Annual Report 2009 NattoPharma ASAin the global vitamin K2 market that has now joined forces. In...

Annual Report 2009NattoPharma ASA

About NattoPharma ASA

NattoPharma ASA is a Norwegian biotechnology company. NattoPharma was established in November 2004 and has been listed on the Oslo Axess list on the Oslo Stock Exchange since 30 January 2008. The company is registered with headquarter at Lysaker, Bærum.

NattoPharma has signed a 5 year distribution agreement with the Italian company Gnosis S.P.A for delivery of vitamin K2. The agreement grants NattoPharma exclusive rights to sell and market vitamin K2 products into the global Fortified Food and Animal Feed market. In addition, there are exclusive rights within the European market for supplement, while for the rest of the world within this segment there will be an exclusive Partnership Agreement between the companies. NattoPharma’s brand MenaQ7® will be utilised in all sales. NattoPharma is very pleased with the establishment of this strategic cooperation. It will play a major role in the company’s relationship with international operators within the food and food supplement business. NattoPharma offers vitamin K2 to the health food industry as an ingredient in health supplements, and to the food industry as an ingredient in fortified food. It is in many ways the number one and two in the global vitamin K2 market that has now joined forces. In total, the companies have a market share equal to approximately 80%.

The company’s vision is to further strengthen the brand MenaQ7® and continue to be the leading global brand within vitamin K2 with focus on the food supplement market and the fortified food market. The company will continue to build competitive advantages by obtaining protection through patenting, clinical research, obtaining regulatory rights, new European market claims and strong sales and marketing efforts.

Please visit our website www.nattopharma.com for more information.

2 Annual Report 2009 – NattoPharma ASA

RegulatoryThe European Commission published an updated list of substances (including menaquinone, MK-7 which corresponds with the molecule NattoPharma is marketing as MenaQ7®) on 13th October 2009 in the Official Journal of the European Union under Commission Regulation (EC) No 953/2009. MK-7 was also added to the Annex II list of EU Directive 2002/46/EC as approved ingredient in dietary supplements and in Annex II of the regulations (EC) No 1925/2006 as approved vitamin additives for food products. The European Commission published an updated list of approved ingredients (including MK-7) on 30th November 2009 in the Official Journal of the European Union under Commission Regulation (EC) No 1170/2009.

MarketNattoPharma is the market leader in the global vitamin K2 market, and hence is in the driver’s seat with respect to opening up and further develop this market. NattoPharma has been successful in establishing MenaQ7® as a scientifically documented brand recognised as a product of high quality at all levels.

An increasing number of companies show interest in MenaQ7®, especially after the EU regulatory breakthrough in 2009. Furthermore, the company has obtained approval of a health claim in EU in connection with marketing of MenaQ7® in relation to bone health.

In USA, competition within the supplement market is increasing, since there are no regulatory requirements as in EU. However, MenaQ7® holds its position as market leader, and the company will increase its sales and marketing activity in USA in order to meet the increased competition.

In February 2009, NattoPharma signed an agreement with Danisco which gives Danisco the global, exclusive marketing and sales rights of MenaQ7® towards the market for fortified food, the so called “functional food” market. Danisco has commenced the sales process in Europe, as well as in other parts of the world such as South-America. In USA however, further regulatory applications is required. This segment of the market demands a relatively long sales and product development processes., and significant revenue is therefore not expected until 2011.

Highlights in 2009

3Annual Report 2009 – NattoPharma ASA

CEO’s Review

Regulatory affairs

In 2009, menaquinone (vitamin K2 as MK-7) was added to the EU Directive 2001/15/EC for substances that can be added for specific nutritional purposes in foods for specific nutritional uses. The EU Commission published an updated list of substances (including menaquinone) on 13th October 2009 in the Official Journal of the European Union under Commission Regulation (EC) No 953/2009. MK-7 was also added to the Annex II list of EU Directive 2002/46/EC as an approved ingredient in dietary supplements and in Annex II of the regulations (EC) No 1925/2006 as approved vitamin additives for food products. The EU Commission published an updated list of approved ingredients (including MK-7) on 30th November 2009 in the Official Journal of the European Union under Commission Regulation (EC) No 1170/2009.

As previously reported, NattoPharma is the only company that has the Novel Food Approval; i.e. NattoPharma’s MenaQ7® (natural vitamin K2 as MK-7) is the only vitamin K2 product allowed to be marketed and sold in Europe.

The work of approvals in other non-EU countries like Switzerland, Russia and Australia is progressing as planned. In the United States continued efforts is made to achieve a ”no comment letter”.

Health claims in the EU for NattoPharma’s vitamin K2

In September 2009, EFSAs ”Panel on Dietetic Products, Nutrition, and Allergies” (NDA), published the results of their first round of Article 13.1 ”Health claim” evaluations. They concluded that there is a cause and effect relationship between intake of vitamin K including vitamin K2 based on NattoPharma’s application, and maintenance of normal bone health. This positive result is very important for NattoPharma’s sales and marketing activities as customers who use MenaQ7® in their products can now label the products in accordance with this law and approved statement. During the last quarter of 2009 NattoPharma decided on a strategy with regards to Article 13.5 ”Health Claims” (health claims for healthy adults based on new science) for both bone and cardiovascular health. NattoPharma is also working on a strategy for Article 14.0 Health Claims (health claims related to prevention of disease and health claims aimed at children).

R&D

At the end of 2009, a clinical study comparing three different product types of MenaQ7® (Powder and Oil formats) was completed. All product

types had the same absorption and efficacy. The absorption profiles were determined by measuring the circulating MK-7 levels. Efficacy was determined by effects on circulating levels of uncarboxylated osteocalcin and matrix Gla-protein, two important markers for extra-hepatic vitamin K deficiency.

Moreover, an intervention study on animals studying MenaQ7’s ability to modulate arterial calcification was finalized during the 4th quarter of 2009. Analysis of the main study parameters also started in the last quarter of 2009.

During the 2nd and 3rd quarters of 2010, the two-year measurements of the three-year clinical trial in postmenopausal women will be performed. The aim of this comprehensive clinical study is to document the positive effect of MenaQ7® for arterial- and bone health in this population group. The final results will not be available until January 2012.

In the 2nd and 3rd quarters of 2010, several clinical studies will be started with the objective of securing specific documentation for health claim applications towards several health segments.

Marketing and Business development

The total sales in 2009 amounted to NOK 23.5 million, representing approx. 20% increase compared to 2008. Volume wise, the increase represents approx. 30%, since volume discounts were given to the largest customers. Sales in 2009 were distributed with approx. 60% in the U.S. and approx. 40% in Europe and rest of the world. All sales was in the food supplemets market. An even stronger sales development would be preferable, but it has to be recognised that it takes time to establish knowledge within the industry as well as amongst the consumers of what is experienced as a new vitamin. However, together with partners and customers NattoPharma is working hard to spread the knowledge through different channels.

An additional challenge in the marketing and sales development is the increased requirements within EU for approval of health claims related to supplement products. The company has a strong focus on carrying out more clinical studies in order to apply for several relevant health claims, so that the company and its customers in a profound way can inform the consumers of the health benefits of MenaQ7®. Since it is a very direct link between approved health claims and the interest shown from the industry, it is expected that more relevant health claims quickly can be transformed into higher sales.

In both Europe and the USA NattoPharma is now working more directly in the market and have fewer distributors than previously. The company has


received positive feedback from customers and prospects for this new strategy which now has a shorter way to obtain relevant knowledge and direct access to key personnel within R&D, regulatory issues and marketing. In some markets this strategy has been necessary from a competitive point of view, in order to avoid unnecessary and costly intermediaries.

Today, there are more than 100 supplement products in the market that contain NattoPharma’s product MenaQ7®. In Norway, the company’s home market, there are several products being distributed through supplement stores, pharmacies and direct sales channels.

Within the fortified food market, our exclusive partner Danisco is making good progress with market and sales activities. Danisco has also completed a significant application work in order to develop relevant procedures for how MenaQ7® can be added to different foods. MenaQ7® is well suitable as an additive in many different types of foods such as dairy products, bakeries and health drinks. Significant revenue from this market segment is expected from 2011 onwards.

NattoPharma has also in 2009 developed new marketing material. For example, the “Educational Series” and the “Fact Sheets” have been well received and considered to be important elements in the introductory phase of the sales effort. Danisco has developed marketing material specifically directed towards the food segment.

The product website “www.menaq7.com” was considerably upgraded in 2009, and has become a very significant and popular source for information about vitamin K2 and MenaQ7®. New marketing efforts such as electronic Newsletters and other electronic based marketing will be further emphasised in 2010.

The company participated in several international meetings and exhibitions during the year, of which Vitafoods 2009 in Geneva, where NattoPharma had its own stand, was the most important one. This is an important arena for marketing, client meetings, talks with potential customers/partners and brand building.

NattoPharma register that competing products of MenaQ7® continually tries to penetrate the market. As for the time being, MenaQ7® is still the only approved vitamin K2 product in the EU. In USA, the competition is

harder, but MenaQ7® still has a market share of approximately 65%. Based on the company’s GMP production, regulatory approvals, a high quality product, very good scientific documentation and last but not least a solid and growing patent portfolio, there is absolutely reasons for having an optimistic view of the future sales development.

Shareholder information

The company was listed on Oslo Axess as per 30th January 2008.

The company’s share capital, as per 31st December 2009, is NOK 2 562 950.3. It is issued a total of 25 629 503 shares, each share’s nominal value is NOK 0.10. As per 31st December 2009, there were a total of 467 shareholders in the company.

In the annual general meeting 29th June 2009, the Board was authorized to issue up to 5,000,000 new shares each with a face value of NOK 0.10 and at a minimum subscription price of NOK 4.5 per share. The share issue authority is valid for a period of twelve months as from June 29th 2009.

Outlook 2009

The major positive health effect of vitamin K2 is becoming increasingly known, and studies related to new health areas in addition to bone and cardiovascular health, is being frequently published. As the knowledge among professionals and consumers increases, we expect to have soon reached the critical mass were consumer’s demand for vitamin K2 and MenaQ7® will increase to a much higher level than what it is today. All market signals indicate that MenaQ7® will become a significant ingredient in many types of products. The product is still in an early phase of the life-cycle. The company has several different cooperation projects ongoing with many international large operators, and the results of these will contribute positively in the sales development already in 2010.

A positive patent situation makes the company optimistic with respect to an even better protection in the market, which is expected to result in an increased value for NattoPharma and its customers in 2010.

Morten SundstøCEO


Annual Report 2009

The company and its operations

NattoPharma ASA develops and sells the health food product vitamin K2 globally. In order to improve the company’s gross margin, a decision has been made to replace the supplier of vitamin K2 from Sumitomo Corp., which has the global sales rights for the natural vitamin K2, based upon a production technique developed by J-Oil Mills Inc, to Gnosis–bio S.P.A. Gnosis-bio is an Italian-Swiss pharmaceutical company who manufactures a high quality vitamin K2 product. The agreement has a 5 year life span, and grants NattoPharma exclusive rights to sell and market vitamin K2 products into the global fortified food and animal feed market, and exclusivity within the European market for supplement. For the supplement market outside Europe, there will be an exclusive Partnership Agreement between the companies, were both companies will work together directly towards the end user market. NattoPharma’s brand MenaQ7® will be utilised in all sales.

The company head office is located at Lysaker in Bærum. The subsidiary company MGP Diagnostics AS was sold in May 2009. The company has not had any particular activity in 2009, and all of the figures presented in the annual report will be based on the consolidated accounts.

Annual accounts 2009

Turnover, result and equityThe company achieved a turnover of NOK 23.5 million in 2009 compared to NOK 19 million in 2008. Total operating costs as per 31st December 2009 amounted to NOK 38.1 million, which after financial expenses of NOK 3.9 million, results in a loss before tax of NOK 18.5 million and NOK 16.9 million after correction for deferred tax advantage. The gross margin for the period equalled 43.8 %.

The cash flow from operational activities showed a negative result of NOK 18.2 million in 2009. As a result of equity payments during the year, cash and cash equivalents as per 31st 2009 total NOK 8.3 million including NOK 1.0 million in restricted funds. A statement of the changes in equity is enclosed. This shows an accumulated deficit up to 31st December 2009 of NOK 57 million which based on equity payments of NOK 48.1 million and other payments of equity of NOK 5.7 million results in a negative equity as per 31st December 2009 of NOK 3.1 million. The balance sheet totals NOK 12.9 million as per December 31st 2009.

Continued operation / Going concernThe annual report and accounts were prepared on the basis of a going concern assumption for NattoPharma ASA. The going concern assumption for NattoPharma ASA is based on the budget for 2010 and the group’s long-term strategic prognosis for the years ahead. The Board of Directors points to that the company’s balance sheet shows a negative equity of NOK 3.1 million. The Board of Directors realizes and are

on a continued basis evaluating its obligation and duty to act in accordance with the Norwegian public limited liability companies act, section 3-4 and 3-5. In their continued evaluation of the basis for continued operation and their duty to act, the Board of Directors are of the opinion that should the expectations with respect to the result and cash flow for 2010 fail, the company has on a short term notice the ability to raise new equity through issue of new shares.

The Board of Directors points out that in a situation of a winding up of the company, the value of the company’s assets could be NOK 3.2 million less than the book value and the bond loan will have to be repaid at nominal value NOK 17 million.

No events of significance has occurred since the end of 2009 up to the presentation of the annual report and accounts that have not been specified in the annual report. The Board is not aware of any significant factors with respect to the company’s position other than those presented in the annual accounts.

Accounting informationIn the Board’s opinion the presented financial statements, balance sheet with notes, consolidated accounts and cash flow statement provide comprehensive information about its operations and position at the end of the year.

The Board proposes that the company’s deficit is to be handled as follows:Transferred to retained earnings (accumulated deficit)NOK (16,875,000)The mother company has no free equity.

Liquidity and share capital As per 31st December 2009, the company’s cash balance was NOK 8.3 million compared to NOK 10.3 million as per 31st December 2008, of which restricted funds equalled NOK 1.0 million as per December 31st

2009. The company’s share capital as per December 31st 2009 equalled NOK 2,562,950.30 after two share issues in 2009. In May 2009 a share issue were carried out through a private placement providing the company with NOK 6,289,990.18 in net proceeds after share issue and guarantee costs, through an issue of 2,000,044 new shares each with a face value of NOK 0.10 and at a subscription price of NOK 3.5 per share. The share issue were resolved in an extraordinary general meeting May 20th 2009. In October it was carried out a share issue through a private placement providing the company with NOK 8,917,706.60 after deduction of share issue costs and guarantee costs, by the issue of 3,184,235 new shares, each with a face value of NOK 0.10 and at a subscription price per share of NOK 3.14. The share issue were resolved in an extraordinary general meeting November 5th 2009. The share issue proceeds were distributed with NOK 518,427.9 as new share capital and NOK 14,328,936 as share premium reserves.

The company was listed on Oslo Axess as per January 30th 2008 under the ticker code ”natto”.


R&D activities

In 2006, the company signed a research agreement with VitaK BV, which is part of the Cardiovascular Research Institute (CARIM) at Maastricht University in the Netherlands. The research agreement encompasses a five-year clinical programme aimed at further documenting and researching the role MenaQ7® (vitamin K2) plays in health and diseases. This will help to improve the company’s competitive position. The agreement is prolonged up until December 31st 2015 with a possibility for further prolongation.

The patent acquired in December 2006 and approved by the EU in the spring of 2007, as well as the fact that technology and IPR were finally delivered as per the 3rd quarter, and the report completed in December 2007 form the basis for entering NOK 3.2 million into the balance sheet as intangible assets. All other studies are regarded as research or searches for new areas of application for our product, hence all costs not related to the above studies within “cardiovascular health” will subsequently be recognised as an expense in the profit and loss account. As this intangible value will form a large part of the future economic development of the company, it will be subject to depreciation.

Risk areas

The company’s Board and management team carry out continuous analyses of the risk factors faced by the company.

Product risk

In 2006, NattoPharma signed a five-year exclusive agreement with the VitaK BV Institute at Maastricht University, the Netherlands. VitaK is the world’s leading research institute in the field of vitamin K, has been and will contribute to gaining NattoPharma significant recognition and trust with both existing and potential customers with respect to vitamin K2, as well as help to eliminate potential product risk exposure. The agreement has been prolonged up until December 31st 2015.

Market risk

In the last quarter of 2009, menaquinone (vitamin K2 as MK-7) was added to the EU Directive 2001/15/EC for substances that can be added for specific nutritional purposes in foods for specific nutritional uses. The EU Commission published an updated list of substances (including menaquinone) on 13th October 2009 in the Official Journal of the European Union under Commission Regulation (EC) No 953/2009. MK-7 was also added to the Annex II list of EU Directive 2002/46/EC as approved ingredient in dietary supplements and in Annex II of the regulations (EC) No 1925/2006 as approved vitamin additives for food products. The EU Commission published an updated list of approved ingredients (including MK-7) on 30th November 2009 in the Official Journal of the European Union under Commission Regulation (EC) No 1170/2009.

As previously reported NattoPharma is the only company that has the Novel Food Approval; i.e. NattoPharma’s MenaQ7® (natural vitamin K2 as MK-7) is the only vitamin K2 product allowed to be marketed and sold in Europe.

The work of approvals in other non-EU countries like Switzerland, Russia and Australia is progressing as planned. In the United States continued efforts is made to achieve a ”no comment letter”.

The company’s distributor in North America, PL Thomas & Co. represents 54 % of the revenue in 2009. Per September 2009 the agreement expired without a renewal taking place. However, until September 2010, NattoPhama is obliged to supply goods to already established customers of PL Thomas & Co. In the future, NattoPharma will work and operate more directly in the US market.

Financial risk

Liquidity risk: The company is still in a research and development phase, and with annual R&D costs amounting to around NOK 6 - 8 million, this entails a financial risk. In order to meet the company’s capital need, in addition to the two share capital issue in 2009, the company has negotiated a renewal of the bond loan for a period up until 9th July 2011. The new bond loan totals NOK 17 million. This will be sufficient in order to cover for the R&D expenses and other operating costs until signed distribution and sales contracts generates enough revenue to finance the company’s operation as from 2010.

The company expects to be self-financed with respect to positive working capital as from 2010. The company’s working capital is monitored constantly to ensure the company can meet its obligations.

Foreign currency risk: The costs are primarily linked to NOK and JPY, while revenue for the major part is nominated in Euro and USD. The foreign currency risk exposure is monitored on a continuous basis. The USD as well as the Euro and the YEN have weakened the last half of 2009 compared with NOK. The management of the company and the Board of Directors have not seen the necessity to implement efforts to reduce this risk exposure. If necessary, financial instruments will be evaluated in order to reduce this exposure, especially where the payment terms for larger customers include credit time.

Credit risk: The credit risk exposure is currently limited, but could change significantly as new contracts are signed with major international and global business operators. The company has implemented the systems and tools necessary for credit evaluation in order to meet and reduce this risk, including agreements with highly recognised international credit analysis and debt collection agencies.Interest rate risk: The company is exposed to interest rate risk in connection with a bond issue that took place on 10th July 2009. The loan, which runs for two years and is free of instalments, is subject to a fixed interest rate of 10.4 per cent per annum. In other words, the company is not exposed to risk with respect to interest rate fluctuations. Excess liquidity is administered on the basis of a low risk strategy and the company’s liquidity is deposited in the company’s account at DnB NOR, its principal supplier of banking services.

The working environment

NattoPharma is conscious of its social responsibilities and its goal is to ensure a healthy, safe and secure working environment within the applicable laws and regulations.

The company has a good working environment. It is registered a sick leave in 2009 were one employee were registered sick for a period from October 12th and for the remaining part of the year. The sick leave represents an


absence equal to 3.14 % of the total man labour-year in 2009. Other than this, no sick leave is registered except for one employee taking maternity leave from April 2009.

In 2009, the man labour-year totalled 7.83. At the end of the year, there were six employees, of which one was on maternity leave. In 2008 there were nine employees at the end of the year. Five of the six employees in the company are women, which equal 83.3 %. There is full equality in the company. It is therefore not planned measures for further promoting gender equality and it is not considered necessary to take measures to prevent discrimination, as there are no conditions in the company that is in violation of the law on gender equality.

No injuries or accidents involving any of the employees were reported. In order to adjust the company’s cost level to the company’s activities, the company has had to reduce the number of employees by one as per January 1st 2010. One employee, taking a maternity leave in April 2009, has returned mid April 2010.

The board of directors consist of one woman and two men.

External environment

The company’s activities do not pollute the external environment.

Corporate Governance in NattoPharma ASA – Corporate governance report

The Board believes that good corporate governance is a prerequisite for the long-term planning and predictability of the Board’s work, which is necessary for value creation over time, and to ensure that all interested parties have full confidence in the company. The stock exchange listing in January 2008 has resulted in increased public attention and new challenges. Good routines and proper management can be decisive vis-à-vis value creation in the company, ensuring good decisions are made, and meeting the business challenges the company faces. Good corporate governance will therefore be prioritised, and the Board will do its part in continuing to ensure the establishment of good practical routines. The Board has not drawn up ethical guidelines.

The Board of Directors are of the opinion that the company comply with NUES’ recommendations.

ActivitiesThe company’s activities involve developing, distributing and selling nutritional products and pharmacy products, as well as associated services. The company is especially interested in business opportunities related to vitamin K2 and its positive effects vis-à-vis improving bone and cardiovascular health. This includes investments in R&D and IPR (patents/documentation) associated with the use of vitamin K2 as a commercial product.

Share capital and dividendThe Board will assess the working and investment capital needed to meet future growth set against the dividend policy.

In connection with the carrying out of a bond issue on 10th July 2009, the company has to desist from paying dividends to the company’s shareholders before the loan is fully repaid, which will be no later than 9th July 2011. It is not the company’s intention otherwise not to pay dividends or to have a restrictive dividend policy. Since the company still is in a development phase, the Board believes that it is in the interest of the shareholders to build up capital in order to meet the challenges the company faces, rather than paying out dividends before 9th July 2011.

Equal treatment of shareholders and transactions with closely related partiesThe company’s goal is to maximise the return on the shareholders’ invested capital. It is important for the Board to ensure that the company’s management bodies have competent people and ensure themselves that the company’s accounts are revised by a qualified and independent auditor. The company also believes that it is important that information is communicated in a way that does not favour any shareholders or interested parties, and that the information that is provided is fair and provides a truthful impression of the company’s position and its operations. NattoPharma has only one share class, all of which have equal voting rights. All of the shareholders are equally entitled to dividends and have equal rights in the event of share issues.

Previous consultancy agreement with Anacott Steel AS, concerning the contracting of Mr. Morten Sundstø as acting IR manager and adviser in relation with strategic issues and capitalization of the company, was renewed as per June 1st 2009, with a three months mutual termination period. Per August 18th 2009, a new agreement is signed were Mr. Morten Sundstø is engaged as CEO and President of the company, with a two months mutual termination period. Mr. Morten Sundstø is a shareholder in NattoPharma. Basically the agreement is regarded as an agreement between the company and a shareholder, which is regulated by Section 3-8 of the Norwegian Public Limited Liability Companies Act. At the time the agreement was signed the company’s Board considered that the consultancy agreement was covered by the exemption in Section 3-8 (1) no. 4 of the Norwegian Public Limited Liability Companies Act since the consultancy agreement was signed at arm’s length as part of the company’s ordinary activities and on terms that are normal for equivalent agreements. No independent valuation was obtained in line with NUES’ recommendation in chapter 4.

Freely tradableThere are no limitations or restrictions associated with the tradability of the company’s shares. The company’s shares were accepted for listing on Oslo Axess on 30th January 2008. The company is subject to the requirements and regulations that apply to all companies listed on the Oslo Stock Exchange.

Annual general meetingNattoPharma complies with Section 5 of the Norwegian Public Limited Liability Companies Act and NUES’ chapter 6 when it comes to the shareholders’ rights with respect to ensuring that as many shareholders as possible can participate and exercise their rights in the company’s annual general meeting. The invitation and meeting documents for the general meeting, including the election committee’s recommendations,


will be available on the company’s website no later than 21 days before the general meeting is held. A written invitation to the general meeting will also be sent out. All shareholders are entitled to attend the meeting, or participate via a proxy. The annual general meeting shall approve the annual accounts and the Board of Directors’ report, elect the company’s Board and Election Committee, and approve their remuneration, as well as elect the auditor and approve his/her remuneration.

Election CommitteeIn an extraordinary general meeting held on 8th June 2007 it was decided to introduce an election committee arrangement. The company’s articles of association were amended and registered with the Register of Business Enterprises. The Election Committee will propose candidates to the Board who will be elected by the company’s annual general meeting. As per today the Election Committee consists of three members. A paragraph in the articles of association concerning the Election Committee proposing its own guidelines has been resolved. Since the Board has not produced an evaluation report, no such report has been dealt with by the Election Committee.

Corporate Assembly and Board, composition and independenceThe company has no Corporate Assembly. The Board bears overall responsibility for the company’s management team. The Board currently has three members (two men and one woman). The number of Board members, the composition of the Board with respect to independence, and the number of women (ref. Norwegian law applicable from 1st January 2008) has been met. The members of the Board are elected for a period of two years, and none of the members are up for election in 2010. All of the company’s Board members own shares in the company. All of the board’s members are regarded as independent. The composition of the Board is therefore in line with NUES’ chapter 8.

The Board of Directors consists of the following:

Chairman of the Board Ola Røthe: Ola Røhte (49) holds a degree in law from the University in Oslo. He has practiced as a business lawyer, and has management and board experience from as well listed as unlisted companies. Today he manages his 100 % owned investment company Sobona AS.

Christian Stang Våland, board member: Christian Stang Våland (43) performs general business legal assistance, with importance to transactions, security trade, public law and procedure. In 1991 Christian Stang Våland took a university degree, got employed as a solicitor in 1994 and Supreme Court advocate certificate in 2004. He also has had practice as a deputy judge at Eiker, Modum and Sigdal Registry Office and as scientific assistant by the institute for public law, University of Bergen. Is today a partner in the law firm Kvale & Co.

Lisa Ann Cooper, board member: Lisa Cooper (47) has lived in Norway for 20 years and has held several top management positions in the private as well as the public sector. She has 20 years of international experience (US, Norway, France and the Baltic’s) and sit on several Boards. Lisa Cooper has a degree in marketing, an MBA and Masters of Management in progress. In March 2008 she started her own company,

the Leadership Foundation, a consulting company and think tank focused on promoting value of diversity.

The work of the Board Written rules of procedure for the Board were drawn up and adopted by the Board on 14th April 2008. Instructions for the CEO and a work schedule were adopted at the same time. Board meetings are held as needed, with a minimum of six board meetings being held each year. The Board has not carried out a self-evaluation in the form of a specific report. However, the Board has reviewed its routines and working methods, and in connection with this also adopted new rules of procedure for the Board, instructions for the CEO and a work schedule in order to provide the Board with a foundation that enables it to work as a group. The work has thus begun and the Board has changed its routines to ensure the implementation of a self-evaluation on an annual basis.

Risk management and internal controlThe Board will ensure that good internal control and appropriate systems for risk management are introduced in order to help eliminate unnecessary risks to which the company is exposed with respect to the company’s activities. Typical risks the company is exposed to include operational risk, foreign currency risk, financial risk and risks associated with the markets the company is involved in with respect to the laws and regulations in the individual countries with which the company must comply.

In addition, the Board will help to ensure the quality of internal and external reporting, help to ensure that the company is properly run from a business perspective with respect to the adopted ethical norms and standards, and that the company keeps within the applicable laws, rules and regulations. The company will draw up ethical guidelines. As per today the company does not satisfy NUES’ recommendation with respect to risk management and internal control. On 14th April 2008, the company adopted new rules of procedure for the Board and instructions for the CEO, and reviewed the company’s risk management. The company has not implemented ethical guidelines. However, it is the company’s objective to comply with NUES with respect to this point as well in the future.

The Board’s remunerationThe Board’s remuneration is approved by the company’s annual general meeting. The remuneration is a fixed annual sum that is not dependent on the result. No options have currently been issued to board members. Two of the Board’s members have indirectly taken on specific tasks that they are performing in addition to their board duties in 2009.

The law firm Kvale & Co., has rendered services amounting to NOK 410,025. Mr. Christian Stang Våland is partner in the law firm Kvale & Co, Board member in NattoPharma ASA as well as shareholder in the company.

From Sobona AS, services amounting to NOK 360,000 (exclusive of VAT) and including participation in a guarantee consortium has been rendered. Sobona AS is a shareholder in NattoPharma ASA and is owned and controlled by Mr. Ola Røthe, Chairman of the Board of Directors of NattoPharma ASA.


A policy regarding approval of agreements entered into with members of the Board of Directors has been implemented. These agreements shall be approved by the Board of Directors in advance. This policy has been included in the new Instructions for the Board of Directors as per April 14th 2008 and the fees for the agreed tasks is in line with this policy and approved of by the Board of Directors.

The remuneration of senior employeesThe remuneration for the CEO and leading employees for 2009 is detailed in note 22 to the annual accounts. Pursuant to Section 6-16a of the Norwegian Public Limited Liability Companies Act the Board has produced a declaration concerning the stipulation of pay and other remuneration for the CEO and other senior employees.

The Board of Directors is responsible for determining compensation to the CEO and the CEO in consultation with the board again responsible for determining compensation of senior executives. By defining the criteria that form the basis for guidelines for remuneration is the underlying principle that the total salary package will reflect the responsibilities and the tasks that lie with the individual in the executive team, and that the employee contributes to the long-term value of the Company. It is essential that the company can offer competitive terms to attract people with the qualities and the expertise necessary to underpin the strategic development of the company, both nationally and internationally. The CEO is not employed by NattoPharma ASA, but is contracted through an agreement with Anacott Steel AS dated 18th August 2009, where it is agreed a mutual notice period of two months. In addition, it is agreed a severance pay equivalent to two months of consultancy fees to be paid as a lump sum at the termination date. Senior management have standard employee contracts and standard conditions relating to the period of notice. There are no other agreements relating to severance packages. As per today, the senior management, exclusive of the CEO, participate in a pension and insurance scheme through Storebrand Life Insurance AS. There are currently no authorized share-based compensation programs.

Information and communicationNattoPharma’s policy is that all shareholders shall be treated equally as far as access to information relevant to evaluating and valuing the company is concerned, and that the company will receive and evaluate the shareholders’ points of view and interest in the company’s operations, result and strategies. NattoPharma strives to present accounts and other financial reporting in which investors can have full confidence and which satisfy the requirements of the Oslo Stock Exchange for listed companies (due to the company’s shares being accepted for listing on Oslo Axess on 30th January 2008). NattoPharma’s accounting practices indicate a high degree of transparency and are based on the IFRS standard. Up-to-date financial information and other company related information is published

on the company’s website. The company has not set out guidelines for the company’s contact with shareholders outside the annual general meeting, but is working on establishing these.

Company takeoverThe company’s Board has stipulated the following principles, among others, for dealing with any takeover bid:

•IftheBoardreceivesinformationaboutapossibleoractualtakeoverbidfor the company’s shares, the Board shall help ensure that all shareholders are treated equally and receive satisfactory information at all times.

•In theeventof a takeoverbid for thecompany, theBoardshall helpensure that the company’s activities are run without interruption in relation to normal operations.

•In theeventofa takeoverbid, theBoardshallnotactivelyhinder thebid unless special reasons indicate that this is in the interests of the shareholders as a whole.

•The Board shall not attempt to hinder takeover bids by utilisingauthorisations to issue new shares or reaching other decisions with the aim of hindering the implementation of the bid.

•Ifabidisreceived,theBoardshallpublishitsassessmentofthebidanda recommendation to the shareholders to either accept or reject the bid. The Board shall work to ensure that the shareholders have sufficient time to reach a decision concerning the bid.

The company’s Board will continue to work on drawing up guidelines and principles for how the company should handle any takeover bid for the company’s shares.

AuditorThe auditor is appointed by the annual general meeting on behalf of all the shareholders and the election is conducted pursuant to the law and regulations. The auditor supervises the bookkeeping, annual accounts and closure of the accounts, and also assists with tax settlements and the submission of the company’s tax return. The auditor supervises and inspects the company’s administration on behalf of the Board. A minimum of one annual meeting will be held with the Board at which the company’s day-to-day management team is not present in order to review the company’s internal control, among other things. Nitschke AS has been chosen as the company’s auditor. A meeting was held to review the company’s internal control in accordance with chapter 15 of NUES in 2009.

The auditor’s fees are detailed in note 7 to the annual accounts.

Ola RøtheChairman

Christian Stang VålandBoard Member

Lisa Ann CooperBoard Member

Morten SundstøCEO

OSLO, April 30th 2010Board of Directors of NattoPharma ASA


NattoPharma ASA NattoPharma group

2009 2008 Amount in NOK thousand 2009 2008

-16 905 -28 508 Result for the period -16 875 -28 538

Other income and expenses recorded against equity

-16 905 -28 508 Total result for the period -16 875 -28 538

-16 905 -28 508 Result and diluted result assigned to the company’s shareholders:

-16 875 -28 538


2009 2008 Amount in NOK thousand Notes 2009 2008

REVENUE

23 410 18 935 Revenue 4 23 410 18 935

61 51 Other income 61 51

23 471 18 986 TOTAL REVENUE 23 471 18 986

OPERATING EXPENSES

-13 116 -8 302 Raw material and consumables used -13 116 -8 302

-5 865 -11 263 Employee benefit expense 5, 6, 22 -5 865 -11 263

-975 -1 130 Depreciation and amortisation expense 11,12 -975 -1 130

-18 247 -20 731 Other operating expense 7 -18 158 -20 898

-38 203 -41 426 TOTAL OPERATING EXPENSES -38 114 -41 593

-14 732 -22 440 OPERATING PROIFT/LOSS -14 643 -22 607

FINANCIAL INCOME AND EXPENSES

74 888 Finance income 8 74 889

481 726 Other finance income 8 426 726

-3 557 -2 809 Interest expense 8 -3 557 -2 809

-819 -967 Other financial expenses 8 -823 -831

-3 821 -2 162 NET FINANCE -3 880 -2 025

-18 553 -24 602 LOSS BEFORE INCOME TAX -18 523 -24 632

1 648 -3 906 Income tax expense 9 1 648 -3 906

-16 905 -28 508 NET PROFIT/LOSS -16 875 -28 538

Result and diluted result per share assigned to the company’s shareholders:

10 -16 875 -28 538

Result and diluted result per share 10 -0,78 -1,40

Income statement by nature of expense 2009

Total Result



31.12.09 31.12.08 Amount in NOK thousand) Notes 31.12.09 31.12.08

NON CURRENT ASSETS

INTANGIBLE ASSETS

3 120 3 920 Other intangible assets 11 3 120 3 920

Patents

– – Deferred tax advantage – –

3 120 3 920 TOTAL INTANGIBLE ASSETS 3 120 3 920

TANGIBLE ASSETS

128 286 Equipment 12 128 286

128 286 TOTAL TANGIBLE ASSETS 128 286

3 248 4 206 TOTAL NON CURRENT ASSETS 3 248 4 206

CURRENT ASSETS

63 86 Warehouse 63 86

1 305 1 213 Accounts receivables 14 1 305 1 213

8 314 10 171 Cash and cash equivalents 15 8 314 10 272

9 682 11 470 TOTAL CURRENT ASSETS 9 682 11 571

12 930 15 676 TOTAL ASSETS 12 930 15 777

Balance sheet Assets



31.12.09 31.12.08 Amount in NOK thousand) Notes 31.12.09 31.12.08

EQUITY

OWNERS EQUITY

2 563 2 045 Share capital 16 2 563 2 045

45 561 30 932 Share premium reserve 16 45 561 30 932

5 747 1 496 Other paid in equity 5 747 1 496

53 871 34 473 TOTAL OWNERS EQUITY 53 871 34 473

EARNED EQUITY

-56 961 -40 056 Accumulated loss -56 961 -40 086

-3 090 -5 583 TOTAL EQUITY -3 090 -5 613

LIABILITIES

– – Long term debt – –

– – TOTAL LONG TERM DEBT – –

CURRENT LIABILITIES

11 819 14 802 Bond loan 17 11 819 14 802

1 611 1 033 Accounts payable 1 611 1 164

328 1 146 Public duties payable 328 1 146

2 262 4 277 Other current liabilities 18 2 262 4 277

16 020 21 258 TOTAL CURRENT LIABILITIES 16 020 21 389

16 020 21 258 TOTAL LIABILITIES 16 020 21 389

12 930 15 676 TOTAL EQUITY AND LIABILITIES 12 930 15 777

Balance sheet Equity and liabilities

Ola RøtheChairman

Christian Stang VålandBoard Member

Lisa Ann CooperBoard Member

Morten SundstøCEO

OSLO, April 30th 2010Board of Directors of NattoPharma ASA


Cash flow statement

NattoPharma ASA NattoPharma

group

200901.01 – 31.12

200801.01 – 31.12

Amount in NOK thousand 200901.01 – 31.12

200801.01 – 31.12

CASH FLOW FROM OPERATING ACTIVITIES

-18 553 -24 602 Net loss before income tax -18 523 -24 632

975 1 130 Depreciation 975 1 130

145 – Loss by sale of subsidiary – –

1 866 1 177 Interest amortisation 1 866 1 177

– 328 Loss by repurchase of bonds – 328

15 65 Share based remuneration 15 65

– 100 Write downs of shares in subsidiary – –

Changes in assets and liabilities:

-92 4 412 Trade receivables and other receivables -92 4 412

-2 811 -2 648 Prepaid expenses 447 -2 517

-3 557 3 022 Other receivables and payables -2 812 3 022

-17 878 -17 016 NET CASH FLOW FROM OPERATING ACTIVITIES -18 124 -17 015

CASH FLOW FROM INVESTMENT ACTIVITIES

55 – Payment from sale of subsidiary – –

-200 – Loan to subsidiary – –

-16 -56 Purchase inventory and equipment -16 -56

– -100 Registration of subsidiary – –

-161 -156 NET CASH FLOW FROM INVESTMENT ACTIVITIES -16 -56

CASH FLOW FROM FINANCIAL ACTIVITIES

15 147 13 263 Issuance of share capital 15 147 13 263

16 535 – Payment from issuance of bonds 16 535 –

-15 500 -3 106 Repurchase of obligations -15 500 -3 106

– – Payment from issuance of warrants – –

– – Payment from issuance of subscription rights – –

16 182 10 157 NET CASH FLOW FROM FINANCIAL ACTIVITIES 16 182 10 157

-1 857 -7 015 Net change in cash and cash equivalents -1 959 -6 914

10 171 17 186 Cash and cash equivalents 1.1.09 10 272 17 186

8 314 10 171 CASH AND CASH EQUIVALENTS 12.31.09 8 314 10 272

1 612 1 175 Paid interest 1 612 1 175


NattoPharma group Amount in NOK thousand

Share capital

Share premium

Paid-in not registered

equity

Other equity

Accumulat-ed deficits

Total Equity

Equity 01.01.2008 1 878 16 661 1 175 1 431 -11 548 9 597

Result for the period -28 538 -28 538

Reigistry of paid in equity 30 1 145 -1 175 – – –

Share issue 137 16 278 – – – 16 414

Transaction costs – - 3 152 – – – -3 152

Share based remuneration – – – 65 – 65

Equity 12.31.2008 2 045 30 932 – 1 496 -40 086 -5 613

Result for the period -16 875 -16 875

Share issue 518 16 480 – 16 998

Transaction costs -1 851 -1 851

Share based remuneration 4 237 4 237

Share based remuneration 14 14 Equity 12.31.2009 2 563 45 561 – 5 747 -56 961 -3 090

Changes in Equity


The company has sales and marketing rights for vitamin K2, and it is these that generate the company’s revenues. In addition, the company carries out research and development within this business area. Internal and external R&D activities are not considered segments for which reporting is required. No segment information is therefore provided beyond geographic market segmentation.

2.3 Consolidation principles

Subsidiary

Companies in which NattoPharma ASA has control are included in the consolidated accounts as subsidiaries. Control means the power to steer the company’s financial and operational principles with the aim of achieving benefits from the company’s activities. Control is normally achieved when the group directly or indirectly owns more than 50 % of the shares in the company, or when the group is able to exercise control over the company through agreements or articles of association. When assessing the level of control the potential voting rights that could be exercised immediately or are convertible are taken into account in the assessment.

The subsidiaries are included in the consolidated accounts from the moment such control is achieved, and removed from the consolidated accounts when such control ceases. The consolidated accounts show the total financial result and the overall financial positions when the parent company and subsidiary are presented as a single financial unit. Therefore, when the consolidated accounts are prepared, shares in the subsidiary, internal receivables and liabilities, as well as transaction between the group companies are eliminated. Unrealized gains in stocks that are ascribed to internal deliveries are eliminated from the group’s stocks.

The subsidiary company MGP Diagnostics AS was sold in May 2009. As Per December 31st 2009, NattoPharma is no longer a Group, but the profit & loss accounts, cash flow and changes in equity reflects the consolidated accounts up until the sale of MGP Diagnostics AS. 2.4 Foreign currency conversion

Functional currency and presentation currencyThe accounts of the individual units in the group are valued in the currency primarily used in the economic area in which the unit operates (functional currency). The consolidated accounts are presented NOK, which are both the functional currency and the presentation currency in the parent company.

Transactions and holdings in foreign currencyProfit and loss items are recorded in the individual accounts at the exchange rate at the time of the transaction. Monetary items in foreign currencies are converted at the exchange rate on the balance sheet date.

Realized/unrealized currency gains and realized/unrealized losses related to monetary items are recorded as financial income.

2.5 Shares in subsidiaries - principles for the parent company NattoPharma ASA

Shares in subsidiaries are valued at historic cost with allowance for impairment losses as a result of market value on the balance sheet date is lower than historical cost. This only applies for 2008.

2.6 Property, plant and equipmentProperty, plant and equipment are valued at their acquisition cost less deductions for total depreciation and write-downs. The acquisition costs include costs directly linked to the acquisition of the asset. Depreciation is calculated linearly based on the assets’ expected useable lifetime and expected scrap value. When costs related to the asset are incurred after the investment, these costs are activated to the extent that it can be shown that it is likely that the company will enjoy future financial benefits from these and the expenses can be reliably measured.

Note 1: Presentation of the company

NattoPharma ASA is a privately owned public limited company founded in 2004. Its head office is at Lysaker Torg 5, Lysaker, Bærum. Our product is the branded MenaQ7®, which is based on a substance called Menaquinone-7, the natural vitamin K2 – extracted from a Japanese national dish Natto.

NattoPharma has signed a 5 year distribution agreement with the Italian company Gnosis S.P.A for delivery of vitamin K2. The agreement grants NattoPharma exclusive rights to sell and market vitamin K2 products into the global fortified food and animal feed market. In addition, there is an exclusive right within the European market for supplement, while for the rest of the world within this segment there will be an exclusive Partnership Agreement between the companies.

NattoPharma has a strategic R&D agreement with VitaK BV, by Cardiovascular Research Institute Maastricht (CARIM), University of Maastricht, Netherland, which is one of the worlds’ largest and leading research institutes within the vitamin K area. The agreement expires at the end of 2015.

The company’s shares were listed on the Oslo Stock Exchange’s list Oslo Axess on the 30th January 2008.

The group accounts of NattoPharma ASA and the subsidiary was approved by the board of directors on April 30th 2010.

Note 2: Presentation of the parent company and group’s annual accounts and accounting principles

Annual accounts are prepared for both the parent company and the group. As there is limited activity in the subsidiary, the principle description and the notes are given for both the parent company and the subsidiary. In cases where there are differences, this is presented in the principle description and in the respective notes. These principles are applied consistently to all periods presented unless otherwise stated.

2.1 Basis for preparation of the accounts

NattoPharma’s consolidated accounts are presented in accordance with the EU approved IFRS, pertinent interpretations, and other Norwegian requirements concerning information that follow from the Accounting Act, Stock Exchange Regulations and Stock Exchange Rules, which apply as per 31st December 2009. The accounts are prepared on the basis of historic cost, with the exception of financial derivatives, which are valued at their fair value against the result.

Changes to the accounting principles due to new or changed standards have been applied with retroactive effect unless otherwise specifically determined for the relevant standard. Retroactive effect requires the conversion of the results from previous periods and the opening balances for such periods.

2.2 Segment reporting

A business area is an identifiable part of the operations that delivers individual products or services, or groups of such, and which is subject to risks and returns that are different to other business areas.

A geographic market is an identifiable part of the operations that delivers products or services within a defined geographic area and which is subject to risks and returns that are different to other parts of the business that operate in other geographic areas. Geographic markets will either be based on the location of the fixed assets or the customer’s location.

Notes All amounts are given in NOK thousand unless otherwise stated.


The depreciation schedule is reviewed annually with a respect to the remaining usable lifetime and scrap value. In the event of changes to usable lifetime and scrap value, the remaining depreciation schedule is changed accordingly. Gains and losses from the disposal of property, plant and equipment are entered into the profit and loss accounts and amount to the difference between sales price and the value entered in the balance sheet.

2.7 Intangible assets

An R&D process will consist of a research and a development phase, which also involves patenting. Research expenses are entered as costs. Development expenses are activated from the moment during the development phase when a future financial benefit probably exists. Development expenses include all internal and external expenses associated with the future financial benefit. It is a prerequisite for activation that the development expenses are identifiable and can be measured in a reliable manner.

Development is only entered into the balance sheet as an intangible asset if all of the following criteria can be documented:

•thecompanyintendstocompletetheintangibleassetanduseitorsellit,•thecompanyisreliablyabletomeasuretheexpensesascribabletotheintangible

asset while it is under development,•thetechnicalprerequisitesforcompletingtheintangibleassetwithaviewtomaking

it available for use or sale,•thecompany’sabilitytouseorselltheintangibleasset,•howtheintangibleassetislikelytogeneratefuturefinancialbenefits,and•the availability of sufficient technical, financial and other resources necessary to

complete development and the use or sell the intangible asset.

When all of the above criteria can be documented, the costs related to development will start to be shown in the balance sheet. Expenses entered as costs in previous accounting periods shall not be shown in the balance sheet.

Intangible assets with limited lifetimes shall be depricated linearly based on their estimated lifetime. Intangible assets with specific lifetimes shall be tested for falls in value when indications of a fall in value exist. If the recoverable amount is lower than the value entered into the balance sheet, the asset is written down to the recoverable amount. If the basis for the write-down no longer exists, the booked write-down is reversed. If the lifetime has changed, the remaining depreciation schedule is changed accordingly.

Intangible assets with undefined lifetimes shall not be depreciated, but shall be assessed each year for reductions in value. Write-downs of intangible assets with undefined lifetimes are not reversed.

A write-down test is performed for the activated development expenses when indications that the future financial benefit is lower than the booked value exist. Activated development expenses for incomplete projects are tested for write-downs each year. Completion is dependent on the project having reached a commercial milestone with a significant revenue flow. Activated development expenses are valued at the acquisition costs less deductions for accumulated depreciation and accumulated write-downs. 2.8 Reduction in the value of non-financial assets

All non-financial assets with the exception of inventory and deferred tax assets are assessed for each reporting period to see whether there are indications of a reduction in value. If such an indication exists, the recoverable amount is calculated.

The recoverable amount of an asset or cash flow generating unit is the highest of the use value and net sales value. The assessment of the use value takes into account expected future cash flow discounted to the present value by using a discount interest rate before tax that reflects the day’s market assessments of the time value and the specific risk associated with the asset. The recoverable amount is calculated on the basis of expected future cash flow.

A reduction in value is recognised in the value recognised in the balance sheet for an asset or cash flow generating unit if it is greater than the recoverable amount. A cash flow generating unit is the smallest identifiable group that generates incoming cash flow that is essentially independent of other assets or groups. Value reductions related

to cash flow generating units are initially settled against the unit’s goodwill and then reduce the value of the other assets in the unit entered into the balance sheet in a pro rata manner. These assets will normally be property, plant and equipment and other intangible assets.

2.9 Inventories

The company has an inventory that amounts to NOK 86 thousand. Since the inventory is of a negligible size, it is not found in the separate note. Sales terms are ”ex works” which means that when the company sells a product, the risk passes to the buyer when the goods leave the supplier, i.e., when it is loaded on board ships or aircraft (means of transport). The goods do not pass through Norway for customers outside Norway.

2.10 Trade receivables

Trade receivables and other receivables are initially recognised in the balance sheet at fair value and subsequently measured at amortised cost using the effective interest method, less allocations for impairment. Allocations for impairments are made on the basis of an individual assessment of the individual receivables, and such an allocation is made if there are indications that the company will not be able to collect the re-ceivables nominal amount. The allocation is booked during the period it occurs.

2.11 Cash and cash equivalent

Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.

2.12 Share capital

Share capital Ordinary shares are classified as equity. When new shares are issued, the costs asso-ciated with the issue are booked as a reduction of equity, if this is included in the issue papers; otherwise they are booked as running costs.

Costs associated with equity transactions Transaction costs directly linked to an equity transaction and the tax effects of equity transactions are recognised directly against equity after deductions for tax.

2.13 Long term loans

Long-term loans are initially recognised at fair value less transaction costs when the loans are taken out, and subsequently measured at amortised cost in the following periods. That part of the loan that falls due for payment within one year of the balance sheet date is classified as current liabilities.

2.14 Structured financial instruments

The company has issued bonds with subscription rights. The liability component of the bond is measured at fair value when it is initially recognised. Fair value is assessed on the basis of corresponding liabilities without subscription rights. The equity component constitutes the difference between the fair value of the instrument and the fair value of the liability component and is recognized in equity. Directly attributable transaction expenses are distributed proportionally on the basis of the value upon when they were initially recognised. After the initial recognition the liability component is subsequently measured at the amortised cost using the effective interest rate method. The equity component is not measured again after it is initially recognised.

2.15 Taxes

Payable taxPayable tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and tax regulations used to calculate the amount are those that are in force or largely in force on the balance sheet date.

Deferred taxThe deferred tax asset is calculated using the liability method on temporary differences on the balance sheet date between the accounting values of assets and liabilities on the balance sheet date.


Deferred tax liabilities are recognised for all tax increasing temporary differences except where the deferred tax asset arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

Unrecognised deferred tax assets are reassessed on each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and taxation authority.

2.16 Pensions and share based remuneration

a) Pension The company has a defined contribution plan. A defined contribution plan is a pension plan under which the company pays fixed contributions into a separate entity. The company is not obliged to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

For defined contribution plans, the company pays contributions to publicly or privately administered pension insurance schemes on a mandatory, contractual or voluntary basis. The company has no further payment obligations once the contributions have been paid. The contributions are recognised as personnel expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payment is available.

b) Share based remunerationThe company operates a share option plan for senior employees and company officers. The running value of the option plan is calculated and recognised as a personnel expense. The total amount to be expensed until the expiry of the plan is determined on the basis of the value of the options granted, excluding non-market dependent factors (for example, profitability and sales growth targets). Non-market dependent factors are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement, with a corresponding adjustment to equity. The fair value of the options is estimated on the granting date and is not subsequently changed.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

2.17 Provisions

Provisions are recognised when NattoPharma ASA has a legal or in some other way existing obligation as a result of past events. The criteria for making an allocation is that the probability the company will have to settle the obligation in the future is assessed by the company to be greater than 50 per cent. It must also be possible to estimate the amount associated with the obligation reliably.

The provision is measured at the current value of the expected payments necessary to settle the obligation.

Assumed and factual future obligations not invoiced were the amount is estimated on a fair basis and which is likely to be paid, is considered a periodic expense. The periodic expense is equal to the pre tax amount which the company expects to pay and which includes fair market interest and reflects the risk related to the obligation. Increases in the periodic expenses as a result of accrued interests, is considered as an interest expense.

2.18 Revenue recognition

Revenue includes the fair value of licensing, sold goods and delivered services, net of Value Added Tax and discounts. Sales within the Group are eliminated.

Sales of goods Revenue is recognised when the control and risk vis-à-vis the product is transferred to the customer. Royalties and licence income In the case of minimum royalties that are paid in advance the accruals principle is applied to income during the period the minimum royalty is supposed to cover pursuant to the licence agreement. In the case of other licences and royalty incomes the income is recognised in accordance with the contract.

Rental incomeRental income is recognised linearly over the rental period.

2.19 Cash flow

The cash flow statement has been prepared using the indirect method.

2.20 Events after the balance sheet day

New information about the company’s position on the balance sheet date is taken into account in the annual financial statement. Events after the balance sheet date that do not affect the company’s position on the balance sheet date, but will affect the company’s position in the future, are stated if they are significant.

2.21 IFRSs and IFRIC interpretations that have not yet come into force

a) IFRS and IFRIC which is mandatory for the 2009 accounts:

Standards that is employed and has an effect on the financial statements: • IAS 1 – Presentation of the financial statements (revised in 2007) The revised standard requires that income and expense items that were previously

recognized directly in equity will now be presented in an expanded income statement (Total result). In Changes in Equity table, transactions with the owners and income and expense items are presented separately. The change only affects the presentation and not the result per share.

• IFRS 8 – Operating segments The new standard requires the use of management approach in which segment information is presented in the same way as for internal reporting. The Group implemented IFRS 8 in 2008 and has implemented the changes in IFRS 8 completed in ”Improvements to IFRS’s” (April 2009). The change states that the segment assets and liabilities must only be reported if included in the segment target reported to the chief decision maker.

• Otherstandardsandinterpretationsthataremandatoryfor2009havenothadasignificant impact on the Group’s financial statements for 209.

b) IFRS and IFRIC interpretations which has not yet been employedIn the annual accounts for 2010 and later, the following standards, changes and interpretations of existing standards will be mandatory. The Group has chosen not to make an early implementation. Effective Date is set at the EU’s effective date to the extent that it deviates from IASB’s effective date. • IFRS 2 Share-based Payment: Group Cash-settled Share-based Payment

Transactions, effective date January 1. 2010.• IFRS3BusinessCombinations (Revised)and IAS27ConsolidatedandSeparate

Financial Statements (Amended), effective date July 1. 2009.• IFRS9Financialinstruments,effectivedateJanuary1.2013.• IAS24Relatedparties–(Revised),effectivedateJanuary1.2011.• IAS32Financialinstruments–Puttablefinancialinstrumentsandobligationsarising

on liquidation, effective date February 1. 2010.• IAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged

Items, effective date July 1. 2009.• IFRIC12Serviceconcessionarrangements,effectivedateMarch29.2009.• IFRIC14Amendment–PrepaymentsofaMinimumFundingRequirement,effective

date January 1. 2011.


Information as to major customers:The information of sales in the table above is based on the customers’ place of residence. Revenue from one of NattoPharma’s customers in the U.S. represented 54% of total sales in 2009 and 59% of total sales in 2008.

Note 5: Payroll and no. of employees

Amount in NOK thousand 2009 2008

Payroll 4 897 9 467

Employers' social security (SC) costs 820 1 271

Share based remuneration 1) 14 65

Pension costs 69 269

Other benefits 65 191

Sum 5 865 11 263

Total labour years 8 9

Specification of salary and benefits to senior management is presented in note 22.

Pension costsThe company is obliged to have a mandatory pension plan pursuant to the Norwegian act relating to mandatory occupational pensions.The company has signed with Storebrand Livsforsikring AS an agreement for a contribution pension plan. This is based on a premium payment of 3% for income between 1 G and 6 G (G = National Insurance Plan = NOK 72,881) and 6 per cent of income between 6 G and 12 G. The plan includes disability cover. In addition, group life insurance has been taken out based on compensation equivalent to 15 G in the event of death. Pursuant to Section 6-16a of the Norwegian Public Limited Liability Companies Act the Board has produced a declaration concerning the stipulation of pay and other remuneration for the CEO and other senior employees.

Note 6: Share based remuneration

The annual general meeting has not anew option plans in 2009. Previous option plans resolved in 2007 expired in 2009.

2009 2008

Number of options

Weighted average excer-

cise price

Number of options

Weighted average excer-

cise price

Balance as per pr 01.01 50 000 5,00 100 000 5,00

Awarded

Terminated

Ecercised

Matured -50 000 5,00 -50 000 5,00

Balance as per 12.31 – – 50 000 5,00

Exercisable as per 12.31 – – – –

There are no options outstanding as per December 31st 2009.

Personnel costs related to the option plans were as follows:

Personnell Costs


Share options awarded in 2007 14 65

SC costs on share options – -44

Total number of options 14 21

The employer’s contribution tax is calculated based on estimated salary and benefit and is calculated by the difference between the market price per. 31.12 and the call price.

• IFRIC15Agreementsfortheconstructionofrealestate,effectivedateJanuary1.2010.

• IFRIC16HedgesofaNetInvestmentinaForeignOperation,effectivedateJuly1.2009.

• IFRIC17DistributionofNon-cashAssets toOwners,effectivedateNovember1.2009.

• IFRIC18TransfersofAssetsfromCustomers,effectivedateJuly1.2009.• IFRIC19ExtinguishingFinancialLiabilitieswithEquityInstruments,effectivedateJuly

1. 2010• Improvementsto IFRSs(April2009),15changes in12standards.Effectivedate

varies, but for a major part July 1. 2009, and January 1. 2010.

Note 3: Important accounting estimates and approximate valuations

Estimates and approximate valuations are continuously evaluated and based on historic experience and other factors, including expectations concerning future events it is deemed reasonable to expect given certain conditions.

Important estimates and approximate valuations The company establishes estimates and assumptions concerning the future. Estimates can per definition deviate significantly from actual results. Estimates and assumptions that contain a significant risk of significant adjustments having to be made to booked amounts for assets and liabilities during the next financial year are listed below.

Intangible assetsAn agreement has been signed with VitaK at Maastricht University concerning research into vitamin K2 and the purchase of patents and intellectual property rights (IPR). This external purchase of technology and patent rights from VitaK BV forms the basis for the recognition of intangible assets in the balance sheet in accordance with IFRS. The patent purchase in December 2006, approved by the EU in the spring of 2007, and the technology and IPR were finally delivered in the 3rd quarter and the report completed in December 2007 forms the basis for the amount recognised in the balance sheet. All other studies should be regarded as research or searches for new areas of application for the product, ergo all expenses not related to cardiovascular in 2007 and the future will be recognised as they are incurred. Given that this intangible value will constitute a significant part of the company’s future financial development, it will be subject to amortisation.

TaxThe deferred tax asset from the deficit that can be carried forward is only recognized in the balance sheet to the extent that a future taxable surplus is likely. The company’s management considers the likelihood of future realization of deferred tax and deferred tax assets. The company’s management has deemed it as not sufficiently probable that the deferred tax asset will be realized during the next income year, and has thus failed to capitalize the deferred tax assets.

Note 4: Segment reporting

NattoPharma has only one segment based on activities and the location of its fixed assets. The company’s activities concentrate around the purchase and sale of vitamin K2, as well as research and development within the same area as the primary segment. Geographic information related to the company’s activities is presented in the table below:

Geographick distribution


USA 12 725 11 298

Europe 9 112 7 534

Other areas 1 635 103

Total sales 23 472 18 935


Note 7: Specification of other operating expenses

Amount in NOK thousandNattoPharma

ASA Group

2009 2008 2009 2008

Lease costs 1) 1 183 -235 1 183 -235

R&D costs 7 202 9 368 7 202 9 368

Travel expenses 1 456 1 430 1 456 1 430

Fees and other expenses 5 116 4 973 5 116 4 973

Sales and marketing costs 384 3 936 384 3 936

Other operating costs 2 906 1 259 2 817 1 426

Total other operating expenses 18 247 20 731 18 158 20 898

1) Due to cancellation of the lease before the expiration of the agreed lease period, compensation from the landlord to

the Group was made.

The total cost related to research and development for NattoPharma ASA in 2009 amounts NOK 7 996 thousand (2008 NOK 10 195 thousand). In addition to R&D costs, presented in the above table, R&D costs are related to pay roll costs.

Specification of auditor’s remuneration:

2009 2008

Amount in NOK thousand excluding VAT

ASA Group ASA Group

Statutory auditing 110 110 140 140

Other auditing services 28 28 62 62

Tax advice – – – –

Other non-auditing services – – – –

Total auditors fee 138 138 202 202

Note 8: Financial items

Amount in NOK thousandNattoPharma

ASA Group

2009 2008 2009 2008

Statutory auditingOther auditing services 74 888 74 889

Tax advice 481 726 426 726

Other non-auditing services 555 1 614 500 1 615

Finanskostnader:

Interest cost 3 557 2 809 3 557 2 809

Other financial costs 819 867 823 831

Write down of investment in subsidiary – 100 – –

Total financial expenses 4 377 3 776 4 380 3 640

Other financial items include loss of NOK 328 thousand realised by repurchase of bonds at par value in 2008.

Note 9: Tax

This year’s payable tax is made up as follows:


Payble tax – –

Changes in deferred tax 1 648 3 905

Total tax cost 1 648 3 905

Skatteeffekt av midlertidige forskjeller er vist i følgende tabell:


Fixed assets/intangible assets 287 188

Provisions 53 –

Bond loan -1 451 -195

Deficit that can be carried forward1) 16 709 11 655

Total tax advantge 15 598 11 648

Deferred tax in the balance sheet:

Deferred tax advantage – –

Deferred tax obligation – –

1) Of the accumulated deferred tax amount, NattoPharma’s share totals NOK 11 609 thousand.

A deferred tax advantage of NOK 1 681 thousand related to the equity element of the bond loan was recorded directly to the equity (see note 17 – Bond loan). A similar tax advantage of NOK 1 648 thousand was registered in the P&L while NOK 33 thousand was netted against transaction costs in the equity statement in order to balance the deferred tax advantage.

Previously the company has activated deferred tax advantage. On the basis of the parent company and the Group’s weak performance in 2008 compared to budgets, the company has concluded that the criteria for capitalization of deferred tax advantages no longer apply. As per December 31st 2007, the deferred tax advantage amounted to NOK 3 905 thousand which is in the annual accounts for 2008 are recognised as an expense.

The following table shows reconciliation between the estimated tax based on income before income taxes and nominal tax rate and actual tax expense/income:


Profit before tax -18 523 -24 632

Nominal tax rate 0 0

Expected tax income -5 186 -6 897

Tax effect on non-deductable costs 61 37

Changes in non-balanced tax advantages 1) 3 477 10 765

This year's basis for tax -1 648 3 905

Effective tax rate 9% 16%

1) In addition NOK 833 thousand in deferred tax are included, which relates directly to the equity transaction costs

related to the share issue and recorder directly against the equity.


Note 10: Result per share

Profit per share is calculated by dividing the profit on the weighted average number of ordinary shares outstanding during the year net of own shares.


Result of the year -16 875 -28 538

Weighted average number of outstanding shares

21 751 20 434

Ordinary result per share -0,78 -1,40

3 778 thousand potential diluted warrants (see note 17 – Bond loan) is not included in the calculations since they do not have a dilutive effect.

Note 11: Intangible assets

Amount in NOK thousandPurchased IP rights

PatentsTotal intan-gible assets

Acquisition costs:

Acquisition as per 1.1. 2008 3 236 1 650 1 650

Supply/purchase of intangibles – – –

Disposals – – –

Acquisition cost as per 12.31.2008 3 236 1 650 4 886

Supply/purchase of intangibles – – –

Disposals – – –

Acquisition cost as per 12.31.2009 3 236 1 650 4 886

Accumulated amortisations:

Accumulated amortisations as per 12.31.2007 – 166 166

This year's amortisations and fall in value 647 153 800

Accumulated amortisations as per 12.31.2008 647 319 966

This year's amortisations and fall in value 647 153 800

Accumulated amortisations as per 12.31.2009 1 294 472 1 766

Balance value as per 12.31.2009 1 942 1 178 3 120



Both the parent and the Group employ stright-line depreciation for all assets. The ecomomic life span is estimated to be:

Patent 1 10 years

Patent 2 + 3 11 years

Purchased rights 5 years

The company has relied on regular appraisal about the duration of a patent. Normally a patents life estimated to be 15 years from the time a patent is registered. For the purchased patents in 2006, the remaining lifetime is assessed to be 10 and 11 years. This is also the basis for depreciation. See more about the reviews around the activations of intangible assets in note 2.7 and note 3.

The board of directors note that the value of its assets could be NOK 3.2 million lower in possibly a wind up situation for the company.

Note 12: Tangible assets

Amount in NOK thousand

Upgra-ding of leased offices

Computer equip-ment

Inventory

Total property, plant and

equip-ment

Acquisition cost:

Acquisition cost 1.1.2008 371 278 243 892

Supply/Purchased tangibles – 56 10 66

Disposal -371 – – -371


Supply/Purchased tangibles – 16 – 16

Disposal – – -10 -10


Accumulated depreciations:

Accumulated depreciations 1.1.2008 190 113 29 332

This years depreciation – 101 58 159

Disposal -190 -190

Acumulated write-downs 12.31.2008 – 214 87 301

This years depreciations 116 58 174

Disposals -10 -10

Acumulated write-downs 12.31.2009 – 330 135 465

Balance value as per 12.31.2009 – 20 108 128

Balance value as per 12.31.2008 – 120 166 286

Balance value as per 1.1.2008 181 165 214 560

Both the parent company and the Group employ linear and reducing balance method of depreciation for all tangible assets. The ecomomic life span of assets is:

Renovation, in accordance with the lease life span linear 4 years

Computer equipment linear 3 years

Inventory and web sites linear 5 years

Note 13: Investment in subsidiary

May 15th 2009 an agreement was signed with Tibesi AS regarding the sale of the shares in MGP Diagnostics AS for the price of NOK 55 thousand. Tibesi AS is owned by a shareholder in NattoPharma, Stein Vidar Westbye. The Norwegian public limited liability companies act § 3-8 do not apply.

Note 14: Accounts receivables and other short term receivables

Amount in NOK thousand 2009 2008Accounts receivables 315 899

VAT 465 287

Prepayments 448 27

Other receivables 77 –

Total accounts receivables 1 305 1 213

The company has recognized a loss on accounts receivables of NOK 189 thousand in 2009 and 0 in 2008. For a statement of NattoPharma’s credit risk exposure, see note 19 – Financial market risk.


In accordance with the loan agreement, ion case of negative equity, the bond issuer can request immediate repayment of the bond loan. As per December 31st. 2009 the company’s equity was negative with NOK 3 090 thousand. Because of this situation, the bond loan has been classified as short term debt.

As per the date of the approval of the annual accounts, the bond issuer has not chosen to request repayment of the bond loan. The company has not changed its estimates related to the expected cash flow of the bond loan, which is the basis for the amortised costs.

Note 18: Other short term liabilities


Accrued interest 835 761

Provision for severance pay – 1 906

Prepayment from customers 746 –

Other 681 1 610

Total other short term liabilities 2 262 4 277

Note 19: Financial market risks

The company is exposed to market risk, liquidity risk, credit risk and risk associated with interest rates.

Market risk

Fixed interest riskThe company is exposed towards real value risk related to the bond loan which has a fixed interest rate. (See note 17 Bond loan). The Group is also exposed towards cash flow risk related to floating interest rate on bank deposits.

Currency riskThe company has significant revenue nominated in foreign currencies with related accounts receivables (see geographic segment reporting in note 4). The currency balance related to accounts receivables is limited du the fact that the customers pay 50 % or more in advance. The company has limited accounts payable nominated in foreign currency as per December 31st 2009.

Liquidity riskThe company is activity is financed through equity and issuance of a bond loan. In 2009 issuance of new shares provided a net cash contribution of NOK 15 147 thou-sand. As per December 31st 2009, the company’s cash position equalled NOK 8 314 thousand. The company refinanced a bond loan of net NOK 15 500 thousand which came due in 2009 by the issuance of a new bond loan of NOK 17 000 thousand with maturity date July 10th 2011 (see note 17 bond loan for more information).

The company have a negative equity of NOK 3 090 000 per December 31st 2009, and the bond issuer may demand immediate repayment of the loan in accordance with the loan agreement. The company expects that the loan will run to the agreed maturity date July 10th 2011. The company expects operating cash flow will be sufficient to cover the company’s ongoing operations.

For further information, see note 23 “Going concern assumptions”.

The following table shows when the financial obligation becomes due. Agreed interest payments are included in the contractual obligations:


Bond loan (1)

Accounts payable

Other financial debt Total

0-6 months 17 835 1 6 11 682 20 128

6-12 months – – – –

1-5 years – – – –

Total 17 835 1 611 682 20 128

Note 15: Bank deposits

Included in the cash and cash equivalents as per December 31st 2009 were public taxes of NOK 157 thousand and a cash security of NOK 676 thousand. Correspondingly in 2008 public taxes equal NOK 341 thousand and cash security NOK 626 thousand. The cash security relates to DnBNOR, who has guaranteed for part of the tenancy agreement for the rent of offices at Lysaker Torg 5 and a guarantee towards the custom authority, with a security pledged against the company’s cash deposit in DnBNOR.

Note 16: Equity

Number of shares

Face value

Share capital

Number of shares outstanding as per 1.1.08 18 777 300 0,1 1 877 730

Paid in shares in 2006, registered in 2007

300 000 0,1 30 000

Share issue 1 367 924 0,1 136 792

Number of shares outstanding as per 12.31.08

20 445 224 0,1 2 044 522

Share issue 2009 5 184 279 0,1 518 428

Total number of shares outstanding as per 12.31.09 25 629 503 0,1 2 562 950

The annual general meeting in 2009 authorised the issuance of 3 778 thousand shares in relation with issuance of a corresponding number of warrants related to the bond loan issued in 2009 (see note 17).

In addition, the annual general meeting also authorised the issue of up to 5 million new shares with a minimum subscription price of NOK 4.0 per share.

The company’s shares are not divided into classes of shares. All shares have an equal right to dividends and voting rights. The face value per share is NOK 0.10.

Note 17: Bond loan

2009


Nominal interest

Expiry date

Face value

Balance value

Bond loan with subscription rights

10,4% 10.07.2011 17 000 11 819

2008


Nominal interest

Expiry date

Face value

Balance value

Bond loan with subscription rights

10,4% 10.07.2009 15 500 14 802

The company’s bond loan of net NOK 15 500 thousand due at July 10th 2009 was refinanced by the issuance of a new bond loan of NOK 17 000 thousand. The issuer is Norsk Tillitsmann ASA. The term to maturity is 2 years from July 10th 2009, and has a nominal interest rate of 10.4 % per annum. It is issued new subscription rights/warrants which gives the bond holders the right to subscribe up to 3 777 778 shares each with a face value of NOK 0.10 and with a subscription price of NOK 4.50 per share.A distribution of the bond and the warrants between debt and equity, which shows an equity element of NOK 6 004 thousand, has been carried out. The tax liability of NOK 1 681 000 arising from the separation of the equity element from the financial obligation is recorded as a reduction of the equity element. After deferred tax and transaction cost of NOK 87,000 the net entering towards the equity amounts to NOK 4,237 thousand.

Loan status


(1) The bond issuer may require immediate repayment of the loan due to negative equity. The amount includes nominal value + accrued interest. See note 17 – Bond loan for further information.

Interest risk and interest sensitivityThe company is exposed to interest rate risk with respect to investments in financial items with variable interest rates. Excess liquidity is deposited in the bank. In addition the company conducted a bond issue with a fixed interest rate of 10.4 per cent. The bond exposes the company to fair value changes in the event of any changes in interest rates. Since the interest rate is fixed and the bond is valued at the amortised cost, then changes in interest rates will not affect the result. Hence, there is therefore no interest cost sensitivity in relation to future interest rate changes.

Credit riskCredit risk is the risk of incurring loss if a customer or other counterparty fails to fulfill its contractual obligations that has arisen through the sales of products. The company’s largest customer, which is the distributor for North America, was responsible for 54 % of the turnover in 2009. The customers pay 50 % when placing the order and the rest upon delivery, which significantly reduces the credit risk exposure.

Balance value of financial assets represents maximum credit exposure. Maximum exposure for credit risk on the balance day was accounts receivables of NOK 315 thousand in 2009 and NOK 899 thousand in 2008.

Foreign currency risk and sensitivityThe company is operating on global basis and thus is exposed to foreign currency risk, for a major part towards USD, YEN and EURO. The currency risk exposure is related to transactions involving purchasing goods and services. The risk is considered acceptable and no risk reduction instruments or means have been implemented.

The effect of a change of 10 % in the currency exchange rates per December 31st

2009 when converting financial assets and liabilities in foreign currency would not have had a significant impact on the profit.

Real value of financial instrumentsBalance value of cash and cash equivalents, accounts receivables, accounts payable and other short term financial instruments are approximately equal to the real value due to the short time up until the due date.


2009 2008

Balance value

Real value

Balance value

Real value

Receivables measured at amortised cost

373 373 899 899

Cash and cash equivalents 8 314 8 314 10 271 10 271

Total 8 687 8 687 11 170 11 170

Financial debt measured at amortised cost:

Bond loan 11 819 11 992 14 802 13 652

Other financial debt measured at amortised cost:

3 128 3 128 5 441 5 441

Total financial debt measured at amortised cost 14 946 15 120 20 243 19 093

The fair value of the bond loan is calculated based on the amortisation of the present value of future cash flow of interests and instalments. Market interest plus a corporate specific credit risk is used as the discount rate. The fair value of the bond given in the above table are based on the assumption that bond loan expires at original maturity date. (See note 17 Bond loan). If the bond issuer request repayment, the company must pay the nominal value of NOK 17 000 thousand plus accrued interest.

Cash managementThe objective of the company’s cash management is to maintain funding to meet the cash flow requirements for the running operations and fulfilling its obligations.

The company manages the cash surplus in a bank account deposit. The loan agreement includes a clause that limits the company’s possibility to pay dividends for the duration of the loan. The company has no policy resolved with regards to purchase of own shares.

Note 20: Non balance obligations

Operational leasesOperational leases consist of an office lease signed in November 2007, which expires in November 2013. The rental is subject to adjustment on an annual basis based on the consumer price index. The company also has operational computer equipment.

The consolidated company recorded NOK 1,183 thousand in office rental costs in 2009 and NOK 1,087 thousand in 2008.

In 2008, the company recorded NOK 1,322 thousand as income for compensation for early termination of rental contract for previous offices.

Specification of contractual lease obligations:


Less than a year 956 1 008

Between 1 and 5 years 2 699 3 840

More than 5 years – –

Total 3 655 4 848

Note 21: Shareholder information

NattoPharma ASA has 467 shareholders as per December 31st 2009. The company has only one share class, all of which have equal voting rights. All of the shareholders are equally entitled to dividends.

List of 20 major shareholders as per December 31st 2009:

Shareholder Number of shares

Owership interest

Svenska Handelsbanken Stockholm 2 485 500 9,7 %

Tibesi AS 2 287 268 8,9 %

Anacott Steel AS 2 264 700 8,8 %

Sellæg, Bjørn Arne Fr. 1 986 700 7,8 %

Bohan & Co AS 1 612 700 6,3 %

Macama Invest AS 955 533 3,7 %

Nordea Bank Denmark 736 666 2,9 %

MP Pensjon 660 000 2,6 %

Zinober Invest AS 473 000 1,8 %

Sobona AS 450 000 1,8 %

Haadem Invest AS 427 800 1,7 %

Sellæg Aase 416 600 1,6 %

Pictet & Cie Banquiers, Sveits 400 000 1,6 %

Gjersvik, Karsten 398 000 1,6 %

Universal Exports AS 388 000 1,5 %

Easy2Connect AS 300 000 1,2 %

Hagen, Karsten 223 000 0,9 %

Uddén, Anders 214 286 0,8 %

Carlsen, Geirr Emil 203 235 0,8 %

LKG Holding AS 200 000 0,8 %

Other shareholders 8 546 515 33,3 %

Total 25 629 503 100,0 %


Shares owned by the board members or senior management:

Name Position Number of shares

Ownership interest

Morten Sundstø (Anacott Steel AS) CEO/President 2 264 700 8,80 %

Ola Røthe (Sobona AS) Chairman 450 000 1,80 %

Lisa Ann Cooper Board member 20 000 0,08 %

Christian Stang Våland (Advokat Christian Stang Våland AS)

Board member 20 000 0,08 %

Total 2 754 700 10,76 %

Transaction between close related parties(Amount in NOK thousand)

Company/ position

Closely related party

Transaction amount

Accounts payable

Anacott Steel AS Morten Sundstø 1 274 188

Kvale & Co. Christian Stang Våland 410 8

Sobona AS Ola Røthe 360 0

A consultant agreement between NattoPharma ASA and Anacott Steel AS (shareholder in the company) dated March 1st 2009 regarding the hiring of Mr. Morten Sundstø as IR manager and advisor in connection with strategic company and funding issues, is renewed with effect as per June 1st 2009, with a 3 months mutual termination clause. As per August 18th 2009, a new agreement has been signed were Mr. Morten Sundstø has been appointed CEO, with a 2 months mutual termination clause.

Legal advice and consultancy has been acquired from the law firm Kvale & Co. Mr. Christian Stang Våland is a partner in Kvale & Co, board member of NattoPharma ASA and shareholder in the Company.

Sobona AS has invoiced the Company for services rendered amounting to NOK 360.000 exclusive of vat. Sobona AS is a shareholder in NattoPharma AS and is controlled / owned by Mr. Ola Røthe, who is the chairman of the board of directors of NattoPharma ASA.

Note 23: Going concern assumptions

The financial statements for 2009 for the parent company and the Group are prepared on the going concern assumption. The Board observes that the company’s balance sheet shows a negative equity of 3.1 per million as per December 31st 2009. The Board is fully aware of its responsibility and on a continued basis evaluate its duty to act in accordance with the Norwegian public limited liability companies act § 3-4 and § 3-5. In this assessment, the company’s expectations for a positive result and cash flow for 210 is taken into the consideration.

Note 22: Transactions between closely related parties and remuneration of senior manage-ment and officers

Remuneration of senior management and officers in 2009: (Amount in NOK thousand)

Name/Position SalaryOther

benefitsPension

costs

Excer-cised share

optionsThomas ChristensenCEO up to 08.18.09

1 215 5 36 –

Stein WestbyePrevious CEO

868 11 23 –

Egil GrevePrevious CEO up to Dec. 08

976 – – –

Erik TjørstadCFO

735 12 27 –

Anne Bjørnebye VikVP R&D

701 7 29 –

Siri Stabel OlsenVP Sales and Markteing

735 7 28 –

Hogne VikElection Committee

21 – – –

Alexander Munch-ThoreChairman of Election Committee

21 – – –

Morten SundstøChairman in 2008

83 – – –

Ola RøtheChairman

87 – – –

Erik LangakerChairman in 2008

37 – – –

Frank E. BjordalBoard member 2008

25 – – –

Line Ravlo–LosvikBoard member 2008

67 – – –

Bjørn PedersenElection Committee

21 – – –

Theresa Comiskey OlsenBoard member 2008

92 – – –

Christian Bartlett TeigBoard member 2008

33 – – –

Lisa Ann CooperBoard member

58 – – –

Gerhard Christian Stang VålandBoard member

58 – – –

Total 5 833 42 143 –

There has been given no loans or guarantees to the CEO, Chairman of the board or any closely related parties.

In accordance with the Norwegian public limited liability company’s act §6-16a, the board of directors has prepared a statement of salaries and other compensation for the CEO and other senior staff.


Contact:

NattoPharma ASALysaker Torg 5

P.O. Box 397 Lysaker1326 Lysaker, Norway

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