REPORT Automated Solutions for Diagnostics INTERIM REPORT FOR THE

Q4 REPORT 2008 Automated Solutions for Diagnostics INTERIM REPORT FOR THE FOURTH QUARTER ENDED DECEMBER 31, 2008 HIGHLIGHTS Q4 2008 Successful outcome of STI clinical trials with both Roche & Becton Dickinson New distribution agreement with Roche Diagnostic, Scandinavia AB 104% growth in operating income vs Q3 08 Multiple application strategy shows good traction Clinical testing for CRC integrated test concluded A rights issue resolved, provided gross proceeds of NOK 33.6 million Funding from Norwegian Research Coucil (BiA) of NOK 9.4 million for new product development received in Q1 09 Robert V. Ahlgren elected new Chairman of the Board, previous key positions in Fisher, Apogent and Baxter OUTLOOK Strong sales expected to continue Stronger international presence Launch of several new applications on the “Bullet” instrument Launch of the desk top instrument “Arrow” with multiple applications Strong focus on cost control to continue Warrants can bring in MNOK 38.6 during the next 2 years Partner seek for commercialization & launch of CRC tests with focus on the German market (Genefec III) FINANCIAL REVIEW (unaudited) NOK 1,000 Full Year Q4 2008 5 143 49 % 314 -7 934 0 -7 934 -11 689 -7 956 -0,15 0,14 88 252 4 544 30 828 -104 319 84 % -7 239 -12 066 -5 682 -5 005 1 465 -9 222 15 651 Q4 2007 3 260 99 % 808 -7 996 0 -7 996 -12 804 -12 073 -0,26 -0,24 84 838 6 230 46 574 -117 719 86 % -9 718 -10 178 -7 957 -2 787 -6 -10 750 36 187 Q3 2008 2 464 60 % 1 238 -10 441 0 -10 441 -13 667 -11 995 -0,25 -0,23 84 587 4 582 38 590 -110 946 87 % -8 813 -8 000 -11 698 -2 261 27 200 13 241 24 873 Q2 2008 3 226 64 % 579 -7 898 0 -7 898 -11 150 -10 221 -0,27 -0,25 84 270 5 202 23 968 -95 447 84 % -9 229 -8 764 -10 162 -2 407 0 -12 569 11 632 Q1 2008 3 352 62 % 1 080 -9 349 0 -9 349 -12 726 -11 918 -0,31 -0,29 84 014 5 531 35 922 -105 812 84 % -9 351 -10 304 -10 675 -1 311 0 -11 986 24 201 2008 14 185 57 % 3 211 -35 622 0 -35 622 -49 232 -42 090 -0,94 -0,87 88 252 4 544 30 828 -104 319 84 % -7 239 -12 066 -38 217 -10 984 28 665 -20 535 15 651 2007 1) Operating revenues Gross margin Other revenues/governmental grants 2 EBITDA before restructuring costs Restructuring costs EBITDA after restructuring costs EBIT Net profit/loss EPS Diluted EPS Intangible fixed assets Equipment and other fixed assets Current assets Equity Equity ratio Non-current liabilities Current liabilities Net cash from operating activities Net cash from investing activities Net cash from financing activities Net change in cash Cash at end of period 1) Genpoint is included from 1 March 2007 11 651 73 % 3 988 -45 345 -2 657 -48 002 -59 325 -54 960 -1,57 -1,45 84 838 6 203 46 574 -117 719 86 % -9 718 -10 178 -42 855 -84 878 122 991 -4 742 36 187 2) Due to change of business structure, the Company has reclassified revenues related to instrument rental and service agreements from other revenues/governmental grants to operating revenues. 2 Q4 Report 2008 Operating revenues and other revenues/governmental grants NorDiag had operating revenues of NOK 5.1 million and other revenues/grants of NOK 0.3 million in Q4-2008, compared with NOK 3.3 million and NOK 0.8 million in Q4-2007. The Company more than doubled the operating revenues from the previous quarter. The strong growth in operating revenues current quarter comes as a consequence of successful clinical trials for STI sample preparations. 5 new “Bullet” instruments were sold, and 1 placed in the quarter. For 2008, the total operating revenue was NOK 14.2 million compared with NOK 11.6 million in 2007. There was no operating revenue from cancer tests in 2008, this means that the operating revenues from instruments and kits in Infections diseases had a growth of 45 per cent (pro forma). Due to the fact that development projects recognized in the balance sheet are supported by governmental grants; NOK 0.8 million are accounted for as a reduction in the balance sheet instead of recognized as revenue in the profit & loss statement, in Q4-2008. Gross profit Gross profit related to operating revenues was 49 per cent in Q4-2008 compared to 99 per cent in the same period last year. The extraordinary high gross margin in Q4-07 was related to correction of previous quarters. For 2008, the gross profit was 57 per cent compared to 73 per cent in 2007. The decrease in gross margin in Q4-08 compared to previous quarters in 2008 as well as 2008 versus 2007 is an effect of change in product mix (more instrument sales in Q4-08 and 2008). Operating expenses (excluding cost of goods sold) Total operating expenses in Q4-2008 were NOK 10.7 million compared to NOK 12.1 million in Q4 last year and NOK 13.2 million in previous quarter. As of December 1 2008, all employees of Genpoint AS were transferred from defined benefit pension plans to defined contribution pension plans. This has led to no pension liabilities in the balance sheet as of December 31, 2008. A positive one-off effect of NOK 2,9 million was recognized in the profit & loss statement; in connection with settlement of the pension plan in 2008. For the whole year, total operating expenses were NOK 46.9 million, NOK 10.9 million lower than in 2007. The reduced operating expenses was according to plan, and a consequence of the discontinuation of Genefec Il in Q3-2007. Further cost-cutting measures decided will have an effect of up to NOK 7 million in 2009. Operating profit (EBITDA) before restructuring costs EBITDA in Q4-2008 was NOK – 7.9 million compared to NOK – 8.0 million in Q4-2007, and NOK – 10.4 million in Q3-2008. Depreciation was NOK – 3.8 million compared to NOK – 4.8 million same quarter last year, and NOK - 3.2 million in last quarter. On a yearly basis, EBITDA in 2008 was – 35.6 million, an improvement of NOK 9.7 million from 2007. Net financial items Net financial income was NOK 2.7 million in Q4-2008 compared with NOK 0.7 million last year and NOK 1.1 million previous quarter. The high level of financial income current quarter is attributable to currency gains of NorDiag’s internal loan transactions. For 2008, the financial income was NOK 4.8 million compared to NOK 2.5 million in 2007. Results Profit before taxes for Q4-2008 was NOK – 9.0 million compared with NOK – 12.1 million in Q4-2007. Profit before tax in the third quarter 2008 was NOK – 12.5 million. Profit before taxes for 2008 was NOK – 44.4 million, an improvement of NOK 12.5 million from the previous year. Balance sheet Total assets by the end of 2008 were NOK 123.6 million compared with NOK 137.6 million at end of 2007. Equity ratio was 84 % as of December 31 2008. The conclusion from the impairment testing of goodwill and capitalized development costs is that no write down is needed. An increase in the discount rate and/or decrease in the growth rate for the operating revenue can lead to a write down of the assets. Cash flow Net cash flow in Q4-2008 was NOK – 9.2 million, giving cash balance at the end of Q4-2008 of NOK 15.6 million. The first milestone reach in Q4-2008 for payment of NOK 2.0 million in risk loan from Innovation Norway, classified as long term loan in the cash flow and balance sheet. As previoulsy announced, NorDiag's Board of Directors addressed the need for additional funding for the Company during the fourth quarter. A rights issue of NOK 25-60 million by the issuance of minimum 50,000,000 and maximum 120,234,510 new shares with a subscription price of NOK 0.5 per share, was proposed. An extraordinary general meeting resolved the Board’s proposal at December 19. A specific warrant structure was included in the offering, giving subscribers an additional opportunity 3 Q4 Report 2008 to benefit from the participation in the offering. The transaction was guaranteed by an underwriting syndicate of NOK 25 million corresponding to the minimum number of shares offered in the transaction. The subscription period for the offering was after the closing of the fourth quarter, from January 16 to January 30. After the close of the subscription period Friday 30 January 2009, a total of 67,214,127 shares had been subscribed for, of which 50,000,000 were subscribed for under the underwriting syndicate. Consequently, the share capital of NorDiag will increase from NOK 5,343,755.90 to NOK 12,065,168.60, divided between a total of 120,651,686 outstanding shares with a nominal value of NOK 0.10. The transaction gives the Company approx. NOK 31.6 million in additional funding. Furthermore, the warrants issued can give an additional capital of NOK 38.6 million if fully utilized. In Q1-2009, the Company was granted NOK 9.4 million by the Norwegian Research Council`s BIA funds. Organization NorDiag employed 35.0 man years as of December 31 2008. As a consequence of the new priorities, the Board of Directors in NorDiag has approved a plan in Q4-2008 for further cost reductions. The research laboratory in Bergen will be closed down. The Company’s staff will be reduced by 6 employees, in addition to reduced use of external consultants. The plan will give annualized cost reductions of NOK 9.5 million, with an effect of up to NOK 7 million in 2009. In order to establish a leaner Board structure, several changes of the Board of Directors were decided at the extraordinary general meeting at December 19. The Board members Elke Holinski-Feder and Robert Allnutt resigned from the Board. Robert V. Ahlgren was appointed as a new Chairman of the Board, effective from the date and on the condition that the rights issue is completed. Hans Hekland, previous chairman continued as a member of the Board. Mr. Ahlgren has extensive international management experience within the medical and diagnostics industry and has held numerous management positions in companies such as Fisher, Apogent, Murex Diagnostics and Baxter. He is a U.S. citizen. Robert Ahlgren will play an active role together with the president of NorDiag Inc to build the US market for NorDiag’s products. BUSINESS REVIEW NorDiag’s core competence is isolation of DNA from difficult clinical samples. NAT (genebased) testing represents a major business opportunity as the total number of DNA tests in the world today is approximately 100 million per year, and NAT testing is the fastest growing area in the diagnostic market. The use of difficult clincal samples has not been fully exploited for NAT testing due to lack of automated and high quality sample preparation systems. NorDiag offers such solutions and it is expected that difficult clinical samples will be used for diagnostics to a much larger extent and that new markets will rapidly emerge. NorDiag’s current product portfolio and development portfolio consist of sample preparation instrument and kits to isolate DNA, and tests to conduct the analysis of the isolated DNA . The business model is to sell instruments to hospitals and laboratories directly or through partners, and offer sample preparation kits for different diagnosis for third parties analysis, and for selected diseases offer integrated tests (sample preparation + analysis) as well. Instrument development The Company delivered successful clinical documentation within the area Sexually Transmitted Infectious (STI) for its "Bullet" instrument and sample preparation kits combined with Roche's Taqman 48 and Becton Dickinson's ProbeTec analyzers and test kits. This provided a platform for strong growth in Q4 2008. The growing sales volume in Q4 2008 is a direct result of significantly increased sales run rate based on achieved milestones. In total, 5 new instruments were sold, and 1 was placed in the quarter. Launch of the Company's new desktop instrument “Arrow” in March 09, for which the Company has placed the first instruments at customers' locations for testing, will further stimulate volume growth. The new instrument is suitable for smaller laboratories due to its affordability and size, and it has unique high quality applications that is expected to drive revenues. NorDiag is now satisfied with the portfolio of sample preparation instruments that it offers to the customers. Further development will focus on integrating Spartan’s analyzing technology into the Arrow instrument in order to offer an affordable end-to-end solution to customers in the future. Infectious diseases NorDiag has developed and develops a number of different sample preparation applications to be used on the “Bullet” and “Arrow” instrument platforms. In general – the kits offered by NorDiag are now being used in connection with diagnostics for STI, MRSA and VRE. Furthermore, we expect the kits to be used in connection with diagnostics for tuberculosis, viruses, 4 Q4 Report 2008 cancer testing where samples such as blood, sputum, urine and stool are used, – all on the instrument platforms “Bullet” and “Arrow”. Development of new applications will be completed during the first half of 2009. NorDiag has a razor & razorblade business model where the instruments are the razors and kits for different applications are the razorblades. As such, multiple application use on the same instrument is a major revenue driver. An example is one of NorDiag’s new customers that use the instrument in connection with diagnostics of STI, MRSA, VRE and will use it for diagnostics of viruses when this application is ready. These are all high throughput applications – and it could be as high as 60 000 isolations per year on one instrument – which again represents a reagent sales value of approximately MNOK 1.0 per year over several years. After closing of the quarter, NorDiag won a tender offer for sale of a high throughput ("Bullet") instrument and reagents to Lund University Hospital in Sweden. The instrument will be used for several applications, including MRSA from clinical samples. This indicates that the multiple application strategy as described above, fits the customer's needs and is beginning to attract interest. Roche Diagnostics Scandinavia AB and NorDiag ASA signed a new collaboration agreement in Q4-2008. The agreement grants Roche Diagnostics Scandinavia AB non-exclusive rights to market and sell NorDiag`s new automated sample preparation for sexually transmitted infections to existing and new users of the Roche COBAS® TaqMan® 48 Analyzer in Sweden. NorDiag also successfully completed the clinical testing with the Becton Dickinson (BD) system. The Company fully automated the process from the primary urine tubes to the set up of the BD (Becton Dickinson) ProbeTec ET System. The clinical trial has been executed at Ullevaal University Hospital in Norway. After the closing of the quarter, NorDiag was granted up to NOK 9.4 million in the period 2009-2011 by the Norwegian Research Council`s BIA funds. The grant will be used for the development of diagnostic tests for M-Tuberculosis and Lyme disease. The tests will be based on NorDiags in licensed and unique technology platform to produce antigens against certain aggressive infections. The market potential for a M-tuberculosis test is estimated to be 130 million tests per year. Also Lyme disease (Borelia) is becoming a widely spread disease in many countries, and late diagnosis can create serious problems. Cancer Within the Cancer area there has also been positive development in the quarter. Clinical results for the Company's test, which is to contribute to diagnosis of colorectal cancer (CRC), confirmed the targeted combined sensitivity (80%) and specificity (90%) in combination with the Hemocult FOBT test which was used in a study in Germany concluded in November. The Company is now in position to offer a cost effective system for CRC testing in 2009, and it is seeking a partner for commercialization and distribution. The focus will in the first phase be on the German market since this is where the clincal documentation took place. The test will be positioned as a complementary test to FOBT with the purpose of giving the medical doctors a tool to decide which patients shall be forwarded for further examination (colonoscopy). NorDiag is also positioning its sampe preparation system from stool to be the front end solution to other’s CRC test(s). The Company has in that respect a collaboration with Exact Sciences where the goal is to be the sample preparation provider towards their next generation CRC test. Geographic expansion NorDiag's future business will be more focused on sales. R&D resources will be moved to sales and the sales organization will be strengthened. Dr. Roswitha Keller was hired as manager for sales & marketing Europe in NorDiag from January, 2009. NorDiag has started to penetrate the European market with its CE IVD labeled instruments and reagents, and Dr. Keller will contribute to this process. Together with the previous strengthening of the US organization, this will strongly focus NorDiag towards the international market. NorDiag has already established a solid foothold and market share in Scandinavia and the strategy is to use the Scandinavian market as a reference market for further commercialization and geographic expansion. After the closing of the quarter NorDiag announced two new distribution agreements in Europe. NorDiag appointed Isogen Life Science as exclusive distributor in the field of infectious diseases for the Netherlands, Belgium, Luxemburg and Spain. The Company also appointed DiaTech SRL as exclusive distributor in the field of infectious diseases for Italy. NorDiag is agressively expanding the portfolio of distributors for its infectious disease products. Sale of products from third parties Cross sales of products with partners was introduced as a part of NorDiags strategy in the second half of 2008. The target is to boost sales of own instruments and kits, and also benefit from higher operating revenue through distribution of complementary products from partners. In Q4-2008, the Company announced two such partner agreements (Spartan Bioscience Inc. and 5 Q4 Report 2008 Molzym GmbH & Co KG). They are both companies with a large potential for their products. NorDiag is looking to supply them with an automated sample preparation system as well as getting rights to sell their assays in markets where NorDiag is strongly represented. This creates a win win situation – NorDiag will sell their products in selective regions and they will drive sales of NorDiag products in markets where they are represented by others. NorDiag expect that sale of third party products will reduce the time needed to break even. OUTLOOK NorDiag expects the strong sales to continue in 2009. The combination of strong sales focus, larger geographical footprint and a broader instrument and application portfolio is expected to pay off. The Company also expects that distribution of complementary third party products and cross sales can accelerate the way to break even. As for the integrated testing of CRC in the Cancer area, the search for a commercial partner in Europe will have priority. There will be a strong focus on cost control in the whole Company which is expected to give further cost reductions, although some increase in international sales costs will be unavoidable. The funding achieved through the rights issue in January, together with possible additional capital through the warrant scheme, is expected to take the Company a substantial step towards break-even. 6 Q4 Report 2008 Financial statements with note disclosures, unaudited These interim financial statements have been prepared in accordance with IAS 34, Interim Finance Reporting. INCOME STATEMENT (unaudited) NOK 1,000 Operating revenues Sales revenues Instrument rental, service and license agreements Total operating revenues Cost of goods sold Gross profit Other revenues/governmental grants Operating expenses Payroll and related costs Other operating expenses Total operating expenses EBITDA before restructuring costs Restructuring costs EBITDA after restructuring costs Depreciation EBIT Financial income and expenses Financial income Financial expenses Net financial income/expense Profit/loss before taxes Tax on ordinary result Net profit/loss EPS Diluted EPS 2 959 -280 2 679 -9 010 1 054 -7 956 -0,15 -0,14 1 147 0 1 147 -12 520 525 -11 995 -0,25 -0,23 777 -173 604 -10 546 325 -10 221 -0,27 -0,25 559 -150 409 -12 317 399 -11 918 -0,31 -0,29 854 -123 731 -12 073 1 919 -10 154 -0,26 -0,24 -17 238 -0,45 -0,41 -16 324 -0,43 -0,40 -11 244 -0,44 -0,41 691 -171 520 -17 238 903 -176 727 -16 324 535 -67 468 -11 244 5 442 -603 4 839 -44 393 2 303 -42 090 -0,94 -0,87 2 983 -537 2 446 -56 879 1 919 -54 960 -1,57 -1,45 -6 167 -4 587 -10 754 -7 934 0 -7 934 -3 755 -11 689 -7 563 -5 593 -13 156 -10 441 0 -10 441 -3 226 -13 667 -5 444 -5 103 -10 547 -7 898 0 -7 898 -3 252 -11 150 -8 050 -4 472 -12 522 -9 349 0 -9 349 -3 377 -12 726 -6 051 -6 007 -12 058 -7 996 0 -7 996 -4 808 -12 804 -10 592 -4 900 -15 492 -12 236 -2 657 -14 893 -2 865 -17 758 -9 011 -8 921 -17 932 -14 491 0 -14 491 -2 560 -17 051 -6 488 -5 935 -12 423 -10 622 0 -10 622 -1 090 -11 712 -27 224 -19 755 -46 979 -35 622 0 -35 622 -13 610 -49 232 -32 142 -25 763 -57 905 -45 345 -2 657 -48 002 -11 323 -59 325 4 767 376 5 143 -2 637 2 506 314 2 057 407 2 464 -987 1 477 1 238 2 483 743 3 226 -1 156 2 070 579 2 943 409 3 352 -1 259 2 093 1 080 2 849 411 3 260 -6 3 254 808 2 765 324 3 089 -1 445 1 644 1 612 3 403 260 3 663 -1 136 2 527 914 1 600 39 1 639 -492 1 147 654 12 250 1 935 14 185 -6 039 8 146 3 211 10 617 1 034 11 651 -3 079 8 572 3 988 Q4 2008 Q3 2008 Q2 2008 Q1 2008 Quarter Q4 2007 Q3 2007 Q2 2007 Q1 2007 Full Year 2008 2007 7 Q4 Report 2008 BALANCE SHEET (unaudited) NOK 1,000 Assets Non-current assets Patent and patent rights, trademark Capitalized development costs Goodwill Equiment and other fixed assets Total non-current assets Current assets Inventory Accounts receivables Other current assets Cash Total current assets Total Assets Equity and liabilities Equity Share capital Share premium fund Option plan Other equity/retained loss Total equity Non-current liabilities License agreement Pension obligation Deferred taxes Interest-bearing debt Total non-current liabilities Current liabilities Accounts payable Unpaid gov.charges and VAT Other current liabilities Total current liabilities Total Equity and liabilities Q4 2008 Q3 2008 Q2 2008 Q1 2008 Q4 2007 Quarter Q3 2007 Q2 2007 Q1 2007 Full Year 2008 Full Year 2007 2 611 66 691 18 950 4 544 92 796 5 743 4 473 4 961 15 651 30 828 123 624 2 672 63 594 18 321 4 582 89 169 5 093 3 637 4 987 24 873 38 590 127 759 2 704 63 245 18 321 5 202 89 472 4 453 3 230 4 653 11 632 23 968 113 440 2 269 63 424 18 321 5 531 89 545 4 184 3 451 4 086 24 201 35 922 125 467 2 331 64 186 18 321 6 203 91 041 4 812 1 910 3 665 36 187 46 574 137 615 5 406 66 656 9 011 6 230 87 303 4 139 2 521 4 482 46 937 58 079 145 382 5 450 68 378 9 011 6 684 89 523 3 495 3 521 4 265 61 629 72 910 162 433 5 371 69 327 9 011 5 630 89 339 3 092 1 889 4 322 69 473 78 776 168 115 2 611 66 691 18 950 4 544 92 796 5 743 4 473 4 961 15 651 30 828 123 624 2 331 64 186 18 321 6 203 91 041 4 812 1 910 3 665 36 187 46 574 137 615 -5 344 -241 966 -5 502 148 493 -104 319 0 0 -5 145 -2 094 -7 239 -4 701 -529 -6 836 -12 066 -123 624 -5 344 -242 046 -5 176 141 620 -110 946 0 -2 469 -5 835 -509 -8 813 -4 031 -11 -3 958 -8 000 -127 759 -3 832 -216 299 -4 672 129 356 -95 447 0 -2 357 -6 363 -509 -9 229 -2 762 -1 126 -4 876 -8 764 -113 440 -3 832 -216 299 -4 628 118 947 -105 812 0 -2 213 -6 692 -446 -9 351 -2 425 -369 -7 510 -10 304 -125 467 -3 832 -216 299 -4 628 107 040 -117 719 0 -2 182 -7 096 -440 -9 718 -2 291 -1 027 -6 860 -10 178 -137 615 -3 832 -216 299 -4 574 95 405 -129 300 -2 716 -1 925 0 -399 -5 040 -1 958 -1 008 -8 076 -11 042 -145 382 -3 832 -216 299 -2 648 78 103 -144 676 -2 948 -1 365 0 -411 -4 724 -5 615 -1 532 -5 886 -13 033 -162 433 -3 715 -207 206 -2 162 61 769 -151 314 -3 048 -1 305 0 -417 -4 770 -4 889 -1 062 -6 080 -12 031 -168 115 -5 344 -241 966 -5 502 148 493 -104 319 0 0 -5 145 -2 094 -7 239 -4 701 -529 -6 836 -12 066 -123 624 -3 832 -216 299 -4 628 107 040 -117 719 0 -2 182 -7 096 -440 -9 718 -2 291 -1 027 -6 860 -10 178 -137 615 CASH FLOW STATEMENT (unaudited) NOK 1,000 Cash flow from operations Profit before taxes Depreciation and amortisation (Gain) / Loss on sales of fixed assets Options - expenses with no cash effects Termination of defined benefit plan Net interest income Change in working capital Net cash from operating activities Cash flow from investments Investment intangible assets Investment equipment and other fixed assets Proceeds from sale of fixed assets Interests received Investment in subsidiaries - acquistion cost Net cash from investing activities Cash flow from financing Remission from debt Interest paid Long term loan Share issue cost Issue of equity capital Net cash from financing activities Net change in cash Cash at beginning of the period Net decrease/increase in cash Cash at end period Q4 2008 -9 010 3 755 -51 326 -2 372 -739 2 409 -5 682 -4 855 -969 1 818 0 -5 005 -412 -111 2 067 -79 0 1 465 -9 222 24 873 -9 222 15 651 Q3 2008 -12 521 3 226 7 504 0 -241 -2 673 -11 698 -2 164 -914 531 286 0 -2 261 0 -59 0 -2 969 30 228 27 200 13 241 11 632 13 241 24 873 Q2 2008 -10 546 3 252 0 44 0 -719 -2 193 -10 162 -3 139 8 0 724 0 -2 407 0 0 0 0 0 0 -12 569 24 201 -12 569 11 632 Q1 2008 -12 316 3 377 -42 0 0 -372 -1 322 -10 675 -1 823 -264 409 367 0 -1 311 0 0 0 0 0 0 -11 986 36 187 -11 986 24 201 Q4 2007 -12 073 4 808 0 204 0 -310 -586 -7 957 -2 491 -612 0 316 0 -2 787 0 -6 0 0 0 -6 -10 750 46 937 -10 750 36 187 Quarter Q3 2007 Q2 2007 -17 238 2 865 0 1 926 0 -981 -1 706 -15 134 -384 -155 0 981 0 442 0 0 0 0 0 0 -14 692 61 629 -14 692 46 937 -16 324 2 560 0 205 0 -705 559 -13 705 -1 282 -2 773 0 706 0 -3 349 0 -1 0 -789 10 000 9 210 -7 844 69 473 -7 844 61 629 Q1 2007 -11 244 1 090 0 529 0 -446 4 012 -6 059 -684 -146 0 447 -78 801 -79 184 0 -1 0 -2 151 115 939 113 787 28 544 40 929 28 544 69 473 Full Year 2008 -44 393 13 610 -86 874 -2 372 -2 071 -3 779 -38 217 -11 981 -2 139 941 2 195 0 -10 984 -412 -170 2 067 -3 048 30 228 28 665 -20 536 36 187 -20 536 15 651 Full Year 2007 -56 879 11 323 0 2 864 -2 442 2 279 -42 855 -4 841 -3 686 0 2 450 -78 801 -84 878 0 -8 0 -2 940 125 939 122 991 -4 742 40 929 -4 742 36 187 8 Q4 Report 2008 CHANGE IN EQUITY NOK 1,000 (unaudited) Equity 01/01/2007 Share Issue Share issue cost Option plan Change in exchange rate Loss 31/12/2007 Equity 31/12/2007 Share Issue Share issue cost Option plan Change in exchange rate Loss 31/12/2008 Equity 31/12/2008 5 344 241 966 5 502 Share capital 2 351 1 481 Share Option plan premium 94 782 124 458 -2 941 2 995 -1 562 -54 960 -107 040 1 633 Retained losses -50 518 Total equity 48 247 125 939 -2 941 2 995 -1 562 -54 960 117 719 30 228 -3 048 874 635 -42 090 -148 493 874 635 -42 090 104 319 3 832 1 512 216 299 28 716 -3 048 4 628 On June 18 2008, an extraordinary general meeting resolved a rights issue of minimum 15 000 000 and maximum 25 002 457 shares at a subscription price of NOK 2 per new share in a public offering with pre-emptive rights for the Company’s shareholders per June 18 2008. The subscription period was set from June 26 to July 9 2008. After the close of the subscription period a total of 15 113 744 shares had been subscribed for. Consequently, the share capital of NorDiag ASA increased from NOK 3 832 381,50 to NOK 5 343 755,90, divided between a total of 53 437 559 outstanding shares with a nominal value of NOK 0.10. Gross Proceeds from the public placement was NOK 30.2 million. Costs directly linked to the share issue amount to NOK 2.9 million before taxes, and are netted against the share premium fund. The tax effect is charged to the share premium fund as the Company, in accordance with IAS 12, does not recognize deferred tax assets in the balance sheet. Note disclosure to interim financial statements NOTE 1: Accounting Principles These Financial Statements have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34, Interim Financial Reporting as approved by EU and additional requirements in the Norwegian Securities Trading Act. These Interim Financial Statements do not include all of the information required for full annual financial statements, and should be read in conjunction with the financial statements of the Company for the year ended December 31, 2007. These condensed consolidated interim financial statements are unaudited. These Interim Financial Statements were approved by the Board of Directors on February 25, 2009. The accounting policies adopted are consistent with those followed in the preparation of the Company’s annual financial statements for the year ended December 31, 2007. Presentation currency NorDiag presents its financial statements in NOK, which is also the Company’s functional and presentation currency. Each entity in the Group uses their functional currency for the registration of all items included in the accounts. The income statement of foreign subsidiaries is reported in foreign currencies, converted to NOK at weighted average exchange rate for the year. The balance sheet is converted at the exchange rate at year-end. The exchange differences arising on the translation are taken directly to a separate component of equity. All figures are rounded to the closest thousand (TNOK) except when otherwise indicated. 9 Q4 Report 2008 Revenue Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenues from the sale of products are recognized upon delivery, returns are recognized as a reduction to revenues. Sales of instruments are recognized at the time of delivery, or regulated as a leasing or service agreement. Parts of the Company’s sales revenues for 2007 and all of 2006 revenues are related to the performance of laboratory services related to clinical diagnostic analysis using stool samples. Revenues from sale of laboratory services are entered in the income statement at the time of delivery of the analyzed result, and the Company has established a trade receivable towards the customer. Sales revenue comprises the fair value of sale of laboratory services net of VAT and discounts. Interest income is recognized as interest accrues. Governmental grants Public contributions are recognized in the income statement when there is reasonable certainty that the contribution will be received and all requirements related to the contribution will be met. Contributions that are compensations for incurred costs are recognized on an accrual basis and accounted for as other income in the income statement in the same period as the costs are incurred. Public contributions related to capitalized investments and development costs are netted against the booked value of the asset, and accounted for in the income statement as reduced depreciations over the useful life of the asset. Grants are classified as other revenues/governmental grants in the income statement. Research and development costs Expenditures on research are recognized in the income statement when they are incurred. Likewise, expenses related to development are recognized in the income statement, unless the following criteria are met: 1) The product or process is clearly defined and its cost elements can be identified and reliably measured; 2) The technical solution for the product has been demonstrated; 3) The product or process will be sold or used in the Company’s operations; 4) The asset will generate future economic benefits; 5) Sufficient technical, financial and other resources for completing the project are present. When all the above mentioned criteria are met, the costs relating to development start to be recognized in the balance sheet. Costs that have been expensed in previous accounting periods are not recognized in the balance sheet. Recognized development costs are depreciated on a straight-line basis over the estimated useful life for the asset, usually not exceeding 10 years. The fair value of the development costs will be estimated when there is an indicator of a fall in value or that the need for previous period’s impairment losses no longer exists. Consolidation principles The consolidated financial statements show the total financial position of the parent company and its subsidiaries as a financial entity. The consolidated accounts include Nordiag ASA and all subsidiaries where NorDiag ASA holds a controlling interest. Shares in subsidiaries are consolidated according to the purchase method, eliminating shares at cost at the time of acquisition against equity in the subsidiaries. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intercompany transactions and balances have been eliminated in consolidation. Unrealised profit from inventories originating from intercompany transactions is eliminated in the Group’s inventory. Business combinations and goodwill Business combinations are accounted for using the purchase method. Goodwill represents the excess of the cost of the business combination over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of the acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Separately recognized goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cashgenerating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. 10 Q4 Report 2008 NOTE 2: Pro forma financial information The pro forma consolidated Statement of Income has been compiled to illustrate how the acquisition of Genpoint might have affected the Statement of Income of NorDiag if the transaction had occurred January 1 2007. Pro forma financial information is provided for illustrative purposes only, and does not represent what the Statement of Income would actually have been if the transaction had in fact occurred on January 1 2007, and it is not representative of the results of operations for any future periods. The pro forma financial information has been compiled using accounting principles that are consistent with the accounting principles of NorDiag (IFRS). IFRS adjustments include unrecognized pension obligation and option cost for Genpoint. NOK 1,000 (unaudited) Operating revenues Sales revenues Instrument rental and service agreement Total operating revenues Cost of goods sold Gross profit Other revenues/governmental grants Operating expenses Payroll and related costs Other operating expenses EBITDA before restructuring cost Restructuring cost EBITDA after restructuring cost Depreciation EBIT Financial income Financial expenses Net profit/loss Q4 2008 Q3 2008 Q2 2008 Q1 2008 Q4 2007 Q3 2007 4 767 376 5 143 -2 637 2 506 314 -6 167 -4 587 -7 934 0 -7 934 -3 755 -11 689 2 959 -280 -9 010 2 057 407 2 464 -987 1 477 1 238 -7 563 -5 593 -10 441 0 -10 441 -3 226 -13 667 1 147 0 -12 520 2 483 743 3 226 -1 156 2 070 579 -5 444 -5 103 -7 898 0 -7 898 -3 252 -11 150 777 -173 -10 546 2 943 409 3 352 -1 259 2 093 1 080 -8 050 -4 472 -9 349 0 -9 349 -3 377 -12 726 559 -150 -12 317 2 849 411 3 260 -6 3 254 808 -6 051 -6 007 -7 996 0 -7 996 -4 808 -12 804 854 -123 -12 073 2 765 324 3 089 -1 445 1 644 1 612 -10 592 -4 900 -12 236 -2 657 -14 893 -2 865 -17 758 691 -171 -17 238 Q2 2007 Q1 2007 3 403 260 3 663 -1 136 2 527 914 -9 011 -8 921 -14 491 0 -14 491 -2 560 -17 051 903 -176 -16 324 2 922 95 3 017 -1 619 1 398 1 221 -8 969 -8 104 -14 454 0 -14 454 -2 525 -16 979 573 -80 -16 486 Full year 2008 12 250 1 935 14 185 -6 039 8 146 3 211 -27 224 -19 755 -35 622 0 -35 622 -13 610 -49 232 5 442 -603 -44 393 Full year 2007 11 939 1 090 13 029 -4 206 8 823 4 555 -34 623 -27 932 -49 177 -2657 -51 834 -12 758 -64 592 3 021 -550 -62 121 NOTE 3: Tax Income taxes consist of taxes payables and recognized changes to deferred taxes. Deferred tax/tax assets are calculated on all taxable temporary differences on assets and liabilities. Deferred tax assets are recognized when it is probable that the Company will have sufficient profit for tax purposes to utilize the tax asset. The Company recognizes formerly unrecognized deferred tax assets to the extent it is has become probable that the Company can utilize the deferred tax assets. As NorDiag has a history of annual tax losses and has been unable to prove the probability of sufficient profit for tax purposes, the deferred tax assets are not recognized in the financial statements. As per December 31, 2008 the Group has NOK 220 million in tax losses brought forward, resulting in deferred tax assets of NOK 61.5 million, which is not recognized in the balance sheet. Tax losses can be brought forward with no time limitation. NOTE 4: Stock option The Extraordinary General Meeting held on June 18 2008 approved that the Board of Directors introduced a new option scheme for NorDiag Group’s employees of up to 3 770 000 option shares in connection with the rights issue. The new stock option program replaced the previous program from March 16, 2007 that expired on April 19, 2008. Each option entitles the holder the right to purchase one share, at an exercise price of NOK 2 per share. The options can be exercised within 36 months from the time of issue and can be exercised in tranches, at the earliest 12 months subsequent to the time of issue. The fair value of the distributed options is recognized and accounted for in accordance with IFRS 2. The Extraordinary General Meeting resolved on 19 December 2008 that the Board of Directors may neutralize the diluting effect of the rights issue by issuing up to 12,252,500 share options to the Company’s management, employees, key personnel and to Robert V. Ahlgren in his position as Chairman of the Board of Directors. Conditional on and with effect from the date when the rights issue is completed, the Board of Directors resolved on 15 January 2009 to use the General Meeting’s authorization to issue a sufficient and necessary number of options to existing option holders to neutralize the diluting effect of the rights issue, and that the strike price for new and existing options shall be set at NOK 0.50. 11 Q4 Report 2008 Based on the Board of Directors’ decision, new options are issued to existing option holders such as their total number of options corresponds to 2.2578 times the number of options held before the rights issue. NOTE 5: Segment information NorDiag develops, manufactures and markets automated sample preparation solutions consisting of instruments and kits for infectious and cancer diagnostics. NorDiag was established in 2002 and introduced its diagnostic test for colorectal cancer, Genefec, the same year. Early 2007, the Company acquired Genpoint, a company specializing in sample preparation of DNA/RNA from difficult clinical samples such as urine, sputum and faeces. Up to and including Q4 2006, the Group’s business was limited to one product for sale in one market, and no segment information has been prepared and presented. Following the acquisition of Genpoint on March 2007, the Group’s primary segments are the business areas Cancer and Infectious diseases. This segmentation is chosen based on type of organization, market segmentation and business risk. Cancer segment: The NorDiag test is a test that contributes to detect colorectal cancer to decide whether a patient or participator in a government screening program shall be forwarded to further examination (for example colonoscopy). The Group is primarily targeting the medical doctor market where their use will be semi screening of patients. The product also has a potential to be used as part of a test panel in national screening programs. Infectious diseases segment: The Group offers robotic instruments, software and kits for sample preparation for infectious diseases (sexually transmitted infections, Tuberculosis and MRSA). (unaudited) NOK 1,000 Operating revenues Sales revenues Instrument rental and service agreements Total operating revenues Cost of goods sold Gross profit Other revenues/governmental grants Operating expenses Payroll and related costs Other operating expenses Total operating expenses EBITDA before restructuring cost Restructuring cost EBITDA after restructuring cost Depreciation EBIT Financial income Financial expenses Net profit/loss Other segment information Segment assets Segment liabilities Segment investment 23 280 -3 648 -686 -1 766 -2 021 -3 787 -3 521 0 -3 521 -936 -4 457 1 050 0 -3 407 0 0 0 0 0 266 Cancer Q4 2008 Infect. Diseases Total Cancer Q3 2008 Infect. Diseases Total Year to date 2008 Cancer Infect. Diseases Total Year to date 2007 Cancer Infect. Diseases Total 4 767 376 5 143 -2 637 2 506 48 4 767 376 5 143 -2 637 2 506 314 0 0 0 0 0 340 2 057 407 2 464 -987 1 477 898 2 057 407 2 464 -987 1 477 1 238 0 0 0 12 250 1 935 14 185 -6 039 12 250 1 935 14 185 -6 039 8 146 3 211 3 235 0 3 235 -948 2 287 1 444 7 382 1 034 8 416 -2 131 6 285 2 544 10 617 1 034 11 651 -3 079 8 572 3 988 0 1 575 8 146 1 636 -4 401 -2 567 -6 967 -4 413 0 -4 413 -2 819 -7 232 1 909 -281 -5 604 -6 167 -4 587 -10 754 -7 934 0 -7 934 -3 755 -11 689 2 959 -281 -9 011 -2 939 -1 960 -4 899 -4 559 0 -4 559 218 -4 341 600 0 -3 740 -4 624 -3 633 -8 257 -5 882 0 -5 882 -3 444 -9 326 546 0 -8 780 -7 563 -5 593 -13 156 -10 441 0 -10 441 -3 226 -13 667 1 147 0 -12 520 -10 000 -7 488 -17 489 -15 914 0 -15 914 -1 524 -17 437 2 315 -164 -15 286 -17 224 -12 267 -29 491 -19 709 0 -19 709 -12 086 -31 795 3 128 -440 -29 107 -27 224 -19 755 -46 979 -35 622 0 -35 622 -13 610 -49 232 5 442 -603 -44 393 -18 303 -17 305 -35 608 -31 877 -2 657 -34 534 -3 660 -38 194 2 853 -370 -35 711 -13 839 -8 458 -22 297 -13 468 0 -13 468 -7 663 -21 131 323 -360 -21 168 -32 142 -25 763 -57 905 -45 345 -2 657 -48 002 -11 323 -59 325 3 176 -730 -56 879 100 345 -15 658 -5 139 123 624 -19 305 -5 824 27 403 -4 675 -399 100 357 -12 137 -2 676 127 760 -16 812 -3 074 23 280 -3 648 -2 215 100 345 -15 658 -11 905 123 624 -19 305 -14 120 47 076 -11 705 -11 774 90 540 -8 191 -74 105 137 616 -19 896 -85 879 12 Q4 Report 2008 NOTE 6: Earnings (loss) per share, number of shares and share capital The basic earnings per share amount are calculated as the ratio of the profit for the year attributable to ordinary shareholders. The weighted number of ordinary shares outstanding in Q4 2008 is 53 437 559 compared to 38 323 815 in Q4 2007. The basic earnings per share in Q4 2008 are negative with NOK – 0.15 compared to NOK – 0.26 in Q4 2007 (Genpoint included from March 1 2007) for the Group. The diluted earnings per share amounts are calculated by the weighted average number of ordinary shares outstanding during the year plus weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. The weighted average number of diluted shares in Q4 2008 is 57 207 559 compared to 41 593 815 in Q4 2007. The dilutive earnings per share in Q4 2008 are negative NOK – 0.14 compared to NOK – 0.24 in Q4 2007 (Genpoint included from March 1 2007) for the Group. A 3 year share option program of up to 3 770 000 was established on June 18, 2008, and replaced option program of 3 270 000 shares from March 2007 that expired April 19 2008. This is giving dilutive effect on earnings per share from Q2 2008. 1999: Establishment of NSGIC AS 2002: Merger NSGIC AS/NorDiag AS 2005: Share Issue Novel Diagnostics ASA 2005: Share split 1;500 2005: Share Issue Novel Diagnostics ASA 2005: Public share issue 2007: Share Issue Consideration shares 2007: Share Issue Private Placement 2007: Share issue Public Placement 2008: Share issue Public Placement Issued Shares 31/12/2008 20/03/2006: 3 year option programme 12/05/2006: 3 year option programme 16/03/2007: Convertion and new option plan - net change 18/06/2008: Convertion and new 3 year option plan - net change Diluted number of Shares 31/12/2008 Number of shares 2 000 20 000 30 000 15 000 000 16 007 425 23 507 425 33 307 407 37 147 345 38 323 815 53 437 559 53 437 559 1 500 000 120 000 1 650 000 500 000 57 207 559 Nominal value 50,00 50,00 50,00 0,10 0,10 0,10 0,10 0,10 0,10 0,10 0,10 Share capital 100 000,00 1 000 000,00 1 500 000,00 1 500 000,00 1 600 742,50 2 350 742,50 3 330 740,70 3 714 734,50 3 832 381,50 5 343 755,90 5 343 755,90 Issued shares Weighted number of shares Q1 2007 Weighted number of shares Q2 2007 Weighted number of shares 30.06.2007 Weighted number of shares Q3 2007 Weighted number of shares 30.09.2007 Weighted number of shares Q4 2007 Weighted average number of shares 2007 Weighted number of shares Q1 2008 Weighted number of shares 31.03.2008 Weighted number of shares Q2 2008 Weighted number of shares 30.06.2008 Weighted number of shares Q3 2008 Weighted number of shares 30.09.2008 Weighted number of shares Q4 2008 Weighted number of shares 2008 25 780 745 37 931 658 31 856 202 38 323 815 34 012 073 38 323 815 35 090 008 38 323 815 38 323 815 38 323 815 38 323 815 48 399 644 41 682 425 53 437 559 44 621 208 Diluted shares 27 675 745 41 201 658 34 438 702 41 593 815 36 823 739 41 593 815 38 016 258 41 593 815 41 593 815 41 593 815 41 593 815 52 169 644 44 329 091 57 207 559 48 591 208 13 Q4 Report 2008 NOTE 7: 20 largest shareholders per December 31 2008 Name Sarsia Life Science Fund AS Braganza AS Start-Fondet c/o Convexa Capital AS Biovekst AS Holberg Norden MP Pensjon Holberg Norge Skagenkaien Eiendom Colon AS St. Jakobsplass 9 AS Aquatrans AS Sparebanken Vest ISInvest AS SåkorninVest AS Anders Holmberg Svenska Handelsbanken Pactum AS Mathias Uhlèn L. Meltzers Høyskolefond Sarsia Innovation AS 20 largest shareholders Other shareholders Total per 31/12/2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Number of shares 12 958 381 3 629 376 3 155 981 2 665 606 2 292 937 1 747 100 1 701 421 1 500 000 1 464 172 1 358 696 1 325 164 1 270 000 1 252 647 950 732 759 655 683 285 678 000 613 950 592 288 579 566 41 178 957 12 258 602 53 437 559 % share 24,25 % 6,79 % 5,91 % 4,99 % 4,29 % 3,27 % 3,18 % 2,81 % 2,74 % 2,54 % 2,48 % 2,38 % 2,34 % 1,78 % 1,42 % 1,28 % 1,27 % 1,15 % 1,11 % 1,08 % 77,06 % 22,94 % 100.00% Oslo, February 25 2009 – Board of Directors of NorDiag ASA 14 Q4 Report 2008 NorDiag ASA (Genpoint AS) Frysjaveien 40 0884 Oslo, Norway Tel: +47 22 02 65 65 Fax: +47 22 02 65 66 E-mail: info@nordiag.com NorDiag AB Instrumentvägen 19 SE-126 53, Hägersten, Sweden Tel: +46 (0) 8 440 04 85 Fax: +46 (0) 8 411 18 50 E-mail: info@nordiag.com NorDiag Inc 901 S. Bolmar, Suite R, West Chester, PA19382, USA Tel: +1610 344 7987 15 Q4 Report 2008