2020
ANNUAL REPORT
TAKING KIDNEY CARE TO HEART.
TABLE OF CONTENTS
Letter from the Chairman ...........................................................................................................................3
Letter from the President and CEO .........................................................................................4–5
Independent Auditors’ Report ...............................................................................................................6
Consolidated Financial Statements
Consolidated Balance Sheets ...............................................................................................................7
Consolidated Statements of Operations .................................................................................8
Consolidated Statements of Shareholders’ Equity ......................................................9
Consolidated Statements of Cash Flows ............................................................................ 10
Notes to Consolidated Financial Statements .......................................................11–20
Shareholder Information ............................................................................................................... 21–23
Corporate Directory ....................................................................................................................................... 24
2
LETTER FROM
THE CHAIRMAN
JOHN ERB
Dear Shareholders,
On behalf of Osprey Medical’s Board of Directors and management, it gives me great pleasure to present our 2020 Annual Report
for Osprey Medical.
Reflecting on the last 12 months, we can see that 2020 has presented its fair share of challenges globally as we experienced a global
shutdown due to the pandemic, which has impacted us personally and within our businesses. During this period, the Osprey Medical team
has focused its efforts on stabilizing the core commercial business,optimizing its balance sheet, and evaluating opportunities for increased
effectiveness in business operations.
In 2020, Osprey re-evaluated its U.S. commercial structure by implementing a strategy that leveraged its direct sales force in key
geographies while expanding sales coverage through the addition of independent sales agents (ISAs). The ISAs strategy is complementary
to Osprey’s existing direct sales strategy and is comprised of experienced sales professionals in the cardiology field who will look to expand
geographic reach in driving growth in 2021.
Additionally, the Osprey team expanded its commercial reach outside of the U.S. through its four-year strategic alliance with GE
Healthcare. The DyeVert System will now be marketed in Europe, Russia, Middle East, Africa, Central Asia, and Turkey through
GE representatives to local hospitals and physicians, allowing Osprey to expand internationally with broad coverage.
In 2020, we also continued to make advancements in other areas of the business with a number of impactful clinical and economic
publications and product launches. Internationally, based on strong clinical and economic evidence, the DyeVert System received a
MedTech Innovation Briefing in the UK, positioning it for a recommendation for use to decrease contrast-induced acute kidney injury
(CI-AKI) in 2021. In the U.S., three studies were published detailing the benefit of using the DyeVert System to reduce CI-AKI in high-risk
patients and the economic benefit of reducing hospital costs. Osprey also launched the DyeVert Power XT internationally, expanding its
market offering for physicians who prefer a powered injection machine for angiographies. The DyeVert Power XT is expected to launch in
the U.S. in 2021.
From a financial standpoint, as mentioned above, we were not immune to the impacts of the global pandemic as elective procedures came
to a halt. Despite revenue declines caused by this, the business proactively responded through a number of cost reduction initiatives, which
have resulted in a 31% decline in total operating expenses compared to 2019. These cost-saving measures will carry forward through
to 2021 and serve as a foundation for the Company’s long-term cost-effective commercial strategy. In addition to these cost initiatives,
Osprey took active steps in shoring up its balance sheet through successfully raising gross proceeds of A$14.7 million to support the
ongoing operations of the business and to achieve key milestones in 2021.
Finally, I would like to take this opportunity to thank our Chief Executive Officer, Mike McCormick, and the entire Osprey Medical
management team for their outstanding contribution throughout the year especially given the challenges that we have faced. I would also
like to thank the Board for their tireless efforts in 2020. The progress and efficiencies achieved in 2020 will establish a strong commercial
foundation for growth moving forward.
On behalf of the Osprey Medical Board, I would like to thank all our shareholders for your ongoing support. We are proud of the progress
and stability made in 2020 and look forward to providing further progress updates and sharing our achievements with you in 2021.
Yours sincerely,
John Erb
Chairman
Osprey Medical Inc.
3
LETTER FROM
THE PRESIDENT
AND CEO
MIKE MCCORMICK
Dear Shareholders,
Despite 2020 having been a challenging year marked by historical events and unforeseen changes to work and home lives, Osprey has continued to make
significant progress throughout this period.
In response to the global pandemic and a postponement in elective procedures, the Osprey team has continued to focus on key areas that drive our business
growth while mitigating the challenges which came with the global shutdown.
We are proud of the way and pace with which our team proactively responded to the challenges that arose as a result of the pandemic. The financial
adjustments made allowed the Company to navigate the pandemic, while emerging stronger and better equipped to serve our customers.
Our Sales and Marketing teams discovered and implemented new ways to help our customers rapidly react to the changing nature of healthcare. The need
to protect patients’ kidneys from the dangers of angiography dye and ultimately reducing unintended hospital stays was a key priority for our customers
during COVID-19. Listening to our customers’ challenges and needs led to the growth of our product portfolio. We also refocused our commercial strategy
for expansion and cost effectiveness with a new sales distribution model.
I am proud to report that over the last year, the Osprey team has worked diligently to deliver the following achievements in what has been a
challenging year.
OUS sales strategy progressing strongly
Osprey signed a four-year strategic alliance with GE Healthcare in July 2020 for exclusive distribution rights to Osprey’s product portfolio in Europe, Russia,
Middle East, Africa, Central Asia, and Turkey. GE Healthcare’s Pharmaceutical Diagnostics unit develops and supplies imaging agents, and its range of
products includes iodinated X-ray contrast media used in interventional and other diagnostic procedures including coronary angiography, making them a
well-suited partner for commercialization of the DyeVert System.
In Australia and New Zealand, Osprey partnered with Australian-owned medical distribution company Regional Health Care Group Pty Ltd (RHCG), which
will see RHCG exclusively distribute Osprey’s products in those regions.
U.S. Sales strategy extended to increase geographic reach
Throughout the period, Osprey also expanded its U.S. sales coverage with the addition of a strategic independent sales agency (ISA) agreement with
BioCore Inc., an independent sales group covering 8 states in the northeast part of the United States. In the first quarter of 2021 Osprey added 3 additional
ISAs covering 7 states outside of Osprey’s existing direct salesforce coverage. Each ISA has been in operation as an independent sales group for over
10 years, selling heart-related products for cardiac surgery, electrophysiology, and the cath lab, making them well suited to represent Osprey Medical’s
value proposition.
The ISA model significantly increases Osprey’s geographic reach and allows the business to offer its products across a much broader hospital universe
allowing the business to not only increase unit sales but also extend its brand awareness.
Key clinical and economic outcomes publications
In early 2020, Osprey announced that the National Institute of Health and Care Excellence (NICE) in the UK issued a MedTech Innovation Briefing (MIB) on
DyeVert for reducing contrast media in coronary and peripheral angiography. Alongside this, a peer-reviewed publication to accompany the MIB on the cost-
utility of DyeVert was published in The Pharmacoeconomics & Health Economics Journal. In October, the DyeVert System was selected by NICE for Guidance
consideration, which could lead to a recommendation by NICE for the use of DyeVert to reduce contrast-induced acute kidney injury (CI-AKI) in 2021.
Throughout the period, additional clinical and economic data detailing the impact of the use of the DyeVert System to prevent CI-AKI and reduce overall
hospital costs was published. At the SCAI 2020 Scientific Session, two abstracts on the topic of procedure-based strategies to reduce contrast-induced
acute kidney injury published outcomes of 57% and 84% mean relative CI-AKI reduction with the DyeVert System. In April, an important peer-reviewed
manuscript was published on CI-AKI prevention in acute coronary syndrome (heart attack) patients. Professor Briguori et al. published their controlled
retrospective two-arm study reporting on a 58% mean relative reduction of CI-AKI in the patient group treated with the DyeVert System.
In July 2020, we were very pleased to receive a Supplier Horizon Award from Premier Inc. We were one of just nine suppliers to win the prestigious award,
and we were the only cardiovascular supplier to receive the award this year. The award recognizes suppliers who have made a positive impact on patient
care and who lower healthcare costs.
Portfolio expansion
Osprey received CE Marking for our DyeVert Power XT 2nd generation device with the added benefits of displaying the contrast saved throughout the
procedure, which allows real-time contrast monitoring. The DyeVert Power XT device is expected to be the core product in the DyeVert portfolio that is
being commercialized by GE Healthcare internationally. The DyeVert Power XT is for physicians who prefer a powered injection machine to perform coronary
angiograms. Approximately 50% of the European market and 35% of the U.S. market use power injection machines; thus Osprey now has full coverage for
both markets with the DyeVert Plus EZ and DyeVert Power XT.
The DyeVert Power XT has been submitted to the United States Food and Drug Administration, and clearance is expected in 2021.
4
Financial performance
2020 was a year disrupted by the global pandemic, which saw postponement of elective heart procedures, restricted sales representative access to
hospitals, and suspension of new technology evaluations. This impact was felt globally, by both our U.S. and International initiatives. From a financial
standpoint, we were not immune to the impacts of the global pandemic as elective procedures came to a halt, and as a result, Osprey revenues declined
in 2020. Despite this, the business proactively responded through a number of cost reduction initiatives, which have resulted in a 31% decline in total
operating expenses compared to 2019. These cost-saving measures will carry through to 2021 and serve as a foundation for the Company’s long-term
strategy of increasing worldwide sales coverage with cost-effective ISAs in the U.S. and GE distribution of the Osprey portfolio outside of the U.S.
In addition to the above, the Company successfully raised gross proceeds of A$14.7m from an entitlement offer, loan proceeds from the U.S. Paycheck
Protection Program, and the exercise of unlisted options issued under the entitlement offer. In the first quarter of 2021, additional funding of A$12.8m
was received following the exercise of unlisted options issued under the 2020 entitlement offer and a second loan from the U.S. Paycheck Protection
Program. The Company has a strong balance sheet and is well capitalized for future growth.
As we look forward to 2021, sales revenue is expected to grow as elective hospital procedures recover and hospitals shift their focus toward improving
patient outcomes and reducing hospital costs. Financial adjustments and distribution-based sales expansion undertaken in 2020 have placed Osprey in a
good position to capitalize on the recovery of healthcare in 2021.
The key areas of focus in 2021 include, but are not limited to, the following:
Continued U.S. commercial penetration
The Osprey direct salesforce and ISAs will continue to focus on establishing the DyeVert as part of the standard of care for physicians treating patients at
risk of dye-related kidney damage. The Company has successfully executed its ISA commercial strategy to increase its U.S. coverage while maintaining a lean
business model. The ISA strategy provides Osprey with a dual-pronged sales approach across the U.S., via both ISAs and direct sales reps, with agreements
structured to leverage the key advantages of both these sales forces.
Full European commercial launch with GE Healthcare
As the pandemic eases, we are planning a full launch of the DyeVert System in 2021 throughout Europe with our partner GE Healthcare, which has an
established salesforce of over 100 reps throughout Europe, Russia, the Middle East, and Africa. In the UK, the DyeVert Systems were selected by the
National Institute of Health and Care Excellence (NICE) for the Medical Technologies Guidance Program. The guidance evaluates new, innovative medical
devices with the aim of boosting update of devices and technologies in the NHS. Approximately 15 technologies per year are selected for this review that
can lead to recommendation by NICE for device use. Osprey expects the NICE review to be completed in 2021.
The image below demonstrates Osprey’s cost-effective growth in worldwide sales coverage from 2020 to 2021.
Medical community scientific promotion and market development
1
We are continuing to work with key opinion-leading physicians to direct podium presentations and peer-reviewed journal articles on the performance of the
DyeVert System and the importance of dye reduction for patients at risk of dye-related kidney damage.
We are planning additional post-marketing studies of the DyeVert Plus System in Europe and the U.S. in 2021. These studies will focus on demonstrating
the value of contrast monitoring and dye savings using the DyeVert System in a kidney care approach to reduce CI-AKI. We anticipate these studies to be
presented and published at key heart meetings in the U.S. and Europe.
New product enhancements and developments
We continue to invest in our DyeVert product franchise. In 2021 our top R&D priority is the U.S. launch of the power injector-compatible DyeVert Power XT
System with dye savings display technology. This DyeVert Power XT System will allow power injection procedures to have the same dye-saving advantages
as manual injection procedures with DyeVert Plus EZ.
Finally, I would like to thank our employees, Board of Directors, and shareholders for your continued support. We look forward to a productive 2021 and
believe our 2020 achievements and adjustments have established a strong runway for success in the coming year.
Mike McCormick
Osprey Medical
President and CEO
5
INDEPENDENT AUDITORS’ REPORT
Board of Directors, Audit Committee, and Shareholders
Osprey Medical, Inc. and Subsidiary
Minnetonka, Minnesota
and
Level 13, 41 Exhibition Street
Melbourne, Victoria 3000, Australia
ARBN: 152 854 923
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Osprey Medical, Inc. and Subsidiary, which comprise the consolidated
balance sheets as of December 31, 2020 and 2019, and the related consolidated statements of operations, shareholders’ equity, and cash flows
for the years then ended, and the related notes to the consolidated financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated 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 consolidated 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 consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.
The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated
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 consolidated 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 consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Osprey
Medical, Inc. and Subsidiary as of December 31, 2020 and 2019, and the results of their operations and cash flows for the years then ended in
accordance with accounting principles generally accepted in the United States of America.
Baker Tilly US, LLP (formerly known as Baker Tilly Virchow Krause, LLP)
Minneapolis, Minnesota
February 24, 2021
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.
6
FINANCIAL REPORT
CONSOLIDATED BALANCE SHEETS
As of December 31, 2020 and 2019
ASSETS
2020
2019
CURRENT ASSETS
Cash and cash equivalents
Accounts receivable,net
Prepaid expenses
Inventories
Total Current Assets
PROPERTY AND EQUIPMENT
Office and computer equipment
Laboratory equipment
Furniture and fixtures
Leasehold improvements
Less: Accumulated depreciation
Net Property and Equipment
OTHER ASSETS
Intangible assets, net of accumulated amortization of $168,696
and $156,200 as of December 31, 2020 and 2019, respectively
Right of use operating lease asset
Other asset
Total Other Assets
TOTAL ASSETS
CURRENT LIABILITIES
Accounts payable
Other accrued expenses
Accrued vacation
Loan payable
Operating lease liability
Total Current Liabilities
LONG-TERM LIABILITIES
Operating lease liability – noncurrent
Total Liabilities
$
$
5,787,030
183,039
129,637
827,040
6,926,746
533,942
1,374,956
46,103
212,635
(1,555,040)
612,596
58,315
278,194
12,250
348,759
7,888,101
$
821,954
783,873
193,913
1,325,122
131,852
3,256,714
236,539
3,493,253
$
$
$
8,276,720
464,912
100,031
937,869
9,779,532
468,551
1,112,244
46,103
212,635
(1,265,852)
573,681
70,811
382,394
12,250
465,455
10,818,668
1,094,309
947,736
188,312
–
125,241
2,355,598
384,495
2,740,093
LIABILITIES AND SHAREHOLDERS’ EQUITY
SHAREHOLDERS' EQUITY
Preferred stock, $0.0001 par value; 20,000,000 authorized shares;
none issued and outstanding as of December 31, 2020 and 2019
Common stock, $0.0001 par value; 3,000,000,000 and 1,130,000,000
authorized shares; 811,673,481 and 215,898,685 shares issued and
outstanding as of December 31, 2020 and 2019
Additional paid-in capital
Accumulated deficit
Total Shareholders' Equity
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
–
–
81,168
132,527,022
(128,213,342)
4,394,848
7,888,101
21,590
122,892,257
(114,835,272)
8,078,575
10,818,668
$
See accompanying notes to consolidated financial statements.
FINANCIAL REPORT
7
OSPREY MEDICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2020 and 2019
SALES
COST OF SALES
Gross Profit
OPERATING EXPENSES
Sales and marketing
General and administrative
Clinical and regulatory
Research and development
Total Operating Expenses
Operating Loss
OTHER INCOME
Interest Income
Net Other Income
2020
2019
$
1,671,868
$
3,665,142
1,223,687
448,181
5,730,978
3,464,224
2,426,700
2,215,109
13,837,011
1,767,868
1,897,274
10,702,654
3,871,684
2,501,866
3,061,610
20,137,814
(13,388,830)
(18,240,540)
16,037
16,037
173,930
173,930
Loss Before Income Taxes
(13,372,793)
(18,066,610)
Income Taxes
NET LOSS
EARNINGS PER SHARE:
Basic and diluted loss per common share
Basic and diluted weighted average shares outstanding
5,277
9,773
$ (13,378,070)
$ (18,076,383)
$
0.02
591,663,330
$
0.08
215,898,685
8 FINANCIAL REPORT
See accompanying notes to consolidated financial statements.
OSPREY MEDICAL, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the Years Ended December 31, 2020 and 2019
BALANCES, December 31, 2018
Stock-based compensation expense
2019 net loss
BALANCES, December 31, 2019
Issuance of common stock at $0.02,
per share, net of issuance costs of
$320,614
Issuance of common stock at $0.02,
per share, net of issuance costs of
$12,167
Stock-based compensation expense
2020 net loss
BALANCES, December 31, 2020
Common Stock
Shares
215,898,685
–
–
215,898,685
$
$
Amount
21,590
–
–
21,590
Additional
Paid-in Capital
122,271,893
620,364
–
$ 122,892,257
Accumulated
Deficit
(96,758,889)
–
(18,076,383)
$ (114,835,272)
Total
Shareholders’
Equity
25,534,594
620,364
(18,076,383)
8,078,575
$
533,495,727
53,350
7,880,626
–
7,933,976
62,279,069
–
–
811,673,481
$
6,228
–
–
81,168
1,214,830
539,309
–
$ 132,527,022
–
–
(13,378,070)
$ (128,213,342)
1,221,058
539,309
(13,378,070)
4,394,848
$
See accompanying notes to consolidated financial statements.
FINANCIAL REPORT
9
OSPREY MEDICAL, INC. AND SUBSIDIARY
OSPREY MEDICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2020 and 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss
Adjustments to reconcile net loss to net cash flows from operating activities
Depreciation
Amortization
Stock-based compensation expense
Change in allowance for doubtful accounts
Changes in operating assets and liabilities
Accounts receivable
Prepaid expenses
Inventories
Accounts payable
Other accrued expenses
Operating lease
Accrued vacation
Net Cash Flows from Operating Activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment
Net Cash Flows from Investing Activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock, net of issuance costs
Loan payable
Net Cash Flows from Financing Activities
2020
2019
$
(13,378,070)
$
(18,076,383)
289,188
12,496
539,309
140,014
141,859
8,839
6,992
(272,355)
(163,863)
(37,145)
5,601
(12,707,135)
265,571
12,496
620,364
–
(72,278)
191,347
(166,027)
218,504
278,891
(158,201)
19,129
(16,866,587)
(262,711)
(262,711)
(108,483)
(108,483)
9,155,034
1,325,122
10,480,156
–
–
–
Net Change in Cash and Cash Equivalents
(2,489,690)
(16,975,070)
CASH AND CASH EQUIVALENTS - Beginning of Year
8,276,720
25,251,790
CASH AND CASH EQUIVALENTS - END OF YEAR
$
5,787,030
$
8,276,720
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid for taxes
Transfer of inventory to fixed assets
$
$
5,227
65,392
$
$
9,773
–
10
FINANCIAL REPORT
See accompanying notes to consolidated financial statements.
OSPREY MEDICAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2020 and 2019
NOTE 1 - Summary of Significant Accounting Policies
Nature of Operations
Osprey Medical, Inc. (“Osprey,” “Osprey Medical,” or the “Company”) is a U.S.-based, commercial stage company focused on
protecting patients from the harmful effects of X-ray dye (contrast) used during commonly performed angiographic imaging
procedures. Osprey’s mission is to improve outcomes in patients with chronic kidney disease (CKD) by reducing contrast-induced
acute kidney injury (AKI), and lowering hospital costs. The incidence of AKI also has a negative economic impact on the health
care system and providers caring for these patients. Osprey Medical is committed to making angiography safer for patients
suffering from CKD, improving clinical outcomes, and reducing economic impact.
Osprey Medical’s core technologies originated from research conducted at Melbourne’s Baker IDI Heart and Diabetes Institute.
Its proprietary contrast reduction and monitoring technologies are designed to minimize and track contrast volumes delivered
to patients. The Company’s DyeVert™ System reduces contrast delivered to the patient while maintaining image quality in a
simple self-adjusting, easy-to-use design. DyeVert’s monitoring capabilities allow for real-time contrast monitoring throughout
the procedure and the ability to establish maximum contrast thresholds customized for each patient. DyeVert’s monitoring system
displays total contrast delivered to the patient and the amount diverted away from the patient during the procedure.
The Company obtained European Regulatory approval (CE Mark), TGA approval, and United States of America Food and Drug
Administration (“FDA”) clearance for the AVERT™, AVERT Plus, the DyeVert NG, DyeVert Plus, and DyeVert Plus EZ Systems.
The Company received FDA clearance for medical claims of contrast savings, image quality, and reflux reduction for its various
products.
The Company commenced its commercial strategy in 2015 and has since built a sales organization focused on commercializing its
DyeVert Systems to acute care hospitals throughout the United States.
The Company signed a four-year strategic alliance with GE Healthcare for exclusive distribution rights to Osprey’s product portfolio
in Europe, Russia, Middle East, Africa, Central Asia, and Turkey, GE Healthcare’s Pharmaceutical Diagnostics unit.
On October 30, 2007, the Company formed a wholly owned Australian subsidiary with the name Osprey Medical Pty. Ltd. (OM
Pty) for the purpose of conducting research on future products. The subsidiary began operations in early 2008.
FINANCIAL REPORT
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2020 and 2019
NOTE 1 - Summary of Significant Accounting Policies (cont.)
Principles of Presentation
The consolidated financial statements include the accounts of the Company’s wholly owned Australian subsidiary, OM Pty. All
intercompany accounts and transactions have been eliminated in consolidation.
The U.S. dollar is the functional currency of OM Pty, and as a result, all currency gains and losses are reflected in operations.
Currency gains and losses include realized amounts on transactions and unrealized amounts related to translating accounts from
local currency to the functional currency, with translation accomplished using the current rate method.
In its consolidated statements of operations, the Company segregates its operating expenses into four categories that provide
useful information to both management and Company shareholders.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include short-term investments with maturities of three months or less from their date of purchase. The
Company maintains cash balances that exceed federally insured limits; however, it has not incurred losses on such amounts to date.
Accounts Receivable
The Company grants credit to customers in the normal course of business and generally does not require collateral or any other
security to support amounts due. Customer accounts with balances outstanding longer than the contractual terms are considered
past due. The Company records accounts receivable at the original invoice amount less an estimate made for doubtful receivables
based on periodic reviews of all outstanding amounts. The Company determines the need for an allowance for doubtful accounts
by considering a number of factors, including length of time accounts receivables are past due, customer financial condition
and ability to pay the obligation, historical and expected credit loss experience, and the condition of the general economy and
the industry as a whole. It is the Company’s policy to write off accounts receivable when deemed uncollectible. There was an
allowance for doubtful accounts of $140,014 and $0 as of December 31, 2020 and 2019, respectively.
Concentration of Credit and Other Risks
One customer accounted for 11 percent and 10 percent of the total revenue for the years ended December 31, 2020 and 2019,
respectively. The Company does not require collateral to extend credit to an account. One customer accounted for 10 percent
of the total accounts receivable as of December 31, 2020, and one customer accounted for 30 percent of the total accounts
receivable as of December 31, 2019.
Inventories
Inventories are stated at lower of cost (using the first in, first out method) or net realizable value, and are as follows as of December 31:
Raw Materials
Finished Goods
Total
$
$
2020
443,619
383,421
827,040
$
$
2019
524,107
413,762
937,869
The Company has invested in its manufacturing operations to support future sales. The Company is not currently operating at full
capacity. Charges related to excess capacity are included as current period charges to cost of sales and are not capitalized into inventory.
Property and Equipment
Property and equipment are recorded at cost, and depreciation and amortization are provided on the straight-line method over
the estimated useful lives of the assets as follows:
Office and computer equipment
Furniture and fixtures
Laboratory equipment
Leasehold Improvements
Years
3
7
5
5
12 FINANCIAL REPORT
OSPREY MEDICAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2020 and 2019
NOTE 1 - Summary of Significant Accounting Policies (cont.)
Maintenance and repairs are charged to expense as incurred. Depreciation expense on property and equipment was $289,188
and $265,571 for the years ended December 31, 2020 and 2019, respectively.
Intangible Assets
Intellectual property acquired for consideration is recorded either as research and development expense or as intangible assets,
as appropriate to the use of the property. Intellectual property that has multiple future uses is capitalized when acquired, and
single use property is expensed as research and development. The Company’s recorded intangible assets are comprised entirely of
patent applications acquired from V-Kardia Pty. (VK Pty) for which there were multiple future uses. At acquisition of these assets
there was a difference between the value of the asset acquired and its tax basis, and the Company increased the assigned value
of the asset acquired by the amount of the related deferred tax liability. The Company amortizes intangible assets on a straight-
line basis over their expected economic lives, which is equivalent to the time from acquisition through expiration of the patents
expected to be issued from the acquired patent applications. The intangible assets acquired in June 2007 are expected to have a
life of approximately 18 years from the date of acquisition.
Revenue Recognition
Revenue from all customers is recognized when a performance obligation is satisfied by transferring control of a distinct good or
service to a customer. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer
and is the unit of account. A contract’s transaction price is allocated to each distinct performance obligation in proportion to the
standalone selling price for each and recognized as revenue when, or as, the performance obligation is satisfied. Each unit of
product delivered under a customer order represents a distinct and separate performance obligation as the customer can benefit
from each unit on its own or with other resources that are readily available to the customer and each unit of product is separately
identifiable from other products in the arrangement.
Individual promised goods and services in a contract are considered a performance obligation and accounted for separately if
the good or service is distinct. A good or service is considered distinct if the customer can benefit from the good or service on
its own or with other resources that are readily available to the customer and the good or service is separately identifiable from
other promises in the arrangement. Costs related to products delivered are recognized in the period incurred, unless criteria for
capitalization of costs are met. Cost of goods sold consists primarily of direct labor, manufacturing overhead, materials,
and components.
The Company excludes from revenue taxes collected from a customer that are assessed by a governmental authority and imposed
on and concurrent with a specific revenue-producing transaction. The transaction price for the products is the invoiced amount.
Generally, revenue is recognized upon the transfer of control of the products which is based on shipment terms; however, in
certain cases the amount of shipment is adjusted for expected future returns and related consideration received. The Company
includes shipping and handling fees in revenue. 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.
Impairment of Long-Lived Assets
The Company reviews long-lived assets, including property and equipment and intangible assets, for impairment whenever events
or changes in business circumstances indicate that the carrying amount of an asset may not be fully recoverable. An impairment
loss would be recognized when the estimated future cash flow from the use of the asset is less than the carrying amount of that
asset. To date, there have been no such losses.
Lease Expense
In February 2016, the the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02
“Leases” (Topic 842). Topic 842 supersedes the lease accounting guidance previously set forth in the Accounting Standards
Codification (ASC) Topic 840 “Leases,” and requires lessees to recognize a right of use operating lease liability and a right of use
operating lease asset for all leases that extend beyond one year. The Company adopted Topic 842 with a date of initial application
of January 1, 2019, which resulted in the recording of an initial operating lease liability and an operating lease asset of $610,000
and $463,000, respectively and an operating lease liability and right of use operating lease asset of $368,000 and $278,000,
respectively, as of December 31, 2020, and $510,000 and $382,000 respectively as of December 31, 2019.
The Company did not apply Topic 842 retrospectively using the transition option in ASU 2018-11, “Targeted Improvements” to
ASC 842, to not restate comparative periods in transition and instead to use the effective date of ASC 842, “Leases,” as the
date of initial application of transition. In addition, we elected the package of practical expedients permitted under the transition
guidance within the new standard, which allowed us to carry forward the historical lease classification.
FINANCIAL REPORT
13
OSPREY MEDICAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2020 and 2019
NOTE 1 - Summary of Significant Accounting Policies (cont.)
Short-term lease recognition exemption: The Company adopted the short-term lease recognition exemption as an
accounting policy. Renewal and purchase options for a lease will be reassessed upon the occurrence of certain discrete
reassessment events: (1) the lease term is extended more than 12 months beyond the end of the previously determined lease
term or (2) the lessee now concludes that the lessee’s exercise of a purchase option is reasonably certain. When a lease no longer
qualifies for the short-term lease exemption, the Company will apply ASC 842 guidance on initial recognition and measurement;
the commencement date of the lease for this purpose is the date of the change in circumstances.
Combining lease and non-lease components into a single component: The Company elected to adopt this practical
expedient for all asset classes. As a result of this election, the consideration included in the lease payments for these asset classes
will be greater, resulting in a larger operating lease liability and a right of use operating lease asset.
Loan Payable
On April 24, 2020, the Company entered into a loan pursuant to the Paycheck Protection Program under the Coronavirus Aid,
Relief, and Economic Security Act (the “CARES Act”), as administered by the U.S. Small Business Administration (the “SBA”). The
loan, in the principal amount of $1,325,122 (the “PPP Loan”), was disbursed by Silicon Valley Bank (“Lender”) on April 23, 2020,
pursuant to a Paycheck Protection Program Promissory Note and Agreement (the “Note and Agreement”).
The PPP Loan matures on the two-year anniversary of the funding date and bears interest at a fixed rate of 1.00% per annum.
Monthly principal and interest payments with the amendments in August that got them extended to 10 months after the covered
period (an automatic extension) less the amount of any potential forgiveness (discussed below) will commence after the six-month
anniversary of the funding date. The Company did not provide any collateral or guarantees for the PPP Loan, nor did the Company
pay any facility charge to obtain the PPP Loan. The Note and Agreement provides for customary events of default, including those
relating to failure to make payment, bankruptcy, breaches of representations, and material adverse effects. The Company may
prepay the principal of the PPP Loan at any time without incurring any prepayment charges.
All or a portion of the PPP Loan may be forgiven by the SBA and the Lender upon application by the Company.
The Company has accounted for the PPP Loan as debt in accordance with FASB ASC 470, Debt and accrues interest in accordance
with the interest method under FASB ASC 835-30. If the loan is forgiven in part or in whole, and legal release is received, the
Company would reduce the liability by the amount forgiven and record a gain on extinguishment in the statement of operations.
Based on the uncertainty surrounding the amount and timing of potential forgiveness, governmental determined changes in the
Paycheck Protection Program from the original provisions, and two-year maturity of the unforgivable portion, the Company has
classified all amounts outstanding as current liabilities on the consolidated balance sheets.
Research and Development Costs
Research and development costs are charged to expense as incurred. The Company has acquired licenses to intellectual property
that do not have multiple uses and records such acquisition costs as research and development as incurred. Consideration for
such intellectual property includes current and future payments of cash, issuance of common stock, and warrants to acquire
common stock.
Income Taxes
The Company utilizes the liability method of accounting for income taxes. Under the liability method, deferred tax assets and
liabilities are determined based on the differences between financial reporting and tax bases of the assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company
records a valuation allowance to reduce net deferred tax assets when it believes it is more likely than not that all or part of its
deferred tax assets will not be realized.
Stock-Based Compensation
The Company accounts for stock-based payment transactions when it receives employee or supplier goods and services in
exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity
instruments or that may be settled by the issuance of such equity instruments using a fair-value-based method. The Company
uses the Black-Scholes-Merton (BSM) option pricing model to determine the fair value of stock-based awards. The fair value of
stock-based payment is recognized over the requisite service period.
The Company evaluates change in options for modification treatment in order to determine whether to recognize the grant date
fair value of the newly issued options or the incremental grant date fair value as the stock-based compensation expense.
14 FINANCIAL REPORT
OSPREY MEDICAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2020 and 2019
NOTE 1 - Summary of Significant Accounting Policies (cont.)
Issuance of Stock
The Company issues new shares of stock upon the exercise of stock options, warrants, and converted instruments.
Recent Accounting Pronouncements
ASU No. 2016-13—Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses previously defined on
Financial Instruments and Other ASUs Issued Amending Topic 326. During June 2016, the FASB issued ASU No. 2016-13,
“Measurement of Credit Losses on Financial Instruments.” ASU No. 2016-13 requires financial assets measured at amortized
cost to be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from
the amortized cost basis. The measurement of expected credit losses is based on relevant information about past events,
including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the
reported amount. During November 2018, April 2019, May 2019, and November 2019, the FASB also issued ASU No. 2018-19,
“Codification Improvements to Topic 326, Financial Instruments – Credit Losses”; ASU No. 2019-04, “Codification Improvements
to Topic 326, Financial Instruments – Credit Losses”; ASU No. 2019-05 “Targeted Transition Relief”; and ASU No. 2019-11,
“Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” ASU No. 2016-13 (as amended) is effective for
annual periods and interim periods within those annual periods beginning after December 15, 2022. Early adoption is permitted
for annual and interim periods beginning after December 15, 2018. The Company does not believe
that the adoption of ASU No. 2016-13 (as amended) will have a material effect on its results of operations, financial position,
or cash flows.
Subsequent Events
For the year ended December 31, 2020, the Company has evaluated, for potential recognition and disclosure, events that
occurred prior to the issuance of the consolidated financial statements for the year ended December 31, 2020, on February 24,
2021. On February 15, 2021, the Company closed on the final funding associated with the Entitlement Offer in April 2020. As a
result of the financing, the Company raised $9,961,277, or through the issuance of 456,394,993 common shares. The remaining
common shares available from the Entitlement Offer of 14,821,665 have an associated underwriting agreement to purchase
these remaining shares as of March 3, 2021, for a value of $0.03 per common share. On February 10, 2021, the Company
issued a promissory note for $1,080,743 under the Paycheck Protection Program through the SBA. The loan was authorized
in the Consolidated Appropriations Act (CAA). The promissory note is uncollateralized and is fully guaranteed by the federal
government. The promissory note bears interest at 1% per annum and is due on February 10, 2026. Per the Paycheck Protection
Program’s terms, some or all of the debt may be forgiven based upon the Company’s use of
the funds.
Going Concern
The financial statements are prepared on a going concern basis. Management evaluates the ability for the entity to continue as a
going concern for at least twelve months from the date the financial statements are issued. In the event management concludes
that there is substantial doubt regarding the Company’s ability to continue as a going concern, the assumption is emphasized in
the consolidated financial statement disclosures, including management’s plan to mitigate the conditions that cause substantial
doubt. If substantial doubt regarding the Company’s ability to continue as a going concern is alleviated, the Company provides
disclosures regarding the conditions or events that raised substantial doubt, management’s evaluation of the significance of those
conditions or events, and management’s plans that alleviated the substantial doubt.
NOTE 2 - Liquidity
The accompanying financial statements have been prepared on the basis that the Company will continue as a going concern. The
Company had a loss for the year ended December 31, 2020, had an accumulated deficit as of December 31, 2020, and does have
adequate liquidity to fund its operations twelve months from the report date February 24, 2021, as noted in the 2021 subsequent
events that have provided additional cash.
FINANCIAL REPORT
15
OSPREY MEDICAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2020 and 2019
NOTE 3 - Fair Value Measurements
Generally, fair value is determined on the exchange price which would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants. The Company discloses each major asset and liability category measured at fair value on either a recurring or
nonrecurring basis and establishes a three-tier fair value hierarchy which prioritizes the inputs used in fair value measurements.
The three-tier hierarchy for inputs used in measuring fair value is as follows:
>
>
>
Level 1: Observable inputs such as quoted prices in active markets
Level 2: Inputs other than the quoted prices in active markets that are observable either directly or indirectly
Level 3: Unobservable inputs in which there is little or no market data, which requires the reporting entity to
develop its own assumptions
The table below presents the balances of assets and liabilities measured at fair value on a recurring basis:
Total
Level 1
Level 2
Level 3
As of December 31, 2020:
Cash and cash equivalents – money market securities $
783,753
$
783,753
$
As of December 31, 2019:
Cash and cash equivalents – money market securities $ 6,769,121
$ 6,769,121
$
–
–
$
$
–
–
NOTE 4 - Leases
The Company leases space for our corporate headquarters in Minnetonka, Minnesota under a non-cancelable operating
lease which expires in May 2023. This lease has escalating lease terms and also includes a tenant incentive that was
recorded at the time the lease was originally entered into. The lease does not contain contingent rent provisions or
renewal options. Further, the lease does not have significant rent escalation holidays, concessions, or other build-out
clauses. The lease includes both lease (e.g., fixed rent payments) and non-lease components (e.g., common area or other
maintenance and utility costs) which are accounted for as a single lease component, as we have elected the practical
expedient to group lease and non-lease components for all leases.
We use our incremental borrowing rate based on the information available at the lease commencement date for a similar
asset and similar term in determining the present value of the lease payments.
The cost components of our corporate headquarters operating leases were as follows for the periods ended December 31,
2020 and 2019:
Operating lease cost
Variable lease cost
Totals
2020
2019
$
$
120,699
81,868
202,567
$
$
120,699
94,197
214,896
16 FINANCIAL REPORT
OSPREY MEDICAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2020 and 2019
NOTE 4 - Leases (cont.)
Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs for our leased
corporate headquarters, which are paid based on actual costs incurred by the lessor.
Maturities of our lease liabilities for our corporate headquarters operating lease are as follows at December 31, 2020:
2021
2022
2023
Total lease payments
Less: interest
Present value of lease liabilities
159,908
164,704
69,960
394,572
(26,181)
368,391
$
The remaining lease term as of December 31, 2020, is 2.4 years, and the discount rate was 5.5%. The cash outflow for
operating leases for the year ended in December 31, 2020, was $155,250.
NOTE 5 - Employee Benefits
The Company provides a 401(k) plan as a benefit to its employees. In April 2018, the Company started a 5% match of qualified
payments under the 401(k) plan. Under the plan, eligible employees may contribute amounts through payroll deductions
supplemented by employer contributions for investment in various investments specified in the plan. The Company discontinued
the company match as of March 31, 2020. Company contributions to the plan were $62,881 and $246,046 for the years ended
December 31, 2020 and 2019, respectively.
NOTE 6 - Intangible Assets
The Company received a license at inception from its then parent company, VK Pty, to certain intellectual property. That license
became inoperative when VK Pty assigned its intellectual property to the Company on June 21, 2007, in advance of preferred stock
financing from CM Capital Investments (CMCI). The assignment was done in exchange for issuing 348,098 shares of the Company’s
common stock to VK Pty, valued at $.50 per share. As a result of these transactions, during 2007 the Company expensed as research
and development the full $14,600 of the original intangible asset value and an additional $4,443 of value related to the deferred tax
liability assigned to the initial license. The Company capitalized $174,049 of purchased value and an additional $52,962 related to the
corresponding deferred tax liability as an intangible asset, reflecting the value of the acquired intellectual property.
The intellectual property is expected to have a useful life equal to the life of the underlying patent applications. Such life will extend,
on average, 18 years from 2007 to 2025. Amortization is recorded on a straight-line basis beginning at acquisition date, resulting
in amortization expense of $12,496 for both years ended December 31, 2020 and 2019. Amortization expense will approximate
$12,496 in each of the next five years and fully amortized in the fifth year, resulting in less than full amount of amortization.
NOTE 7 - Income Taxes
Osprey Medical is a C corporation under the U.S. Internal Revenue Code.
The Company incurred income tax expense of $5,277 and $9,773 for the years ended December 31, 2020 and 2019, respectively.
As of December 31, 2020 and 2019, the Company has recorded a valuation allowance to offset its net deferred tax assets due to
uncertainty surrounding realization of the net deferred tax assets.
The Company has accumulated net operating losses to be carried forward to future years in the amount of $119,531,585 applicable to
income subject to federal income tax and $100,748,157 applicable to income subject to state income tax as of December 31, 2020. These
federal tax and state tax carryforwards begin to expire in 2028 and 2023, respectively. Utilization of these net operating losses to offset
future taxable income may be limited.
Income tax expense (benefit) consists of the following:
FINANCIAL REPORT
17
OSPREY MEDICAL, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2020 and 2019
NOTE 7 - Income Taxes (cont.)
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Deferred tax asset valuation allowance
Total provision
2020
2019
$
$
–
5,277
–
5,277
2,828,000
(27,000)
–
2,855,000
(2,855,000)
5,277
$
$
–
9,773
–
9,773
3,540,000
1,185,000
–
4,725,000
(4,725,000)
9,773
Income tax expense differs from the amount computed at the statutory federal income tax rate of 21% due principally to nondeductible
expenses, different rates for foreign jurisdictions, and the recognition of a valuation allowance against the net deferred tax asset.
Significant components of deferred tax assets and liabilities as of December 31 are as follows:
Deferred tax assets:
Net operating loss carryforwards
Research and development credit
Organization costs
Accrued vacation
Deferred rent
Stock-based compensation expense
Deferred tax liability:
Intangible assets
Property and equipment
Net deferred tax asset
Valuation allowance
2020
2019
$
$
28,800,000
1,575,000
–
117,000
–
173,000
30,665,000
(13,000)
(7,000)
(20,000)
26,126,000
1,521,000
1,000
46,000
–
141,000
27,835,000
(45,000)
–
(45,000)
30,645,000
(30,645,000)
–
$
27,790,000
(27,790,000)
–
$
The valuation allowance for deferred tax assets changed by $2,855,000 and $4,725,000 for the years ended December 31, 2020
and 2019, respectively.
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% likelihood of being realized
upon ultimate settlement with the relevant tax authority.
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 on the Company’s
statement of operations.
18 FINANCIAL REPORT
OSPREY MEDICAL, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2020 and 2019
NOTE 8 - Common Stock
During the years ended December 31, 2020 and 2019, there were no options exercised.
In May 2020, the Company authorized an additional 1,870,000,000 shares of common stock resulting in a total amount authorized
of 3,000,000,000 as of December 31, 2020.
In April 2020 and June 2020, the Company issued 533,495,727 shares of common stock at a price of $0.02 per share. As a result of
the total financing, the Company raised approximately $8,254,590 in gross proceeds, before issuance costs of $320,614. Included
in the issuance costs were $31,145 paid to Brandon Capital Partners, a related party with ownership in the Company. As part of
the issuance of common stock, the Company also offered each common stockholder that participated in the raise the option to
purchase additional shares of common stock through February 15, 2021, at a share price of $0.03 per share. On October 15, 2020,
the Company issued 62,279,069 shares of common stock at a price of $0.03 per share. As a result of the financing the Company
raised approximately $1,233,225 in gross proceeds before issuance costs of $12,167. The total common stock available for purchase
was 533,495,727, and as of the year ended December 31, 2020, 471,216,658 remain available to purchase shares of common stock,
and all remain outstanding as of December 31, 2020. The options are accounted for within equity in the consolidated financial
statements.
As of both December 31, 2020 and 2019, the common shares outstanding were 811,673,481 and 215,898,685. As of December 31,
2020 and 2019, there are no preferred shares outstanding.
NOTE 9 - Weighted Average Shares Calculation
Basic loss per share is computed by dividing net loss by the weighted average shares outstanding during the reporting period.
Diluted loss per share is computed similarly to basic loss per share except that the weighted average shares outstanding are
increased to include additional shares from the assumed exercise of stock warrants and options, if dilutive. Diluted loss per share
does not include any of these dilutive effects in its calculation. The number of additional dilutive shares is calculated by assuming
that outstanding stock options were exercised and that the proceeds from the exercise were used to acquire shares of common
stock at the average market price during the reporting period.
Shares used in the loss per share computations for the years ended December 31, 2020 and 2019, are as follows:
Weighted average common shares outstanding – basic
Dilutive effect of stock option and warrants
Weighted average common shares outstanding – diluted
2020
2019
591,663,330
–
591,663,330
215,898,685
–
215,898,685
As of December 31, 2020 and 2019, stock options shares of 16,954,364 and 18,372,846, respectively, were not included as their
effect is anti-dilutive due to the loss for the years. In addition, options for the purchase of additional common stock granted to
common stockholders that participated in the raise during the year ended December 31, 2020, of 471,216,658 were not included
as their effect is anti-dilutive due to the loss for the year ended December 31, 2020.
NOTE 10 - Stock-Based Compensation
The Company had a stock incentive plan (the 2006 Plan) that provided for the issuance of incentive and non-qualified stock
options to employees and directors, for the purpose of encouraging key officers, directors, employees, and consultants of the
Company to remain with the Company and devote their best efforts to the business of the Company. The 2006 Plan expired in
2016, and 1,806,231 shares then outstanding remain available for exercise as of December 31, 2020. On August 29, 2016, the
Company’s stockholders approved a new stock option plan (the 2016 Plan) with the same directive as the old plan. Under the
2016 Plan, incentive stock options must be granted at exercise prices not less than 100% of the fair value of the Company’s stock
as of the grant date. If incentive options are granted to persons owning more than 10% of the voting stock of the Company, the
Plan provides that the exercise price shall not be less than 110% of the fair value of the Company’s stock as of the grant date.
These options have exercise and vesting terms established by the Option Committee of the Company’s Board of Directors at
the time of each grant, but in no event are the options exercisable after ten years from the date of grant. The options granted
are subject to time-based vesting ranging from immediate vesting to vesting 48 months after the date of grant. The Board
of Directors approved an increase in the 2016 Plan of 44,000,000 shares in June 2020 and evergreen adjustment of 4% on
December 31, 2020, or 2,465,142 shares. The Company has reserved 64,093,683 shares of common stock for issuance under the
2016 Plan as of December 31, 2020. As of December 31, 2020, options issued under the 2016 Plan were 15,148,133.
FINANCIAL REPORT
19
OSPREY MEDICAL, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2020 and 2019
NOTE 10 - Stock-Based Compensation (cont.)
Effective April 5, 2019, the ASX Limited (“ASX”) permitted the Company to cancel 9,215,104 stock options issued to its
employees, consultants, and independent non-executive directors under its 2006 Stock Incentive Plan and 2016 Stock Incentive
Plan with an exercise price of A$0.60 or higher per share (equivalent to A$0.30 or higher per the CHESS Depositary Interests, or
CDI) in consideration for issue of 9,202,500 new stock options that have reduced exercise prices and extended exercise periods
under a proposed exchange offer. Common stock option holders had to elect the cancellation of these stock options in exchange
for the same number of new common stock options with an exercise price of A$0.23 (equivalent to A$0.115 per CDI) and an
expiration date of May 27, 2029, with vesting terms of 25% vesting one year after the date of the grant and the remainder
over 36 months.
In connection with the stock option exchange, the Company cancelled and reissued 9,202,500 common stock options. The
estimated fair value of additional compensation cost related to the stock options exchanged was $498,879, which will be
recognized over the vesting term of the new option grants, which become fully vested in 2023.
The following table presents the weighted average assumptions used to estimate the fair values of the stock options granted
to employees and nonemployees in the periods presented, using the BSM option pricing formula: The risk-free interest rate
for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The
expected life and expected volatility are based on the average reported lives and volatilities of our company.
Risk-free interest rate
Expected volatility
Expected life (in years)
Dividend yield
Weighted average estimated fair value of options granted
Year Ended
December 31, 2020
0.30%–1.46%
72.81%– 73.81%
Year Ended
December 31, 2019
1.71%–2.62%
73.28%–74.28%
5.92
0.00%
$0.04
5.92
0.00%
$0.23
The following table summarizes the activity for outstanding employee and non-employee stock options:
Balance as of December 31, 2018
Granted
Expired
Cancelled
Balance as of December 31, 2019
Granted
Expired
Cancelled
Balance as of December 31, 2020
Exercisable as of December 31, 2019
Number of Shares
13,564,956
14,478,732
(27,342)
(9,643,500)
18,372,846
135,500
–
(1,553,982)
16,954,364
6,607,271
Weighted Average
Exercise Price
0.64
0.16
(0.50)
(0.76)
0.21
0.04
–
(0.16)
0.21
0.20
$
$
$
Weighted Average
Remaining
Contractual Term
(Years)
5.78
Aggregate
Intrinsic Value
–
$
8.43
$
7.38
6.07
$
$
–
–
–
The aggregate intrinsic value is calculated as approximately the difference between the weighted average exercise price of the
underlying awards and the Company’s estimated current fair value as of December 31, 2020.
The Company recognized stock-based compensation expense related to stock options of $539,309 and $620,364 for the years
ended December 31, 2020 and 2019, respectively. As of December 31, 2020, $799,316 of total unrecognized compensation cost
related to stock options is expected to be recognized over a weighted average period of 2.22 years. To the extent the forfeiture
rate is different than anticipated, stock-based compensation related to these awards will be different from the Company’s
expectations.
20 FINANCIAL REPORT
OSPREY MEDICAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended December 31, 2020 and 2019
SHAREHOLDER INFORMATION
Overview
The Company’s securities are listed for quotation in the form of CHESS Depositary Interests (CDIs) on the Australian Securities
Exchange (ASX) and trade under the symbol “OSP.” Each share of common stock (Share) is equivalent to 2 CDIs.
The shareholder information below was applicable as at 4 March 2021.
The Company’s corporate Governance Statement approved by the Board on 16 February 2021 is located at:
https://ospreymed.com/investors/corporate-governance/
The Company’s share capital was as follows:
Type of security
Total number of issued Shares (1)
Total number of issued CDIs
(1) Includes Shares held by CHESS Depositary Nominees Pty Limited (CDN)
Number of securities
1,282,890,139
2,565,780,278
SUBSTANTIAL HOLDERS
The names of substantial holders in the Company and their respective stock holdings (to the best of the Company’s knowledge) follow below:
Names of holders as disclosed in substantial holding notices
given to the Company
MRCF3 SERVICES (H) PTY LTD ATF MRCF3 (H) TRUST
MRCF3 SERVICES (SW) PTY LTD ATF MRCF3 (SW) TRUST
Funds and investment mandates for which Allan Gray Australia Pty Ltd
acts as investment manager
MRCF3 SERVICES (HP) PTY LTD ATF MRCF3 (HP) TRUST
CITICORP NOMINEES PTY LIMITED (1)
Number of
CDIs held
Percentage of
voting power
702,144,984
422,849,954
340,612,294
236,891,133
144,332,175
27.37%
16.48%
13.28%
9.23%
5.63%
(1) The Company is not aware of the extent (if any) to which the holdings of Citicorp Nominees Pty Limited are subject to an exception listed in section 609 of the Corporations Act.
For the purpose of the above table, a “substantial holder” is a security holder, who together with their associates, has a relevant
interest (within the meaning of section 608 of the Australian Corporations Act) in securities representing 5% or more of the total
number of votes attached to voting shares in the Company.
DISTRIBUTION SCHEDULE
Number of CDIs
Number of holders
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total
The above holdings do not include CDN.
160
413
245
1,910
1,209
3,937
% of CDIs held by the holders
in each category
4.07
10.49
6.22
48.51
30.71
100
SHAREHOLDER INFORMATION
21
OSPREY MEDICAL, INC. AND SUBSIDIARY
Unmarketable Parcels
Based on the market price on 3 March 2021, there were 1,636 shareholders holding less than a marketable parcel (i.e. a parcel
of securities of less than $500.)
Osprey Medical Top 20 Holders
Set out below is a schedule of the 20 largest holders of securities in the Company, including the number and percentage of
securities held by those holders as at 4 March 2021. [Related but separate legal entities are not aggregated for the purposes
of the table below.]
Name of registered holder
MRCF3 SERVICES (H) PTY LTD ATF MRCF3 (H) TRUST
MRCF3 SERVICES (SW) PTY LTD ATF MRCF3 (SW) TRUST
MRCF3 SERVICES (HP) PTY LTD
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NATIONAL NOMINEES LIMITED
PAUL MCCARTHY NOMINEES PTY LIMITED
DIXSON TRUST PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
SACAVIC PTY LTD
MR AMIRPOYA ERBEZIN ZANJANI
BBF1 IIF PARTNERSHIP LP
78 QUARRY ROAD PTY LTD
MRCF PTY LTD
MR BAHRAM REZAEI
HENDERSON INTERNATIONAL PTY LTD
DRUPKELDERS PTY LTD
S F CAPITAL PTY LTD
MR SUNDEEP KALRA & MR ANOOP KALRA & MRS SHIKHA MOHANTY
MR BRIAN TULLY & MRS MARGARET TULLY
1.
2.
3.
4.
5.
6.
7.
8.
9.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
Total CDIs held by top 20 CDI holders
Total CDIs held by all other CDI holders
Total CDIs
Options (not listed on ASX)
No. of CDIs held % of total CDIs
27.37
16.48
9.23
5.63
4.57
3.01
1.64
0.78
0.78
0.47
0.47
0.44
0.42
0.37
0.36
0.34
0.32
0.31
0.29
0.29
0.23
73.80
26.20
100.00
702,144,984
422,849,954
236,891,133
144,332,175
117,315,681
77,154,510
42,046,113
20,000,000
20,000,000
12,132,908
12,000,000
11,400,000
10,842,156
9,450,000
9,134,673
8,600,000
8,333,332
8,012,000
7,511,761
7,362,144
6,000,000
1,893,513,524
672,266,754
2,565,780,278
As at 4 March 2021, there were 18,391,786 options on issue to purchase shares of common stock (equivalent to 36,783,572 CDIs)
under the Company’s 2006 and 2016 Stock Incentive Plans.
The following table is a distribution schedule of the number of holders of options as at 4 March 2021:
Category
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total
Number of holders
4
11
4
12
17
48
22 SHAREHOLDER INFORMATION
OSPREY MEDICAL, INC. AND SUBSIDIARY Restricted Securities
There were no ASX restricted securities or securities subject to voluntary escrow as at 4 March 2021.
Voting Rights
Every holder of Shares present in person or by proxy is entitled to one vote for each Share held on the record date for the meeting
on all matters submitted to a vote of Shareholders.
CDI holders may attend and vote at the Company’s general meetings. The Company must allow CDI holders to attend any
meeting of Shareholders unless relevant U.S. law at the time of the meeting prevents CDI holders from attending those meetings.
In order to vote at such meetings, CDI holders may:
•
•
•
instruct CDN, as the legal owner, to vote the Shares underlying their CDIs in a particular manner. A voting instruction form
will be sent to CDI holders with the notice of meeting or proxy statement for the meeting, and this must be completed and
returned to the Registry before the meeting;
inform Osprey that they wish to nominate themselves or another person to be appointed as CDN’s proxy for the purposes of
attending and voting at the general meeting; or
convert their CDIs into a holding of Shares and vote these at the meeting. Afterwards, if the former CDI holder wishes to sell
their investment on the ASX, it would need to convert the Shares back to CDIs. In order to vote in person, the conversion
from CDIs to Shares must be completed before the record date for the meeting.
One of the above steps must be undertaken before CDI holders can vote at Shareholder meetings.
Proxy forms, CDI voting instruction forms, and details of these alternatives will be included in each notice of meeting or proxy
statement sent to CDI holders by the Company.
Holders of issued but unexercised options are not entitled to vote.
Australian Corporate Governance Statement
The Board of Directors has confirmed that the Company’s corporate governance framework complies in almost all respects
with the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (4th Edition)
(“Recommendations”) and that where it does not comply, it is due to the current relative size of the Company, its stage of
development, and the scale and nature of its operations.
The Company’s Corporate Governance Statement and further details in relation to the Company’s governance framework are
set out in a dedicated corporate governance information section of the Company’s website https://ospreymed.com/investors/
corporate-governance/. This section of the Company’s website contains copies of all of the corporate governance policies and
Board Committee charters.
Required Statements
(a) There is no current on-market buy-back of the Company’s securities.
(b) The Company is incorporated in the state of Delaware in the United States of America.
(c) The Company is not subject to Chapters 6, 6A, 6B, and 6C of the Corporations Act 2001 (Cth)
dealing with the acquisition of Shares (i.e., substantial holdings and takeovers).
(d) The Company’s securities are not quoted on any exchange other than the ASX.
(e) Under the Delaware General Corporation Law, shares are generally freely transferable subject to restrictions imposed by U.S.
federal or state securities laws, by the Company’s certificate of incorporation or by-laws, or by an agreement signed with the
holders of the shares at issue. The Company’s amended and restated certificate of incorporation and by-laws do not impose
any specific restrictions on transfer.
(f) T he name of the Australian Secretary is Brendan Case.
(g) The address and telephone number of our principal registered office in Australia is:
Level 13, 41 Exhibition Street
Melbourne, Victoria 3000
+ 61 410 442 393
(h) Register of securities:
Link Market Services
Level 1, 333 Collins Street
Melbourne, Victoria 3000
Telephone: + 61 3 9615 9800
Facsimile: + 61 2 9287 0303
www.linkmarketservices.com.au
SHAREHOLDER INFORMATION
23
OSPREY MEDICAL, INC. AND SUBSIDIARY CORPORATE DIRECTORY
Board of Directors and Australian Secretary
Mr John Erb, Non-executive Chairman
Mrs Sandra Lesenfants, Non-executive Director
Mr Mike McCormick, President & CEO
Mr Neville Mitchell, Non-executive Director
Dr Christopher Nave, Non-executive Director
Mr Brendan Case, Australian Secretary
Company – U.S. Office & Headquarters
5600 Rowland Drive, Suite 250
Minnetonka, MN 55343
United States of America
+1 952 955 8230
Auditor
Baker Tilly Virchow Krause, LLP
225 S Sixth Street, Ste 2300
Minneapolis, Minnesota 55402-4661
USA
Telephone: + 1 612 876 4500
Facsimile: +1 612 238 8900
www.bakertilly.com
Investor Relations
Mr Leijie Li
Vesparum Capital
T: (61) 3 8582 4800
ospreymed@vesparum.com
Mr Doug Schoenberg
VP of Marketing, Education, & Reimbursement
T: (952) 955 8234
dschoenberg@ospreymed.com
ASX Code
OSP
Executive Team
Mr Mike McCormick, President & CEO
Mr Vic Fabano, VP Operations
Ms Melanie Hess, VP of Regulatory Affairs, Quality
and Compliance
Mr Rod Houfburg, VP Research & Development
Ms Nancy Ness, CFO
Mr Doug Schoenberg, VP Marketing, Education, &
Reimbursement
Ms Sarah Runde, Senior Director of Clinical Affairs
Company – Registered Office in Australia
Level 13, 41 Exhibition Street
Melbourne, Victoria 3000
+ 61 410 442 393
Share Registry
Link Market Services
Level 1, 333 Collins Street
Melbourne, Victoria 3000
Australia
Telephone: + 61 3 9615 9800
Facsimile: + 61 2 9287 0303
www.linkmarketservices.com.au
Annual Meeting of Stockholders Date
The Annual Meeting of stockholders will be held as a
virtual meeting on Tuesday, 11 May 2021 at 10.00am
Australian Eastern Standard Time (Monday, 10 May
2021 at 7.00pm U.S. Central Time).
CORPORATE DIRECTORY
24
www.ospreymed.com
DyeVert, Osprey Medical, Be Kind to Kidneys, and DyeMINISH are all registered trademarks of
Osprey Medical, Inc. in the U.S. and other countries. © 2021 Osprey Medical, Inc.
All Rights Reserved. IC0093A