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MeVis Medical Solutions AG

Quarterly Report Nov 20, 2008

287_10-q_2008-11-20_7f4bb43a-3e27-4fc5-b595-c04253b0cf00.pdf

Quarterly Report

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Key Figures (IFRS)

01.01. – 01.01. –
Figures in T€ 30.09.2008 30.09.2007 Changes in %
Revenues 7,932 6,192 28.1%
of which generated with customers in:*
– Europe 1,085 1,224 -11.4%
– USA 6,847 4,969 37.8%
EBIT 1,576 1,800 -12.4%
EBIT-margin 19.9% 29.1%
Net financial results 744 93 700.0%
EBT 2,320 1,893 22.6%
Consildated net profit for the period 1,352 1,002 34.9%
Earnings per share in € (undiluted and diluted) 0.80 1.89 -57.7%
30.09.08 31.12.07 Changes in %
Equity 30,760 30,769 0.0%
Intangible assets 8,637 1,388 522.3%
Associated companies accounted
for using the equity method 0 34
Deferred taxes on the asset side 526 1,079 -51.3%
Long and short term liabilites 7,354 4,806 53.0%
Balance sheet total 38,115 35,575 7.1%
Equity ratio in % 80.7% 86.5%
Cash and cash equivalents 17,354 28,471 -39.0%
Employees (balance sheet date) 185 113 63.7%
* Comprising industrial indirect sales partnerships as

well as clinical end-customers procuring services for the planning of interventions in the field of liver surgery.

Key share data

As at September 30, 2008
Industry sector Software/medical technology
Subscribed capital € 1,820,000.00
No. of shares 1,820,000
Last quotation on July 1, 2008 € 34.00
Last quotation on September 30, 2008 € 28.30
Peak / lowest price during the period under review € 35.50 / € 28.30
Market capitalisation € 51.506m
Treasury stock 91,000
Free float 40%
Prime Standard ("Regulierter Markt") Frankfurt and Xetra
Over-the-counter-markets Berlin, Düsseldorf, Munich, Stuttgart
Indices CDAX, Prime All Share, Technology All Share,
DAXsubsector Software, DAXsector Software,
German Entrepreneurial Index (GEX)
ISIN / WKN / Ticker symbol DE000A0LBFE4 / A0LBFE / M3V

Content

MeVis Medical Solutions AG

Letter to the shareholders 02
The Share 05
Overview over the areas of business 08
Interim group management report 10

MeVis Medical Solutions Group

Consolidated income statements 16
Consolidated balance sheet 18
Consolidated cash flow statement 19
Statement of changes in equity 20
Consolidated notes 21

Letter to the shareholders

Dear Shareholders, Customers, Partners and Colleagues,

With an increase in revenues by approximately 28 percent over the course of the first three quarters of 2008, we were able to generate a significant increase in group wide revenues. During the reporting period total revenues amounted to approximately € 7.9m (Q1–Q3 2007: € 6.2m). This value equates to the total sum of revenues generated over the entire financial year of 2007. These results have been achieved in spite of an unfavorable US dollar exchange rate during the first three quarters of 2008 compared to the previous year.

Caused by the ongoing expansion of our product portfolio, expenses increased significantly over the course of the first three quarters of 2008 and thus had a negative effect on our consolidated EBIT. However, we were able to maintain an EBIT-margin of approximately 20% due to the high earning power of our BreastCare applications.

The "Digital Mammography" business segment remains the mainstay of group-wide revenues. By a dynamic world-wide increase in license sales we have once again demonstrated our leading market position. As a result, we were able to increase our revenues in this business segment by 15 percent as compared to the same time period of the previous year.

The incremental growth rate achieved by the "Other Diagnostics" business segment, which has resulted in an increase in revenues of 55 percent over the course of 2008, is an exemplary demonstration of the high growth dynamics of the MeVis Medical Solutions group. This positive development is based upon the successful partnership with Invivo, which led to the development of the market-leading DynaCAD® software product for the use in magnetic resonance imaging based diagnostics and biopsy of the female breast.

Our US-American subsidiary MeVis Medical Solutions, Inc. is still in the phase of setting up its business operations. Our proprietary lung-software for the automatic detection of lung nodules, which is sold under the brand name MeVis Visia™ CT-Lung system, has been successfully launched on the US market and has started to contribute to revenues in the "Other Diagnostics" business segment. We were able to gain Invivo Corp. to act as our new sales and marketing partner for the MeVis Visia™ CT-Lung system. Also carried

out by our industrial partner Invivo, the market launch of our innovative software solution for the use in neurosurgery is taking place during the current quarter of 2008. By the sales of licenses, we expect first contributions to revenues until the end of the financial year 2008.

With an equity ratio of approximately 81 percent, the growth of MeVis Medical Solutions AG continues on a firm financial basis. Despite the increase in expenses incurred as a result of the expansion of our product portfolio, we were able to significantly increase consolidated net profits for the period by 35 percent to € 1.4m (Q1–Q3 2007: € 1.0m).

As stated in our interim report for the first half of 2008, we have since identified and realised cost cutting potentials leading to a decrease in other operating expenses of approximately 39 percent as compared to the second quarter of 2008.

On October 21, 2008, we have separated the business activities with our industrial partner Hologic, Inc. from the joint venture MeVis BreastCare GmbH & Co. KG, which is jointly operated with Siemens AG, and have acquired the participation in these activities held by Siemens. As a direct result the MeVis Medical Solutions group is experiencing an immediate increase in revenues and earnings as of the fourth quarter of 2008, as this profitable business activity of the "Digital Mammography" segment is now wholly included in the consolidated financial statements of the group. The transaction had no effect on the quarter ended on September 30, 2008. The purchase price to the amount of at most € 17.5m is contingent upon the achievement of certain conditions and is payable over the course of the period from 2008 until 2015. The purchase price encompasses the acquisition of cash and cash equivalents pertaining to the business activities to the amount of € 4m (as at June 30, 2008).

The reason for this acquisition rests upon our strategic aim to increase the cooperation with our industrial partners and to apply the successful business model of MeVis BreastCare to other disease oriented software solutions. The transaction facilitates the tailor-made development of new software solutions for Siemens within the framework of the remaining business activities of the joint venture. In parallel we gain new opportunities to intensify our cooperation with Hologic, the world-wide leader in the segment "Women's Health".

The MeVis-share was pressured over the course of the third quarter of 2008, as it was unable to detach from the overall challenging current stock market environment. However, subsequently to the announcement of the acquisition of the Hologic business activities by MeVis Medical Solutions AG, increases in purchasing orders resulting in an appreciation in share prices could be observed.

On November 4 we have decided to increase the amount of treasury stock held by the company up to the amount of 10 percent of subscribed capital as part of a new share repurchase programme. Thereby, we intend to improve our ability to react to potential purchase opportunities related to companies or business units in a more flexible and swift fashion. In particular, for fast growing, internationally operating companies such as MeVis Medical Solutions AG, international competition and the ongoing globalisation of the economy result in an increasing importance of treasury stock as means of acquisition compensation.

The global economy is going to be materially affected by the repercussions of the ongoing financial crisis. This may have an impact on the market areas of our industrial partners over the course of the next financial year. However, in 2009, and in consideration of the acquisition on October 21, 2008, we expect to generate a significant increase in revenues to the amount of € 19m resulting in a significantly higher EBIT to the amount of € 6.5m.

The number of employees rose to 185 as of the end of the third quarter, accompanied by a substantial decline in hiring rate at the end of the period. We are extremely pleased to have such a highly qualified and motivated team, with which we intend to implement our company's vision.

We would like to express our gratitude towards all employees for their extraordinary commitment, as well as to our commercial partners, our customers and shareholders for their confidence in us!

Dr. Carl J.G. Evertsz Dr. Olaf Sieker Thomas E. Tynes

President & CEO CFO COO Sales and Marketing

The Share

Capital market environment

Over the course of the third quarter of 2008, capital markets were marked by significant losses and short term counter-movements. With the announcement of the collapse of several financial institutions by the middle of the third quarter and in October, anxiety of investors increased that the financial crisis will have adverse effects on other sectors of the economy. At this time the full extent of the ramifications for the real economy cannot be adequately assessed. However, in general a broad consensus is expecting a worldwide recession leading to a considerable decrease in investment activities.

The decline in share prices over the course of the third quarter 2008 affected entire stock markets with German stock market indices (MDAX: -21%; DAX: -18%; Tec-DAX: -9%; SDAX: -8%) following suit. This development continued in October resulting in significant losses in all stock market segments.

As a result of the financial crisis, several important commodity and foreign exchange markets experienced an unexpected deterioration in prices. As MeVis is generating the majority of its revenues outside of the Euro-zone, the exchange rate of the US-\$ to the Euro is of significant importance. From the beginning to the end of the third quarter of 2008 the US-\$ has gained in value from US-\$ 1.58 to US-\$ 1.44, signifying an appreciation of approximately 9 percent. In October, the official exchange rate as set by the European Central Bank amounted to approximately US-\$ 1.25, marking the lowest level for the Euro over the course of the last two years. We made use of this advantageous situation and entered into currency hedges covering the financial year 2009.

Development of the MeVis-Share

In the light of this development during the third quarter, the MeVis-share exhibited an overall market uniform performance.

Whereas the MeVis-share was traded at € 34.00 on July 1, prices declined to € 28.30 on September 30, representing a drop in prices of 17% (SDAX: -8%, MDAX: -21%). Peak prices during this period amounted to € 35.50, with trading pricing fluctuating at around € 26.73 during the month of October.

Stock Chart MeVis Medical Solutions AG

Volume traded

figures in thousand shares

Comparison of performance

figures in percent

The ongoing decline in stock market prices gained additional momentum during the second half of September, which at first also affected the MeVis-share. Since the middle of October, the MeVis-share was able to detach itself from the overall market development and executed a substantial upturn in share price.

This recent increase in share price can be attributed to the announcement of the carve out of the Hologic business activities from within our Siemens joint venture MeVis BreastCare GmbH & Co. KG and the ensuing acquisition of these activities by the MeVis Medical Solutions AG on October 21, 2008. The immediate improvement of results due to consolidation effects and the related significant leap in growth in 2009 is an important strategic step on the path of our future development and allows us to intensify and broaden our activities with our partner Siemens within our joint venture.

However, at the end of the third quarter of 2008 the overall performance of our share equates to a loss of 44%, resulting in a market capitalisation of MeVis Medical Solutions AG of € 51.51m. In line with our intentions to broaden our investor base, we have presented our company at three major capital market conferences in Frankfurt and Zurich over the course of the second half of 2008. As part of these conferences, numerous individual interviews were held with international institutional investors and analysts. We intend to increase these activities in the future.

After the completion of a first share repurchase programme by the middle of June 2008, the company now holds 5% of the subscribed capital as treasury stock as at the end of the third quarter. On November 4, 2008 the Management Board of the company has decided to initiate a second share repurchase programme. In this context the private bank M.M. Warburg & Co. KGaA based in Hamburg, was mandated on November 5, 2008 to act for MeVis Medical Solutions AG to acquire up to 91,000 shares via the stock exchange until March 31, 2009.

By the end of the third quarter the freefloat amounted to 40% of the subscribed capital with approximately two-thirds owned by institutional investors and one third held by private investors.

Overview over the areas of business of the MeVis Group

Group structure

As partner in a joint venture with Siemens Aktiengesellschaft, MeVis Medical Solutions AG owns 51% of the shares in MeVis BreastCare GmbH & Co. KG. On the basis of a contract signed on October 21, 2008, all business activities with the industrial partner Hologic were separated from the joint venture and ensuingly the part of these activities held by Siemens was acquired by MeVis Medical Solutions AG. The transaction had no effect on the quarter ended September 30, 2008.

In addition, MeVis Medical Solutions AG is the parent company of the wholly owned subsidiary MeVis Medical Solutions, Inc. in the USA. As at September 30, 2008, MeVis Research GmbH, which was previously accounted for using the equity method as an associated company, is not included as part of the MeVis Group. The participation held in the company was sold to Freie Hansestadt Bremen at book value.

Areas of businesss

MeVis Medical Solutions AG is an independent, world-wide leading producer of software solutions for the use in digital imaging, in particular in the field of digital radiology. Since the incorporation of the company in 1997 in Bremen, the experts at MeVis have adopted a strictly disease-oriented approach to the development of software solutions in order to address clinically relevant challenges in the field of early detection, diagnosis and treatment. To this end, the listed MeVis Medical Solutions AG is working in close cooperation with the renowned non-profit research institute MeVis Research GmbH, which is going to be incorporated into the Fraunhofer-Gesellschaft on January 1, 2009.

Business segments

For reporting purposes the MeVis Group is distinguishing two operational segments ("Digital Mammography" and "Other Diagnostics") as well as two geographic segments (USA and Europe / others).

The segment "Digital Mammography" develops, markets and sells software products for the use in image based diagnostics within the field of digital mammography. Products are being sold via OEM (original equipment manufacturers) –partners (Siemens Aktiengesellschaft and Hologic, Inc.) to end-customers.

The segment "Other Diagnostics" is covering the areas of digital radiology (e.g. magnetic resonance imaging (MRI), computer tomography (CT), etc.) and general evaluation of radiological images. In addition, this segment comprises the provision of image and risk analysis services related to the planning of liver surgery and tumor volumetry evaluation for pharmaceutical companies engaged in clinical trials.

Interim group management report for the period ended September 30, 2008

Development of group revenues and earnings

As during the first three quarters of the previous financial year, group revenues were mainly driven by the dynamic development of license sales during the first nine months of 2008. Within the Digital Mammography segment, segment revenues increased by 15 percent until the end of the third quarter of 2008 to T€ 4,900 (Q1-Q3 2007: T€ 4,250). Segment net profit (excluding other operating income and expenses) amounted to T€ 3,654 (Q1-Q3 2007: T€ 2,707), representing an increase of 35%. Within the Other Diagnostics segment, the number of licenses sold increased dynamically, leading to an increase in segment revenues of approximately 55 percent to T€ 3,032 (Q1-Q3 2007: T€ 1,953). Segment net profit (excluding other operating income and expenses) is affected in particular by a significant increase in operating expenses of T€ 2,915 (Q1-Q3 2007: T€ 1,516) and amounted to T€ -113 (Q1-Q3 2007: T€ 662). In 2008 net profit of the Other Diagnostics segment is mainly affected by the initial built-up of business activities of MeVis Medical Solutions, Inc. as well as by the significant increase in development activities of MeVis Medical Solutions AG. However, the Management Board is expecting a positive development in the immediate future due to the gradual market launch of new products.

During the period under review total revenues amounted to T€ 7,932 (Q1-Q3 2007: T€ 6,192), representing an increase of 28 percent. Of these, revenues generated within the geographic segment USA amounted to 86% (Q1-Q3 2007: 80%), with the remainder of 14% (Q1-Q3 2007: 20%) being generated within the geographic segment Europe / others. As the majority of revenues are being generated within the US-\$ region, the MeVis Group has concluded currency hedging contracts to significantly offset exchange rate fluctuations.

Increases in staff costs by T€ 2,601 to T€ 5,209 are mainly driven by the systematic increase in personnel due to the development of new products to be launched in between 2008 and 2010. A capitalisation of development expenses in accordance with IAS 38 is in effect since the beginning of the financial year 2008. Over the course of the first three quarters of 2008, expenses pertaining to product development amounted to T€ 1,518 (Q1-Q3 2007: T€ 0). The remaining staff expenses increased by T€ 1,083 to T€ 3,691 (Q1-Q3 2007: T€ 2,608). On September 30, 2008 the MeVis Group employed 185 employees (Q1-Q3 2007: 97 employees). These numbers equate to an average headcount over the period under review of 149, of which 101 were permanent employees (Q1-Q3 2007: on average 81 employees, of which 53 were permanent employees).

During the reporting period other operating expenses increased by T€ 918 to T€ 2,669 (Q1-Q3 2007: T€ 1,751). Compared to the second quarter of 2008 other operating expenses increased by T€ 657 (Q1-Q3 2007: T€ 1,146). Other operating expenses are mainly comprised of legal and consulting expenses to the amount of T€ 674 (Q1-Q3 2007: T€ 451), rental expenditure to the amount of T€ 362 (Q1-Q3 2007: T€ 83), work contracted out to the amount of T€ 204 (Q1-Q3 2007: T€ 16), travel expenses to the amount of T€ 191 (Q1-Q3 2007: T€ 45), financing obligations towards MeVis Research GmbH to the amount of T€ 143 (Q1-Q3 2007: T€ 141), expenses related to personnel recruiting to the amount of T€ 137 (Q1-Q3 2007: T€ 19), costs of preparing and auditing financial statements to the amount of T€ 113 (Q1-Q3 2007: T€ 413) and maintenance expenses to the amount of T€ 110 (Q1-Q3 2007: T€ 146).

During the period under review, earnings before interest, taxes, depreciation and amortisation (EBITDA) amounted to T€ 2,225 (Q1-Q3 2007: T€ 2,026). The EBITDA-margin amounted to 28.1% (Q1-Q3 2007: 32.7%).

Earnings before interest and taxes amounted to T€ 1,576 (Q1-Q3 2007: T€ 1,800) corresponding to an EBIT-margin of 19.9% (Q1-Q3 2007: 29.1%).

Net financial results have increased to T€ 744 (Q1-Q3 2007: T€ 93). The increase reflects the proceeds generated by the IPO in 2007, which have been invested in short term securities, the positive change in value of financial instruments held for currency hedging purposes as well as earnings from the change in exchange rates amounting to T€ 45 (Q1-Q3 2007: T€ 110).

Consolidated earnings before taxes (EBT) amounted to T€ 2,320 (Q1-Q3 2007: T€ 1,893), representing an almost unchanged EBT-margin of 29.2% as compared to the EBT-margin for the first three quarters of 2007 to the amount of 30.6%.

Consolidated profit for the period amounted to T€ 1,352 (Q1-Q3 2007: T€ 1,002) equating to an increase of 34.9%, with taxes on income amounting to T€ 968 (Q1-Q3 2007: T€ 891). Undiluted / diluted earnings per share amounted to € 0.80 (Q1-Q3 2007: € 1.89).

Net worth and financial position

The MeVis Group currently possesses adequate financial resources for the realisation of its growth plans. On September 30, 2008, cash and cash equivalents amounted to T€ 17,354 (31.12.2007: T€ 28,471).

Over the period under review the balance sheet total increased by T€ 2,540 to T€ 38,115. The decrease in current assets by T€ 5,146 to T€ 27,530 is mainly due to the reduction in cash and cash equivalents by T€ 11,117 to T€ 17,354 partly caused by the investment in a promissory note loan ("Schuldscheindarlehen") to the amount of € 5.0m. At the same time this investment is the main cause for the increase in other financial assets by T€ 5,267 to T€ 5,826. Income tax receivables have increased by T€ 510 to T€ 1,146. Trade receivables have increased by T€ 275 to T€ 2,868.

During the first three quarters of 2008, non-current assets increased by T€ 7,686 to T€ 10,585. The increase is mainly due to the increase in intangible assets by T€ 7,249 to T€ 8,637 and relates to the acquisition of the "R2 ImageChecker CT" software product (incl. intellectual property, patents, source-code and all business activities) from R2 Technology, Inc. – a subsidiary of Hologic, Inc.. The product has been launched under the proprietary brand name MeVis Visia™ CT-Lung system. The purchase price amounted to USD 9,0m and is payable on an installment basis. In addition, development expenses to the amount of T€ 1,797 were capitalised during the period under review.

Property, plant and equipment increased by T€ 1,024 to T€ 1,422. This increase is mainly comprised of leasehold improvements and investments in modern IT-fileserver technology.

On June 30, 2008 MeVis Medical Solutions AG and Verein zur Förderung der wissenschaftlichen Forschung in der Freien Hansestadt Bremen e.V., as shareholders of the MeVis Research GmbH (hereinafter referred to as "MRE GmbH"), signed a purchase and assignment of shares agreement concerning the sale of the 25.1% participation held by MeVis Medical Solutions AG in the MRE GmbH in order to enable the transformation of MRE GmbH into a Fraunhofer Institute. The transfer of the shareholding was carried out at book value and resulted in an asset disposal to the value of T€ 34 coming into effect on June 30, 2008.

At the balance sheet date equity amounted to T€ 30,760 (31.12.2007: T€ 30,769). The subscribed capital amounted to T€ 1,820 (31.12.2007: T€ 1,820). The equity ratio has decreased to 80.7% from 86.5%, mainly due to the acquisition of treasury stock within the scope of a share repurchase programme.

During the period under review cash flow from current operating activities amounted to T€ 1,341 (Q1-Q3 2007: T€ -454). It is mainly comprised of the consolidated earnings before interest and taxes to the amount of T€ 1,576 (Q1-Q3 2007: T€ 1,800), adjusted for depreciation to the amount of T€ 649 (Q1-Q3 2007: T€ 226), other non-cash expenses and earnings as well as reclassifications to the amount of T€ 132 (Q1-Q3 2007: T€ 0), interest received to the amount of T€ 634 (Q1-Q3 2007: T€ 78), interest paid to the amount of T€ -30 (Q1-Q3 2007: T€ -1), taxes paid to the amount of T€ -916 (Q1-Q3 2007: T€ -551), changes to inventories to the amount of T€ 119 (Q1-Q3 2007: T€ 17), changes to trade receivables and other current assets to the amount of T€ -618 (Q1-Q3 2007: T€ -551) and changes to trade payables and other current liabilities to the amount of T€ -205 (Q1-Q3 2007: T€ -1,150).

Cash flow from investing activities amounted to T€ -10,150 (Q1-Q3 2007: T€ -568) and is mainly comprised of cash outflows for investments in fixed assets to the amount of T€ -1,358 (Q1-Q3 2007: T€ -318), for investments in intangible assets to the amount of T€ -76 (Q1-Q3 2007: T€ -96), due to the capitalisation of development expenses to the amount of T€ -1,797 (Q1-Q3 2007: T€ 0), for investments in the acquisition of business units to the amount of T€ - 1,919 (Q1-Q3 2007: T€ 0), which relate to the acquisition of the "R2 Image Checker CT" software product as well as for short term investments in a promissory note loan ("Schuldscheindarlehen") to the amount of € 5.0m (Q1-Q3 2007: T€ 0).

Cash flow from financing activities amounted to T€ -2,375 (Q1-Q3 2007: T€ 51) and is comprised of cash outflows for the acquisition of treasury stock to the amount of T€ -1,502 (Q1-Q3 2007: T€ -2,208) and cash outflows for the repayment of credit facilities to the amount of T€ -873 (Q1-Q3 2007: T€ -1), which relate to the repayment of a loan by MeVis Medical Solutions AG to MeVis BreastCare GmbH & Co. KG by the waiving of dividend rights.

During the period under review, changes in cash and cash equivalents amounted to T€ -11,117 (Q1-Q3 2007: T€ -983).

Risk report

Since the beginning of the financial year 2008, the risk exposure of the MeVis Group has not changed in a significant manner. The current development of the stock markets is closely monitored by the Management and Supervisory Boards and is analysed as to potential effects on the business activities of the group. The Management Board does not see any risks threatening the continuance of the company. The statements made as part of the risk report contained in the annual report 2007 are thus still valid.

Outlook and opportunities

We confirm the future prospects and outlook stated within the consolidated annual statements of 2007 for the financial year 2008. We continue to expect that 2008 will be marked by a continuous growth in revenues, which will lead to a concomitant increase in earnings before taxes. We expect a continuation of this trend in 2009, which should be reinforced by additional product launches over the course of the year. However, we cannot rule out possible negative effects on the general market for software products for the use in medical imaging due to the world-wide financial crisis over the course of 2009. The determining factor will be whether end-users will reduce investments due to the deterioration of financing terms or the lessening of marketing and sales activities by our industrial partners.

Post balance sheet date events

On October 21, 2008 MeVis Medical Solutions AG has signed an agreement with its joint venture partner Siemens Aktiengesellschaft concerning the complete separation of the business activities of the joint venture MeVis BreastCare GmbH & Co. KG with the industrial partner Hologic, Inc. and the ensuing acquisition of the share in these business activities held by Siemens Aktiengesellschaft through MeVis Medical Solutions AG.

With this acquisition we intend to directly increase our earning power as well as being able to increase our focus and to further our joint activities with our partners Siemens and Hologic.

In addition, by the adoption of a resolution at the annual general meeting on July 9, 2008, MeVis Medical Solution AG was authorised to acquire up to 10% of its own subscribed capital as treasury stock in compliance with section 71, article 1, phrase 1, no. 8 of the German Stock Corporation Act ("Aktiengesetz") until January 8, 2010.

Based on this resolution and by assent of the Supervisory Board, the Management Board of MeVis Medical Solutions AG initiated a new share repurchase programme on November 4, 2008. On the basis of this share repurchase programme, the company intends to acquire 91,000 (ninety one thousand) additional shares (representing 5 percent of the subscribed capital) via the stock exchange until March 31, 2009. Private bank M.M. Warburg & Co. KGaA, Hamburg, was mandated to execute the share repurchase programme.

Consolidated income statements

until 27 August 2007: MeVis Technology AG

Notes 01.01. – 01.01. –
Figures in T€ 30.09.2008 30.09.2007
Revenues 1 7,932 6,192
Other operating income 1,001 501
Cost of materials / cost of services purchased -348 -308
Staff costs 2 -3,691 -2,608
Other operating expenses 3 -2,669 -1,751
Earnings before interest, taxes, depreciation
and amortisation (EBITDA) 2,225 2,026
Depreciation and amortisation -649 -226
Earnings before interest and taxes (EBIT) 1,576 1,800
Interest income 854 82
Borrowing costs -155 -99
Other financial results 45 110
Net financial results 744 93
Earnings before tax (EBT) 2,320 1,893
Income taxes -968 -891
Consolidated net profit for the year 1,352 1,002
Earnings per share in €
Basic 10 0.80 1.89
Diluted 0.80 1.89

Consolidated income statements

until 27 August 2007: MeVis Technology AG

01.07. – 01.07. –
Figures in T€ 30.09.2008 30.09.2007
Revenues 2,459 2,023
Other operating income 680 376
Cost of materials / cost of services purchased -236 -104
Staff costs -1,387 -1,027
Other operating expenses -657 -1,146
Earnings before interest, taxes, depreciation
and amortisation (EBITDA) 859 122
Depreciation and amortisation -289 -72
Earnings before interest and taxes (EBIT) 570 50
Interest income 292 31
Borrowing costs -132 -50
Other financial results 79 143
Net financial results 239 124
Earnings before tax (EBT) 809 174
Income taxes -376 -64
Consolidated net profit for the year 433 110
Earnings per share in €
Basic 0.25 0.22
Diluted 0.25 0.22

Consolidated balance sheet

until 27 August 2007: MeVis Technology AG

Figures in T€ Notes 30.09.08 30.06.08 31.03.08 31.12.07
Non-current assets
Intangible assets 4 8,637 7,391 1,810 1,388
Property, plant & equipment 1,422 1,236 876 398
Associated companies accounted for
using the equity method 0 0 34 34
Deferred taxes 526 749 936 1,079
10,585 9,376 3,656 2,899
Current assets
Inventories 127 125 27 8
Trade receivables 2,868 2,814 2,815 2,593
Income tax receivables 1,146 990 815 636
Other financial assets 5 5,826 778 2,135 559
Other assets 209 159 303 409
Cash and cash equivalents 17,354 22,605 25,523 28,471
27,530 27,471 31,618 32,676
Assets 38,115 36,847 35,274 35,575
Equity
Subscribed capital 1,820 1,820 1,820 1,820
Share premium account 28,348 28,317 28,337 28,276
Treasury stock -3,048 -3,048 -1,759 -1,546
Cumulative translation differences 43 -158 -172 -26
Retained earnings 3,597 3,164 2,639 2,245
30,760 30,095 30,865 30,769
Non-current liabilities
Other financial liabilities 6 2,669 3,269 631 689
Provisions for pensions 7 19 13 0 0
2,688 3,282 631 689
Current liabilities
Provisions 51 51 51 51
Trade payables 667 293 427 652
Liabilities to banks 16 2 77 154
Other financial liabilities 6 2,988 1,766 1,611 2,050
Deferred income 674 736 458 439
Remaining other liabilities 271 622 1,149 768
Income tax 0 0 5 3
4,667 3,470 3,778 4,117
Equity and Liabilities 38,115 36,847 35,274 35,575

Consolidated cash flow statement

until 27 August 2007: MeVis Technology AG

01.01.2008 – 01.01.2007 –
Figures in T€ 30.09.2008 30.09.2007
Consolidated net profit for the year before interest and taxes 1,576 1,800
+ Depreciation and amortisation 649 226
+/- Increase / decrease in provisions 0 -3
+/- Other non-cash income / expenses and reclassifications 132 0
+ Interest received 634 78
- Interest paid -30 -1
- Taxes paid -916 -870
-/+ Increase / decrease in inventories 119 17
-/+ Increase / decrease in trade receivables and other assets -618 -551
+/- Increase / decrease in trade payables and other liabilities -205 -1,150
= Cash flow from current operating activities 1,341 -454
- Payments made for investments in property, plant and equipment -1,358 -318
- Payments made for investments in intangible assets -76 -96
- Increase in intangible assets due to the capitalisation of
development expenses -1,797 0
- Payments made / received for the acquisition of
consolidated companies 0 -154
- Payments made for the acquisition of business units1 -1,919 0
- Payments made for investments in short term promissory
note loan ("Schuldscheindarlehen")2 -5,000 0
= Cash flow from investment activities -10,150 -568
+ Payments received from increases in equity 0 760
+ Payments received from the sale of treasury stock 0 1,500
- Payments made for the acquisition of treasury stock -1,502 -2,208
- Payments made to repay borrowings -873 -1
= Cash flow from financing activities -2,375 51
Currency translation differences 66 -12
Changes in cash and cash equivalents -11,117 -983
+ Cash and cash equivalents at the beginning of the period 28,471 5,428
= Cash and cash equivalents at the end of the period 17,354 4,445

1 Acquisition of "R2 Image Checker CT" (see note 4). 2

Payments made for the investment in a short term promissory note loan result from the investment of cash and cash equivalents

Statement of changes in equity

until 27 August 2007: MeVis Technology AG

Equity
Figures in T€ Subscribed
capital
Share
premium
account
Treasury
stock
Cumulative
translation R
differences
etained
earnings
Total
01.01.07 50 0 0 0 2,603 2,653
Increase in equity 1,250 -490 760
Acquisition of treasury stock -2,208 -2,208
Sale of treasury stock 838 662 1,500
Cumulative translation differences -12 -12
Consolidated net profit
for the period 1,002 1,002
30.09.07 1,300 838 -1,546 -12 3,115 3,695
01.01.08 1,820 28,276 -1,546 -26 2,245 30,769
Stock options 72 72
Acquisition of treasury stock -1,502 -1,502
Cumulative translation differences 69 69
Consolidated net profit for
the period 1,352 1,352

30.09.08 1,820 28,348 -3,048 43 3,597 30,760

Notes to the consolidated interim financial statements of MeVis Medical Solutions AG

General disclosures

The quarterly financial statements of the MeVis Group – including a group interim management report and notes to the consolidated interim financial statements – have been formulated in compliance with the regulations of section 37x, article 3 of the German Securities Trading Act ("Wertpapierhandelsgesetz WpHG").

In preparing its consolidated interim financial statements, MeVis Medical Solutions AG (hereinafter "MMS AG") has complied with its obligation under Section 315a of the German Commercial Code. The consolidated interim financial statements as at September 30, 2008 have been prepared in accordance with applicable International Financial Reporting Standards (IFRS) in the form endorsed by the EU as formulated by the International Accounting Standards Board (IASB), London as well as the interpretations of the International Financial Reporting Interpretations Committee (IFRIC). Accordingly, the consolidated interim financial statements for the first three quarters of 2008 have been prepared in compliance with IAS 34 "Interim financial reporting".

The notes to the consolidated interim financial statements have been prepared in the abridged form as allowed for under IAS 34.

Share repurchase programme

From January 1, 2008 until 30 June 2008, MMS AG has purchased a total of 53,200 shares of treasury stock. The volume amounted to T€ 1,502, of which T€ 213 can be attributed to the first quarter of 2008. The average purchase price per share amounted to T€ 28.23. On the balance sheet date a total of 91,000 shares of treasury stock were owned by MMS AG, representing 5% of the subscribed capital.

Recognition and measurement

The basis for preparation of the consolidated interim financial statements for the period January 1 until September 30, 2008 is fundamentally identical to the principles of recognition and measurement adopted in the IFRS consolidated financial statements for the financial year 2007. Therefore, the consolidated interim financial statements for the period under review are to be read in conjunction with the consolidated financial statements for the financial year 2007.

Until the financial year 2008, research and development expenses have been taken directly to the income statement. By the implementation of a project development system at the beginning of the year 2008, it is now possible to identify the current project phase of an individual development project and to identify directly attributable expenses.

Insofar as these expenses are related to research activities, they are taken directly to the income statement. Development expenses are capitalised, if a newly developed software product or procedure can be clearly and individually defined, is intended for sale and the product / procedure can be reasonably expected to generate future cash flows.

Development expenses related to software products are capitalised after software specifications have been defined and agreed upon with the customer. In this context, direct and indirect costs that are incurred until the completion of the product and are attributable to development activities, are capitalised and ensuingly depreciated over the useful economic life of the product.

Due to the implementation of the project development system and the related initial capitalisation of development expenses, the year-on-year comparability of the interim financial statements is limited.

During the period under review a total of T€ 3,042 can be attributed to research and development expenses, of which – based on the requirements of IAS 38 – T€ 1.797 were mandatorily capitalised as development activities. Of the total research and development expenses, T€ 1,974 are attributable to MeVis Medical Solutions AG and T€ 1,068 to MeVis BreastCare GmbH & Co. KG.

In conformity with IAS 8 the following change in disclosure has been adopted: deviating from the financial statements for the financial year ended December 31, 2007, currency translation gains and losses are reported within the financial results, if they are related to assets held in connection with the financing of the company.

In addition, currency gains and losses resulting from operating activities have been netted for the first time during the second quarter of 2008.

Figures for the prior reporting period have been adjusted accordingly.

Selected notes to the consolidated balance sheet and consolidated income statement

1. Revenues

Revenues can be broken down as follows:

01.01.2008 – 01.01.2007 –
Figures in T€ 30.09.2008 30.09.2007
Software and licenses 7,073 6,036
Maintenance (software service contracts) 551 129
Hardware 189 15
Services (consulting and training) 119 12
7,932 6,192

2. Staff costs

The development of staff costs is driven – on the one hand – by the increase in the number of employees. During the first three quarters of 2008 149 (Q1-Q3 of 2007: 81) employees were employed on average. Of these, 52 employees (Q1-Q3 of 2007: 42) were employed by the proportionally consolidated company MeVis BreastCare GmbH & Co. KG. The averages for the first three quarters of the year include 48 software testers (Q1-Q3 of 2007: 28).

On the other hand, staff costs have been reduced by T€ 1.518 due to the capitalisation of development expenses.

3. Other operating expenses
01.01.2008 – 01.01.2007 –
Figures in T€ 30.09.2008 30.09.2007
Legal and consulting expenses 674 451
Rental expenditure 362 83
External work 204 16
Travel expenses 191 45
25.1% financing obligation towards MeVis Research GmbH 143 141
Personnel recruiting 137 19
Cost of preparing and auditing financial statements 113 413
Maintenance / repairs 110 146
Marketing costs 71 9
Accounting costs 66 50
Insurance costs 47 1
Office supplies 40 23
Remuneration of the Supervisory Board 39 4
Energy costs 27 23
Vehicle costs 26 6
Telephone costs 25 10
Internet costs 25 3
Training costs 21 21
Cleaning costs 21 6
Fees and dues 20 11
Deposit fees 19 0
Voluntary employee benefits 20 16
Costs of annual general meeting 12 0
Business entertainment expenses 12 9
Banking fees 10 4
Others 234 241
2,669 1,751

The increase in legal and consulting expenses by T€ 223 to T€ 674 is mainly due to the increased requirements related to reporting and disclosure requirements of MMS AG as a result of the companies stock market listing in November 2007.

The increase in rental expenditure by T€ 279 to T€ 362 is due to the increase in premises rented by the MeVis Group (mainly MMS AG) as a result of the increase in the number of staff.

External work includes administrative expenses which have been charged to the joint venture MeVis Breast Care GmbH & Co. KG.

The reduction in costs incurred for the preparation and auditing of financial statements as compared to the amounts of the previous period is due to the one-off costs incurred during the IPO of the company in 2007.

The payment of the financing obligation towards MRE GmbH was due to the participation held in the MRE GmbH by MMS AG. With the signing of a purchase and assignment of shares agreement on June 30, 2008, MMS AG has withdrawn as a shareholder from MRE GmbH.

4. Intangible assets

The increase in intangible assets is mainly due to the acquisition of a software product by the MMS Inc. as well as the capitalisation of development expenses.

On April 4, 2008 MMS Inc. acquired the FDA approved "R2 ImageChecker CT" software product (incl. intellectual property, patents, source-code and all business activities) from Hologic, Inc., for USD 9.0m. Of the total purchase price a first installment of USD 3.0m has already been paid. The remainder is to be paid in eight equal installments over the course of two years. On the acquisition date the present value of the outstanding payments amounted to USD 5.3m. In addition, TUSD 69.0 were recognised as transaction costs incurred during the acquisition process.

As the acquired assets meet the requirements of IFRS 3, Appendix A regarding the recognition as a business, a purchase price allocation in accordance with IFRS 3 is mandatory. To the acquisition date the purchase price amounted to T€ 5,329 and was attributed to intangible and other assets as follows:

Main items of the acquired assets relate to the customer base, which was acquired in form of customer lists Hologic, Inc. and the "R2 ImageChecker CT" software product.

Changes to intangible assets due to the capitalisation of development expenses – since the beginning of the financial year 2008 – can be broken down as follows:

Figures in T€ 30.09.2008 30.06.2008 31.03.2008 31.12.2007
Total research and development expenses 3,042 2,093 1,049 2,830
thereoff capitalised 1,797 965 492 0
Rate of capitalisation 59.1% 46.1% 46.9% 0.0%

5. Other current financial assets

Figures in T€ 30.09.2008 30.06.2008 31.03.2008 31.12.2007
Other marketable securities 0 0 1.784 0
Derivatives 18 121 188 512
Promissory note loan ("Schuldscheindarlehen") 5.000 0 0 0
Loans and receivables 808 657 163 47
5.826 778 2.135 559

During the third quarter of 2008 a promissory note loan ("Schuldscheindarlehen") to the sum of € 5.0m, bearing an annual interest of 5.19% was acquired. The date of maturity is March 2, 2009. The loan is classified as "Loans and Receivables" and is valued at historical costs.

Derivatives relate to forwards and options used for currency hedges and have been stated at fair value affecting net income.

mevis medical solutions ag interim report Q3 2008 consolidated notes

6. Other financial liabilities

The changes to other financial liabilities mainly result from the liability of MMS, Inc. due to the acquisition of the "R2 ImageChecker CT" software product. The purchase price amounted to USD 9.0m of which USD 3.0m have already been paid during the second quarter of 2008. The remaining liability has been stated at fair value using a 7.5% discount rate. At the balance sheet date the liability amounts to USD 5.5m.

In addition, the last repayment installment regarding the loan granted to MMS AG by MBC KG to the sum of T€ 735 has been repaid prior to maturity from dividend payments made by MBC KG on the basis of the loan agreement in between MMS AG and MBC KG.

7. Provisions for pensions

The provisions for pensions to the sum of T€ 19 relate exclusively to provisions for performance oriented pension benefit plans. On the basis of these benefit plans, employees are entitled to payments equalling the deferred compensation and an annual rate of interest of 4%.

Valuation and recognition of pension liabilities and required expenses to cover these liabilities is carried out by the use of the projected unit credit method as prescribed by IAS 19 "Employee Benefits".

8. Related parties

With regard to transactions with related parties no significant changes have occurred since the financial year ended December 31, 2007.

As at September 30, 2008, the financial receivables and liabilities due from and owing to members of the Management and Supervisory Boards are deemed to be non-material by the MeVis Group.

As at September 30, 2008 (December 31, 2007) the following receivables were due from and the following liabilities were owing to related parties:

Figures in T€ 30.09.2008 31.12.2007
MeVis Research GmbH
R
eceivables
396 188
Liabilities 458 1,205
Joint ventures
R
eceivables
247 431
Liabilities 85 780

9. Contingent receivables and liabilities

In comparison to the consolidated financial statements 2007, no changes to the contingent receivables and liabilities have occurred during the period under review.

10. Earnings per share

Earnings per share equal the profit on ongoing activities or the profit after tax respectively divided by the average, weighted number of shares outstanding during the period under review. Earnings per share (fully diluted) are calculated on the assumption that all securities, stock options and stock awards with a potentially dilutory effect are converted or exercised.

01.01.2008 – 01.01.2007 –
Figures in T€ 30.09.2008 30.09.2007
Consolidated net profit for the period 1,352 1,002
Weighted average of shares outstanding during the reporting period 1,694,369 529,496
Undiluted earnings per share in € 0.80 1.89
Number of dilutory shares under option 0 0
Number of shares that would have been issued at fair value 0 0
Total 0 0
Consolidated net profit for the period 1,352 1,002
Number of shares 1,694,369 529,496
Diluted earnings per share in € 0.80 1.89

11. Segment information

The MeVis Group is classifying its revenues with external customers in two segments ("Digital Mammography" and "Other Diagnostics"):

mevis medical solutions ag interim report Q3 2008 consolidated notes

Primary segmentation

Segment report for the period ended September 30, 2008

Digital Other Others /
Mammog raph
y
Diagnost
ics co
nsol
idat
ions
MeVis Group
01.01. – 30.09. 01.01. – 30.09. 01.01. – 30.09. 01.01. – 30.09.
Figures in T€ 2008 2007 2008 2007 2008 2007 2008 2007
External revenues 4,900 4,239 3,032 1,953 0 0 7,932 6,192
Intersegment revenues 0 10 0 0 0 -10 0 0
Total revenues 4,900 4,250 3,032 1,953 0 -10 7,932 6,192
Grants 0 0 311 351 0 0 311 351
Sum of segment revenues 4,900 4,250 3,343 2,304 0 -10 8,243 6,544
Depreciation and amortisation -122 -143 -541 -126 14 42 -649 -226
Operating expenses -1,124 -1,400 -2,915 -1,516 0 0 -4,039 -2,916
Segment net profit and loss 3,654 2,707 -113 662 14 32 3,555 3,402
Other operating income 690 150 690 150
Other operating expenses -2,669 -1,751 -2,669 -1,751
Result of operating activities -1,965 -1,569 1,576 1,800

Secondary segmentation

Segment report for the period ended September 30, 2008

Figures in T€ 01.01. – 30.09. 2008 01.01. – 30.09. 2007
Europe 1,085 14% 1,224 20%
USA 6,847 86% 4,969 80%
Total segment revenues 7,932 100% 6,192 100%

12. Post balance sheet events (September 30, 2008)

Acquisition of all business activities with Hologic, Inc. by MMS AG

On October 21, 2008 MeVis Medical Solutions AG has signed an agreement with its joint venture partner Siemens Aktiengesellschaft concerning the complete separation of the business activities of the joint venture MeVis BreastCare GmbH & Co. KG with the industrial partner Hologic, Inc. and the ensuing acquisition of the share of these business activities held by Siemens Aktiengesellschaft through MeVis Medical Solutions AG.

This acquisition relates to the 49% stake held by Siemens in the assets of the joint venture MeVis Breast-Care GmbH & Co. KG concerning the business activities with Hologic, Inc.. As part of this transaction all rights (e.g. intellectual property, source codes, etc.) as well as all employees pertaining to the business with Hologic have been transferred to MeVis Medical Solutions AG.

The purchase price to the amount of at most € 17.5m is contingent upon the achievement of certain conditions and is payable over the course of the period from 2008 until 2015. The payment of the purchase price installments to Siemens is effected in cash until 2012 as well as in granting license credits to Siemens until 2015.

Share repurchase programme

By adoption of a resolution at the annual general meeting on July 9, 2008, MeVis Medical Solution AG was authorised to acquire up to 10% of its own subscribed capital as treasury stock in compliance with section 71, article 1, phrase 1, no. 8 of the German Stock Corporation Act ("Aktiengesetz") until January 8, 2010.

Based on this resolution and by assent of the Supervisory Board, the Management Board of MeVis Medical Solutions AG initiated a new share repurchase programme on November 4, 2008. On the basis of this share repurchase programme, the company intends to acquire 91,000 (ninety one thousand) additional shares (representing 5 percent of the subscribed capital) via the stock exchange until March 31, 2009. Private bank M.M. Warburg & Co. KGaA, Hamburg, was mandated to execute the share repurchase programme.

Bremen, November 20, 2008 MeVis Medical Solutions AG

Dr. Carl J.G. Evertsz Dr. Olaf Sieker Thomas E. Tynes

President & CEO CFO COO Sales and Marketing

Disclaimer

Future related statements

This Interim Report contains future-related statements that are based on current assessments of the Management on future developments. Such statements are subject to risks and uncertainties that lay outside the scope of control or precise assessment of MeVis Medical Solutions AG for example in connection with the future market environment and the economic conditional framework, the behaviour of other market participants as well as measures taken by government offices. If one of these or other uncertainty factors and imponderables should arise or should the assumptions on which these statements are based turn out to be incorrect, the actual results may differ significantly from the results explicitly specified or implicitly contained in these statements. MeVis Medical Solutions AG neither intends to update future-related statements nor does it assume any specific or separate obligation to update such statements in order to adjust them to events or developments after the date of this report.

Deviations for technical reasons

For technical reasons (e.g. conversion of electronic formats) deviations may arise between the accounting documents contained in this Interim Report and those submitted to the electronic Federal Gazette. In this case the version submitted to the electronic Federal Gazette shall be considered the binding version.

The Interim Report is also provided as an English translation. In the case of differences, the German version of the Interim Report shall apply instead of the English translation.

The Interim Report is available for downloading in both languages on the Internet at http://www.mevis.de/mms/Finanzberichte.html.

Investor Relations Universitätsallee 29 28359 Bremen Germany

Phone +49 421 22495 - 63 Fax +49 421 22495 - 11

www.mevis.de [email protected]

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