Idex is a company specialising in on-screen - otc.nfmf.nootc.nfmf.no/public/news/2267.pdf · Idex...

Idex is a company specialising in on-screen

navigation and fingerprint recognition

technology, the leading field in the high

growth biometrics industry. Our goal is to be

the leading provider of intellectual property

rights (IPR) in this field.

We continue to invest in biometric research

and development and engage in partnerships

with leading producers of semi-conductors

who have the organisation and facilities to

mass produce and market the technology

world-wide.

Revenues will be generated from license fees

on IPR via both third party funding of joint

development with our partners, and royalty

payments on individual module shipments.

IDEX ASAIT FornebuMartin Linges vei 25N-1367 Snarøya

Telephone: (+47) 67 82 72 80Fax: (+47) 67 82 72 88

Web: www.idex.no

Design by D

inamo Effekt, N

orway

SmartFinger sensor:

IdentificationNavigator

Pointing deviceAuthorization

3IDEX ANNUAL REPORT 2003

General introduction 4

Technical update 5 - 6

Sales and Market update 7

Partnership update 9

Report of the Board of Directors for 2003 10 - 12

Profit and Loss Account for IDEX 14

Statement of Financial Position 15 - 16

Statement of Cash Flows 17

Notes to the Financial Statements 18 - 23

Auditor’s report 24

Table of Contents

Biometr ics

The information age is quickly revolutionizing the way

transactions are completed. Everyday actions are incre-

asingly being handled electronically, instead of with

pencil and paper or face to face. This growth in electro-

nic transactions has resulted in a greater demand for

fast and accurate user identification and authentication.

Biometric technology is a way to achieve fast, user-

friendly authentication with a high level of accuracy.

Only biometric authentication

bases identification on

an intrinsic part of

a human being.

Tokens, such as smart cards, magnetic stripe cards and

physical keys can be lost, stolen, duplicated, or left at

home. Passwords and PIN-codes can be forgotten, sha-

red or observed. While all biometric systems have

advantages and disadvantages, there are common

characteristics needed to make a biometric

system usable. The biometric must be based upon a

distinguishable trait and for nearly a century, law

enforcement has used fingerprints to identify people.

There is a great deal of scientific data supporting the

idea that no two fingerprints are alike.

IDEX specialises in Fingerprint Technology.

SmartFinger sensor:

Gaming deviceMicro MouseBiometric ID

Security

General int roduct ion

Idex is a company specializing in on-screen navigation

and fingerprint recognition technology, the leading field

in the high growth biometrics industry. The Company’s

goal is to be the leading provider of intellectual proper-

ty rights in this field. The Company’s business plan is to

design components, then engage in license agree-

ments and development partnerships with leading pro-

ducers of semi-conductors, who have the organization

and facilities to mass produce and market Idex techno-

logy worldwide.

Idex’ core Smartfinger technology for the fingerprint

capturing system comprises an AC capacitive stripe

scanner. During operation a low-level AC current is intro-

duced to the user’s finger, providing a unique

signal/noise ratio. As the user draws a finger over the

sensor surface of the scanner, a row of sensor elements

measure the distance between the sensor surface and

the ridges and valleys of the finger surface. Additional

sensor elements are used to detect the speed of the

finger, and from this the image is re-sampled to create

an image equally scaled in both axes.

Idex’s revolutionary Smartfinger technology has the

inherent advantages of;

• Combining biometric verification and identification

with on-screen navigation capabilities,

• Being small in size which is of great advantage in

mobile telephony and any small electronic devises

where “real estate” is expensive,

• Being “solid state” which makes it robust and

provides for low power consumption,

• Being cheap to mass produce requiring only one

18 mm2 ASIC per unit.

General int roduct ion

The main technical activities during 2003 were based on

the re-spin of the fingerprint sensor in accordance with

the ST Microelectronics (STM) contract. During the re-spin

all the technical flaws were fixed and in October 2003

Idex had fully working sensors available for testing.

Another major technical achievement in 2003 was the

development of a Technology Evaluation Kit (TEK)

based upon a USB solution. This has put Idex in the

position of being able to ship sensors to potential cus-

tomers for testing and evaluation.

During 2003 Idex initiated several new projects with

focus on improving the technology. This is part of an

ongoing process vital in maintaining Idex’s position as

the leading provider of intellectual property within the

field of fingerprint swipe sensors.

The “first spin” of the sensor for the SmartFinger

module was concluded, under Idex’s contract with ST

Microelectronics in February 2003. The first series of

SmartFinger modules showed design faults and during

testing malfunctions were observed that affected the

image quality for certain finger types and the robust-

ness of the pointer functionality.

Following this failure Idex decided to re-spin a new

batch of sensors comprising six different designs opti-

ons. The sensors were re-spun at STMicroelectronic’s

plant in Tours, France a facility which specialises in pro-

ducing sensors. STM’s unique Via process was employ-

ed to link the sensor to the control ASIC. The sensors

were then sent to STMicroelectronics in Grenoble for

mounting and assembly. A full testing programme was

run on the Smartfinger modules to establish if any of

the new designs had resolved the previously identifi-

ed problems. Initial tests showed that two design

alternatives seem to have overcome the previous

design errors. After a meeting with STMicroelectronics

in Tours in early October 2003 it was decided to pro-

ceed to process the remaining wafers using the two

successful designs. This is estimated to give us chips in

sufficient numbers to send to customers for further

testing and evaluation.

Initial test results have left us cautiously optimistic that

our re-design work has been successful but we have

further work to do on the packaging solution (to

enable volume manufacturing) and on the coating pro-

perties for wear ability and robustness. Work is contin-

uing in both areas.

In June 2003 we finalised the design of a USB perip-

heral (Universal Serial Bus) and in September 2003 we

assembled the components into a working device. This

latest design contains the sensor, mounted inside a

module and USB communication between the module

and a PC. An installation program has been written

which installs all necessary software on the PC from an

accompanying CD. Together the USB peripheral and the

installation CD will make up Idex’ Technology

Evaluation Kit (TEK). The TEK can be shipped to poten-

tial customers or partners who would like to evaluate

the technology.

Work in this area was identified in the 2002 Annual

Report and we are pleased to report that in May 2003

the first step towards this goal was achieved. One of

the algorithms was successfully encoded in VHDL (Very

High Speed Integrated Circuit Hardware Description

Language) and implemented in an FPGA (Field

Programmable Gate Array). This work gives Idex a


Technica l update

Int roduct ion

Re-Spin of Sensors

USB Per iphera l

DHW (Direct hardware)

unique position in the market as we are the only com-

pany that is able to successfully port sensor specific

algorithms to hardware and include them into the sen-

sors ASIC. From a mobile handset manufacturers per-

spective this means they can save on power con-

sumption from the device as this can now be derived

directly from the ASIC.

Idex has continued work to develop a

robust coating technology for the sen-

sor. In addition to being more wear-

resistant, the new coating material

also enhances the image quality. We

are working with a number of diffe-

rent specialist research companies in

this field and whilst the research has

been time consuming, early results indicate that we

are on the right track.

Idex has developed a packaging solution for the sen-

sor where the sensor is molded in plastic. The packa-

ged sensor is only 0.7 mm thick and can be mounted

directly onto a circuit board. The plastic package can

replace or be used in conjunction with the former

“elastomer” packaging solution. This new packaging

concept is more robust and makes it easier for poten-

tial customers to implement the sensor into cellular

phones, smart phones and PDAs.

Idex has continued to work on improving the sensor

specific algorithms during the last year. Specifically, we

have put much effort into improving the image recon-

struction algorithm. This algorithm combines each line

scanned by the Smartfinger‘ sensor into a true image

of the finger. The improvements made during the last

period gives Idex the most flexible fingerprint swipe

sensor solution on the market. Now, the sensor hand-

les finger swiping speeds varying from 0-56 cm/s and

finger swiping directions deviating as much as 40∞

from the direction of the sensor line. Work is ongoing

to include this algorithm into the ASIC of the sensor.

Idex has also focused resources on improving the poin-

ter algorithm for on-screen navigation. This algorithm

enables the user to work the sensor as a mouse. We

have implemented scrolling which makes the pointer

more user-friendly especially when navigating on

large screens. More features will be added in order to

make the Idex sensor the ultimate choice for hand-

held devices enabling simple navigation through

menus and advanced gaming.

One of the strengths of any company involved in tech-

nology development lies in its intellectual property

rights (IPRs). Idex has worked closely with Sintef

(Norway’s SINTEF Group is the largest independant

research organization in Scandinavia) since 1997 and

has an exclusive world wide license to use, develop

and commercially exploit Sintef’s main patent relating

to fingerprint recognition devices. During the period

Idex has filed an additional 4 patent applications and

withdrawn 1 which means the company has a total of

23 separate patents either granted or pending in addi-

tion to the Sintef agreement.

Technica l update

6 IDEX ANNUAL REPORT 2003

Packaging

Coat ing issues

Algor i thms

Patents


During the period IDEX has been present

at the following trade shows:

Cartes 2003

Paris, France

Biometrics 2003

London, England

Consumer Electronics Show

Las Vegas, USA

GSM World Conference

Cannes, France

Cebit

Hanover, Germany

We continue to address the same market

segments

• PDA

• Smart Cards and Payment processing

• Wireless/Cell Phone

• PC and Lap Top

• Biometric Software

• Foundries

After a year of strong growth for the Mobile

Handset market in 2003, which saw sales above

460 million units the market is forecast to expand

in 2004 to over 500 million units as shipments of

2.5G and 3G mobiles accelerate worldwide (source

Gartner). This is of course one of Idex’ main target

markets together with the lap Top, PDA, AND Smart

Card markets.

Idex is now in the position of having produced wor-

king prototypes which prove the technology and

highlight the inherent advantages of the technolo-

gy. Moreover, Idex now has the means to demon-

trate the technology to partners who may also con-

duct their own testing and evaluation. Looking for-

ward into 2004 Idex will be focused on taking the

technology to partners as the best route foward to

commercial production. In-house the Company will

maintain its research and development efforts in

keeping the core technology at the cutting edge.

Future Out look Sales and

Market update

Sales & Marketing update

Sales & Marketing update

The Idex SmartFinger“ module was presented at the

International Solid-State Circuits Conference (ISSCC

2003) February 9-13 2003, San Francisco, CA.

The conference covered the most advanced solid

state circuits, spanning from microprocessors opera-

ting at 5GHz, to non-volatile memory including the

use of novel 3-D architectures, to fingerprint sen-

sors, MEMS/BioMEMS/implantable devices and RF

circuits for next generation mobile phones.

For IDEX and SINTEF the conference had a special

signification since the presentation was the first

from a Norwegian company in the 50 years history

of the Conference.

The quality of 2003 technical papers was extremely

high, continuing the tradition of excellence long

associated with ISSCC. The acceptance of the paper

is recognition for the originality of the SmartFinger®

module developed by IDEX, SINTEF and ST

Microelectronics.

The SINTEF 2003 Award for Outstanding Research

has gone to four scientists who have been central to

the development of the SmartFinger Module. The

award winners have won international recognition

for developing a system which is both inexpensive

and robust.

The four prize-winners, Ovidiu Vermesan and Helge

Rustad at SINTEF and Sigmund Clausen and Jon B.

Nysæther at IDEX, have played a key role in the

development process within their own area of

expertise.

Conference Presentation

The S INTEF 2003 Award

for Outstanding

Research:


Partnership update

STMicroelectronics (ST), the world’s third largest

independent semiconductor company, is a global

leader in developing and delivering semiconductor

solutions across the spectrum of microelectronics

applications.

Bård Eker Industrial Design (BEID) develop

complete products from idea to industrialisation

and has expertise within industrial design,

mechanics, thermal engineering, electronics

and optics.

Kitron Development in Norway and Sweden is one

of the major R&D pools in Scandinavia, comprising

more than 180 engineers. We hold competences

within microelectronics, electronics and mechatro-

nics. In addition we have unique access to produc-

tion competence and facilities through our owner

Kitron ASA, the second largest electronic products

manufacturer in Scandinavia.

Kitron Development have services within develop-

ment and re-engineering of complete electronic

products or sub systems like electronic modules,

enclosures or software modules. We also perform

feasibility studies and consultancy on per hour

basis. Kitron Development is ISO 9001: 2000

qualified.

IDEX ASA has had extensive collaboration with the

Bioimpedence Group of the Department of Physics,

University of Oslo. This group’s expertise from

more than 20 years of active research on the

electrical properties of biomaterials, and in particu-

lar human skin, has enabled further development in

areas like sensor layout optimisation and live fing-

er detection.

SINTEF is one of Europe’s larger Advanced Research

Centers with more than 1600 employees. IDEX

continue to work with the Electronics/Cybernetics

Institute on the Smartfinger® development.

Partnership update


Idex ASA is a Norwegian research and development

company specialising in on-screen navigation and

fingerprint recognition technology, the leading field of

endeavour in the high growth biometrics industry. The

Company’s goal is to be the leading provider of intel-

lectual property in this field. The Company’s business

plan is to design and prove leading edge fingerprint

technology and to patent and protect the Intellectual

Property Rights (IPR) to this technology. Idex will then

engage in licence agreements and development part-

nerships with the leading producers of semi-conduc-

tors, who have the organization and facilities to mass

produce and market Idex technology worldwide. Idex

is a Norwegian public company, its activities are

based in Bærum and its shares are traded on the A

List of the Norwegian Stockbrokers Association OTC

List.

Activities in 2003

The period under review has been a frustrating period

for the Company as we waited for the results of the re-

spin program agreed with STMicroelectronics. During

this time we were unable to actively market the Idex

navigation and fingerprint capturing technology until

we were sure that the identified malfunctions in the

first spin of the technology had been corrected in the

re-design.

By year-end we had received the first batch of the re-

designed sensors. Initial testing has left us optimistic

that our re-design work has been successful but rese-

arch is continuing on both coating and packaging solu-

tions, activity which is covered in the technical activi-

ties report.

This situation has meant that the Company received no

revenues for the period as it was not possible to enter

into detailed negotiations with other chip manufacturers

before we could understand the results of the re-design

and demonstrate a fully working prototype to potential

partners.

The Company undertook both a Private Placing and

Rights Issue during the Third Quarter to strengthen the

Company’s Balance Sheet, to give the Company the

financial strength and resources to maintain its inde-

pendence from its business partners and to broaden its

shareholder base. The increased cash resource has

enabled Idex to continue its development program

and also to apply for additional patents for technology

in areas which enable us to be partner independent at

the technology level. The ongoing protection of our

Intellectual Property Rights (IPR) is essential to give us

the opportunity to enter into partnerships with other

international semi-conductor manufacturers.

As highlighted in the 3rd Quarter Report 2003 the Idex

Board felt it was appropriate to develop a level of

reporting which shareholders should expect from an

SMB listed company and sought permission from the

Oslo Stockbrokers Association to admit the Companys

shares to the ‘A’ list of the OTC List. The company’s sha-

res were admitted to the ‘A’ list on 2 February 2004.

Financial Statements

Idex had zero operating revenues in 2003 compared

with NOK 8,012,000 in 2002 this was a direct result of

the failure of the first batch of chips from

STMicroelectronics. The successful re-spin was delivered

too late in the year to have any effect on sales and

therefore revenues in 2003.

Manning was reduced from 17 to 6 during the year.

This reduced the payroll expense to NOK 4,310,714

compared to NOK 9,972,052 in 2002. In contrast and in

consequence external re-search and development

expenses increased from NOK 1,609,942 in 2002 to

NOK 4,347,991 as Idex replaced direct research capa-

bilities with external and consultant work. In both

2002 and 2003 Idex received NOK 800,000 in research

and development grants from Skattefunn such that net

research and development expenses were NOK

3,547,991 in 2003 verses NOK 809,942 in 2002.

Depreciation on fixed assets remained steady at NOK

378,771 against Nok 343,799 in 2002.

Report of the Board

of D i rectors for 2003


Other operating expenses in 2003 were NOK

5,206,673 against NOK 5,806,080 in 2002. One of the

components of these expenses was the lease costs on

the Company’s facilities at Asker. The lease

expired on 31 January 2004 and the facilities have

been moved to Fornebu at much reduced cost to be

reflected in the accounts for 2004.

Although Total operating expenses had been success-

fully reduced in 2003 to NOK 13,444,149 against NOK

16,931,873 in 2002 in response to the deteriorating

operating circumstances the failure to secure any reve-

nues meant that the Operating loss increased from

NOK 8,919,873 in 2002 to NOK 13,444,149 in 2003.

Net financial profit decreased to NOK 1,373,751

against NOK 1,665,712 in 2002. Interest income was

down significantly to NOK 1,392,107 from NOK

2,599,258 in 2002 as Idex’s cash balance dwindled and

interest rates fell during the year. This was partly com-

pensated by a reduction in Other financial expenses

which were cut from NOK 984,128 in 2002 to only NOK

14,342 in 2003.

Net loss for the year was NOK 12,070,398 against NOK

7,254,161 in 2002. The Board proposes to charge the

loss, in full, to the Share Premium Reserve.

Total cash and bank deposits were Nok 31,528,527 at

year-end compared to NOK 31,961,507 at year-end

2002. Idex raised NOK 7,816,989 net of expenses by

way of issuing new shares during the year.

Furthermore, the Company has warrants outstanding

which, if fully exercised, would raise a further NOK 15,

341,215 for the Company in the period up to 1 April 2006.

The Share Capital increased from NOK 3,985,634 at

year-end 2002 to NOK 5,579,888 at year-end 2003 by

way of Private Placement and Rights Issue, see below.

The Share Premium Reserve increased by NOK

6,377,012 as a result of the share issues, but, after

allowing for costs and Year-end allocation of Losses the

Year-end Share Premium Reserve stood at NOK

27,151,508 verses NOK 32,999,171 in 2002. The total

equity of NOK 32,731,396 of 31th December 2003 is

restricted. The annual report is issued assuming continu-

ed operation.

The Organisation

As reported last year, during a period of great uncer-

tainty, Idex reduced the number of staff it employed in

order to conserve resources. The cuts fell primarily

in the research department. At the end of the year, the

group had 5 employees – down from 17 at the end

of 2002. Idex also significantly reduced the amount of

subcontracting of tasks to outside research organisati-

ons. The Company does make use of consultants or

persons on temporary contracts as required.

The company practices equal opportunities in all

aspects. Traditionally, fewer women than men have

graduated or obtained a PhD degree in sciences rele-

vant for Idex’s activities: physics, chemistry and elec-

tronic components design. Because of the highly

specialised field of work, the candidates available for

recruiting have often been all male. The management

structure reflects the composition of the technical staff.

Since 2002, the Company has not recruited during the

year which limits the possibilities to balance the work-

force. All facilities are equally well equipped for both

women and men. There are no instruments, machinery

or tools that require particular strength or other physi-

cal ability. All assignments and training/development

activities are offered equally. The Company offers fle-

xible work hours to all employees, and staffs have

been equipped with home/portable office equipment.

The Board considers the equality as good as can be

and have not found reason to initiate any particular

program.

The lease on the offices in Asker terminated at the end

of January 2004 and the Company has moved into

smaller premises at IT Fornebu. The move generates a

significant cost saving in rent and services. The wor-

king environment at Idex is pleasant, stimulating and

safe, and beneficial for all employees. The working

environment complies in all respects with the relevant

laws and regulations. No specific actions have been


considered necessary. There have not been any injuries

to the company’s employees at the place of work

causing absence from work. No significant incidents

involving the company’s assets have occurred. The sick

leave remains less than 2%.

Shareholders

At the start of the year the share capital of the

Company was Nok 3,985,634 consisting of 7,971,269

ordinary shares in issue. During the year the Company

conducted shares capital increases totaling NOK

1,594,254 million by way of issuing new ordinary sha-

res. The issued share capital of the Company at year-

end 2003 was NOK 5,579,888 consisting of 11,159,774

ordinary shares, each share having a par value of NOK

0.50. There are also 7,293,012 warrants in issue. If all

of these warrants should be exercised the Company

would recieve total proceeds of NOK 18,492,530 and

the total number of shares in the Company would be

18,452,986. At 31st December 2003 the largest twenty

shareholders held 68,91% of the shares in issue compa-

red to 63.49% in 2002. The Board of Directors held a

combined 17,67% of the shares in issue against 16,41%

in 2002. There were a total of 658 share-holders in the

Company at year-end 2003 compared to 672 in 2002.

Outlook

Idex has developed an advanced technological appro-

ach to create a unique system which allows for finger-

print capturing and on-screen navigation within the

same module. The technology is based on a patented

miniaturised hardware solution driven by advanced

proprietary algorithms giving key advantages. The system

combines finger navigation with biometric verification

within a single module, it is miniaturised and suitable

for use on all advanced mobile/handheld devices, and

it is simple, robust and cheap to produce. The technology

is proven and now in late stage development.

During 2003 Idex reorganized, cutting costs, reduced

its research capabilities and it has now moved to new

offices. This leaves the Company in a position to better

pursue its business model of entering into license and

development agreements with partners to fully exploit

its IPR. The Company raised sufficient funds during the

year to ensure it has sufficient resources for the fore-

seeable future.

Idex’ target market is in all forms of hand held device.

After a year of strong growth for the Mobile Handset

market in 2003, which saw sales above 460 million

units the market, is forecast to expand in 2004 to over

500 million units as shipments of 2.5G and 3G mobi-

les accelerate worldwide. Other target markets inclu-

ding computer laptops, PDAs, and Smart Card are all

experiencing large annual growth rates.

As the economic outlook continues to improve, espe-

cially in our key markets, we are optimistic that Idex

can now benefit from an increase in our sales and

marketing efforts in promoting what is outstanding

technology in its field.

We would look to update shareholders with any deve-

lopments at the General Meeting.

Finally we would like to thank the staff and our part-

ners for helping to achieve the progress through a dif-

ficult period and we look forward to a renewed period

of growth and success.

The Board of Directors of Idex ASA

Bærum 11th June 2004

Morten Opstad

Chairman of the board

John Andrew Heap

Board member/CEO

Robert Keith

Board member

Thomas Fussell

Board member


F INANCIALSTATEMENT

• 2 0 0 3 •

14 IDEX ANNUAL REPORT 2003 – This translation from the official version is for information purposes only.

PROFIT AND LOSS ACCOUNT 1 JAN. - 31 DEC .

OPERATING REVENUE AND EXPENSES 2003 2002 2001

Operating income (Amount in NOK)

Sales revenue Note 10 0 8 012 000 8 921 375

Other operating revenue 0 0 1 586 836

Total revenues 0 8 012 000 10 508 211

Operating expenses

Payroll expense Note 3 4 310 714 9 972 052 8 899 254

Research and development expense Note 5 3 547 991 809 942 11 308 871

Depreciation expense Note 4 378 771 343 799 186 116

Other operating expenses Note 9 5 206 673 5 806 080 7 148 797

Total operating expenses 13 444 149 16 931 873 27 543 038

Operating loss -13 444 149 -8 919 873 -17 034 827

FINANCIAL INCOME AND EXPENSES

Interest income 1 392 107 2 599 258 3 526 651

Other financial income 0 51 558 10 500

Interest expense 4 014 976 942

Other financial expenses 14 342 984 128 21 093

Net financial profit 1 373 751 1 665 712 3 515 116

Net result before taxes -12 070 398 -7 254 161 -13 519 711

Taxes Note 6 0 0 0

Net loss for the year -12 070 398 -7 254 161 -13 519 711

COVER OF NET LOSS

Share premium reserve Note 7 12 070 398 7 254 161 13 519 711

Total disposition 12 070 398 7 254 161 13 519 711

15This translation from the official version is for information purposes only. – IDEX ANNUAL REPORT 2003

STATEMENTS OF F INANCIAL POSIT ION AS OF 31 DEC .

ASSETS 2003 2002

Long-term assets (Amount in NOK)

Intangible assets

Deferred tax asset Note 6 1 260 000 1 260 000

Total intangible assets 1 260 000 1 260 000

Fixed assets

Machinery and office equipment Note 4 623 681 1 002 452

Total fixed assets 623 681 1 002 452

Financial assets

Long-term receivables and other assets Note 9 525 259 500 352

Total financial assets 525 259 500 352

Total long-term assets 2 408 940 2 762 804

Current assets

Receivables

Accounts receivable 0 0

Other receivables 1 045 888 1 230 274

Prepaied expenses 0 4 172 700

Total receivables 1 045 888 5 402 974

Cash and bank deposits

Cash and bank deposits Note 2 31 528 527 31 961 507

Total cash and bank deposits 31 528 527 31 961 507

Total current assets 32 574 415 37 364 481

TOTAL ASSETS 34 983 355 40 127 285


STATEMENTS OF F INANCIAL POSIT ION AS OF 31 DEC .

EQUITY AND LIABILITIES 2003 2002

Equity (Amount in NOK)

Paid-in-capital

Share capital Note 7 5 579 888 3 985 634

Share premium reserve Note 7 27 151 508 32 999 171

Total equity 32 731 396 36 984 805

Liabilities

Short-term liabilities

Trade accounts payable 355 751 275 413

Payroll taxes payable and social security 152 098 492 958

Other short-term liabilities 1 744 110 2 374 109

Total liabilities 2 251 959 3 142 480

TOTAL EQUITY AND LIABILITIES 34 983 355 40 127 285


STATEMENT OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES 2003 2002

(Amount in NOK)

Operating result before taxes -12 070 398 -7 254 161

Depreciation expense 378 771 343 799

Loss on disposal of assets 0 9 151

Change in receivables 0 7 662 250

Change in payables 80 338 -9 592 518

Net change in other current assets and liabilities 3 386 227 -4 540 522

Net change in other current assets and liabilities -8 225 062 -13 372 001

CASH FLOWS FROM INVESTING ACTIVITIES

Investments 0 -501 006

Net cash provided by investing activities 0 -501 006

CASH FLOWS FROM FINANCING ACTIVITIES

Issuance of shares 7 816 989 270 684

Change in long-term receivables -24 907 -44 452

Net cash provided by financing activities 7 792 082 226 232

Net change in cash and cash equivalents -432 980 -13 646 755

Cash and cash equivalents-balance at the beginning of the year 31 961 527 45 608 282

CASH AND CASH EQUIVALENTS-BALANCE AT THE

END OF THE YEAR 31 528 527 31 961 527


NOTES TO THE FINANCIAL STATEMENTS – 31 DEC . 2003

Note 1 – Accounting principles

The financial statements are prepared in accordance

with the Norwegian Accounting Act and Norwegian

generally accepted accounting principles.

Classification and evaluation of

balance sheet items

Assets of a long-term nature are classified as fixed

assets. Other assets are classified as current assets.

Receivables that will be collected within one year

are classified as current assets. The classification of

short and long term liabilities is based on the same

criteria as for assets.

Fixed assets are valued at cost, but written down to

realisable value if the decline in value is expected

to be permanent. Fixed assets are depreciated over

their economic useful lives.

Current assets are valued at the lower of cost and

net realisable value. Short-term debt is stated at the

historical nominal balance. Short-term debt is not

revalued to market value following changes in the

interest rates.

Currency

Monetary balances in foreign currencies are valued

at the exchange rate ruling at the closing balance

sheet date.

Research and developments costs

All research and developments costs have been

expensed.

Fixed assets

Fixed assets are valued at cost and depreciated over

their economic life.

Accounts receivable

Trade accounts receivable and other debtors are stated

at face value reduced by a provision for anticipated

losses.

Taxes

The tax expense in the profit and loss account inclu-

des the tax on the ordinary result for the period as

well as the change in deferred taxes. Deferred tax is

calculated with 28% on the temporary differences

between the recorded and tax values, as well as on

any tax loss carry-forwards at the balance sheet clo-

sing date. Any temporary differences increasing or

reducing tax that will, or may, reverse in the same

period are netted.

Note 2 – Cash and cash equivalents

Cash and cash equivalents are NOK 31 528 526. Of

this amount NOK 95 611 is restricted for the use

of employees payroll tax withholding.


Note 4 - Fixed assets

Machinery / office equip.

Cost at 1.1.03 1 738 712

Purchases during the year 0

Disposals at cost 0

Acc. Depreciation 1 115 031

Book value 31.12.03 623 681

Annual depreciation 378 771

Depreciation rate 20-33%

The Company leases office equipment with a total

expense of NOK 10 694 for the year 2003.

Note 5 – Research and developments expenses

External direct research and development costs are

expensed, and amounted to NOK 4 347 991 in 2003

compared to NOK 1 609 942 in 2002. In 2003 IDEX ASA

has been granted NOK 800 000 in research and deve-

lopment grants from SKATTEFUNN, a governmental

research and development grant which is managed by

Norsk Forskningsråd. The research and development

grant has been recorded as a reduction in external

research and development expenses. In 2003, net

research and development expenses amounted to

NOK 3 547 991.

In addition, a significant amount of the salary costs

are related to research and development. Indirect

research and development costs are included in the

profit and loss account as “other operating expenses”.


Note 3 – Salaries and other personnel expenses.

2003 2002

Salaries 3 190 727 7 778 476

Social security taxes 313 506 999 057

Other personnel expenses 806 481 1 194 519

Total 4 310 714 9 972 052

Average annual

number of employees 5 14

The Managing Director has received a remuneration

of NOK 1 166 667 in 2003. In addition he will recei-

ve a fee of NOK 200 000 as a member of the board,

subject to the approval of the general assembly. The

Managing Director is engaged by the Board of

Directors through a management for hire contract

that could be terminated on a six-month notice.

From 1 December 2003 the yearly remuneration is

set to NOK 1 500 000.

Subject to the approval of the general assembly,

the Board of Directors’ remuneration for 2003

is NOK 800 000. The amount has been accrued as of

31 December 2003. The chairman of the board

is partner in the law firm Ræder Wisløff Aasland

Ottesen DA. In 2003 Ræder Wisløff Aasland Ottesen

DA has been paid NOK 435 585 for legal services.

Two other board members received NOK 250 000

each through a consultancy firm for business develop-

ment services rendered during the year.

In 2003 fees to the auditors related to audit of

the statutory accounts have been expensed with

NOK 57 750. Other audit related fees amounts to

NOK 39 700. Fees to the auditors related to technical

assistance regarding preparation of annual report

and tax return and other related tax services have

been expensed with NOK 73 450.


Note 7 - Equity

Share capital Share premium TOTAL

reserve

Equity 01.01.03 3 985 634 32 999 171 36 984 805

Shares issued in 2003 1 594 254 6 377 012 7 971 266

Share issuance costs -154 277 -154 277

Net loss for the year -12 070 398 -12 070 398

Equity 31.12.03 5 579 888 27 151 508 32 731 396

The share capital of IDEX ASA consists of 11 159 774 shares with a par value of NOK 0.50.


Note 6 - Taxes

Specification of the tax expense for the year: 2003 2002

Payable taxes on the profit of the year 0 0

Change in deferred taxes 0 0

Tax expense on ordinary profit 0 0

Reconciliation of tax expenses against ordinary profit before taxes:

Computation of taxes payable for the year: 2003 2002

Ordinary profit before taxes -12 070 398 -7 254 161

Permanent differences -558 825 -543 104

Changes in temporary differences -481 732 45 006

Basis for taxes payable -13 110 955 -7 752 259

28% tax, constituting total taxes payable on current year’s profit 0 0

Specification of taxes payable in the balance sheet: 2003 2002

Taxes payable on this year’s profit 0 0

Total taxes payable 0 0

Specification of the basis for deferred taxes: 2003 2002

Fixed assets -132 375 -22 366

Accruals 0 -591 741

Tax loss carry forward -76 841 468 -63 730 513

Total -76 973 843 -64 344 620

Deferred tax asset, 28% -21 552 676 -18 016 493

Capitalized deferred tax asset -1 260 000 -1 260 000

The entire deferred tax asset has not been capitalized as future utilization is uncertain.



Shares, options and warrants direct and indirectly held by the CEO and members of the board.

At an extraordinary General Meeting held 4 September 2003 6 377 012 independent subscrption rights (ISR) in

the series A/2003 through D/2003 were issued. No consideration was received. The purchase price per share

of a subscription right is set to NOK 2,50. The ISR in series A/2003 through D/2003 needs to be exercised

before 1 April 2006.

At the ordinary General Meeting held 23 May 2002 a proxy to issue ISR to employees and Board of Directors

was granted. The Board of Directors resolved 3 September 2003 to issue 100 000 ISR to Idex ASA employees.

The purchase price per share of a subscription right was set to NOK 2,50. The ISR needs to be exercised before

23 May 2007. The Board of Directors resolved 28 October 2003 to issue 16 000 ISR to Idex ASA employees.

The purchase price per share of a subscription right was set to NOK 4,25. The ISR needs to be exercised before

23 May 2007.

Note 8 – Share capital and shareholder information

Among the 20 largest shareholders, the following had ownership of more than 1%:

Number Share

Charles Street International 1 120 000 14,56%

Pål Gundersen 1 000 400 13,01%

GPR Technology 988 237 12,85%

Euroclear Bank S.A 878 420 11,42%

Per Valvik 727 768 9,46%

John Andrew Heap 652 461 8,48%

Food International Ltd. 582 158 7,57%

Hyson Limited 233 333 3,03%

Chaos AS 221 761 2,88%

Panares Resources Inc. 180 833 2,35%

A. Sundvall ASA 148 765 1,93%

Spenser Finance Corporation 125 695 1,63%

Rune Sundvall 123 178 1,60%

Merrill Lynch 111 666 1,52%

Perco AS 112 750 1,47%

Simen Engelstad 99 205 1,29%

Kristian Wiermyhr 98 550 1,28%

Marco Polo Norge AS 98 000 1,27%

Per M Christensen 92 000 1,20%

Jens Andre Henriksen 89 808 1,17%

Total 7 689 988 68,91%

Total all other shareholders 3 469 786 31,09%

Grand total 11 159 774 100%



At the ordinary General Meeting held 23 May 2003 800 000 were issued to members of the Board. The purcha-

se price per share of a subscription right was set to NOK 19. At the ordinary General Meeting held 26 June

2003 its was resolved to change the purchase price per share to the average share price in the three-month

period ended 26 June 2003. After this change the purchase price per share is set to NOK 2,79.

As of 31 December 2003 Idex ASA has issued the following ISR:

Number Purchase Price Due Date

Serie A/2003 1 594 253 2,50 01.04.06

Serie B/2003 1 594 253 2,50 01.04.06

Serie C/2003 1 594 253 2,50 01.04.06

Serie D/2003 1 594 253 2,50 01.04.06

Serie 2002 100 000 2,50 23.05.07

Serie 2002 16 000 4,25 23.05.07

Serie 2001 800 000 2,79 31.10.06

Total 7 293 012

Idex ASA employees and members of the Board have also been granted options. As of 31 December 2003

Idex ASA has issued the following options:

Number Purchase Price Due Date

Options issued in 2001 22 726 2,79 26.04.04/06.06.04

Options issued in August/October 2000 315 000 2,79 16.08.05/19.10.05

Options issued in October 2000 9 292 2,79 28.10.04

Total 347 018

The strike prize for options issued in 2000 and 2001 has been changed in 2003 based on a resolution made by

the General Meeting held 26th of June 2003. In October 2003 it was resolved to extend the date og experation

for some of the options issued in October 2002 with one year. Shares, options and subscription rights (ISR)

directly and indirectly held by the CEO and members of the board.

Shares Options ISR ISRprice 2,79 price 2,50

Serie A-D

Morten Opstad (Chairman of the board) 199 695 0 50 000 162 000

John Andrew Heap (Board member/CEO) 652 461 115 000 250 000 364 922

Robert Keith (Board member/Consultant) 1) 100 000 250 000 1)

Thomas Fussell (Board member/Consultant) 1) 100 000 250 000 1)

Total 315 000 800 000

1) Roberth Keith and Thomas Fussell have a beneficial ownership of 1 120 000 shares and 640 000 subscripti-

on rights in IDEX ASA.



Note 9 – Long term lease arrangement

Idex ASA has in 2003 rented office space in Asker at NOK 850 000 a year. The agreement ran until 31 January

2004. The Company has rented new office facilities at IT Fornebu from February 2004. The new rental agree-

ment runs until 31 December 2006. The new rental fee amounts to NOK 616 800 per year. As of 31th

December 2003 Idex ASA has deposted NOK 455 000 in a banned account with respect to the rented office

facilities in Asker.

Idex ASA had no revenue in 2003.

Note 10 - Sales

2003 2002

Technology transfer 0 8 012 000

Research support 0 0

Total 0 8 012 000

Note 11 – Financial market risks

The Company has little exposure towards financial market risks, and possible exchange gains and losses

are recorded as they occur.

The Board of Directors of Idex ASA

Bærum 11th June 2004

Morten Opstad

Chairman of the board

John Andrew Heap

Board member/CEO

Robert Keith

Board member

Thomas Fussell

Board member


Audi tor ’s report for 2003

We have audited the annual financial statements of Idex ASA as of 31 December 2003, showing a loss of

NOK 12 070 398. We have also audited the information in the Directors' report concerning the financial state-

ments, the going concern assumption, and the proposal for the coverage of the loss. The financial statements

comprise the balance sheet, the statements of income and cash flows and the accompanying notes.

These financial statements and the Directors’ report are the responsibility of the Company’s Board of Directors

and Managing Director. Our responsibility is to express an opinion on these financial statements and on other

information according to the requirements of the Norwegian Act on Auditing and Auditors.

We conducted our audit in accordance with the Norwegian Act on Auditing and Auditors and auditing standards

and practices generally accepted in Norway. Those standards and practices require that we plan and perform the

audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the accounting principles used and significant estimates made by

management, as well as evaluating the overall financial statement presentation. To the extent required by law

and auditing standards, an audit also comprises a review of the management of the Company's financial affairs

and its accounting and internal control systems. We believe that our audit provides a reasonable basis for our opinion.

In our opinion,

• the financial statements have been prepared in accordance with law and regulations and present the financial

position of the Company as of 31 December 2003, and the results of its operations and its cash flows for the year

then ended, in accordance with accounting standards, principles and practices generally accepted in Norway

• the Company's management has fulfilled its duty to properly register and document the accounting information

as required by law and accounting standards, principles and practices generally accepted in Norway

• the information in the Directors' report concerning the financial statements, the going concern assumption, and

the proposal for the coverage of the loss is consistent with the financial statements and comply with law and

regulations.

Oslo, 11th June 2004

ERNST & YOUNG AS

Leiv Aschehoug

State Authorised Public Accountant (Norway)

Note: The translation to English has been prepared for information purposes only.

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