialization and
growth plans are supported by a strong
financial position. At year end, we had
net cash of US$25.1 million.
On behalf of the Board and
management, we extend our thanks to
our employees for their commitment,
hard work and resilience during this
challenging year.
Finally, we thank our investors for their
continued support.
Steve Wedan
Executive Chair, President and CEO
Imricor Medical Systems, Inc.
We also continue to selectively grow
our workforce across almost all
functional areas, further building our
organizational strength. We have a team
of talented people who have responded
to challenges that COVID-19 has
thrown at us, remaining focused on our
future success and on delivering great
outcomes for patients and healthcare
professionals.
Regulatory approvals to drive
future growth
A key growth driver for Imricor is
expanding the approved indications for
our products to procedures in the left
side of the heart, including ventricular
tachycardia and atrial fibrillation. While
we have started with treatments for
atrial flutter, we are not stopping there.
We are driving to deliver on the full
promise of iCMR guided ablations for
complex procedures with a goal to make
them the new standard of care.
Expanding our geographic reach is
another important pillar of our strategy,
and we are making good progress with
our plans for securing approvals in the
United States and Australia.
In the United States, we have been
actively engaged with the Food and
Drug Administration (FDA). We are
expecting to reach alignment on a
clinical trial design in due course, with a
target to execute the trial during 2021-
2022, which will support a future FDA
approval.
In Australia we have appointed Regional
Health Care Group, a local agent to
help facilitate an approval from the
Therapeutic Goods Administration. We
have also entered into a distribution
agreement with them and they will be
the exclusive distributor of Imricor’s
consumable products in Australia and
New Zealand and a non-exclusive
distributor of Imricor’s capital
equipment. We do not expect clinical
trials to be a requirement for TGA
approval.
“ The business is well
positioned, with
an exciting outlook
as we work to
expand our clinical
sites, indications
for our products,
our product range
and geographic
footprint.”
3
“ We are the only company globally
to offer cardiac catheter ablation
devices for use in the MRI
environment.”
CE mark approval
received
enabling the sale of
Imricor’s products in
the European Union
Successful commercial
launch
9 sites
contracted
at Heart Centre Dresden also
providing training to future
sites
with a growing pipeline
of new sites
Procedures
undertaken
are delivering excellent
outcomes for surgeons
and patients
Key Achievements & Core Strategies
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
4
Go to market strategies
Geographic expansion
Expanded indications
Expanded Product Range
• Collaborative sales
distribution agreement
with Philips
• CE mark approval
enables the sale of
products in the EU
• Ablation catheter has
CE mark approval for the
treatment of atrial flutter
• Diagnostic catheter under
development to support
margin improvement
• Strategic relationship
with Siemens
• Growing awareness
through sales and
marketing activities
• Engagement with Key
Opinion Leaders
• Comprehensive training and
support at clinical sites
• Strategy to obtain FDA
approval in the US well
advanced and targeting
clinical trials in 2021-2022
• Entered into an agreement
with local agent to support
TGA approval in Australia
• Atrial flutter comprises
only 23% of ablation
procedures in the EU
• Planning to commence
clinical trials to expand
CE mark approval to
other indications
• Steerable sheath and
transseptal needle
supporting expanded
indications
• NIH contract to develop
a device to biopsy the
inner walls of the heart
guided by MRI
Sales agreement
with Philips
enabling Philips to sell
Imricor’s capital equipment
as part of iCMR lab
installation package
Strategic agreements
signed
that further promote
future iCMR lab adoption
Local agent selected to
support TGA approval
Expanded
workforce
remaining on track
with initiatives to
expand indications
and geographies
with 27 new hires in 2020
including hires from high
calibre organisations
5
Europe
CE Mark received
We have an established sales
force targeting Germany
and the Netherlands
Remain on track to targeting
a clinical trial for VT Ablations
in late 2021 – early 2022
United States
FDA strategy well advanced
Discussion with FDA underway
Remain on track to targeting
a clinical trial in 2021-2022
Geographic Expansion
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
6
THE NETHERLANDS
Lübeck University Heart Centre, UKSH
Amsterdam University Medical Centre
Haga Hospital
Münster University Hospital
Maastricht University Medical Centre
GERMANY
Leipzig Heart Centre
Dresden Heart Centre
South Paris Cardiovascular Institute
FRANCE
SWITZE RLAND
Rhön Clinic Bad Neustadt Campus
Australia
Entered into a distribution
agreement with a local agent to help
facilitate TGA approval and act as
agent for Imricor’s products.
Detailed approval strategy
in planning phase
The Netherlands
• Clinical sites established at Haga Hospital, Amsterdam
UMC and Maastricht University Medical Centre
Germany
• Five clinical sites with signed purchase agreements
across Germany
• Imricor products included in Sana GPO approved
catalogue of materials
Switzerland
• Imricor products included in Sana GPO
approved catalogue of materials
France
• Clinical site with signed purchase agreement at South
Paris Cardiovascular Institute
7
Vision-MR Ablation
Catheter
Advantage-MR EP
Recorder/Stimulator
System
Vision-MR Dispersive
Electrode
D E S C RI P T ION
• The Vision-MR Ablation
• Advantage-MR EP
Catheter is an MR-
Conditional (1.5T)
RF ablation catheter
containing patented
technology that allows
it to be used while the
patient is being actively
scanned with MRI. It
is designed to look,
feel, and function like
a traditional ablation
catheter.
• 9F (3.0mm) catheter with
a 4mm open-irrigated
deflectable tip and two
gold electrodes (1.3mm
spacing)
• 3.7mm tip electrode and
a 1.4mm ring electrode
• 2 MR-receive coils in the
distal end for real-time
MR active catheter
imaging
T EC H N I C A L S P E C IF IC ATI ON
Recorder/Stimulator
System provides proven
technology that allows
the physician to utilize
both the EP recording
system and a cardiac
stimulator while
ablating within the iCMR
environment.
• The Vision-MR Dispersive
electrode is used with
the Advantage-MR EP
Recorder/Stimulator
system. It acts like
a standard ablation
dispersive electrode,
but also minimizes eddy
currents induced on the
device’s conductive pads
during MR scanning.
• Provides the functionality
of both a conventional EP
recording system and a
cardiac stimulator
• Compatible with the
Imricor Vision-MR
Ablation Catheter
• Dual-lobe dispersive
electrode used with a
detached cable
•
Includes adhesive
conductive gel (hydrogel)
to ensure full contact
with the patient’s skin
TYPE OF P RODUCT
• Disposable
• Capital Good
• Disposable
• Received CE mark January
• Received CE mark January
• Received CE mark January
2020
2016
2020
Our Products
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
8
NavTrac-MR Transseptal Kit
Vision-MR Diagnostic
Catheter
Biopsy Catheter
• The NavTrac-MR Transseptal Kit is a designed to access
• The Vision-MR Diagnostic
Catheter is an MR-
Conditional (1.5T) 9F
diagnostic catheter
containing patented
technology that allows
it to be used while the
patient is being actively
scanned with MRI. It
facilitates sensing and
pacing during cardiac
electrophysiology
procedures.
• 9F (3.0mm) catheter with
a deflectable tip and two
gold electrodes (1.3mm
spacing)
• 1.5mm tip electrode and
a 1.4mm ring electrode
• 1 MR-receive coil in the
distal end for real-time
MR active catheter
imaging
the left atrium during iCMR EP procedures. NavTrac-MR
includes an actively tracked dilator to allow for precise
anatomical positioning during left-sided EP procedures.
NavTrac-MR name is currently going through the trademark
process
•
Includes trackable dilator, steerable sheath, and
transseptal needle
Deflectable/Steerable Sheath
• 16 F outside diameter
• Curl diameter 30mm
• Usable length 71cm
Actively Tracked Dilator
• Dilator outside diameter .152”
• 2 MR-receive coils in the distal end for real-time MR active
catheter imaging. (Coil spacing 5mm)
• Dilator reveal length .97”
Needle
• Tip outer diameter: 0.028”
• Overall Length (including handle): 43.4”
• Useable Length (just tubing with tip): 41.1”
• Hollow shaft to allow a guidewire to pass through to
facilitate access to the atrial septum
• The Imricor Biopsy-MR
Catheter is designed to
obtain intracardiac tissue
specimens while the
patient is being actively
scanned with MRI.
• 7Fr catheter with an
actuatable forceps at the
tip
• 2 MR-receive coils in the
distal end for real-time
MR active catheter
imaging
• Disposable
•
In development
• Disposable
• Disposable
•
In development
•
In development
9
The Heart Centre
Dresden was the first
hospital to perform an
iCMR ablation anywhere
in the world outside of a
clinical trial. In February
2020, three procedures
were successfully
performed over two
days by Dr. Christopher
Piorkowski and Dr.
Thomas Gaspar, using
the Company’s products
following the CE mark of
the Vision-MR Ablation
Catheter.
Imricor signs its first
commercialisation
contract in Netherlands
with the Amsterdam
University Medical
Centre
First cases at
Dresden Heart
Centre, Germany
Leipzig Heart
Centre, Rhon Clinic &
Maastricht University
purchase agreements
signed
Münster University
Hospital purchase
agreement signed
Imricor signs sale
distribution Agreement
with Philips
HISTORICAL
2020
IPO launched
Imricor signs
agreement
with Sana
iCMR lab opened
and cases commence
at Haga Hospital,
The Netherlands
ICPS Paris & Lübeck
University purchase
agreements signed
Imricor awarded
National Institutes
of Health contract
Timeline
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
10
The Leipzig Heart
Institute, housed within
the Heart Centre, has been
established by Imricor as
a Centre of Excellence in
which visitors from new
sites can observe clinical
cases prior to commencing
iCMR guided ablations at
their own facilities.
Maastricht University
Medical Centre+
(MUMC+) is the first site
to commence procedures
since the extended Covid
lockdowns across Europe
precluded elective surgeries.
MUMC+ is one of the
sites where cardiology and
radiology are partnering
to utilise an existing MRI
suite as an iCMR lab to
start performing ablations
using Imricor’s products
immediately, while future
plans are being made for
constructing dedicated
iCMR lab facilities.
Imricor enters into
sales collaboration
with Optoacoustics
Maastricht University
Medical Centre
commences procedures
Entered into a
distribution agreement
with Regional Health
Care Group, a local
agent in Australia
FUTURE
Transseptal needle
& steerable sheath
ready for clinical trial
CE Mark approval for
VT ablations in Europe
Myocardial Biopsy
system moves into
next phase
Imricor signs supply and
sales agreement with
Osypka
Leipzig Heart Centre
commences procedures
TGA approval
in Australia
Commercial release of
Diagnostic catheter
Atrial Flutter Ablations
approval in the US
11
Steve Wedan
Mark Tibbles
President and Chief
Executive Officer, and Chair
Deputy Chair and Lead
Independent Director
Joined Board in May 2006
Mr Wedan co-founded the
Company in 2006 and has
served as CEO since that time.
Mr Wedan is responsible for
the overall management and
strategic direction of the
Company.
Mr Wedan has over 29 years
of experience in the medical
device industry including
design engineering of MRI
and ultrasound systems for
GE Healthcare, as well as
Vice President and Chief
Technology Officer for
Applied Biometrics Inc.
Immediately prior to co-
founding Imricor, Mr Wedan
founded and operated a
technical consulting company,
Wedan Technologies Inc.,
from 2000-2006. Mr Wedan
is a member of various
international standards
committees in the fields
of MRI safety and the
compatibility of implanted
and interventional products
in MRI.
Mr Wedan currently serves on
the boards of Medical Device
Research Forum and Water
Rescue Innovations, Inc.
Mr Wedan holds a Bachelor
of Science in Electrical
Engineering from Michigan
Technological University
(summa cum laude), and a
Master of Science in Electrical
Engineering from Marquette
University.
Chair of the Nomination and
Remuneration Committee
Member of the Audit and
Risk Committee
Joined Board in September
2014
Mr Tibbles is an entrepreneur,
business owner, company
director and active venture
investor in and advisor to
technology, life science and
medical device companies.
Mr Tibbles is currently a
Board member of THE
NERDERY, LLC, OMEDZA.com,
Inc., the Managing Director
of Strategic Stage Ventures,
LLC and an owner and
managing member of STEM
Fuse, LLC one of the largest
providers of digital K-12
STEM curriculum in the U.S.
Prior to his current roles,
Mr Tibbles was an owner
and member of Intuitive
Technology Group until it
was sold in 2017. Mr Tibbles
was also President and
founder of PRC Consulting,
Inc., a company specialising
in the management and
implementation of IT projects
for Fortune 1000 companies,
from 1998 until 2013, when
PRC was sold.
Mr Tibbles holds a Bachelor
of Arts from Oral Roberts
University.
Board of Directors
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
12
Doris Engibous
Peter McGregor
Anita Messal
Non-executive Director
Term Expired
Joined Board in May 2019
Retired from Board in March
2021 upon expiration of term
Ms Engibous has over 40
years of experience in the
medical device industry. From
2004 to 2010, she served
as President and CEO of
Hemosphere Inc., an early
commercialisation stage
medical technology company,
before it was acquired by
CryoLife Inc. (NYSE: CRY).
Prior to 2004, Ms Engibous
held various roles with
Nellcor (a business of Tyco
Healthcare Group/Tyco
International Ltd., now
Covidien/Medtronic, NYSE:
MDT) for 17 years, including
serving as President from
2000 to 2003. From 2004
to 2018, Ms Engibous
served as an independent
non-executive director of
Nasdaq-listed, Natus Medical
Incorporated.
Ms Engibous holds a Bachelor
of Science in Chemical
Engineering from the
University of Michigan.
Non-executive Director
Non-Executive Director
Chair of the Audit and Risk
Committee
Member of the Audit
and Risk Committee
Member of the Nomination
and Remuneration
Committee
Member of the Nomination
and Remuneration
Committee
Joined Board in May 2019
Mr McGregor has over 30
years’ experience in senior
finance and management
roles, including having
been a partner in the
investment banking firm
of Goldman Sachs JBWere
and a Managing Director
in the institutional banking
& markets division of
Commonwealth Bank of
Australia. He is also a former
Chief Financial Officer of the
ASX50 transport company,
Asciano Limited (ASX: AIO),
and Chief Operating Officer
of ASX listed Australian
Infrastructure Fund Limited
(ASX: AIX).
Mr McGregor is an
experienced Company
Director and currently
serves as a Director of
Pivotal Systems Corporation
(ASX:PVS).
Mr McGregor holds a
Bachelor of Commerce from
the University of Melbourne,
is a member of the Australian
Institute of Company
Directors and a Fellow of the
Financial Services Institute of
Australasia.
Joined Board in March 2021
and will stand for election
at the Company’s upcoming
Annual Stockholder Meeting
Ms Messal has 35 years of
experience in the healthcare
sector and is currently the
Chief Integration Officer
at AccentCare, Inc. a US
based national post-acute
healthcare provider, where
she is responsible for the
successful integration
of merged and acquired
entities across all areas
of the business.
Prior to AccentCare, she
most recently served as
President & Chief Operating
Officer of PlanSource.
Ms. Messal has participated
in fund raising from start-
up through IPO and sale
to strategic buyers and
private equity. She has
worked in both Fortune
100 and start-up companies
with experience in public,
private and non-profit
businesses. Her experience
includes working in
domestic and international
markets, with time spent
developing programs and
partnerships in the United
Kingdom and Europe.
Ms. Messal holds a B.A. from
the University of Minnesota
and an MBA from the Carlson
School of Management at
the University of Minnesota.
13
Steve Wedan
Lori Milbrandt
Gregg Stenzel
Dan Sunnarborg
President and Chief
Executive Officer, and Chair
Vice President of Finance and
Chief Financial Officer
Chief Operating Officer
Vice President of Engineering
Refer to page 12.
Mr Sunnarborg joined Imricor
in 2007 and is responsible for
all hardware and software
development activities at the
Company, including platform
development, system control,
image processing, user
interface, and outsource
partnerships.
Mr Sunnarborg has more
than 20 years of engineering
experience in fields
such as medical devices,
telecommunications, defense,
and consumer electronics.
Mr Sunnarborg has also held
various design software
engineering positions and has
led development groups for
more than 15 years.
Mr Sunnarborg holds a
Bachelor of Science in
Engineering Physics from
North Dakota State University
and a Master of Science in
Electrical Engineering from
Marquette University.
Ms Milbrandt has served as
the Company’s Chief Financial
Officer since 2007, initially
on a contract basis and since
May 2018, as a full-time
employee of Imricor.
Ms Milbrandt has over 30
years of accounting, finance,
and HR experience. Prior to
transitioning to the role of
CFO on a full-time basis, Ms
Milbrandt was a contract CFO
for several medical device
companies. Ms Milbrandt has
previously held management
positions with companies
including Microvena, ev3, and
DiaSorin (FKA Incstar) and
spent the first seven years of
her career with KPMG.
Ms Milbrandt holds a
Bachelor of Business
Administration from the
University of Wisconsin-
Eau Claire and a Master of
Business Administration
(Finance) from the University
of St. Thomas.
Mr Stenzel commenced
his role as Chief Operating
Officer in January 2021 and
is responsible for leading
the execution of Imricor’s
strategic plan across most
functional areas of the
business.
Mr Stenzel was previously
Imricor’s Vice President of
Operations with responsibility
for the Company’s operations
and the development of
manufacturing strategies,
including personnel, facilities
and outsourcing. He has
over 20 years of medical
device experience with deep
knowledge in new product
development, supply chain
management, quality and
regulatory systems and
customer support.
Prior to joining Imricor in
2007, Mr Stenzel was the
Manager of Instrument
Technical Operations at
Beckman Coulter, Inc. a
leading manufacturer of In
Vitro Diagnostic Systems.
Mr Stenzel holds a Bachelor
of Science in Electrical
Engineering from the
University of Wisconsin -
Madison and a Master of
Business Administration from
the University of Minnesota -
Carlson School of Business.
Executive Team
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
14
Jennifer Weisz
Tom Lloyd
Greg Englehardt
Nick Twohy
Vice President of Regulatory
and Quality
Vice President of
Clinical Research
Executive Director of Sales
Executive Director of
Marketing
Ms Weisz joined Imricor
in 2012 and commenced
her current role in 2018.
Ms Weisz is responsible for
implementing and managing
the Company’s regulatory
strategy and quality system.
Mr Lloyd commenced his
current role at Imricor in
2012 and is responsible for
leading preclinical and clinical
studies, managing intellectual
property, and developing
new technologies.
Mr Lloyd began his career
at the Company in 2007 as a
radio-frequency engineer and
is the lead inventor on many
of the Company’s patents.
Mr Lloyd has over 13 years
of medical device design
experience primarily focused
on interactions between
implanted devices and
the electromagnetic fields
associated with MRI.
Mr Lloyd holds a Bachelor
and Master of Science in
Electrical Engineering from
Iowa State University.
Ms Weisz has over 19 years
of experience in the medical
device industry, including
product development,
clinical evidence
development, quality
system implementation,
and regulatory strategy
development and
implementation.
Prior to joining the Company,
Ms Weisz was a member of
the Medtronic Global Clinical
Operations Quality team.
Ms Weisz holds a Bachelor
of Science in Electrical
Engineering from North
Dakota State University and a
Master of Science in Technical
Management from the
University of St. Thomas.
Mr Englehardt joined Imricor
in 2018 and is responsible for
developing and managing
the Company’s global sales
strategies and performance.
Mr Englehardt has 18 years
of experience working in the
medical device industry with
16 years of sales leadership
experience. Prior to joining
the Company, Mr Englehardt
served as Regional Business
Director at Medtronic from
2011 to 2018. Before joining
Medtronic, he worked at
NeuroMetrix from 2004
until 2011, where he was
promoted to multiple sales
and leadership roles including
Director of Global Business
Development/Sales and
National Director of Sales.
Mr Englehardt also served as
a combat medic in the U.S.
army and holds a Bachelor
of Science in Nursing from
Louisiana State University.
Mr Twohy joined Imricor
in 2019 and is responsible
for global portfolio
management, including the
product roadmap, product
management, marketing
teams and communications.
Mr Twohy has over 20
years of experience in the
medical devices industry.
Most recently he worked as
the International Marketing
Director for Medtronic in the
Cardiac Resynchronisation
Therapies business. There
he led business planning
and execution for the
International Markets. Prior
to that role, Mr Twohy led
multiple product launches at
Medtronic including various
launches in the CareLink
remote monitoring business,
and in the Cardiac Rhythm
Management business where
he led the US launch of the
Revo MRI pacemaker system.
Mr Twohy holds a Bachelor of
Arts from Hamline University
and a Master of Business
Administration from the
University of St. Thomas.
15
Operating & Financial Review
Overview
Imricor is a US-based medical device company that seeks to address the current issues with traditional x-ray guided ablation
procedures through the development of MRI-guided technology. The Company’s principal focus is the design, manufacturing,
sale and distribution of MRI-compatible products for cardiac catheter ablation procedures.
Imricor is a pioneer and leader in developing MRI-compatible products for cardiac catheter ablation procedures and in early
2020, brought the first commercially viable and safe MRI-compatible products to the cardiac catheter ablation market.
In January 2020, Imricor obtained CE mark approval for its key consumable products, the Vision-MR Ablation Catheter
(with an indication for treating type 1 atrial flutter) and the Vision-MR Dispersive Electrode. The Vision-MR Ablation Catheter
is the Company’s prime product offering, specifically designed to work under real-time MRI guidance with the intent of
enabling higher success rates along with a faster and safer treatment compared to conventional procedures using x-ray guided
catheters. The Company also has approval for the sale of its capital product, the Advantage-MR EP Recorder/Stimulator
System, in the European Union.
Imricor is in the early stage of commencing the sale of its capital and consumable products to hospitals and clinics for use
in Interventional Cardiac Magnetic Resonance Imaging (iCMR) labs, in which ablation procedures using the Vision-MR
Ablation Catheter can be performed. The installation of iCMR labs is driven primarily by MRI equipment vendors working
collaboratively with Imricor. These vendors help to target certain sites and support the design and construction of iCMR labs
for those sites.
Imricor has joint development agreements with two leading, global MRI vendors, Philips and Siemens. In addition, the
Company has a sales distribution agreement with Philips and is working towards a similar agreement with Siemens.
The Company also performs contract research on and licences some of its IP for use in other MRI compatible devices. Moving
forward, Imricor expects its primary revenue source to be from the sale of its capital and consumable products. Sales revenue
will depend on the number of established clinical sites and the procedure volume at each of those sites, as well as the types of
arrhythmias the products are used to treat.
Business strategy and opportunities
Imricor’s products are designed to operate in a global cardiac catheter ablation market which is expected to increase to
US$4.37 billion in 2021 from $US3.03 billion in 2016; growth by a CAGR of 7.6%. The global growth is underpinned by several
favourable drivers, including rising incidences of cardiac disease due to changing demographic trends, a shift towards
minimally invasive procedures and cost savings that have been associated with catheter ablation as a treatment method for
certain arrhythmias.
Following receipt of CE mark approval for the Vision-MR Ablation Catheter, Imricor has commenced a controlled release of its
key products across Europe, with nine sites having executed purchased agreements across Germany, The Netherlands & France.
Imricor aims to expand its focus with three dedicated Sales Managers targeting clinical sites across other European countries.
Within each targeted country, Imricor will first target ablation centres which historically have carried out larger volumes
of procedures. Imricor believes targeting locations which are geographically proximate to existing clinical sites may also
promote growth.
In Australia, Imricor has entered into a distribution agreement with Regional Health Care Group (RHCG), based in Sydney,
who will be the exclusive distributor of Imricor’s consumable products and a non-exclusive distributor of Imricor’s capital
equipment. RHCG will also help facilitate the necessary regulatory approvals and support of Imricor’s products.
In the United States discussions with the FDA are well progressed, and Imricor is on track for clinical trials in late
2021 – early 2022.
In conjunction with organic growth across existing products, the Company has identified or is targeting growth through
expansion in its product line providing the opportunity for Imricor’s products to be used across a broader range of MR-guided
interventional procedures. The Company therefore intends to pursue regulatory approval for its products with expanded
indications (ie. for treating arrhythmias other than typical atrial flutter).
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
16
Material business risks
The material business risks faced by the Company that have the potential to impact the financial prospects of the Company
include:
• Regulatory risk: The sale of Imricor’s products requires regulatory approval in each relevant jurisdiction. The Company is
not assured of receiving future regulatory clearances for its existing products outside of the European Union or approvals
for expanding indications or additional products currently in Imricor’s product pipeline.
• Market adoption risk: The ability of Imricor to generate revenue is dependent on hospitals and clinics with ablation
centres in markets where it obtains the required regulatory approval establishing an iCMR lab and adopting Imricor’s
MRI-compatible technology for cardiac catheter ablation procedures. While Imricor works collaboratively with leading MRI
vendors to drive lab adoption, there can be no guarantee on the outcome.
•
Integration with third party mapping systems: Active MR Tracking and 3D mapping are required for several expanded
indications Imricor is targeting in the future, such as the treatment of atrial fibrillation and ventricular tachycardia.
Imricor’s ablation system is designed to work with third-party 3D mapping systems developed by leading MRI vendors
which have Active Tracking functionality. In order to be made commercially available, these 3D mapping systems require
certain approvals (CE mark or local ethics committee approval) which have not yet been obtained.
Beyond these risks, the Company maintains general risk exposure associated with market competition, employee capability
and intellectual property as well as potential financial capacity constraints within the healthcare sector.
Financial performance
For the year ended 31 December 2020, the Company generated revenue of US$0.702 compared to US$0.640 million for
the previous corresponding period. Imricor reported a net loss of US$12.446 million (FY19 US$13.294 million). This net loss
decreased from the prior year primarily due to non-recurring non-cash interest and note conversion-related charges during
the year ended 31 December 2019. Operating costs increased to US$12.658 million from US$7.187 million in the year due to
higher expenses associated with staffing expansion and D&O insurance, as well as incremental costs associated with being a
public company.
Financial position
For the 12-month period ending 31 December 2020, Imricor’s net cash outflow from operations was US$12.231 compared to
US$6.628 million for the prior year. Net cash outflows from investing activities of US$0.774 compared to US$0.529 million for
the prior year relate primarily to the purchase of manufacturing and R&D equipment and payments for security deposits.
Net cash inflows from financial activities of US$33.025 were predominately associated with Imricor’s February and November
placements and the December Security Purchase Plan. Net cash inflows from financial activities during the prior year of
US$10.5 million were predominantly associated with Imricor’s IPO completed during the year.
At 31 December 2020, Imricor maintained a cash balance of US$25.140 million (FY19 $US5.049 million) which supports the
progress of its commercialisation plans and growth strategy.
17
Directors’ Report
Principal activities
Imricor is a US-based medical device company focused on addressing the current issues with traditional x-ray guided ablation
procedures through the development of MRI-guided technology.
The principal activities of Imricor during the course of the year were to design, manufacture and sell MRI-compatible products
for cardiac catheter ablation procedures to treat arrhythmias.
There were no significant changes in the nature of the activities of the Company during the year.
Significant changes in the state of affairs
In response to the COVID-19 pandemic, the Company adjusted its sales, marketing and physician education strategies to
be virtual. In addition, the European sales team was trained to perform site installations in order to alleviate the impact of
international travel restrictions on US personnel. Various other internal adjustments to the pandemic were made to support
the continued progression of the Company’s strategic plans of geographic expansion, indication expansion, and product
development.
There were no other significant changes in the state of affairs of the Company during the year.
Operating and financial review
The operating and financial review is set out on pages 16 to 17 of this Annual Report.
Directors qualifications and experience
The directors of Imricor at any time during or since the end of the financial year are:
Director
Steve Wedan
Mark Tibbles
Doris Engibous*
Peter McGregor
Anita Messal
*Resigned on 1 March 2021.
Appointed
May 2006
September 2014
April 2019
May 2019
March 2021
The specific duties, qualifications and experience of each Director are set out on pages 12 to 13 of this Annual Report.
Company secretary
Mr Kobe Li was appointed as the Australian company secretary and local agent in April 2019. Mr Li provides company
secretarial and corporate governance consulting services to ASX listed companies. Mr Li has previously worked at the ASX
Listings Compliance team for eight years as a Senior Adviser. Mr Li is a member of the Governance Institute of Australia.
Directors’ meetings
The number of Directors’ meetings (including meetings of Committees of Directors) and number of meetings attended by
each of the Directors of the Company during the financial year are:
Director
Board
Audit & Risk Committee
Nomination &
Remuneration Committee
Steve Wedan
Mark Tibbles
Doris Engibous
Peter McGregor
Held
Attended
Held
Attended
Held
Attended
8
8
8
8
8
8
8
7
–
6
6
6
–
6
6
6
–
3
3
3
–
3
3
3
Mr Wedan is an invitee and attends the Audit & Risk Committee and Nomination & Remuneration Committee meetings.
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
18
Directors’ interests
In this section, reference is made to Share ownership. The instruments registered for trade on the Australian Securities
Exchange are CHESS Depositary Interests (CDIs). One CDI is equivalent to one Share.
The relevant interest of each Director in the Shares and stock options of Imricor, as notified by the Directors to the Australian
Securities Exchange (ASX) in accordance with ASX Listing Rule 3.19A.2, at the date of this report is as follows:
Director
Steve Wedan
Mark Tibbles
Doris Engibous
Peter McGregor
Anita Messal
Number of
Shares
Number of
Options
4,424,733
1,839,987
4,581,878
485,910
Nil
Nil
Nil
201,571*
206,010
Nil
Directors’ directorships in other listed entities
Please refer to the Board of Directors section above.
Dividends
No dividends were paid or declared by Imricor during the year.
Subsequent events
On 2 March 2021, the Company announced the resignation of Doris Engibous from the Board and the appointment of Anita
Messal, effective 2 March 2021.
On 1 April 2021, the Company announced it had entered into a Distribution Agreement with Australian-owned medical
distribution company Regional Health Care Group Pty Ltd (RHCG), based in Sydney.
Likely developments
Imricor will continue to pursue its product and geographic-led growth strategy, with a focus on product distribution and lab
roll-out in existing markets and expansion in to new markets including Australia.
Due to the effects of the COVID-19 pandemic, Imricor has experienced some delays in the establishment of European clinical
sites in which its products can be used to perform cardiac catheter ablation procedures due to hospital restrictions on external
personnel and elective procedures. In early 2021, the first procedures were carried out at the Maastricht University Medical
Centre in the Netherlands and the Helios Leipzig Heart Centre in Germany. The Leipzig Heart Centre is an Imricor Centre of
Excellence which will also provide training for new sites as they adopt iCMR ablations.
Further information about likely developments in the operations of Imricor and the expected results of those operations in
future financial years has not been included in this report because disclosure of the information would be likely to result in
unreasonable prejudice to the Company.
Environmental regulation
Imricor is not subject to any significant environmental regulation under United States legislation.
Indemnities and insurance of officers
As permitted under Delaware law, Imricor indemnifies its Directors and certain officers and is permitted to indemnify
employees for certain events or occurrences that happen by reason of their relationship with, or position held at, Imricor. The
Company’s Certificate of Incorporation and Bylaws provide for the indemnification of its Directors, officers, employees and
other agents to the maximum extent permitted by the Delaware General Corporation Law.
Imricor has entered into indemnification agreements with its Directors and certain officers to this effect, including
advancement of expenses incurred in legal proceedings to which the Director or officer was, or is threatened to be made, a
party by reason of the fact that such Director or officer is or was a Director, officer, employee or agent of Imricor, provided
that such a Director or officer acted in good faith and in a matter that the Director or officer reasonably believed to be in, or
not opposed to, the Company’s best interests. At present, there is no pending litigation or proceedings involving a Director or
officer for which indemnification is sought, nor is the Company aware of any threatened litigation that may result in claims for
indemnification.
19
Directors’ Report (cont.)
Imricor maintains insurance policies that indemnify the Company’s Directors and officers against various liabilities that might
be incurred by any Director or officer in his or her capacity as such. The premium paid has not been disclosed as it is subject to
confidentiality provisions under the insurance policy.
Corporate Governance
Imricor’s Corporate Governance Statement is available on the Imricor website at https://imricor.com/corporate-governance/.
Non-audit services
During the year, the Company’s auditor Baker Tilly Virchow Krause, LLP has performed certain other services in addition to the
audit and review of the financial statements.
The Board has considered the non-audit services provided during the year by the auditor and in accordance with written
advice provided by resolution of the Audit and Risk Committee, is satisfied that the provision of those non-audit services
during the year is compatible with, and did not compromise, the auditor independence requirements of the Public Company
Accounting Oversight Board (United States) (‘PCAOB’) for the following reasons:
– All non-audit services were subject to the corporate governance procedures adopted by the Company and have been
reviewed by the Audit and Risk Committee to ensure they do not impact the integrity and objectivity of the auditor.
–
The non-audit services provided do not undermine the general principals relating to auditor independence as set out
in PCAOB Rule 3520, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or
decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.
Details of the amounts paid to the auditor, Baker Tilly Virchow Krause, LLP for audit and non-audit services provided during
the year are set out below:
Fees paid for audit and other services:
Taxation services
Audit or review of the financial statements
Jurisdiction of incorporation
2020 US$
2019 US$
9,730
92,515
7,645
73,177
Imricor is a company incorporated in the State of Delaware in the United States and registered in Australia as a foreign
company. As a foreign company registered in Australia, Imricor is subject to different reporting and regulatory regimes than
Australian public companies.
Presentation currency
The functional and presentation currency of the Company is United States Dollars (US Dollars). The financial report is
presented in US Dollars with all references to dollars, cents or $’s in these financial statements presented in US currency, unless
otherwise stated.
Directors authorisation
This Directors’ Report is made out in accordance with a resolution of the Directors.
Steve Wedan
Chairman
13 April 2021
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
20
Remuneration Report
Imricor is a Delaware domiciled company that is listed on the Australian Securities Exchange and as such is subject to
remuneration disclosure requirements that are suitable for reporting in both Australia and the United States. This
remuneration report forms part of the Directors’ Report and has been prepared using the requirements of section 300A of the
Australian Corporations Act 2001 (Cth) as a proxy to determine the contents that the Board has chosen to report.
The Report details the remuneration arrangements for Imricor’s key management personnel (KMP):
– Non-Executive Directors (NEDs);
–
President and Chief Executive Officer (CEO), Steve Wedan; and
– Chief Financial Officer (CFO), Lori Milbrandt.
KMP are those persons who, directly or indirectly, have authority and responsibility for planning, directing and controlling the
major activities of the Company.
Role of the Board and Nomination and Remuneration Committee
The Board and its Nomination and Remuneration Committee are responsible for reviewing and approving remuneration
and incentive policies and practices. The Company has a clear distinction between the structure of Non-Executive Directors’
remuneration and that of the President and CEO, Steve Wedan and CFO, Lori Milbrandt.
The Nomination and Remuneration Committee:
–
–
Establishes processes for the identification of suitable candidates for appointment to the Board;
Establishes processes for reviewing the performance of individual Directors, the Board as a whole, and Board
committees;
– Determines executive remuneration policy and Non-Executive Director remuneration policy;
– Reviews all equity-based incentive plans and makes recommendations to the Board regarding their adoption and
implementation; and
–
Ensures that the remuneration policies of Imricor are balanced and do not reward behaviour that is inconsistent with its
values.
The Nomination and Remuneration Committee comprises three Non-Executive Directors: Mark Tibbles (Chair), Doris Engibous
(to March 2021) and Peter McGregor. Anita Messal replaced Doris Engibous in March 2021.
The Nomination and Remuneration Committee has a formal charter which can be viewed on the Company’s website
https://imricor.com/corporate-governance/.
Use of external remuneration advisors
From time to time the Nomination and Remuneration Committee may, at its discretion, appoint external advisors or instruct
management to compile information as an input to decision making.
During the year the Committee appointed 21-Group to provide remuneration benchmarking services used in determining the
remuneration framework for 2020. These services were provided to the Nomination and Remuneration Committee free from
any undue influence by management. The total amount incurred to 21-Group in 2020 was US$11,775.
Principles of compensation
Imricor’s remuneration framework is designed to support and reinforce its principal strategic objectives. The purpose is to
create a reward and incentive framework that produces remuneration outcomes that are aligned to corporate financial and
operational performance, as well as the interest of stockholders, having regard to high standards of corporate governance.
The Company aims to reward executives with a level and mix of remuneration appropriate to their position, experience and
responsibilities, while being market competitive and enabling the Company to structure awards that may conserve cash
reserves due to the Company’s current stage of development.
2020 remuneration structure
Imricor’s executive compensation packages include a mix of fixed and variable compensation, and short and long-term
performance-based incentives.
Fixed component
The Company aims to provide a competitive base salary with reference to the role, market and experience of the individual.
The performance of the Company and the individual are considered during the annual remuneration review.
21
Remuneration Report (cont.)
Short-term incentive component
The Company allocates cash bonuses linked to annual performance targets determined by the Board. These targets are
established to promote and reward outstanding performance, beyond what is expected in the ordinary course of business.
The target STI opportunity is set as a percentage of fixed remuneration. For 2020 the maximum target opportunity was 50%
for the President and CEO, Steve Wedan and 30% for the CFO, Lori Milbrandt.
Performance targets determined by the Board in relation to 2020, were based 50% on lab adoption, revenue projections
and post-market study enrolment and 50% based upon individual objectives. Commercialization efforts were significantly
negatively impacted due to COVID 2020. As such the Board exercised discretion in granting short-term incentives for 2020
in recognition of the achievements delivered by the management team during the year, including the signing of 9 labs, the
installation of 5 labs, successful financings, a greater than 100% increase in market capitalization, increased media coverage
and public awareness in Australia, and the implementation of an inventory management system.
Long-term incentives component
Imricor’s 2019 Equity Incentive Plan (2019 Plan) provides equity-based compensation for individuals that is linked to service, the
growth and profitability of the Company and increases in stockholder value. The 2019 Plan is designed to align the interests of
management with its stockholders, while maintaining a total remuneration opportunity that enables the Company to retain,
attract and motivate qualified and high-performing executives.
Options granted under the 2019 Plan during the year had time-based vesting conditions only. Further options were granted in
2020, or in the case of the CEO are proposed to be granted, in relation to 2019 remuneration that incorporate both time-based
and performance-based vesting conditions. All vesting is subject to continuous service and options expire 10 years following
the grant date.
The 2019 Plan replaced the 2016 Stock Option Plan, with the Company ceasing to grant new awards under the 2016 Plan in
February 2019. The predecessor to the 2016 Plan was the 2006 Plan. The rules of all plans were released to the ASX on 30 August
2019 and copies are available on the ASX Announcements section of the Company’s website https://imricor.com/investors/.
Other benefits
Certain other benefits are afforded to the executives including medical insurance, life and disability insurance, health savings
and flexible spending account, and participation in the Company’s 401(k) Plan. Since listing on the ASX, the Company matches
50% of employee contributions made to the 401(k) Plan to a maximum of 4% of the employee’s annual income.
Share options
Options granted
The following options were granted during FY20:
• 497,714 options with exercise price of US$0.80, expiring 6 January 2030
• 25,000 options with exercise price of US$0.80, expiring 18 January 2030
• 125,000 options with exercise price of US$1.14, expiring 20 February 2030
• 1,690,280 options with exercise price of US$0.89, expiring 13 May 2030
• 100,000 options with exercise price of US$1.10, expiring 14 July 2030
• 135,000 options with exercise price of US$1.96, expiring 7 October 2030
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
22
Unissued shares
At the date of this report, unissued Shares under option are:
Expiry date
21 March 2022
17 June 2023
19 May 2024
15 July 2025
15 March 2029
30 August 2029
17 December 2029
6 January 2030
18 January 2030
20 February 2030
13 May 2030
14 July 2030
7 October 2030
Exercise price US$
Number of Shares
0.600
0.600
0.600
0.730
0.520
0.980
0.750
0.800
0.800
1.140
0.890
1.100
1.960
485,000
60,000
60,000
124,000
5,411,100
685,625
460,000
497,714
25,000
25,000
1,623,709
100,000
135,000
The options (with the exception of those expiring on 6 January 2030 and 1,481,689 of those expiring on 13 May 2030) are
subject to time-based vesting and have been issued under one of the 2006 Plan, 2016 Plan or 2019 Plan as discussed above. The
remaining options expiring on 6 January 2030 and 1,481,689 options expiring on 13 May 2030 are subject to time-based and
performance-based vesting and have been issued under the 2019 Plan.
These options do not entitle the holder to participate in any share issue of the Company.
Shares issued on exercise of options
During FY20 the Company issued Shares as a result of the exercise of options as follows (there are no amounts unpaid on the
Shares issued):
Number of Shares
Amount paid on each Share
175,000
178,333
40,000
20,000
US$0.341
US$0.50
$US0.52
$US0.60
23
Remuneration Report (cont.)
Executive remuneration during the year
The remuneration of key management personnel in respect of the financial year ended 31 December 2020 (including
remuneration yet to be paid) is summarised below. The options to be granted under the long-term incentive plan for the CEO
in relation to 2020 remuneration must be approved by stockholders at the 2021 Annual Meeting of Stockholders (AGM).
Executive
Steve Wedan
President and CEO
Base salary
US$452,000
Short-term
Incentive1
Long-term incentive
US$113,000
25% of base salary
124,030 options granted on 13 May 2020 at an
exercise price of US$0.892
455,157 options granted on 13 May 2020 at an
exercise price of US$0.893
304,254 options to be granted following
stockholder approval4
Lori Milbrandt
CFO
US$315,000
US$47,250
15% of base salary
134,920 options granted on 6 January 2020 at an
exercise price of US$0.802
329,898 options granted on 13 May 2020 at an
exercise price of US$0.893
1. Determined at the discretion of the Board as discussed above and paid in January 2020.
2. 2019 Options:
Tranche
Percentage of
2019 Options
Vesting Conditions
1
2
3
4
50%
Options will vest over a four-year period, with 25% vesting on each anniversary of the grant date.
30%
Options will vest based on absolute total stockholder return (TSR) over a three-year period commencing
on the grant date. TSR growth will be calculated using the volume weighted average market price of the
CDIs (in Australian dollars) for the five trading days prior to:
(a) the grant date (to calculate the baseline price); and
(b) the three-year anniversary of the grant date (to calculate TSR at the vesting date).
Vesting will occur in accordance with the following table:
TSR Growth Rate
Below 8%
8% to <20%
20% or greater
Percentage Vesting
0%
25+6.5*(TSR Rate - 8))%
100%
10%
10%
Options will vest upon the approval of the Therapeutic Goods Administration of the Company’s first
device in Australia on or prior to the expiration of the Options.
Options will vest upon the approval of the US Food and Drug Administration of the Company’s first
device in the US on or prior to the expiration of the Options.
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
24
3. 2020 Options:
Tranche
Percentage of
2020 Options
Vesting Conditions
1
2
3
50% Options will vest over a four-year period, with 25% vesting on each anniversary of the grant date.
30% Options will vest based on absolute total stockholder return (TSR) over a three-year period commencing
on the grant date. TSR growth will be calculated using the volume weighted average market price of the
CDIs (in Australian dollars) for the five trading days prior to:
(c) the grant date (to calculate the baseline price); and
(d) the three-year anniversary of the grant date (to calculate TSR at the vesting date).
Vesting will occur in accordance with the following table:
TSR Growth Rate
Below 8%
8% to <20%
20% or greater
Percentage Vesting
0%
25+6.5*(TSR Rate - 8))%
100%
20% Options will vest upon the Customer sites (labs) equalling or exceeding 50.
4. Options value determined based on 50% of base salary for 2021 and short-term incentive paid in 2021 for 2020, subject to stockholder approval at
Imricor’s 2021 AGM. As set out in the Company’s Notice of Meeting, the number of Options proposed to be issued to Mr Wedan was determined by
dividing the LTI Grant Value by the Black-Scholes value of an Option assuming an exercise price per Option equal to the closing sale price of a CDI as
of the immediately preceding trading day prior to the Record Date, converted from Australian dollars to U.S. dollars using the prevailing exchange
rate.
Tranche
Percentage of
2021 Options
Vesting Conditions
1
2
3
50% First sale of product in the United States following FDA approval
25% First sale of product in Australia following TGA approval
25% First sale of product for use in a Ventricular Tachycardia ablation procedure following CE Mark approval
Non-executive Directors (NED)
Under Imricor’s Bylaws, the Directors decide the total amount paid to all Directors for their services as a Director of Imricor.
However, under the ASX Listing Rules, the total amount paid to all Directors (excluding the salary of any executive Director)
for their services must not exceed in aggregate in any financial year, the amount fixed by Imricor in a general meeting. This
amount has been fixed at US$400,000.
The Board seeks to set NED fees at a level that provides the Company with the ability to attract and retain NED of high
calibre with relevant professional expertise and reflects the demands that are made on, and the responsibilities of, the NED,
while incurring a cost that is acceptable to stockholders. As Imricor’s operations are in the initial stages of commercialisation,
the Company has structured NED fees to include both cash remuneration and options in order to maintain appropriate
remuneration structures and preserve cash flow. Options issued NED do not have performance hurdles attached.
NED serving on the board of directors will receive US$65,000 in annual fees. Committee chairs will receive an additional
US$10,000 in annual fees. Committee members will receive an additional US$5,000 in annual fees. All fees for Australian NED
are inclusive of superannuation. The Chairman, Mr Steve Wedan, receives no remuneration.
The remuneration of Non-Executive Directors in respect of the financial year ended 31 December 2020 is summarised below:
Non-Executive Director
Peter McGregor
Doris Engibous
Mark Tibbles
1. The options shall vest over four years 25% on each anniversary of grant date.
Cash fees
US$95,000
US$86,250
US$95,000
Options Granted1
71,010
66,571
71,010
25
IMRICOR MEDICAL SYSTEMS, INC.
Minneapolis, Minnesota
Including Independent Auditors' Report
As of and for the years ended December 31, 2020 and 2019
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
26
IMRICOR MEDICAL SYSTEMS, INC.
TABLE OF CONTENTS
Independent Auditors' Report
Financial Statements
Balance Sheets
Statements of Operations
Statements of Stockholders' Equity (Deficit)
Statements of Cash Flows
Notes to Financial Statements
1
2
3
4
5
6 - 21
27
Independent Auditors’ Report
Independent Auditors' Report
To the Stockholders and Board of Directors of
Imricor Medical Systems Inc.
We have audited the accompanying financial statements of Imricor Medical Systems Inc., which comprise
the balance sheets as of December 31, 2020 and 2019, and the related statements of operations,
stockholders' equity (deficit), and cash flows for the years then ended, and the related notes to the financial
statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes the
design, implementation, and maintenance of internal control relevant to the preparation and fair presentation
of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted
our audits in accordance with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditors' judgment, including the assessment
of the risks of material misstatement of the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal
control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of significant accounting estimates made by management,
as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of Imricor Medical Systems Inc. as of December 31, 2020 and 2019 and the results of its operations
and cash flows for the years then ended, in accordance with accounting principles generally accepted in the
United States of America.
Minneapolis, Minnesota
February 24, 2021
Page 1
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
28
Baker Tilly US, LLP, trading as Baker Tilly, is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Balance Sheets
As of 31 December 2020 and 2019
ASSETS
2020
2019
CURRENT ASSETS
Cash
Accounts receivable
Inventory
Prepaid expenses and other current assets
Total Current Assets
$ 25,139,812
223,237
3,069,920
491,628
$ 5,048,893
256,294
1,220,616
287,787
28,924,597
6,813,590
ACCOUNTS RECEIVABLE-LONG TERM
238,749
277,070
PROPERTY AND EQUIPMENT, NET
3,094,721
2,285,390
OTHER ASSETS
OPERATING LEASE RIGHT OF USE ASSETS
PREPAID SERVICE AGREEMENT
224,320
795,365
291,664
192,174
453,305
500,000
TOTAL ASSETS
$
33,569,416
$
10,521,529
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
Accrued expenses
Current portion of contract liabilities
Current portion of operating lease liabilities
Current portion of finance lease liability
Current portion of financing obligation
Total Current Liabilities
LONG-TERM LIABILITIES
$ 529,132
1,068,908
40,202
189,143
8,886
462,961
$ 540,980
367,497
14,557
118,843
8,420
374,023
2,299,232
1,424,320
Other long-term liabilities
Contract liabilities, net of current portion
Operating lease liabilities, net of current portion
Finance lease liability, net of current portion
Financing obligation, net of current portion
67,395
549,806
1,168,644
19,274
649,015
-
592,853
330,803
28,160
1,111,976
Total Liabilities
4,753,366
3,488,112
COMMITMENTS AND CONTINGENCIES (NOTE 7)
STOCKHOLDERS' EQUITY
Preferred stock, $0.0001 par value:
25,000,000 shares authorized and 0 shares outstanding as of both
December 31, 2020 and 2019
Common stock, $0.0001 par value:
-
-
535,000,000 shares authorized as of both December 31, 2020 and 2019 and
125,549,550 and 92,682,535 shares issued and outstanding as of December
31, 2020 and 2019, respectively
Additional paid-in capital
Accumulated deficit
Total Stockholders' Equity
12,556
81,675,671
(52,872,177)
28,816,050
9,268
47,449,853
(40,425,704)
7,033,417
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
33,569,416
$
10,521,529
See accompanying notes to financial statements
Page 2
29
Statements of Operations
For the years ended 31 December 2020 and 2019
REVENUES
Product revenues
Service revenue
Consulting revenue
Government contract revenue
Total Revenue
COSTS AND EXPENSES
Cost of goods sold
Sales and marketing
Research and development
General and administrative
Total Operating Expenses
2020
$ 468,263
38,009
100,000
95,889
702,161
2019
$ 376,321
-
-
263,383
639,704
1,099,833
1,683,653
5,546,324
4,328,611
12,658,421
377,365
573,058
3,601,203
2,635,453
7,187,079
Loss from Operations
(11,956,260)
(6,547,375)
OTHER INCOME (EXPENSE)
Interest income
Foreign currency exchange gain (loss)
Down round expense (NOTE 5)
Beneficial conversion feature expense (NOTE 5)
Interest expense
Other expense
29,237
(198,398)
-
-
(300,637)
(20,415)
13,856
216,139
(1,802,129)
(4,129,856)
(1,030,732)
(13,879)
Total Other Expense
(490,213)
(6,746,601)
NET LOSS
$ (12,446,473)
$ (13,293,976)
EARNINGS PER SHARE:
Basic and diluted loss per common share
Basic and diluted weighted average shares
outstanding
$ (0.11)
$ (0.22)
110,137,915
60,526,541
See accompanying notes to financial statements
Page 3
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
30
Statements of Stockholders’ Equity (Deficit)
For the years ended 31 December 2020 and 2019
Common Stock
Additional
Total
Stockholders'
Shares
Amount
Paid-in
Capital
Accumulated
Deficit
Equity
(Deficit)
BALANCES, December 31, 2018
42,002,813
$420,028
$20,817,689
$(27,131,728)
$(5,894,011)
Stock-based compensation expense
Exercise of warrants
Exercise of stock options
Change in par value from $0.01 to $0.0001
-
150,000
2,281,538
-
-
1,500
21,924
(439,009 )
533,110
49,650
133,166
439,009
Issuance of common stock for convertible notes
and accrued interest
Issuance of common stock, net of issuance
29,217,437
2,922
12,530,842
costs paid in cash of $1,752,176
15,662,650
1,566
7,014,739
Issuance of common stock for services related
to equity financing
180,722
Issuance of down round common stock
3,187,375
Beneficial conversion feature of convertible
notes
Net loss
-
-
18
319
-
-
(18)
1,801,810
4,129,856
-
-
-
-
-
-
-
-
-
533,110
51,150
155,090
-
12,533,764
7,016,305
-
1,802,129
4,129,856
-
(13,293,976)
(13,293,976)
BALANCES, December 31, 2019
92,682,535
$9,268
$47,449,853
$(40,425,704)
$7,033,417
Stock-based compensation expense
Exercise of warrants, net of fees
Exercise of stock options, net of fees
Issuance of royalty conversion shares
-
406,849
413,333
7,197,634
-
41
41
720
821,952
295,384
174,154
(720)
Issuance of common stock, net of issuance costs
paid in cash of $1,863,233
24,849,199
2,486
32,935,048
-
-
-
-
-
821,952
295,425
174,195
-
32,937,534
Net loss
-
-
-
(12,446,473)
(12,446,473)
BALANCES, December 31, 2020
125,549,550
$12,556
$81,675,671
$(52,872,177)
$28,816,050
See accompanying notes to financial statements
Page 4
31
Statements of Cash Flows
For the years ended 31 December 2020 and 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
Adjustments to reconcile net loss to net cash flows from operating
2020
2019
$ (12,446,473)
$ (13,293,976)
activities
Depreciation
Stock-based compensation expense
Gain on disposal of property and equipment
Amortization of debt issuance costs
Accrued interest
Beneficial conversion feature expense
Down round expense
Foreign currency exchange gain
Changes in assets and liabilities
Accounts receivable
Inventory
Prepaid expenses and other assets
Accounts payable
Accrued expenses
Contract liabilities
Net Cash Flows from Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payment of security deposit
Purchases of property and equipment
Net Cash Flows from Investing Activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of options and warrants
Proceeds from convertible notes
Proceeds from financing obligation
Payments on financing obligation
Proceeds from issuance of common stock, net
Payments on finance lease liability
Net Cash Flows from Financing Activities
Net Change in Cash
CASH - Beginning of Year
Effect of foreign currency exchange rate changes on cash
CASH - End of Year
Supplemental cash flow disclosure
Cash paid for interest
Noncash investing and financing activities
528,089
821,952
-
-
-
-
-
198,398
71,378
(1,849,304)
(24,958)
(281,175)
768,806
(17,402)
(12,230,689)
(32,146)
(741,886)
(774,032)
469,620
-
-
(374,023)
32,937,534
(8,420)
33,024,711
257,300
533,110
(26,250)
174,044
578,295
4,129,856
1,802,129
(216,139)
(160,968)
(846,300)
(40,260)
249,138
217,471
14,557
(6,627,993)
(164,580)
(364,758)
(529,338)
206,240
1,745,932
1,700,000
(214,001)
7,016,305
(3,004)
10,451,472
20,019,990
5,048,893
70,929
$ 25,139,812
3,294,141
1,588,348
166,404
$ 5,048,893
$ 300,637
$ 278,393
Common stock issued for 2019 and 2018 Notes and accrued interest
Leasehold Improvements paid by landlord
Operating lease right of use asset
$ -
$ 595,534
$ 606,277
$ 12,533,764
$ -
$ -
See accompanying notes to financial statements
Page 5
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
32
Notes to Financial Statements
As of and for the years ended 31 December 2020 and 2019
NOTE 1 - Summary of Significant Accounting Policies
Nature of Operations and Basis of Presentation
Imricor Medical Systems, Inc. (“Imricor” and the “Company”) is a U.S.-based medical device company that
seeks to address the current issues with traditional x-ray-guided ablation procedures through the development
of Magnetic Resonance Imaging (MRI) guided technology. Incorporated in the State of Delaware in 2006, the
Company’s principal focus is the design, manufacturing, sale and distribution of MRI-compatible products for
cardiac catheter ablation procedures. Imricor’s unique technology utilizes an intellectual property (IP) portfolio
that includes technology developed in-house, as well as IP originating from Johns Hopkins University and
Koninklijke Philips N.V. The Company is headquartered in Burnsville, Minnesota, where it has development
and manufacturing facilities. The Company’s primary product offering, the Vision-MR Ablation Catheter is
specifically designed to work under real-time MRI guidance, with the intent of enabling higher success rates
along with a faster and safer treatment compared to conventional procedures using x-ray guided catheters.
Historically, Imricor generated revenue from licensing some of its IP for use in implantable devices and
performing contract research, but expects to generate most of its future revenue from the sale of the MRI-
compatible products it has developed for use in cardiac catheter ablation procedures (comprising single-use
consumables and capital goods). On January 13, 2016, Imricor obtained CE mark approval to place one of its
key products, the Advantage-MR EP Recorder/Stimulator System, on the market in the European Union. On
January 23, 2020, the Company obtained CE mark approval for its other key products, the Vision-MR Ablation
Catheter (with an indication for treating type I atrial flutter) and the Vision-MR Dispersive Electrode.
The Company has prepared the accompanying financial statements and notes in conformity with accounting
principles generally accepted in the United States of America (US GAAP).
The Company’s financial statements and notes are presented in United States dollar, which is also the
functional currency.
Impact of COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic, which
continues to spread throughout the world and has resulted in travel restrictions, quarantines, “stay-at-home”
and “shelter-in-place” orders, business limitations and shut downs. During the year ended December 31, 2020,
the Company’s revenue was impacted by the COVID-19 pandemic as hospital restrictions banned outside
personnel and postponed most elective procedures. Our products treat conditions that are considered elective.
We have implemented several steps in response to COVID-19 including restricting all unnecessary travel,
working from home when possible, social distancing and masking and adopting more stringent cleaning
procedures in our facilities.
We are unable to accurately predict the full impact that COVID-19 will have on our future results from operations,
financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity
of the pandemic and containment measures, impact on our customers and our vendors, for an indefinite period
of time. Our future results of operations and liquidity could be adversely impacted by delays in payments from
customers, supply chain disruptions, and uncertain demand.
We will continue to monitor the situation and take further actions that we determine are in the best interest of
our stakeholders.
Cash
Cash consists of funds in depository accounts. The Company holds cash with high quality financial institutions
and at times, such balances may be in excess of federal insurance limits.
Page 6
33
Notes to Financial Statements (cont.)
As of and for the years ended 31 December 2020 and 2019
NOTE 1 - Summary of Significant Accounting Policies (cont.)
Accounts Receivable
Accounts receivable are unsecured, are recorded at net realizable value, and do not bear interest except if a
revenue transaction has a significant financing component. The Company makes judgments as to its ability
to collect outstanding receivables based upon significant patterns of uncollectability, historical experience,
and managements’ evaluation of specific accounts and will provide an allowance for credit losses when
collection becomes doubtful. The Company performs credit evaluations of its customers’ financial condition
on an as-needed basis. Payment is generally due 30 days from the invoice date and accounts past 30 days
are individually analyzed for collectability. When all collection efforts have been exhausted, the account is
written off against the related allowance. To date the Company has not experienced any write-offs or
significant deterioration of its accounts receivable aging, and therefore, no allowance for doubtful accounts
was considered necessary as of December 31, 2020 or 2019.
Accounts receivable includes unbilled receivables of $38,321 and $39,470 as of December 31, 2020 and
2019, respectively, which represents the current portion of minimum royalties due to the Company during the
following year. The accounts receivable-long term relates to minimum royalties due to the Company for years
ending after December 31, 2021.
Inventory
Inventories are stated at the lower of cost or net realizable value, with cost determined on the first-in, first-out
(“FIFO”) method. The establishment of allowances for excess and obsolete inventories is based on historical
usage and estimated exposure on specific inventory items. Inventories are as follows as of December 31,
2020 and 2019:
Raw materials
Work in process
Finish goods
Less: obsolescence reserve
Property and Equipment
December 31,
2020
$ 1,216,964
423,666
1,716,052
(286,762)
$ 3,069,920
2019
$ 822,217
65,765
409,544
(76,910)
$ 1,220,616
Property and equipment are stated at cost. Additions and improvements that extend the lives of assets are
capitalized, while expenditures for repairs and maintenance are expensed as incurred. Depreciation is
computed using the straight-line method over the estimated useful lives of the assets. Amortization of
leasehold improvements is computed on a straight-line basis over the shorter of the estimated useful lives of
the related assets or life of the lease.
The standard estimated useful lives of property and equipment are as follows:
Office furniture and equipment
Lab and production equipment
Computer equipment
MRI scanner
Leasehold improvements
5 years
5 years
3 years
7 years
7 years
Page 7
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
34
NOTE 1 - Summary of Significant Accounting Policies (cont.)
The Company reviews property and equipment for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If the impairment tests indicate that the
carrying value of the asset, or asset group, is greater than the expected undiscounted cash flows to be
generated by such asset or asset group, further analysis is performed to determine the fair value of the asset
or asset group. To the extent the fair value of the asset or asset group is less than its carrying value, an
impairment loss is recognized equal to the amount the carrying value of the asset or asset group exceeds its
fair value. The Company generally measures fair value by considering sale prices for similar assets or asset
groups, or by discounting estimated future cash flows from such assets or asset groups using an appropriate
discount rate. Considerable management judgment is necessary to estimate the fair value of assets or asset
groups, and accordingly, actual results could vary significantly from such estimates. Assets to be disposed of
are reported at the lower of the carrying amount or fair value less costs to sell. To date, the Company has not
recognized any impairment loss for property and equipment.
Research and Development Costs
The Company expenses research and development costs as incurred.
Other Assets
Other assets on the balance sheet include security deposits related to the Company’s operating and financing
obligations.
Other Long-term liabilities
A certain portion of the Company’s share of Social Security tax was deferred in accordance with The
Coronavirus, Aid, Relief and Economic Security Act and is included in other long-term liabilities.
Patents
Expenditures for patent costs are charged to operations as incurred.
Income Taxes
Income taxes are recorded under the liability method. Deferred income taxes are provided for temporary
differences between financial reporting and tax bases of assets and liabilities. Deferred tax assets are reduced
by a valuation allowance to the extent the realization of the related deferred tax asset is not assured.
The Company recognizes the financial statement benefit of a tax position only after determining that the
relevant tax authority would more likely than not sustain the position following an audit. For tax positions
meeting the more-likely-than not threshold, the amount recognized in the financial statements is the largest
benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the
relevant tax authority.
Loss per Share
Basic loss per share is computed by dividing net loss by the weighted average shares outstanding during the
reporting period. The weighted average common shares outstanding were 110,137,915 and 60,526,541 for
the years ended December 31, 2020 and 2019, respectively.
Page 8
35
Notes to Financial Statements (cont.)
As of and for the years ended 31 December 2020 and 2019
NOTE 1 - Summary of Significant Accounting Policies (cont.)
Dilutive net income (loss) per share assumes the exercise and issuance of all potential common stock
equivalents in computing the weighted-average number of common shares outstanding, unless their effect is
antidilutive. The effects of including incremental shares associated with convertible notes, options, warrants
and unvested royalty conversion rights are anti-dilutive due to the net loss incurred and are not included in the
diluted weighted average number of shares of common stock outstanding for the years ending December 31,
2020 and 2019.
Foreign currency exchange gains (losses)
During the years ended December 31, 2020 and 2019, the Company had accounts payable that are
denominated in both Australian dollars and Euros and accounts receivable denominated in Euros. As of
December 31, 2019, the Company had cash accounts denominated in both Australian dollars and Euros. As
of December 31, 2020, the Company had cash accounts denominated in Euros. These assets and liabilities
have been translated into U.S. dollars at year-end exchange rates. Foreign currency exchange gains and losses
are included in the statements of operations within other income (expense).
Financial Instruments
The carrying amounts for all financial instruments approximate fair value. The carrying amounts for cash,
accounts payable and accrued expenses approximate fair value because of the short maturity of these
instruments. The fair value of convertible notes approximates carrying value and have been estimated based
on discounted cash flows using interest rates being offered for similar instruments having the same or similar
maturities and collateral requirements.
Revenue Recognition
The Company recognizes revenue for product sales when its customers obtain control of the products, which
occurs at a point in time, in an amount that reflects the consideration that the Company expects to receive in
exchange for those goods. Control is transferred to customers when title to the goods and risk of loss transfers,
which was upon shipment for products sales recognized.
The Company’s product sales contain a single performance obligation and the transaction price is based on
invoice price as there is no variable consideration impacting the transaction price.
Sales tax and value added taxes in foreign jurisdictions that are collected from customers and remitted to
governmental authorities are accounted for on a net basis and therefore are excluded from net sales. Product
sales include shipment and handling fees charged to customers. Shipping and handling costs associated with
outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment
cost and are included in cost of goods sold.
Revenue from service contracts is recognized over the contract period on a straight-line basis.
Royalties
On June 1, 2012, the Company licensed certain intellectual property to a customer which included a royalty of
3% of product sales, subject to a minimum of $50,000 per year. The minimum guaranteed royalties were
recognized upon the execution of the license agreement as these proceeds were not variable
consideration. The remaining minimum royalty payments to be received, less the portion which represents
future interest expected to be received within 12 months is included in Accounts Receivable and the amounts
expected to be received in future periods beyond 12 months are included in Accounts Receivable-Long term.
Any royalties received in the future which are more than the minimum guaranteed royalty will be recognized
when they are earned.
Page 9
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
36
NOTE 1 - Summary of Significant Accounting Policies (cont.)
Consulting Revenue
In June 2015, the Company entered into a Joint Research Agreement. The Agreement was amended in August
2017 whereby the Company received an upfront payment of $100,000 to cover costs incurred in the course of
providing certain services, which had been included in Contract liabilities-net of current portion. The agreement
was to terminate upon the earlier of completion of the project or five years. The project was not completed and
has terminated. Therefore, $100,000 has been recognized as Consulting revenue for the year ended December
31, 2020.
Government Contract Revenue
The Company recognizes revenue for government contracts over time using the “as invoiced” practical
expedient.
The Company was awarded a contract with the U.S. government on September 26, 2017 for up to $2,402,951
to develop a MRI compatible injection catheter for MRI-guided procedures. The Company recognized $0 and
$263,383 as revenue during the years ended December 31, 2020 and 2019, respectively. The Company
cancelled the contract in December 2019 to allow engineering resources to focus on the development of its
core pipeline products.
The Company was awarded a contract with the U.S. government on September 25, 2020 for up to $399,539 to
develop an MRI compatible myocardial biopsy system. The Company recognized $95,889 as revenue during
the year ended December 31, 2020.
Contract Liabilities
On November 27, 2013, the Company licensed certain intellectual property to a customer in exchange for an
upfront non-refundable license fee and milestone payments, which can total up to $7,000,000. The Company
collected $6,000,000 of these milestone payments, including the non-refundable license fee, on or before
October 2016.
$373,333 is included in long-term contract liabilities as of December 31, 2020 and 2019. The customer sold
the portion of the business which held this license in May 2018. The license has been assigned to the
purchaser. The project is still on hold with no plans to work on final development during the next 12 months,
and therefore, the contract liability is included in long-term liabilities.
Amounts received prior to satisfying the above revenue recognition criteria are recorded as contract liabilities
in the accompanying balance sheets, with the contract liabilities to be recognized beyond one year being
classified as non-current contract liabilities. As of December 31, 2020 and 2019, the Company had contract
liabilities of $590,008 and $607,410, respectively.
The following table sets forth information related to the contract liabilities for the years ended December 31:
Balance at the beginning of the year
Decrease from revenue recognized for completion of
performance obligations that were included in contract
liabilities at the beginning of the period included in:
Consulting revenue
Service revenue
2020
$ 607,410
2019
$ 592,853
(100,000)
(14,557)
-
-
Increase for revenue deferred as the performance
obligation has not been satisfied
97,155
14,557
Balance at the end of the year
$ 590,008
$ 607,410
Page 10
37
Notes to Financial Statements (cont.)
As of and for the years ended 31 December 2020 and 2019
NOTE 1 - Summary of Significant Accounting Policies (cont.)
Stock-Based Compensation
The Company measures and records compensation expense using the applicable accounting guidance for
share-based payments related to stock option awards granted to directors and employees. The fair value of
stock options, including performance awards, without a market condition is estimated, at the date of grant, using
the Black-Scholes option-pricing model. The fair value of restricted stock awards and stock options with a
market condition is estimated, at the date of grant, using the Monte Carlo Simulation model. The Black-Scholes
and Monte Carlo Simulation valuation models incorporate assumptions as to stock price volatility, the expected
life of options or awards, a risk-free interest rate and dividend yield.
Compensation expense is recognized on a straight-line basis over the vesting period for all awards, net of an
estimated forfeiture rate, resulting in the recognition of compensation expense for only those shares expected
to vest. Compensation expense is recognized for all awards over the vesting period to the extent the employees
or directors meet the requisite service requirements, whether or not the award is ultimately exercised.
Conversely, when an employee or director does not meet the requisite service requirements and forfeits the
award prior to vesting, any compensation expense previously recognized for the award is reversed.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Subsequent Events
For the year ended December 31, 2020, the Company evaluated, for potential recognition and disclosure,
events that occurred prior to the issuance of the financial statements through February 23, 2021.
NOTE 2 – Liquidity
The accompanying financial statements have been prepared on a going concern basis, which contemplates
the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The
Company incurred losses from operations and negative cash flows from operations for both of the years ended
December 31, 2020 and 2019, had an accumulated deficit as of December 31, 2020. As of December 31,
2020, the Company’s cash balance was $25.1 million. The Company’s ability to achieve profitability and
positive cash flow is dependent upon its ability to increase revenue and contain its expenses.
The Company believes that it will have sufficient working capital to operate for at least twelve months beyond
February 23, 2021.
Page 11
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
38
NOTE 3 – Accrued Expenses
Accrued expenses consist of the following:
Compensation
Other accruals
Total accrued expenses
NOTE 4 – Property and Equipment
Property and equipment consisted of the following:
Office furniture and equipment
Lab and production equipment
Computer equipment
MRI scanner
Leasehold improvements
Less: Accumulated depreciation and amortization
December 31,
2020
$ 504,372
564,536
$ 1,068,908
2019
$ 228,888
138,609
$ 367,497
December 31,
2020
$ 390,160
1,414,136
277,821
1,200,000
1,459,919
4,742,036
(1,647,315)
3,094,721
$
2019
$ 186,030
1,099,744
194,890
1,200,000
723,952
3,404,616
(1,119,226)
2,285,390
$
Depreciation expense was $528,089 and $257,300 for the years ended December 31, 2020 and 2019,
respectively. The MRI scanner and leasehold improvements related to new space for the MRI scanner were
placed in service in May 2019, which is when depreciation began on those assets.
NOTE 5 – Convertible Notes
During September and October 2017, the Company issued $2,325,000 in unsecured convertible notes (“2017
Notes”) with several equity investors, including $885,000 issued to related parties. The notes bore interest at a
rate of six percent annually from the date of issuance and principal and interest were due on August 31, 2018.
The 2017 Notes, including accrued interest, were automatically convertible into the next round of equity
financing if at least $5,000,000 in new funding was raised (“Qualified Financing”) prior to the maturity date, at a
conversion price equal to 94% of the price per share paid by investors in the Qualified Financing. As the
conversion features were contingent upon completion of a Qualified Financing, no beneficial conversion feature
was recorded upon commencement of the notes.
During April 2018, the 2017 Notes and accrued interest of $2,398,115 were converted, with a six percent
discount of $153,071, into $2,551,186 in new unsecured convertible notes (“2018 Notes”), of which $967,686
was to related parties. The Company also issued $7,379,420 of new 2018 Notes with several current and new
investors, including $260,000 to related parties. In connection with the issuance of the 2018 Notes, a strategic
investor invested $3,400,000 consisting of $1,000,000 in cash, and $2,400,000 of in-kind contribution. The in-
kind contribution includes $1,200,000 for an MRI scanner, $500,000 for a four-year prepaid service agreement
on the MRI scanner, and $700,000 in a leasehold improvement allowance to build out space to house the MRI
scanner. The MRI scanner and leasehold improvements are included in property and equipment as of both
December 31, 2020 and 2019. The prepaid service agreement to be amortized within one year is included in
prepaid expenses and other current assets and the amount to be recognized beyond one year is included as
prepaid service agreement in other long-term assets. During the year ended December 31, 2020, the Company
recorded $83,336 in expense which is included in research and development expenses.
Page 12
39
Notes to Financial Statements (cont.)
As of and for the years ended 31 December 2020 and 2019
NOTE 5 – Convertible Notes (cont.)
In connection with the 2018 Notes, the Company incurred debt issuance costs of $278,007, of which $228,660
were settled with the issuance of additional 2018 Notes. These debt issuance costs were being amortized
straight-line over the expected maturity date and recognized as interest expense. The remaining unamortized
balance was expensed upon the Company’s completion of its Initial Public Offering (“IPO”) and associated
listing on the Australian Securities Exchange (“ASX”) on August 26, 2019. The 2018 Notes bore interest at a
rate of eight percent compounded annually from the date of issuance until the outstanding principal was
converted.
On February 4, April 3 and April 4, 2019, the Company issued $1,745,932 in additional convertible notes (“2019
Notes”), including $662,506 to related parties. The notes bore interest at a rate of eight percent compounded
annually from the date of issuance until the outstanding principal was converted.
The 2018 and 2019 Notes and accrued interest totaling $12,533,764 automatically converted into 29,217,437
Conversion Shares immediately prior to, and contingent upon, the allotment of CHESS Depositary Interests
(CDIs) as a result of the IPO, (see NOTE 8). The number of Conversion Shares issued upon conversion of the
2018 and 2019 Notes was 75% of the IPO share price of $0.5654 per share. The Company recorded $578,295
in interest expense related to the 2018 and 2019 Notes for the year ended December 31, 2019.
A beneficial conversion feature expense of $4,129,856 was recorded upon completion of the Company’s IPO
and is included as “beneficial conversion feature expense” in the Statement of Operations for the year ended
December 31, 2019.
During 2016 and 2017, the Company issued $2,680,000 in unsecured convertible notes (“Notes”) with several
equity investors, including $100,000 to related parties. The notes bore interest at a rate of six percent annually
from the date of issuance and were due on August 1, 2017. In August 2017, the Company converted the Notes
and accrued interest totaling $2,798,674 into 3,833,799 shares of Common stock. In the event the Company
issued securities within the 180-day period immediately following the conversion of the Notes (“Qualified
Financing”), the Noteholders were to receive additional shares of Common stock such that total shares issued
would be based upon a price that was 94% of the price paid by the subsequent investors. The 2017 Notes
(described above) met the definition of a Qualified Financing. Consequently, in connection with the IPO, the
Company issued 3,187,375 additional shares such that the total shares received was based upon an adjusted
purchase price of $0.3986 per share in 2019. The fair value of the additional shares issued was $1,802,129
and is included as “Down round expense” in the Statement of Operations for the year ended December 31,
2019 (See NOTE 8).
Interest expense related to the convertible notes for the year ended December 31, 2019 was $578,295 including
$93,721 to related parties.
NOTE 6 – Leases
Operating Leases
In March 2007, the Company entered into an operating lease agreement for its office and manufacturing space
which was originally set to expire in July 2014. The lease was extended through July 2019. In June 2019, the
lease was extended through October 2022. The Company entered into a second operating lease agreement
for office and warehouse space in August 2018 which commenced on January 1, 2019 and was originally set
to expire in March 2026. In February 2020, this lease was amended to include an expansion of space and an
increase to the term through May 2030. Neither lease includes renewal or extension rights. Both lease
agreements require the Company to pay a pro rata portion of the lessor’s actual operating expenses which are
considered variable lease costs as the expenses are trued up on an annual basis.
Page 13
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
40
NOTE 6 – Leases (cont.)
On January 1, 2019, the Company recorded a $220,000 right to use asset and lease liability associated with
these leases. In June 2019, when the extension for the office space lease was executed, the Company recorded
a $358,506 right to use asset and lease liability associated with the lease extension. The remaining
consideration associated with the Company’s office and warehouse space lease has been reallocated and the
lease liability remeasured as the amended lease provided for additional space and the lease term has been
extended. In addition, the landlord agreed to pay $593,534 in leasehold improvements. Upon commencement
of the lease in June 2020, the Company recorded $593,534 in leasehold improvements, a $606,277 right to
use asset, and a $1,201,811 lease liability.
As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information
available at the lease commencement date in determining the present value of the lease payments. As of
December 31, 2020 and 2019, the remaining lease term was 8.5 and 4.5 years and discount rate was 5.5%
and 8.0%, respectively. For the year ended December 31, 2020 and 2019, the operating cash outflows from
our operating lease for office and manufacturing space was $192,166 and $144,195, respectively.
As of December 31, 2020, maturities of our operating lease liabilities are as follows:
2021
2022
2023
2024
2025
2026 and thereafter
Total lease payments
Less interest
Present value of lease liabilities
Less current potion
Operating lease liability, net of current portion
$ 262,522
236,191
148,966
153,437
158,050
756,399
1,715,565
(357,778)
1,357,787
(189,143)
$ 1,168,644
The cost components of the Company’s operating leases were as follows for the years ended December 31,
2020 and 2019:
Operating lease cost
Variable least cost
Total
Finance Lease Liability
2020
$ 192,166
117,356
$ 309,522
2019
$ 154,687
73,735
$ 228,062
In December 2019, the Company entered into a $36,580 finance lease agreement for certain equipment. The
Company traded in fully depreciated equipment worth $26,250. The total equipment value of $62,380 is
included in property and equipment. The interest rate implied in the finance lease is 5.4% and the term of the
lease is four years.
Page 14
41
Notes to Financial Statements (cont.)
As of and for the years ended 31 December 2020 and 2019
NOTE 6 – Leases (cont.)
The Company’s remaining payments under the terms of the finance lease are as follows as of December 31,
2020:
2021
2022
2023
Total payments
Less amount representing interest
Total present value of total payments
Less current portion
Finance lease liability, net of current portion
$ 10,188
10,188
10,188
30,564
(2,404)
28,160
(8,886)
$ 19,274
Financing Obligation
On June 1, 2019, the Company entered into a sale leaseback agreement for the purchase of its MRI scanner
($1,200,000) and related Service Agreement ($500,000). The term of the lease is 36 months with a monthly
rental payment of $54,865. The lease meets the requirements to be classified as a finance lease. Therefore,
the agreement is considered a failed sale leaseback arrangement and is not accounted for as a lease, but rather
is accounted for as a financing obligation. The MRI scanner is included in property and equipment and the
Service Agreement is included as Prepaid Service Agreement. The lease agreement includes an option to
repurchase the related assets for $425,000 at the end of the lease term, which the Company deems it is
reasonably certain to do. The interest rate implied in the financing obligation is 21.5%.
The Company’s remaining payments under the terms of the financing obligation are as follows as of December
31, 2020:
2021
2022
Expected buy out at end of lease term
Total payments
Less amount representing interest
Total present value of total payments
Less current portion
Financing obligation, net of current portion
$ 658,380
274,325
425,000
1,357,705
(245,729)
1,111,976
(462,961)
$ 649,015
NOTE 7 - Commitments and Contingencies
Vendor concentration
Certain components and products that meet the Company’s requirements are available only from a single
supplier or a limited number of suppliers. The inability to obtain components and products as required, or to
develop alternative sources, if and as required in the future, could result in delays or reductions in product
shipments, which in turn could have a material adverse effect on the Company’s business, financial condition,
and results of operations. The Company believes that it will be able to source alternative suppliers or materials
if required to do so.
For the year ended December 31, 2020, the Company had accounts payable to two vendors that accounted for
12% and 11% of the total outstanding balance.
Purchase Commitments
At December 31, 2020, the Company had $241,431 in outstanding firm purchase commitments.
Page 15
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
42
NOTE 7 - Commitments and Contingencies (cont.)
Retirement Plan
The Company maintains a 401(k) retirement plan for its employees in which eligible employees can contribute
a percentage of their compensation. The Company contributed a safe harbor match of $170,062 during the
year ended December 31, 2020 and a discretionary contribution of $22,770 during the year ended December
31, 2019.
(
)
Employment Agreements
(
)
The Company has employment agreements with the CEO and senior executives of the Company. The
agreements require severance of twelve and six months, respectively, of current annual salary and medical
insurance in the event employment is terminated without cause, respectively.
NOTE 8 - Stockholders' Equity
Capital Stock Authorized
As of both December 31, 2020 and 2019, the Board of Directors of the Company had authorized 560,000,000
shares of capital stock, consisting of 535,000,000 shares of common stock and 25,000,000 shares of preferred
stock.
Common Stock
During January and March 2019, 150,000 warrants to purchase common stock were exercised at $0.341 per
share for total proceeds of $51,150.
During January 2019, a total of 2,400,000 options to purchase common stock were exercised with a portion of
the exercise via a cashless exercise. 1,282,474 options to purchase common stock were exercised at $0.097
per share for total proceeds of $124,400. In addition, 1,117,526 options to purchase common stock were
exercised at $0.097 per share on a cashless exercise basis at a fair market value of $0.52 per share, resulting
in the issuance of 909,064 shares of common stock.
On August 29, 2019, the Company completed its Initial Public Offering and associated listing on the Australian
Securities Exchange (ASX). The ASX uses an electronic system called CHESS for the clearance and settlement
of trades on the ASX. The State of Delaware does not recognize the CHESS system of holding securities or
electronic transfers of legal title to shares. To enable companies to have their securities cleared and settled
electronically through CHESS, depository instruments called CDIs are issued. CDIs are units of beneficial
ownership in shares and are traded in a manner similar to shares of Australian companies listed on the ASX.
The legal title to the shares are held by a depository, CDN, which is a wholly-owned subsidiary of the ASX, and
is an approved general participant of ASX Settlement. The equity capital raise consisted of 14,578,313 CDIs
representing the same number of shares of common stock at $0.83 Australian dollars per share and 1,084,337
common shares at $0.5654 US dollars per share in a concurrent US Private Placement, for total proceeds of
$7,016,305, net of expenses.
180,722 CDIs were issued in exchange for services related to the Company’s equity financing. 3,187,375
shares of common were issued to Noteholders in connection with the down round liability (see NOTE 5).
In December 2019, 90,000 options to purchase common stock were exercised at $0.341 per share for total
proceeds of $30,690.
In February 2020, the Company completed an equity raise on the ASX which consisted of 12,083,333 CDIs
representing the same number of shares of common stock at $1.68 Australian dollars per share for proceeds
of $12,653,221, net of expenses.
Page 16
43
Notes to Financial Statements (cont.)
As of and for the years ended 31 December 2020 and 2019
NOTE 8 - Stockholders' Equity (cont.)
During April 2020, 406,849 warrants to purchase common stock were exercised at $0.73 per share for total
proceeds of $295,425, net of expenses.
In February 2007, the Company issued rights to 7,200,000 shares of common stock (as adjusted for a
subsequent stock split) upon the earlier of an acquisition transaction, an initial public offering pursuant to an
effective registration statement under the US Securities Act of 1933 (an initial public offering in the US), or the
expiration of certain license agreements. The number of shares to be issued was to be reduced for the value
of any royalties paid. In April 2020, the agreements related to these rights expired and the Company issued
7,197,634 shares of common stock. The number of shares issued was reduced by 2,366 to reflect the value of
royalties paid. The value of the shares was recorded as an expense upon issuance, which was when the
liability was fixed and determinable.
During the year ended December 31, 2020, 413,333 options to purchase common stock were exercised at
prices ranging from $0.341 to $0.60 per share for total proceeds of $174,195, net of expenses.
In October 2020, the Company completed an underwritten placement on the ASX which consisted of
12,106,383 CDIs representing the same number of shares of common stock at $2.35 Australian dollars per
share for proceeds of $19,195,477, net of expenses.
In November 2020, the Company completed an underwritten security purchase plan on the ASX which
consisted of 659,483 CDIs representing the same number of common stock at $2.35 Australian dollars per
share for proceeds of $1,088,836, net of expenses.
Dividend Rights
Subject to the prior rights of holders of all classes of stock at the time outstanding having prior rights as to
dividends, the holders of the common stock shall be entitled to receive, out of any assets of the Corporation
legally available therefore, any dividends as may be declared from time to time by the Board of Directors. The
right to such dividends shall not be cumulative, and no right shall accrue by reason of the fact that dividends
are not declared in any prior period.
Voting Rights
The holder of each share of common stock shall have the right to one vote for each such share,and shall be
entitled to notice of any stockholders’ meeting in accordance with the Bylaws of the Corporation, and shall be
entitled to vote upon such matters and in such manner as may be provided by law.
Page 17
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
44
NOTE 8 - Stockholders' Equity (cont.)
Stock Option Plans
The Company and its stockholders adopted a stock incentive plan (the “2006 Plan”) in 2006. The 2006 Plan,
as amended on January 26, 2011 by the shareholders, reserved 10,918,500 shares of the Company’s common
stock for the granting of incentive and nonqualified stock options to employees, directors and consultants. On
May 22, 2016, the Company replaced the 2006 Plan with the 2016 Plan, as the 2006 Plan was expiring. The
terms of the 2016 Plan were the same as the 2006 Plan. In August 2018, the Board of Directors approved an
increase of 500,000 shares to the option pool. On February 14, 2019, the Board of Directors terminated the
2016 Plan and approved the 2019 Plan, reserving 11,418,500 shares of the Company’s common stock for the
granting of incentive and nonqualified stock options to employees, directors and consultants. On February 14,
2019, the Board of Directors also authorized the Company to offer to current employees, directors and
consultants an option to exchange certain previously issued options for repriced options with additional vesting
requirements ranging from two to four years. As a result, 5,462,600 incentive and nonqualified stock options
were cancelled and reissued on March 15, 2019 resulting in incremental value of $563,546 which will be
expensed over the revised vesting terms. On June 4, 2019, the Board of Directors approved an increase of
2,000,000 shares to the option pool and provided that on the first day of each of the Company’s fiscal years
during the term of the 2019 Plan beginning in 2020, the number of shares of Common Stock available for
issuance from time to time under the 2019 Plan will be increased by an amount equal to the lesser of (i) five
percent (5%) of the aggregate number of shares reserved under this Plan on the last day of the immediately
preceding fiscal year, and (ii) such number of shares determined by the Board (the “Annual Increase”). On April
20, 2020, the Board of Directors approved an increase of 3,470,925 shares to the option pool, which was
approved by the shareholders at the Annual Meeting on May 12, 2020. Prior to the Company’s offering on the
ASX, the Board of Directors determined the exercise price of all options, but the exercise price of incentive
options shall not be less than the fair value of the common stock at the date of grant. Options granted after
completion of the offering on the ASX are granted at a price equal to the closing sale price of a CDI as of the
date of grant, converted from Australian dollars to US dollars using the prevailing exchange rate. Vesting terms
of outstanding options range from immediate to four years. In addition, some options issued to the executive
management team vest upon completion of certain milestones, performance requirements, and market
conditions. In no event are the options exercisable for more than ten years after the date of grant. The Company
issues new shares of common stock when stock options are exercised.
Information regarding the Company's stock options is summarized below:
Options outstanding - December 31, 2019
Exercised
Cancelled
Granted
Options outstanding – December 31, 2020
Options exercisable – December 31, 2020
Weighted average fair value of options granted
during the year ended December 31, 2020
Weighted average fair value of options granted
during the year ended December 31, 2019
Number of
Options
Weighted- Average
Exercise
Price
Aggregate
Intrinsic
Value
8,064,933 $ 0.58
(413,333)
0.44
0.69
(261,500)
0.95
2,572,994
9,963,094 $ 0.68 $ 10,530,311
5,310,350 $ 0.57 $ 6,776,761
$ 0.58
$ 0.46
As of December 31, 2020, the Company had 2,648,598 shares available for grant under the Plan.
The weighted average remaining contractual life of options outstanding and exercisable was 8.01 and 7.30
years, respectively, as of December 31, 2020.
The intrinsic value of options exercised during the years ended December 31, 2020 and 2019 was $306,453
and $1,059,729, respectively.
Page 18
45
Notes to Financial Statements (cont.)
As of and for the years ended 31 December 2020 and 2019
NOTE 8 - Stockholders' Equity (cont.)
The fair value of option awards granted was determined using the Black-Scholes option pricing model utilizing
the following assumptions:
Expected life
Volatility
Risk-free interest rate
Dividend Yield
2020 2019
5 - 7 years
7 years
68.3%
48.12%
0.64% 2.50%-2.83%
0%
0%
The Company reviews its current assumptions on a periodic basis and adjusts them as necessary to determine
the option valuation. The expected life represents the period that the stock option awards are expected to be
outstanding and is based on an evaluation of historic expected lives from the Company’s stock option grants.
Volatility is based on historic volatilities of traded shares from a selected publicly traded peer group, believed
to be comparable after consideration of size, maturity, profitability, growth, risk and return on investment. The
Company did not use its own historical volatility as the majority of stock option grants were issued prior to or in
connection with the IPO and the Company has limited volatility history. The risk-free interest rate is based on
the yield of constant maturity U.S. treasury bonds with a remaining term equal to the expected life of the awards
at the grant date. The expected dividend yield is zero, as the Company has not paid or declared any dividends
to common stockholders and does not expect to pay dividends in the foreseeable future. Historical data is used
to estimate pre-vesting forfeitures and the Company records stock-based compensation expense only for those
awards that are expected to vest.
Total stock-based compensation expense resulting from options granted was $821,952 and $533,110 for the
years ended December 31, 2020 and 2019, respectively, and charged to the Company’s Statement of
Operations as follows:
Sales and marketing
Research and development
General and administrative
December 31,
2020
$ 64,315
296,421
461,216
821,952
$
2019
$ 26,798
184,991
321,321
533,110
$
No income tax benefits were recognized related to this compensation expense due to the full valuation
allowance provided on the Company’s deferred income tax assets.
As of December 31, 2020, the total unrecognized compensation cost related to unvested stock options then
outstanding was $2,034,998. Future stock-based compensation expense is expected to be as follows for the
years ending December 31:
2021
2022
2023
2024
Total
Total
$
807,178
612,219
469,930
145,671
$ 2,034,998
Issuance of additional options subsequent to December 31, 2020 could affect future expected amounts.
Page 19
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
46
NOTE 8 - Stockholders' Equity (cont.)
Stock Warrants
The Company has also issued warrants to purchase shares of common stock which are summarized below:
Warrants outstanding – December 31, 2019
Warrants cancelled
Warrants exercised
Warrants outstanding – December 31, 2020
Number of
Warrants
Weighted- Average
Exercise
Price
787,909 $ 0.73
0.73
(381,060)
(406,849) 0.73
- $ -
During January and March 2019, 150,000 warrants to purchase common stock were exercised at $0.341 per
share for total proceeds of $51,150. During April 2020, 406,849 warrants to purchase common stock were
exercised at $0.73 per share for total proceeds of $295,425, net of expenses. The intrinsic value was $46,121.
The remaining 381,060 warrants were cancelled.
NOTE 9 - Income Taxes
The Company has generated both federal and state net operating losses (NOL) of approximately $41,265,000
and federal and state research and development credit carryforwards of approximately $1,498,000 as of
December 31, 2020, which, if not used, will begin to expire in 2023. The Company believes that its ability to
fully utilize the existing NOL and credit carryforwards could be restricted by changes in control that may have
occurred or may occur in the future and by its ability to generate net income. The Company has not yet
conducted a formal study of whether, or to what extent, past changes in control of the Company impairs its NOL
and credit carryforwards because such NOL and credit carryforwards cannot be utilized until the Company
achieves profitability. The Company has established a full valuation allowance as of December 31, 2020 and
2019, that offsets the net tax benefits associated with the NOL and credit carryforwards since realization of
these tax benefits is not more likely than not.
Income tax expense (benefit) consists of the following for the year ended December 31:
Current:
Federal
State
Deferred:
Federal
State
Deferred tax asset valuation allowance
Total provision (benefit)
2020
2019
$ -
-
-
$ -
-
-
(3,141,000)
-
(3,141,000)
3,141,000
$ -
(1,936,000)
-
(1,936,000)
1,936,000
$ -
Page 20
47
Notes to Financial Statements (cont.)
As of and for the years ended 31 December 2020 and 2019
NOTE 9 - Income Taxes (cont.)
Components of deferred income taxes are as follows as of December 31:
Deferred tax assets (liabilities):
Net operating loss carryforwards
Research and development credit carryforwards
Stock-based compensation
Accrued expenses
Deferred revenue
Prepaid expenses and other assets
Foreign currency exchange
Depreciation and amortization
Gross deferred tax assets (liabilities)
Less valuation allowance
Net deferred tax assets
2020
2019
$
$
10,752,000
1,498,000
185,000
17,000
153,000
(73,000)
18,000
110,000
12,660,000
)
(12,660,000
-
$
$
8,020,000
1,348,000
154,000
5,000
158,000
(130,000)
(43,000)
7,000
9,519,000
)
(9,519,000
-
The change in the valuation allowance was $3,141,000 and $1,936,000 for the years ended December 31,
2020 and 2019, respectively.
The effective tax rate for the year ended December 31, 2020 differs from the federal and state statutory tax
rates mainly due to the change in full valuation allowance, incentive stock option expense, and research and
development credits.
The Company has recognized a reserve of approximately $374,000 and $337,000 for uncertain tax positions
which was recorded directly against the valuation allowance as of December 31, 2020 and 2019, respectively.
If recognized, these benefits would favorably impact the effective tax rate.
The tax years from inception through December 31, 2020 remain subject to examination by all major taxing
authorities due to the net operating loss carryforwards. The Company is not currently under examination by any
taxing jurisdiction. In the event of any future tax assessments, the Company has elected to record the income
taxes and any related interest and penalties as income tax expense in the Company’s Statement of Operations.
Changes in tax laws and rates may affect recorded deferred tax assets and liabilities and our effective tax rate
in the future.
Page 21
IMRICOR MEDICAL SYSTEMS ANNUAL REPORT 2020
48
Additional Stockholder Information
Additional Stockholder Information
The Company has CHESS Depositary Interests (CDIs) quoted on the Australian Securities Exchange (ASX) trading under the
ASX code IMR. Each CDI represents an interest in one share of Class A common stock of the Company (Share). Legal title to the
Shares underlying the CDIs is held by CHESS Depositary Nominees Pty Ltd (CDN), a wholly owned subsidiary of the ASX. The
Company’s securities are not quoted on any other exchange.
Except where noted, all information provided below is current as at 18 March 2021, except as otherwise stated. To avoid
double-counting, the holding of Shares by CHESS Depositary Nominees Pty Limited (underpinning the CDIs on issue) have
been disregarded in the presentation of the information below, unless otherwise stated.
Share Capital
Type of Security
Total number of issued shares1
Total number of issued CDIs
Number of Securities
125,650,545
67,403,955
1.
Includes shares held by CHESS Depositary Nominees Pty Limited (39,931,218).
Top 20 Holders of CDIs and Shares Combined (based on share registry reports)
Rank
Name
Number % of issued capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
SIEMENS MEDICAL SOLUTIONS USA INC
WARREN G HERREID II
CITICORP NOMINEES PTY LIMITED
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