Half Yearly Report

Electrical Geodesics, Inc.

Interim Results

Laying the Foundations for Growth

EUGENE, OREGON, US, 4 September 2013 - Electrical Geodesics, Inc. ("EGI" or the "Company"), a leading neurodiagnostic medical technology company, today announces its unaudited interim results for the six months ended 30 June 2013.

Operating Highlights

Ø Successful AIM listing effective 3 April 2013

Ø $10.1m (net) raised from issue of 6.7m new shares

Ø Launch of new, CE marked GES400 series in May

Ø Premier Healthcare group purchasing contract

Ø Marketing alliance with Hitachi for their near-infrared spectroscopy product

Ø New premises secured allowing all employees to operate from a single site, enhancing operational efficiency

Financial Highlights

Ø As previously disclosed, H1 2013 revenues were $5.4m (H1 2012: $5.8m, FY 2012: $12.5m) a decrease of 7%

- North America down 15% to $2.8m (H1 2012: $3.3m) reflecting the impact of the US federal budget sequestration delaying capital equipment purchases by US research institutions

- International up 4% to $2.6m (H1 2012: $2.5m)

Ø 43 dEEG systems sold at an average price of $67k

Ø 52% of revenues were from sales of complete dEEG systems (H1 2012: 53%, FY 2012: 54%) with the balance derived from accessories, software and support

Ø Broadening customer mix

- 75% - research institutions, 25% - clinical customers

Ø Gross margins 62% - in line with 2012, operating loss widens to $0.8m as expected

Ø Net cash at period end $8.4m ($0.6m net debt at start of year)

Don Tucker, PhD, Chairman and CEO of EGI, said:

"We have made good progress in our first six months as a public company. With the launch of our new GES400 series, coupled with the anticipated FDA clearance and Net Station 5 software upgrade, EGI is set to accelerate growth in the second half of the year. Our strengthened balance sheet allows us to not only to continue to expand our sales channels, but also to implement our near-term strategy of epilepsy monitoring and surgical planning and to target potential future markets such as sleep monitoring and brain function mapping for general neurosurgery. We believe that our technology has a leading position in monitoring brain activity and EGI is well-placed to build and retain a central role in the use of dEEG as a clinical intervention tool, promoting EEG into a fundamental part of neurological disease management."

For more information contact:

Notes to Editors

Electrical Geodesics, Inc. in Summary

Founded in 1992, EGI designs, develops and commercialises a range of non-invasive neurodiagnostic products used to monitor and interpret brain activity based on its proprietary dense array electroencephalography ("dEEG") platform technology. The Company's technology uses up to 256 sensors, providing much higher resolution brain activity data compared to conventional 8 or 16 channel EEG and is used in medical, clinical and research settings in a diverse range of applications including important areas such as the diagnosis and monitoring of epilepsy, neurosurgical planning, sleep assessment, and many others.

EGI's dEEG systems, available in the GES 300 and now the GES 400 lines, capitalise on the Company's unique Hydrocel Geodesic Sensor Net which allows faster, easier, and more convenient placement of many EEG sensors in an even distribution over the entire scalp, providing more accurate and precise diagnosis and measurement. EGI's technology is now widely used in neuroscience research laboratories and is becoming more commonly used in clinics, care centers, and hospitals around the world. Data is measured and visualised using EGI's proprietary amplifier technology and software, providing a complete, advanced, high-resolution EEG platform. The Company's products are compatible with multiple diagnostic and imaging technologies, including magnetic resonance (MR) imaging, functional MRI (fMRI), and magneto-encephalography (MEG).

See our website www.egi.com

Glossary

Overview

Strategy & Recent Activities

We are pleased to present our first set of financial results to shareholders since our admission to AIM in April this year. We raised $12.1m (£8m) in new capital, which delivered $10m of cash to the business after the expenses of the IPO. We are delighted to welcome our new shareholders and thank them for their support in funding us to ensure the near and longer term prospects of the Company can be realised.

With the new funds raised we aim to deliver our technology to a wider range of customers and to expand into new therapeutic areas. The technology on which our business is founded, EEG, has been used as a monitoring tool for many years, particularly in the area of epilepsy diagnosis and management. Basic EEG uses a small number of electrodes placed on the scalp and, whilst delivering useful information, can be somewhat crude and non-specific given the complex topography of each individual's brain. At EGI, we believe that dense-array EEG (dEEG), using up to 256 electrodes, can provide significantly greater levels of information and accuracy about the brain's function and electrical activity.

dEEG presents a number of challenges with respect to the ease and accuracy of attaching the electrodes and the interpretation of data. Our proprietary Sensor Net allows the rapid and painless placement of the sensors or electrodes on a range of patients from premature babies through children, adults and the difficult to monitor patients. Our software products allow the rapid acquisition and review of the dEEG data and include an increasing number of tools and workflows to allow easy visualisation of the measured activity in a 3-D anatomical view.

Initially, our customers were high-end neuroresearch institutions who saw the benefits of dEEG in a wide range of indications. The studies performed using our equipment have delivered a large and increasing database of clinical information. Based on this evidence, we have developed systems with regulatory clearance for medical and clinical use. Through continued innovation, we can retain our strong position in the research market whilst delivering products that take us into the much wider clinical market.

Our near-term strategy is to focus is on the delivery of a suite of products and workflows to assist in long-term monitoring of epilepsy patients, including imaging of the precise source of epileptic seizures that can then guide neurosurgery. Given the risks of neurosurgery, medical practitioners will not rely on a single tool, but rather will seek as much information as possible prior to surgery. This can involve structural imaging from MRI and CT scans, functional imaging measuring blood flow and oxygenation from fMRI, PET and NIRS and electrical or magnetic activity using non-invasive EEG and intra-cranial EEG or MEG.

We have developed a range of products to assist in over-laying visualisations of electrical activity on to MRI images, allowing the clinicians to pinpoint the source of abnormal electrical activity (e.g. a seizure) within the 3-D image of the patient's brain. Our products are cleared for use within the fMRI environment, facilitating the rapid placement of electrodes for the simultaneous registration of electrical and blood-flow data to refine the information on brain activity.

At EGI, we realise the importance of offering complete competitive solutions to our customers and look to ensure our products work with standard neurological tools and tests. We develop our own products where we have the resources and competitive edge or enter into licensing agreements and alliances with other manufacturers where expedient. A broad product range assists our sales channel, both direct and through distributors, to compete successfully in the marketplace.

We recently launched a new generation of EEG amplifiers, the GES400 series. With on-board computing capability, these amplifiers offer both research and clinical customers a quick, powerful system capable of modular upgrade, either to higher channel count systems, as part of multiple linked systems or multi-modal capability allowing the integration of sister tools and products. We will shortly be launching the next generation of our core software, Net Station 5. This product will offer customers an improved workflow for both research and clinical EEG studies that is both fast and intuitive and compatible with leading computer operating software. Our NOLIS database product designed to manage EEG data within hospital medical systems is also in late stage development.

In addition to our proprietary range, we provide our customers with access to products such as the market standard, E-Prime response monitoring system and the GEM ambulatory EEG amplifier. In May, we expanded our product offering through an agreement with Hitachi to promote their near infra-red spectroscopy (NIRS) devices in North America and we are currently collaborating to adapt our Sensor Net product to fit the Hitachi NIRS sensors to allow simultaneous use. As we move forward, we intend to ensure our systems are compatible with intra-cranial EEG products to offer a more complete product for locating the source of epileptic seizures. Building such a suite of products allows us to meet the demands of our research customers and to deliver solutions for the medical setting.

The potential applications for the functional imaging our dEEG products provide are significant. The tools we have developed to take "atlas" brain and skull models and enable simulation of individual MRI images, can form the basis of a truly competitive and ground-breaking neurological technology. Epilepsy monitoring and surgical planning are core to our near-term strategy, but areas such as sleep monitoring, brain function mapping for general neurosurgery, intensive care monitoring, neo-natal care are all realistic targets, taking EEG away from being a simple monitoring tool into a fundamental part of disease management.

A large market opportunity that the Company is also evaluating is to capitalise on the growing body of knowledge, research and use of brain stimulation technologies, including transcranial magnetic stimulation (TMS) and transcranial direct current stimulation (tDCS), in clinical uses such as the treatment of depression. EGI has already developed significant intellectual property in understanding the conductivity and electrical impedance of the skull and brain tissue. Combining this understanding with the precision of our dEEG product could allow breakthroughs in the delivery of intra-cranial stimulation and the monitoring of its effectiveness.

Financial Review

Revenues for the first six months of the year were $5.4m, some 7% lower than the $5.8m recorded in the same period last year. Revenues for the full year to December 2012 were $12.5m. International sales increased by 4% to $2.6m, however, North American sales fell by 15% to from $3.3m to $2.8m. Research institutions remain the core of EGI's customer base and throughout 2013, grant funding to universities and institutions has been impacted by the US federal budget sequestration. This has resulted in delays in finalising grant awards. The influential National Institute of Health reported a 5% cut to its federal funding and many individual states have also seen budget cuts. As confidence returns to the economy, it is thought feasible that the tight controls over grant awards may loosen as the US fiscal year comes to a close in September.

International sales were strong, with sales into Asia and China in particular increasing, driven by the sale of high-end systems for use in epilepsy management and neurosurgery.

52% ($2.8m) of the revenues in the first half of 2013 arose from sales of complete dEEG systems with the balance derived from sales of peripheral devices, software and support, including $1.3m from the sale of new and replacement Sensor Nets. 43 systems were shipped in the period at an average price of $67k, 33 of which were to new customers. This represents decline of 6 systems over the same period last year, with the average price achieved being broadly similar.

Initial interest from potential clinical customers through our purchasing agreement with Premier Healthcare Alliance in the US has been encouraging. However, the impact of this opportunity will not be realised until the GES400 series and the entry level GES405 in particular, are approved for sale for clinical use in the US. The review by the FDA is currently underway. The relative importance of clinical and translational customers (teaching hospitals for example) to the Company is increasing, with 25% of revenues derived from these groups in the period compared to 20% in the prior year.

Gross margins for the period were 62%, broadly in line with the 63% gross margin seen in H1 2012. Gross operating expenses were $5.1m before capitalization of $0.6m of R&D costs (H1 2012: $4.8m gross before capitalised R&D of $0.2m) with the major increase arising in general and administrative costs, much of which related to the costs that inevitably arise on becoming a public company. Significant recruitment is under way, in particular in building the clinical sales force and strengthening sales and customer support internationally, to take advantage of the expanding, clinically approved product range.

Overall the business generated a pre-tax operating loss of $0.7m for the period compared to a loss of $0.1m in H1 2012. Tax credits of $0.4m have been applied, based on the rates that are expected to apply for the full year.

Within the balance sheet, intangible assets increased by $0.4m during H1 2013 to $1.4m, the majority of which relates to the development of the GES400 products and Net Station 5 software. Inventory increased by $1.0m to $2.3m as the Company readied for the launch of GES400, whilst maintaining buffer stocks of components to meet the ongoing sales and support needs of the earlier generation products. Trade receivables fell $0.4m to $2.0m and trade and other liabilities increased by $0.5m. The proceeds received from the issue of shares were $12.1m and costs of the issue were $2.0m. After meeting operating and working capital needs and repaying $1.1m of borrowings, cash balances at 30 June 2013 were $8.6m. The funds are held in a series of short-term certificates of deposit spread amongst a range of banks at levels protected by federal guarantees.

In August 2013, EGI entered into a 5-year lease on new premises, which will allow the Company to accommodate its expanded employee base and operate from a single site by the year-end. The capital expenditure entailed is low (

Outlook

We have made good progress in our first months as a public company. With the launch of our new GES400 series, coupled with the anticipated FDA clearance and Net Station 5 software upgrade, EGI is set to accelerate growth in the second half of the year. Our strengthened balance sheet allows us to not only expand our sales channels, but also to implement our near-term strategy of epilepsy monitoring and surgical planning and to target potential future markets such as sleep monitoring and general neurosurgery.

The Company also plans to launch additional software and hardware modules and features, increasing the product range available to clinical customers, while maintaining its focus on innovation to meet the needs of the core research customers and the new neurosurgery planning market. Accordingly, costs are expected to increase in the second half of the year, particularly as the sales channel and support network is expanded.

We believe that our technology has a leading position in monitoring brain activity and EGI is well-placed to build and retain a central role in the use of dEEG as a clinical intervention tool, promoting EEG into a fundamental part of disease management.

Consolidated statement of comprehensive income for 6 months ended 30 June 2013

Consolidated statement of financial position as at 30 June 2013

Consolidated statement of changes in equity for 6 months ended 30 June 2013

Note: 100% of equity is attributable to owners of parent company

Consolidated statement of cash flows for 6 months ended 30 June 2013

Notes to the condensed consolidated interim financial statements for the six months ended 30 June 2013

1. Authorisation of financial statements and statement of compliance

These condensed consolidated interim financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the group for the year ended 31 December 2012.

These condensed consolidated interim financial statements for the group for the six months ended 30 June 2013 were approved by the Board and authorised for issue on 4 September 2013.

2. Significant Accounting Policies & Basis of Preparation

(a) Basis of preparation

The condensed consolidated interim financial statements have been neither audited nor reviewed. The comparative figures shown for the year ended 31 December 2012 do not constitute the Group's statutory financial statements but have been extracted from the Group's 2012 audited financial statements which have been reported on by the Group's auditor, as adjusted to present the information in accordance with IFRS. The Independent Auditors' Report on the Group's 2012 financial statements was unqualified.

The condensed consolidated interim financial statements are presented in US dollars and all values are rounded to the nearest $1,000 unless otherwise indicated.

The accounting policies adopted in the preparation of the condensed consolidated interim financial statements are consistent with those used and set out in the Group's statutory financial statements for the year ended 31 December 2012 which were prepared under International Financial Reporting Standards as adopted by the European Union.

(b) Presentation of financial statements

The unaudited consolidated financial statements are presented in accordance with IAS 1 Presentation of Financial Statements (Revised 2007). The Group has elected to present the 'Statement of comprehensive income' in one statement: the 'Income statement'.

(c) New Standards & Interpretation

The following Standards and Interpretations, relevant to the Group's operations that have not been applied in the historical financial information, were in issue but not yet effective or endorsed (unless otherwise stated):

IFRS 9 'Financial Instruments' (effective for annual periods beginning on or after 1 January 2015).

IAS 32 Financial Instruments - Presentation - Amendment; Offsetting Financial Assets and Financial Liabilities (effective for annual periods beginning on or after 1 January 2014)

The Directors anticipate that the adoption of these Standards and Interpretations as appropriate in future periods will have no material impact on the historical financial information of the Group.

(d) Going Concern & Liquidity

Having considered uncertainties under the current economic environment, and after making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing these condensed consolidated interim financial statements.

3: Revenue Analysis

Revenues from external customers were generated from the US and were derived from customers in the following geographical areas:

No single customer contributed more than 10% of Group revenues in any period.

4: Other Income

The Group has secured a series of grants from the US Departments of Health and Human Services and the Department of Defense in support of various research projects in the field of EEG. There are no unfulfilled conditions or other contingencies in respect of these grants.

5: Expenses

The (loss)/profit before taxation is stated after charging:

6: (Loss)/earnings per share

Basic earnings per share amounts are calculated by dividing the profit or loss after taxation for the period by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing the profit or loss after taxation for the period by the weighted average number of ordinary shares outstanding during the period (adjusted for the effects of dilutive options). In the case of a loss, no impact for further dilution is reflected as this would not have the effect of increasing the loss per share and is therefore not dilutive. The weighted average number of shares in issue for 2012 has been adjusted to reflect the 17.5:1 share issue effective on the Company's merger into a new Delaware company in March 2013.

The profit or loss per ordinary share is calculated as follows: 

7: Taxation

The charge to taxation consists of income taxes currently due or refundable plus deferred taxes arising from the timing differences between financial and income tax reporting. The effective rate applied for the periods to June 2013 are broadly similar to the rates expected to apply to the Group's results for the full year.

The income tax benefits applied were;

As at the period end the Group recognised in the balance sheet deferred tax assets and liabilities as follows;

The net deferred tax assets relate primarily to the benefit of the Group's historic state and federal tax losses carried forward plus the tax effect of certain timing differences, on the basis that there is sufficient evidence in the form of projected future profitability to conclude that these losses and timing differences will be recoverable in the foreseeable future.

8: Cash and cash equivalents

Cash and cash equivalents consist of the following:

The short term deposits include funds in overnight money market accounts and short-dated certificates of deposit.

9: Financial Liabilities

The Company has available bank finance facilities secured against the current and non-current assets of the business. All borrowings are denominated in US$.

10: Share capital & Share premium

The Company has one class of ordinary share which carries no rights to fixed income. In March 2013 the Company merged into a new Delaware Corporation with shareholders receiving 17.5 shares of $0.001 par value in the new corporation for each ordinary share held in the Company. The comparative numbers above have been adjusted as if this 17.5 split had occurred in the earlier periods.

On 3 April 2013 the Company issued 6,666,667 ordinary shares for a gross consideration of $12,078,000, a premium of $12,071,000. The costs of the share issue amounted to $2,009,000 resulting in a share premium balance of $10,062,000.

Directors

Don Tucker, Chairman & Chief Executive Officer

Ann Bunnenberg, President & Chief Operating Officer

Christine Soden, Chief Financial Officer & Company Secretary

John Brown, Non-executive director

Broker & Nominated Adviser

Peel Hunt LLP

Moor House, 120 London Wall

London EC2Y 5ET

Registrars

Capita Registrars (Guernsey) Limited

Mont Crevelt House

Bulwer Avenue, St Sampson

Guernsey GY2 4LH

Auditors

Registered Office

National Registered agents Inc

160 Greentree Drive, Suite 101

Dover, Kent, DE 19904 USA

Principal Address