ContextVision AB — Interim / Quarterly Report 2010

Oct 21, 2010

CONTEXTVISION

IMAGE IS EVERYTHING

CONTEXTVISION AB FINANCIAL RESULTS

CONTEXTVISION AB

THIRD QUARTER 2010

Q3 HIGHLIGHTS

• First real-time 3D volumetric image enhancement order received
• Further sales growth during Q3 and increased profitability
• Anita Tollstadius appointed CEO of the company

Q3 FINANCIAL DATA

• Sales of 13.7 MSEK (10.6)
• Operating result of 2.1 MSEK (0.1) and result before tax of 2.1 MSEK (0.1)
• Earnings per share of 0.20 (0.01) SEK

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CONTEXTVISION AB-THIRD QUARTER 2010 FINANCIAL RESULTS-PAGE 2 OF 2

MANAGEMENT COMMENT

ANITA TOLLSTADIUS, THE COMPANY'S CEO COMMENTED:

Sales during the third quarter were in line with expectations and we are pleased that we have made up for the sales drop during the first half of this year. The markets in Asia continue to grow, whereas the US market is still experiencing a continued financial pressure. In Europe, the market is gradually recovering and our sales are growing. It is also encouraging that we are getting results from our efforts in Russia over the last few years and a new customer started to place orders for our mammography product during the third quarter. Operating profit ended on 2.1 MSEK showing a margin of 15%, which again is an improvement compared to the last quarters.

In early July this year, the company announced that a memorandum of understanding was signed with a large and fast-growing medical equipment manufacturer. Major efforts are being made to finalize a strategic agreement and we are hopeful to make an announcement in this regard shortly.

A major commercial milestone was achieved earlier this quarter as we signed our first license agreement for our new ultrasound 3D enhancement product (GOPiCE®US) with Medison Co.,Ltd. of South Korea. This newly developed technology allows for real-time 3D volumetric image enhancement. During the recent International ultrasound congress ISOUG in Prague, the GOPiCE®US stirred great interest by many of the market leaders particularly within the Obstetrics and Gynecology segment, in which the clinical use of volume ultrasound (3D/4D) data has become a focus point among physicians and thus more frequently used.

With further development the GOPiCE technology can be applied on any modality. The company is currently conducting a clinical study, designed to establish the clinical utility of the GOPiCE technology for MRI applications.

In early October a core team within the R&D organization completed the development and launched a completely new product platform for current and future ContextVision image enhancement products. This platform has been designed to meet the latest and future processor standards, e.g. multicore and 64-bit processors. The new platform has superior performance characteristics and is more flexible, which will allow us to target a wider range of systems, e.g. interventional mobile systems. It allows faster implementation of new products, updates and installations which will enable us to have shorter time to market.

We have also prepared for further sales potential within the CT segment. Following the liquidation of Sharpview the exclusive rights of selling GOP-based solutions to the end-user market was returned to ContextVision. Since then we have also acquired the technology developed by Sharpview, which allows us to offer an update package for CT to OEM customers. We are now in the process of developing such an Upgrading Product for the OEM market.

During the third quarter there were several changes in the organization.

Anita Tollstadius, previous chairman, was appointed CEO in September and Board member Erik Danielsen was appointed new chairman.

A new Strategic Team has been set up within the company, in order to ensure the implementation of our growth strategy.

Further changes have been made within the organization, in order to improve the productivity in the product development process.

These changes were made in order to ensure long term development of the company and future growth.

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CONTEXTVISION AB | THIRD QUARTER 2010 FINANCIAL RESULTS | PAGE 3 OF 3

NET SALES AND OPERATING PROFIT

THIRD QUARTER 2010

NET SALES

• Quarter three sales for ContextVision were 13.7 MSEK, compared to 10.6 MSEK prior year.
• Over the first nine months of the year, sales are 38.4 MSEK (38.7).

OPERATING PROFIT AND MARGIN

• The operating result was 2.1 MSEK (0.1) with an operating margin of 15.4% (0.7%).

CASH-FLOW AND FINANCING

• Cash flow from operations represented an increase of 2.8 MSEK (-2.3), due to positive result and prepaid customer orders.
• Cash amounted to 16.6 MSEK (13.8) at period end.
• Equity at period end amounted to 37.2 (41.3) MSEK giving an equity ratio of 75% (84%).

EMPLOYEES AND MANAGEMENT

• The company's executive chairman, Anita Tollstadius, was appointed as CEO by a board decision on the 10th of September. As a consequence, Tollstadius leaves her position as the Chairman of the board.
• At the same board meeting, Erik Danielsen was appointed to be the new Chairman of the board.
• The board is from now operating with three board members, Erik Danielsen, Magne Jordanger and Martin Hedlund.
• At period end the company had 36 (37) employees of which 15 are dedicated to research and development. Three employees are located in the United States of America and one in China.

CONTEXTVISION GROUP

• The group consists of ContextVision AB (publ), company registration number 556377-8900 as the parent company, and ContextVision Inc Corp registration number 36-4333625 State of Illinois, USA, as the wholly owned subsidiary.

BUSINESS OPERATIONS

• Sales by region for the quarter are as follows (MSEK): Asia 5.9, Europe 4.7 and USA 3.1.
• Sales by product for the quarter are as follows (MSEK): Ultrasound 8.1, X-Ray 1.9 Magnetic Resonance 2.1 and Other 1.6 (other consists of GOPView iRV, GOPView CT and GOPView MAMMO).

RISKS & UNCERTAINTIES

• Consolidation of the medical business occurs on a regular basis with the general purpose of enhancing technical competence and gaining market shares, at the same time as competition decreases. Besides consolidations, new players enter the market and challenge the established actors. The trends above represent both threats and opportunities for ContextVision.
• The quarter report provides a fair and true overview of the company's and the Group's activities, position and results, and describes the risks and uncertainties of significance faced by ContextVision and by the companies in the Group.

The Board of Directors of ContextVision AB
Stockholm 2010-10-21

This report has not been reviewed by the company's auditors.

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CONTEXTVISION AB | THIRD QUARTER 2010 FINANCIAL RESULTS | PAGE 4 OF 4

PRESENTATION AND REPORTING DATES

This quarterly report will be published on the company's website on the 21:st of October.

There will be a webcast presentation released on the 22:nd of October, at 09.00 CET.

Please follow the link: http://cikmedia.serialive.com/embed.php?id=56512

Please visit www.contextvision.com for further information, or use shareholderinfo@contextvision.se to send a question directly to management.

REPORTING DATES
| Q3 result 2010 | October 21, 2010 |
| --- | --- |
| Q4 2010 and annual result 2010 | February 17, 2011 |

FOR MORE INFORMATION PLEASE CONTACT:
Anita Tollstadius, CEO
Phone +46 (0)8 750 35 59

CONTEXTVISION FAST FACTS

• ContextVision is a spin-off from the Image Processing Laboratory at Linköping University, Sweden. The corporate identity was established in 1983 with the first OEM agreement in radiology in 1987. ContextVision is traded on the Oslo Stock Exchange since 1997.
• ContextVision enhances significant information in digital images using proprietary GOP technology.

THE COMPANY OFFERS:

• More than 25 years successful experience in OEM business
• Unprecedented image enhancement for X-Ray, MRI, CT, and ultrasound images
• Long standing corporate commitment to R&D that ensures timely and rewarding upgrade paths
• Strong customer relationships to ensure their success
• Expert training in image processing for our customers
• Compatibility across any image format and all major computer platforms
• ContextVision's technology enables the company's customers to provide superior digital imaging solutions for hospitals and clinicians. Such solutions promise more rapid and accurate diagnoses, reduced operator eye fatigue, and ultimately, a greater return-on-investment for medical imaging users.

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CONTEXTVISION AB | THIRD QUARTER 2010 FINANCIAL RESULTS | PAGE 5 OF 5

INCOME STATEMENT (SEK 1000)

	Q3 2010	Q3 2009	NINE MONTHS 2010	NINE MONTHS 2009	2009
Net sales	13 656	10 638	38 439	38 652	54 731
Total revenues	13 656	10 638	38 439	38 652	54 731
Goods for resale	-324	-334	-1 012	-781	-1 489
Other external costs	-3 173	-3 146	-10 968	-12 198	-17 950
Personnel costs	-7 147	-6 418	-20 662	-22 793	-29 882
Depreciation assets	-906	-666	-2 276	-1 966	-2 805
Result from associated company 1/	–	–	-5 426	–	–
Write-down of intangible assets	–	–	–	–	-1 933
Operating results	2 106	74	-1 905	914	673
Interest income	–	–	59	343	341
Interest costs and similar profit/loss items	-9	-16	-16	-17	-20
Write-down of assets held for sale	–	–	–	–	-8 973
Results after financial items	2 097	58	-1 862	1 240	-7 979
Tax	-582	-4	-903	-381	-273
Net results	1 515	54	-2 765	859	-8 252
Earnings per share after tax, SEK	0,20	0,01	-0,36	0,11	-1,05

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (SEK 1000)

	Q3 2010	Q3 2009	NINE MONTHS 2010	NINE MONTHS 2009	2009
Effect of currency hedging	–	1 190	-598	1 136	2 326
Fair value adjustment of assets available for sale	–	-327	–	-3 982	-4 368
Fair value adjustment for assets available for sale transferred to the income statement during the period	–	–	–	–	8 973
Translation difference	-186	-105	-89	-132	-87
Total other comprehensive income	-186	758	-687	-1 788	6 634
Net result for the period	1 515	54	-2 765	859	-8 252
Total comprehensive income for the period	1 329	812	-3 452	-929	-1 618

FINANCIAL HIGHLIGHTS

	Q3 2010	Q3 2009	NINE MONTHS 2010	NINE MONTHS 2009	2009
Earnings per share after tax, SEK	0,20	0,01	-0,36	0,11	-1,05
Operating margin (per cent)	15,4	0,7	-5,0	2,4	1,2
Solidity (per cent)	79,6	84,0	79,6	84,0	81,7

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CONTEXTVISION AB | THIRD QUARTER 2010 FINANCIAL RESULTS | PAGE 6 OF 6

CONSOLIDATED BALANCE SHEET (SEK 1000)

	Q3 2010	Q3 2009	2009
Intangible fixed assets	11 583	13 017	11 247
Tangible assets	1 324	1 592	1 438
Participation in associated companies	–	–	1 426
Long-term receivables from associated companies	–	–	2 000
Other financial assets	50	1 862	50
Inventories	372	707	404
Current receivables	16 783	18 530	23 185
Cash and bank	16 644	13 821	10 067
Total assets	46 756	49 529	49 817
Equity	37 226	41 367	40 678
Provisions	874	1 162	1 088
Current liabilities	8 656	7 000	8 051
Total equity and liabilities	46 756	49 529	49 817

CHANGE IN EQUITY (SEK 1000)

	Q3 2010	Q3 2009	NINE MONTHS 2010	NINE MONTHS 2009	2009
Opening balance	35 897	40 555	40 678	49 535	49 535
Total comprehensive income for the period	1 329	812	-3 452	-929	-1 618
Repurchase of own shares	–	–	–	-7 239	-7 239
Closing balance	37 226	41 367	37 226	41 367	40 678

1) THE SHARPVIEW INVESTMENT

During the 2nd quarter associated company Sharpview AB publ went into bankruptcy. As a consequence Contextvision has as of June 30, 2010 written down all assets related to Sharpview to zero based on the assumption that it is not likely that any assets will be recoverable following the bankruptcy. This implies that the equity investment in Sharpview has been written off by 1.161 TSEK and outstanding receivables on Sharpview by 4.000 TSEK, totaling 5.161 TSEK, during the 2nd quarter 2010.

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CONTEXTVISION AB:THIRD QUARTER 2010 FINANCIAL RESULTS:PAGE 7 OF 7

CONSOLIDATED STATEMENT OF CASH FLOWS (SEK 1000)

	Q3 2010	Q3 2009	NINE MONTHS 2010	NINE MONTHS 2009
Result after financial items	2 097	58	-1 863	1 240
Depreciation and write-down of assets	907	666	2 279	1 698
Result from participation in associated company	–	–	5 426	–
Unrealized gain/loss on current investments	–	1 139	-598	-280
Changes in provisions	–	425	-214	875
Income tax paid	-955	-616	-2 025	-8 001
Cash flow from operating activities before change in working capital	2 049	-606	3 005	-4 198
Change in working capital
Increase (-)/decrease (+) inventories	-43	95	32	-278
Increase (-)/decrease (+) current receivables	352	1 376	7 481	1 066
Increase (+)/decrease (-) liabilities	995	-2 444	560	-3 241
Cash flow from operating activities	3 353	-1 579	11 078	-6 651
Investing activities
Investments in intangible assets	-470	-706	-2 202	-3 421
Investments in tangible assets	-68	1	-299	-272
Investments in financial assets	–	–	-2 000	–
Short-term investments	–	–	–	15 202
Cash flow from investing activities	-538	-705	-4 501	11 509
Financing activities
Repurchase of own stock	–	–	–	-7 239
Cash flow from financing activities	0	0	0	-7 239
Cash flow for the period	2 815	-2 284	6 577	-2 381
Change of liquid assets
Liquid assets at beginning of period	13 829	16 105	10 067	16 201
Liquid assets at period end	16 644	13 821	16 644	13 821

BASIS OF PREPARATION
The interim condensed consolidated financial statements for the 2:nd quarter ended June 30, 2010 have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as of 31 December 2009.

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CONTEXTVISION AB | THIRD QUARTER 2010 FINANCIAL RESULTS | PAGE 8 OF 8

GLOSSARY

CT (COMPUTED TOMOGRAPHY)

A diagnostic device through which a two-dimensional cross-sectional image of the studied tissue is obtained using X-rays.

DR (DIRECT RADIOGRAPHY)

A detector that converts X-ray photons into digital signals, replacing the need for X-ray films.

FLUOROSCOPY

An X-ray imaging technique that produces real-time images of a patient's internal structures on a TV monitor. Fluoroscopy allows the study of dynamic processes within the body and can be used for guidance in interventional procedures.

GOP® (GENERAL OPERATOR PROCESSOR)

A term for ContextVision's methodology in detecting structures in an image and relating them to their wider context in order to increase visualization accuracy.

GOPICE® (IMAGE CUBICLE ENHANCEMENT)

GOPiCE® is the family name for ContextVisions real-time 3D volumetric image enhancement product, for OEM embedded software.

GOPVIEW®

The family name for ContextVision's product lines of OEM-embedded software.

HCU (HAND CARRIED ULTRASOUND)

A portable, battery-powered ultrasound machine no larger than a briefcase.

IMAGE ANALYSIS

Processing a digital image in order to describe/classify its contents or to extract quantitative measurements.

IMAGE PROCESSING

A generic term used to describe the computation of digital images, typically to enhance or analyze them.

IMAGE ENHANCEMENT

To improve the visual quality of a digital image by increasing the visibility of relevant structures, as in edge/contrast enhancement and the suppression of noise or artifacts.

MAMMOGRAPHY

An X-ray method used to examine the human breast.

MODALITY

A device that generates internal images of the body, such as X-ray, ultrasound, magnetic resonance imaging, and computed tomography.

MRI (MAGNETIC RESONANCE IMAGING)

A non-invasive procedure, generated by variations in strong magnetic fields, that produces a two-dimensional view of an internal organ or structure, especially the brain and spinal cord.

OEM

The acronym for Original Equipment Manufacturer.

US (ULTRASOUND)

A procedure in which high-energy sound waves are bounced off internal tissues or organs to create echoes. The echo patterns are displayed on the screen of an ultrasound machine, forming a picture of body tissues called a sonogram.

X-RAY

A diagnostic device in which radiation is used to create images for examination of soft and hard tissue, such as muscle and bone.

ContextVision is the leading independent developer in medical imaging enhancement, analysis and processing technologies, serving leading OEMs and distributors for 25 years. ContextVision's embedded imaging software is relied upon daily by thousands of users around the globe. ContextVision's patented GOP algorithm allows unprecedented image quality to be achieved by simultaneously enhancing fine structure while reducing noise and speckle across MRI, X-Ray, Ultrasound, CT, and IR. ContextVision's technology enables the company's customers to provide superior digital imaging quality to hospitals and clinicians. Such solutions promise more rapid and accurate diagnoses, reduced operator eye fatigue, and ultimately, a greater return-on-investment for medical imaging users. For more information, please visit www.contextvision.com.

EUROPE/HEAD OFFICE//CONTEXTVISION AB, CORP. SALES AND MARKETING, KUNGSSATAN 58, SE-111 35 STOCKHOLM, SWEDEN, PHONE: +45 8 758 35 58, FAX: +45 8 758 54 94
RUSSIA//CONTEXTVISION, VALERIA REZNICHENKO, SWEDISH TRADE COUNCIL, ST. PETERSBURG, RUSSIA, PHONE: +7 812 329 2513, FAX: +7 812 329 2597
NORTH AMERICA//CONTEXTVISION INC, 36 BLEN AVENUE, NEWTON, MA 02459-2866, USA, PHONE: +1 617 244 9888, FAX: +1 617 244 9888
ASIA//CONTEXTVISION AB, ASIA SALES, KUNGSSATAN 58, SE-111 35 STOCKHOLM, SWEDEN, PHONE: +45 8 758 35 58, FAX: +45 8 758 54 94
SOUTH KOREA//CONTEXTVISION, BONDSON PARK, SWEDISH TRADE COUNCIL, KPO BOX 4, SEOUL 118-618, SOUTH KOREA, PHONE: +82 2 739 1462, FAX: +82 2 739 1463
CHINA//CONTEXTVISION, 615 CYTO PLAZA, NO.5 DONSINIMEN SOUTH AVENUE, DONGCHENG DISTRICT, BEIJING 188887, P.R.CHINA, PHONE: +86 18 5915 6256, FAX: +86 18 5915 6255
JAPAN//TOYO CORPORATION, 1-6, YAESU 1-CHOME, CHUO-KU, TOKYO 183-8294, JAPAN, PHONE: +81 3 3245 1351, FAX: +81 3 3271 4757

INTERNET//INFO@CONTEXTVISION.SE//WWW.CONTEXTVISION.COM