Year end report 2015

» Group net sales amounted to SEK 375,368.» �Income�after�financial�items�for�the�Group�

amounted to SEK -14,148,843.» �Episurf�Medical�appointed�a�seasoned�Clinical�

Advisory�Board�comprised�of�European�medical�industry�Key�Opinion�Leaders.�

» �Episurf�Medical�received�CE�mark�for�its�fourth�product,�the�Epiguide®�MOS.

Q4

EPISURF MEDICAL YEAR END REPORT 20152

Fourth quarter 2015 for the Group compared to 2014» Net sales amounted to SEK 375,368 (54,541).» �Other�operating�income�amounted�to�SEK�

1,849,848 (997,520).» �Income�after�financial�items�amounted�to�

SEK -14,148,843 (-8,055,327).» �Earnings�per�share�(weighted�average)�

amounted to SEK -0.89 (-0.73).

The period in brief

Significant events during the fourth quarter

» First two surgeries with Episurf’s most recent product, the Episealer® Twin, were performed in Germany with satisfactory results.

» Episurf’s First Surgery in Switzerland was successfully completed.

» Episurf Medical appointed a seasoned Clinical Advisory Board comprised of European medical industry Key Opinion Leaders.

» Episurf Medical received CE mark for its fourth product, the Epiguide® MOS.

Twelve months 2015 for the Group compared to 2014» Net sales amounted to SEK 1,016,462

(173,026).» �Other�operating�income�amounted�to�

SEK 5,628,598 (2,166,468).» �Income�after�financial�items�amounted�to�

SEK -43,974,662 (-32,914,421).» �Earnings�per�share�(weighted�average)�

amounted to SEK -3.52 (-2.98).» Equity�per�share�amounted�to�SEK�6.89�(4.88).

Significant events after year end» �Episurf�Medical�received�CE�mark�for�its�fifth�product,�

EpioscopyTM Damage Assessment Tool.» Episurf Medical launched German website and increased marketing�efforts�in�the�region.

» Episurf Medical announced the 100 account milestone was reached.

» �Episurf�scientific�abstract�submission�was�granted�a�poster�presentation at ESSKA.

» The 4th German sales person was hired.» The 2nd Nordic Sales person was hired.» Spire Hospital UK approved Episealer® as a new clinical

procedure for private insurance patients.

EPISURF MEDICALYEAR END REPORT 2015 3

CEO Statement

Furthermore,�I�can�say�with�supreme�confidence,�from�the�perspective of my extensive medical technology experience, the progress that Episurf has made is an outstanding achievement given the short time frame and investment levels to date. This is particularly relevant in relation to taking an�initial�concept�through�to�developing�five�CE�marked�products with recurring revenue.

Most importantly, the company has transitioned from an engineering tech start up into a commercially driven medical technology company uniquely positioned to become the leading intelligent implant company for joint injuries.

I�shall�highlight�Episurf’s�significant�key�indicator�achieve-ments in 2015:

» Revenues from implant sales exceeded 1 million SEK, representing an increase of 487% on previous year.

» By the end of 2015, Episurf had 73 implants in patients across Europe, representing an increase of 232% compared with 2014.

» To date, 27 orthopedic surgeons in 10 European countries have performed surgeries using an Episealer®. Out of those surgeons, 56% have already performed their second Episealer® surgery and 44% have performed their third surgery using an Episealer®.

Dear�Shareholder,

Following�my�appointment�in�June�2015,�Episurf�Medical�has�spent�the�last�eight�months�laying�a��solid�foundation�to�accelerate�our�commercial�growth�in�2016�and�beyond.�I�am�pleased�to�state��Episurf�has�made�significant��progress�in�2015�against�its�planned�milestones.

» Episurf has 0 surgery revisions to date. 1 patient has passed 3 years, 3 patients have passed 2.5 years and 5 patients have passed 2 years since the surgery date.

» CPL follow up data continues to show improvement in pain, mobility and general wellbeing scores.

» To date, 100 accounts are connected to μiFidelity®, representing an increase of 335% compared with the end of 2014.

In addition, between Q3/Q4 2015, the company has:

» Established a clinical advisory board comprised of European medical industry key opinion leaders.

» �Hired�6�employees�including�a�Chief�Financial�Officer�with�extensive capital market experience.

» Launched 2 new CE marked products.

» Developed a robust business analytics process and CRM system.

» Completed a new share issue.

» Developed a 3 year strategic business plan.

EPISURF MEDICAL YEAR END REPORT 20154

Our�focused�field�activity�in�Q3/Q4�2015�enabled�Episurf�to�finish�the�year�with�solid�trends�in�both�the�number�of�new�accounts and implants. We have established a growing Euro-pean presence with our direct sales strategy. The Episealer® implant technology has been universally well received in the market by surgeons and patients with 73 successful proce-dures and no revisions to date.

We believe there is a strengthening correlation between the pre surgical assessment provided by the Epioscopy™ damage marking process combined with our proprietary Episealer® implant design and the corresponding zero revi-sion rate. Use of the Epioscopy™ damage marking report offers�a�form�a�pre-surgical�quality�control�that�contributes�to�appropriate patient selection and we believe this will be borne out as more Episealer® patients reach yearly milestones.

As we enter 2016, the businesses’ long term strategy consists of four cornerstone activities:

» Consistent commercial execution

» Continued product and service innovation via our proprietary technology platform

» �Producing�scientifically�robust�clinical�evidence

» Pursue the relevant regulatory and reimbursement pathways to support geographical expansion.

2016 is about driving revenue and accelerating market adoption via implant sales. The 100 connected accounts will function as a pipeline for new implant business whilst ensuring account productivity and repeat revenue. The strong sales trends that we experienced in the second half of 2015 have also continued early in 2016.

We shall continue to increase the number of sales people in Germany�and�the�UK�and�anticipate�finishing�2016�with�13�direct sales heads in Europe. A consistent pricing policy will ensure improving revenues as unit volume increases. We

shall be launching high impact marketing initiatives to fur-ther raise awareness amongst patient groups and the public about�the�Episurf�patient�specific�approach�to�treating�carti-lage damage.

Whilst we continue to expand our European activity, we shall begin to assess US market entry strategies and will shortly appoint US based regulatory and reimbursement consult-ants to help us map out our plans and timelines.

The life blood of any medical technology company is its inno-vation pipeline. Episurf has been successful in capita lizing on its core competencies, having developed 5 CE marked prod-ucts and a cloud based platform for integration with sur-geons across the globe. In 2016, we’ll be expanding the applications�offered�via�μiFidelity® to assist both the surgeon and patient, including developing an advanced version of the Epioscopy™�Damage�Marking�report.�We�believe�μiFidelity® can develop into a specialised orthopaedic IT platform for doctors and patients to manage cartilage damage cases over all touchpoints; from when a patient is looking for informa-tion on cartilage repair, to treatment and follow up. The �μiFidelity® platform will become the central information repository for Episurf. This platform based approach will enable expansion from single to multiple high margin revenue streams in sizeable global markets.

I�am�confident�that�the�trends�in�the�business�remain�very�positive for Episurf as evidenced by the growing number of new accounts and implants. Surgical adoption of the Episealer® procedure is steadily increasing, our clinical out-comes are are consistently strong and a growing awareness amongst prospective Episealer® patients is developing. Com-bined with the sizable market for treating cartilage lesions, our Epioscopy™ damage marking process and our intelligent, scalable technology platform, the opportunity to deliver shareholder value has never been stronger.

Stockholm, February 2016

Rosemary Cunningham ThomasCEO Episurf Medical

EPISURF MEDICALYEAR END REPORT 2015 5

GroupNet sales and operating profit/loss Group net sales amounted to SEK 375,368 (54,541) in the quarter and SEK 1,016,462 (173,026) for the twelve months. In 2013 the Company was awarded a grant from Vinnova on SEK 4.2 million, of which SEK 949,104 (1,692,450) has been recognized as revenue which corresponds to accrued costs during January to December 2015 (2014). The increase in personnel expenses compared with the previous year is a direct result of the Company’s increased commercial focus. Eight new employees for Sales and Marketing have been hired since last September, two in England, two in Germany, one for the Benelux and three in Sweden. Other costs have also increased during the quarter compared to last year as a result of the increased commercial focus.

Financial position Group cash and cash equivalents at end of the period amounted to SEK 103,960,776 (34,489,799). The equity ratio was 93.0% (89.8). Group investments in intangible assets amounted to SEK 2,902,558 (752,804) for the quarter, of which SEK 1,781,175 (483,702) are related to capitalized de-velopment costs and SEK 1,121,384 (269,102) to patents, and SEK 7,247,777 (2,830,838) for the twelve months, of which SEK 4,643,111 (483,702) are related to capitalized de-velopment costs and SEK 2,604,666 (2,347,137) to patents. Investments in tangible assets amounted to SEK 128,610 (0) for the quarter and SEK 128,610 (38,699) for the twelve months. A rights issue was executed during the third quarter and the Company raised SEK 120.2 million before issue re-lated costs, which amounted to SEK 5.8 million.

Human resources Number of employees in the Group at end of the year was 18 (13). The increase is primarily a result of recruitment in marketing and sales.

Parent Company Net sales and operating profit/lossOther operating income amounted to SEK 2,605,164 (1,193,498) for the quarter and SEK 6,382,257 (2,362,446) for the�twelve�months.�Income�after�financial�items�amounted�to�SEK -6,464,129 (-4,399,628) for the quarter and SEK -21,709,809 (-23,131,337) for the twelve months.

Financial positionCash and cash equivalents at the end of the period for the Parent Company amounted to SEK 101,963,730 (28,603,699). The equity/assets ratio was 97.0% (93.6). Investments in intangible assets, capitalized development costs, amounted to SEK 1,781,175 (483,702) for the quarter and SEK 4,643,111 (483,702) for the twelve months.

Human resources Number of employees in the Parent Company at end of period was 12 (8).

Financial information

Transactions with closely related parties Shareholder and Board member Leif Ryd has received consulting fees of SEK 540,000 (810,000).

Serendipity Professionals AB has received consulting fees of SEK 1,629,951 (180,000) of which SEK 662,875 was recharged costs and Serendipity Communications AB has received a con-sultancy fee of SEK 613,265 (210,500). Serendipity Profession-als AB and Serendipity Communications AB are related parties to Episurf Medicals largest shareholder Serendipity Ixora AB.

A directors fee of SEK 100,000 is accrued for each board member and the chairman, totally accrued SEK 500,000 (500,000).

Rights Issue Episurf Medical has carried out a new issue of shares with preferential rights for existing shareholders. The subscription price for the new shares of series A and B was SEK 15 per share and the subscription period ran from and including August 26, 2015 until and including September 10, 2015.

The�final�outcome�showed�that�the�new�issue�was� subscribed for by shareholders by virtue of primary and secondary preferential rights to 97.81 per cent. The summa-tion showed that 6,917,407 shares (1,550,892 A-shares and 5,366,515 B-shares), corresponding to 86.76 per cent of the offered�shares,�were�subscribed�for�by�virtue�of�subscription�rights. 881,226 shares, corresponding to 11.05 per cent of the��offered�shares,�were�subscribed�without�the�virtue�of�subscription rights. The remaining 174,823 shares, corre-sponding�to�2.19�per�cent�of�the�offered�shares,�have�been� allocated to the persons having guaranteed the rights issue pursuant to agreements with the Company. The rights issue was thus fully subscribed and the Company has raised approximately SEK 120 million before issue related costs.

Through the new issue, Episurf Medical’s share capital in-creased by SEK 2,392,036.8. The number of A-shares increased by 1,741,228 and the number of B-shares increased by 6,232,228. Consequently, the total number of shares increased by 7,973,456 and the total number of votes increased by 11,455,912.

Share information There are two types of shares in the Company. Each Class A-share carries three votes, and entitles the holder to three votes at the General Meeting and each class B-share carries one vote and entitles the holder to one vote at the General Meeting. Class B shares have traded on Nasdaq Stockholm’s Small Cap segment since June 11, 2014 with the ticker EPIS B.

The total number of shares at year end 2015, was 15,963,305, of which 3,470,769 A-shares and 12,492,536 B-shares, and the total number of votes was 22,911,824.

In connection with Michael McEwan leaving his post as CCO for Episurf in August 2015 he returned free of charge, 13,501 of the 16,877 Class B shares that were issued to him by the deci-sion of the AGM 2015. (The Company intends to propose to the AGM 2016 to cancel these 13,501 series B shares through reduction of the share capital). Therefore the number of shares outstanding December 31 2015 was 15,949,804 and the num-ber of series B shares outstanding was 12,479,035.

EPISURF MEDICAL YEAR END REPORT 20156

The ten largest shareholders in Episurf Medical AB at December 31, 20151

Name No. of A shares No. of B shares % of capital % of votes

Serendipity Ixora AB 2,822,563 0 17.7 37.0Nordea Investment Funds 56,033 1,191,097 7.8 5.9

Gile Medicinkonsult AB 254,945 128,454 2.4 3.9

Försäkringsaktiebolaget, Avanza Pension 0 834,380 5.2 3.6

Rhenman Healthcare L/S Fund 0 688,178 4.3 3.0

AMF – Försäkring och Fonder 0 620,224 3.9 2.7

LMK Forward AB 0 600,000 3.8 2.6

Lönn, Mikael 106,179 280,000 2.4 2.6

Kaupthing HF. 0 501,334 3.1 2.2

Robur Försäkring 0 422,962 2.7 1.9

Total, 10 largest shareholders 3,239,720 5,266,629 53.3 65.4Total, other 231,049 7,225,907 46.7 34.6

Total number of shares 3,470,769 12,492,536 100.0 100.0

Whereof in own treasury 13,501

1 Shares held directly and through nominees.

EPISURF MEDICALYEAR END REPORT 2015 7

Episurf Medical in brief

As�a�pioneer�and�industry�leader�in�patient-specific�technology�for�the�treatment�of�painful�joint�injuries,�Episurf�Medical�does�something�no�other�implant�manufacturer�has�done.�We�put�the�patient�in�the�center�of�the�design�of�implants�and�surgical�instruments.

Episurf�Medical�was�founded�in�2009�and�offers�people�with�joint pain a more active and healthier life by providing minimally �invasive,�patient-specific�treatments.�Episurf�Medical’s�person-alised implant Episealer® and surgical drill guides Epiguide® are developed for treatment of localized cartilage defects in joints.�By�means�of�the�proprietary�software�μiFidelity®, Episurf Medical converts patient data, such as MRI and CT images, to personalized implants and a complete set of personalized surgical instruments. Individually customized implants enable optimal positioning and minimum invasion.

The�technology�behind�patient-specific�implants�and� surgical tools is protected by a strong patent portfolio with some 80 patents and patent applications in areas such as image�processing,�patient-specific�implant�systems,�patient-specific�surgical�techniques,�patient-specific�surgical�tools and manufacture for all joints in the human body.

Episurf Medical addresses a global market where one in ten�people�over�the�age�of�25�suffers�from�joint�problems.�At�the�end�of�2015,�the�Company�have�expanded�its�first�prod-uct portfolio, the knee portfolio, to meet market potential in the west in excess of SEK 30 bn. And this is only the begin-ning of Episurf Medical’s journey.

ObjectivesEpisurf�Medical’s�objective�is�to�introduce�patient-specific�treatments as the new orthopedic standard. This will be achieved by day-to-day interaction between surgeons world-wide�and�Episurf�Medical’s�μiFidelity®-platform. The Company’s ambition is to be the obvious choice for clinics and surgeons that�want�to�offer�patients�customized�solutions�for�treating�joint problems.

StrategyHistorically, the sector has provided orthopedic implants and surgical instruments in the form of standardized products, where�“one�size�fits�all.”�Advances�in�3D�imaging�and�software�enable Episurf to produce a full damage assessment of cartilage and bone defects in the knee. This accurate pre- screening report describes whether a patient is a suitable candidate to receive an Episealer® or not. Since this can be assessed pre-operatively, unwanted events during the surgery can be avoided and the best possible outcomes guaranteed. Therefore, the Company’s strategy is to develop and com-mercialize�μiFidelity® IT based clinical support tools and customized implants for the treatment of painful joints.

Episurf Medical’s head office is located in Stockholm, Sweden. The Company has an in-house sales team in Europe. The shares (EPIS B) are listed on Nasdaq Stockholm. More information about the Company is available on its website, www.episurf.com.

EPISURF MEDICAL YEAR END REPORT 20158

Stockholm, February 23, 2016

Saeid Esmaeilzadeh Jeppe Magnusson Thomas Nortoft Board chairman Board member Board member

Rosemary Cunningham Thomas Leif Ryd Robert Charpentier CEO Board member Board member

The Board of Directors and the CEO hereby give their assurance that the Interim Report gives a true and fair view of the �business�activities,�financial�position�and�results�of�operations�for�the�Group�and�Parent�Company,�and�describes�significant�

risks and uncertainty factors to which the Parent Company and the companies included in the Group are exposed.

Other information

Significant risks and uncertainty factorsEpisurf Medical’s material business risks for the Group as well as for the Parent Company, are to obtain regulatory approval and market acceptance, the outcome of clinical studies, the ability to protect intellectual property rights and dependence on key personnel and partners. The Company does not see any new material risks for the upcoming six months. For a more�detailed�description�of�significant�risks�and�uncertainties,�refer to Episurf Medical’s annual report.

Forthcoming financial information» Interim Report

January-March 2016: May 24, 2016» Interim Report

January-June 2016: August 19, 2016» Interim Report

January-September 2016: November 4, 2016 » Year End Report 2016: February 24, 2017

» The Annual Report for 2015 will be available on the company´s website: April 21, 2016

» The AGM will be held in Stockholm on the May 24, 2016.

Summons will be announced through a press release and published in Post och Inrikes Tidningar and Dagens Industri and will be published on Episurf Medical’s website.

ReviewThis report has not been reveiwed by the Company´s auditors.

Proposed appropriation of fundsNo dividends is proposed by The Board of Directors for the financial�year�2015.

For more information, please contact:Rosemary Cunningham Thomas, CEO Episurf Medical ABPhone 1: +46 (0) 70 765 5892Phone 2: +44 (0) 7803 753 603E-mail: rosemary@episurf.com

The information in this Interim Report is such that Episurf Medical AB is required to disclose in accordance with the Securities Markets Act and/or the Financial Instruments Trading Act. The information was published February 23, 2016, at 08:30 am.

EPISURF MEDICALYEAR END REPORT 2015 9

SEKOct-Dec

2015Oct-Dec

2014Jan-Dec

2015Jan-Dec

2014Jan-Dec

2013

Net sales 375,368 54,541 1,016,462 173,026 37,916Other operating income 1,849,848 997,520 5,628,598 2,166,468 1,658,035

Total income 2,225,216 1,052,061 6,645,060 2,339,494 1,695,951

Operating costsOther costs -5,619,686 -4,458,738 -21,584,339 -21,302,806 -16,982,838Personnel costs -10,100,802 -4,212,243 -26,834,214 -12,536,904 -6,917,036Depreciation -677,894 -478,767 -2,235,026 -1,761,043 -1,075,754

Total operating costs -16,398,382 -9,149,748 -50,653,579 -35,600,753 -24,975,628

Operating loss -14,173,166 -8,097,687 -44,008,519 -33,261,259 -23,279,677

Financial itemsFinancial income, other 24,606 43,211 34,544 353,322 425,729Financial expenses, other -283 -851 -687 -6,484 -2,746

Loss after net financial items -14,148,843 -8,055,327 -43,974,662 -32,914,421 -22,856,694

Loss before tax -14,148,843 -8,055,327 -43,974,662 -32,914,421 -22,856,694

Tax on income for the period - - - - -

Loss at end of the period -14,148,843 -8,055,327 -43,974,662 -32,914,421 -22,856,694

Consolidated statement of comprehensive inome

SEKOct-Dec

2015Oct-Dec

2014Jan-Dec

2015Jan-Dec

2014Jan-Dec

2013

Net profit -14,148,843 -8,055,327 -43,974,662 -32,914,421 -22,856,694

Other comprehensive income for the period:Other comprehensive income for the period, net of tax 173,229 - 173,229 - -

Total comprehensive income for the period -13,975,614 -8,055,327 -43,801,433 -32,914,421 -22,856,694

Net�profit�and�comprehensive�income�attributable Parent company shareholders -13,975,614 -8,055,327 -43,801,433 -32,914,421 -22,856,694

Earnings per share before and after dilution -0.89 -0.73 -3.52 -2.98 -2.09Average number of shares 15,953,619 11,059,418 1 12,504,417 11,059,418 1 10 ,919,929�1

1��Historical�figures�is�converted�in�accordance�with�IAS�33.

Consolidated income statement

EPISURF MEDICAL YEAR END REPORT 201510

Consolidated balance sheet

SEKDec 31

2015Dec 31

2014Dec 31

2013

ASSETSFixed assetsIntangible fixed assets Capitalized development costs 4,660,637 483,702 -Patent 6,385,717 5,411,307 4,693,995

Total intangible fixed assets 11,046,354 5,895,009 4,693,995

Tangible fixed assets Machinery and equipment 423,838 426,682 519,202

Total tangible fixed assets 423,838 426,682 519,202

Total fixed assets 11,470,192 6,321,691 5,213,197

Current assets Inventories Finished goods and goods for resale 1,154,578 1,473,664 539,480Accounts receivable 199,864 24,344 -Other receivables 869,741 468,558 974,365Prepaid expenses and accrued income 545,064 460,331 826,968Cash and bank balances 103,960,776 34,489,799 68,868,627

Total current assets 106,730,023 36,916,696 71,209,440

TOTAL ASSETS 118,200,215 43,238,387 76,422,637

EPISURF MEDICALYEAR END REPORT 2015 11

SEKDec 31 2015

Dec 31 2014

Dec 31 2013

EQUITY AND LIABILITIES EquityEquity attributable to owners of the parentShare capital 4,788,991 2,386,974 2,386,196Other capital 237,044,614 124,560,235 124,410,878Reserves 173,229 - -Earned income including net result -132,072,295 -88,097,632 -55,183,209

Total equity 109,934,539 38,849,577 71,613,865

LiabilitiesCurrent liabilities Accounts payable 1,787,912 1,089,888 1,980,645Other liabilities 1,745,361 678,925 395,996Accrued liabilities and deferred income 4,732,403 2,619,997 2,432,131

Total current liabilities 8,265,676 4,388,810 4,808,772

Total liabilities 8,265,676 4,388,810 4,808,772

TOTAL EQUITY AND LIABILITIES 118,200,215 43,238,387 76,422,637

Solidity 93.0% 89.8% 93.7%Equity per share, SEK 6.89 4.88 9.00

Consolidated balance sheet

EPISURF MEDICAL YEAR END REPORT 201512

Consolidated statement of changes in equity

Attributable to Parent Company shareholders

SEKShare

capitalOther

capital Reserves

Earned income

including net result

Total equity

Opening equity Jan 1, 2014 2,386,196 124,410,878 - -55,183,211 71,613,861TotalTotal comprehensive income for the period - - - -32,914,421 -32,914,421

Total comprehensive income - - - -32,914,421 -32,914,421

Transactions with shareholdersNew share issue, net after issue expenses 778 149,357 - - 150,135

Total transactions with shareholders 778 149,357 - - 150,135

Closing equity Dec 31, 2014 2,386,974 124,560,235 - -88,097,632 38,849,575

Opening equity Jan 1, 2015 2,386,974 124,560,235 - -88,097,632 38,849,575TotalTotal comprehensive income for the period - - - -43,801,434 -43,801,434

Total comprehensive income - - - -43,801,434 -43,801,434

Transactions with shareholdersNew share issue, net after issue expenses 2,402,017 112,484,379 - - 114,886,396

Total transactions with shareholders 2,402,017 112,484,379 - - 114,886,396

Closing equity Dec 31, 2015 4,788,991 237,044,614 - -131,899,066 109,934,539

EPISURF MEDICALYEAR END REPORT 2015 13

Condensed�cash�flow�statement

SEKOct-Dec

2015Oct-Dec

2014Jan-Dec

2015Jan-Dec

2014Jan-Dec

2013

Current operations Operating loss -14,173,166 -8,097,687 -44,008,519 -33,261,259 -23,279,677Adjustments�for�items�not�included�in�cash�flowDepreciation 677,894 478,767 2,235,026 1,761,043 1,075,755Interest received 24,606 43,211 34,544 353, 322 534,618interest paid -283 -851 -687 -6,484 -2,746Paid taxes - - - - -

Cash flow from current operations before change in working capital -13,470,949 -7,576,560 -41,739,636 -31,153,378 -21,672,050

Change in working capital Decrease/increase in inventory 97,271 -234,594 319,086 -934,184 -125,431Decrease/increase in accounts receivables -25,439 -175,520 -8,927 -Decrease/increase in current receivables 647,628 280,784 -493,057 857,027 -133,919Decrease/increase in current liabilities 2,136,296 1,375,248 4,050,095 -419,964 1,288,438

Change in working capital 2,855,756 1,421,438 3,700,604 -506,048 1,029,088

Cash flow from current operations -10,615,193 -6,155,122 -38,039,032 -31,659,426 -20,642,962

Investing activities Purchase�of�intangible�fixed�assets� -2,902,558 -752,804 -7,247,777 -2,830,838 -3,174,135Purchase�of�tangible�fixed�assets� -128,610 - -128,610 -38,699 -467,888

Cash flow from investing activities -3,031,168 -752,804 7,376,387 -2,869,537 -3,642,023

Financing activities New share issue -188,601 - 114,886,396 150,135 70,078,604

Cash flow from financing activities -188,601 - -7,376,387 150,135 70,078,604

Cash-flow for the period -13,834,962 -6,907,926 69,470,977 -34,378,828 45,793,619Cash and cash equivalents at beginning of period 117,795,738 41,397,725 34,489,799 68,868,627 23,075,008

Cash and cash equivalents at end of period 103,960,776 34,489,799 103,960,776 34,489,799 68,868,627

EPISURF MEDICAL YEAR END REPORT 201514

Income statement, Parent CompanySEK

Oct-Dec 2015

Oct-Dec 2014

Jan-Dec 2015

Jan-Dec 2014

Jan-Dec 2013

Operating incomeNet sales 754,609 195,978 754,609 195,978 569,594Other operating income 1,850,555 997,520 5,627,648 2,166,468 1,659,594

Total income 2,605,164 1,193,498 6,382,257 2,362,446 2,229,188

Operating costsOther costs -3,181,188 -3,122,111 -12,949,289 -16,537,846 -17,512,044Personnel costs -5,513,251 -2,571,151 -14,968,281 -9,401,693 -6,905,953Depreciation -496,498 -32,225 -589,997 -126,730 -1,075,755

Total operating costs -9,190,937 -5,725,487 -28,507,567 -26,066,269 -25,493,752

Operating loss -6,585,773 -4,531,989 -22,125,310 -23,703,823 -23,264,564

Financial itemsFinancial income, other 121,925 132,472 415,906 577,725 424,475Financial expenses, other -281 -111 -405 -5,239 -2,746

Loss after net financial items -6,464,129 -4,399,628 -21,709,809 -23,131,337 -22,842,835

Loss before contribution and tax -6,464,129 -4,399,628 -21,709,809 -23,131,337 -22,842,835

ContributionGroup contributions -7,054,000 -3,446,000 -7,054,000 -3,446,000 -

Loss before tax -13,518,129 -7,845,628 -28,763,809 -26,577,337 -22,842,835

Tax on income for the period - - - - -

Loss at end of the period -13,518,129 -7,845,628 -28,763,809 -26,577,337 -22,842,835

Parent Company statement of comprehensive incomeSEK

Oct-Dec 2015

Oct-Dec 2014

Jan-Dec 2015

Jan-Dec 2014

Jan-Dec 2013

Net profit -13 518 129 -7,845,628 -28,763,809 -26,577,337 -22,842,835

Other comprehensive income for the period:Other comprehensive income for the period, net of tax - - - - -

Total comprehensive income for the period -13 518 129 -7,845,628 -28,763,809 -26,577,337 -22,842,835

EPISURF MEDICALYEAR END REPORT 2015 15

SEKDec 31 2015

Dec 31 2014

Dec 31 2013

ASSETSFixed assetsIntangible fixed assets Capitalized development costs 4,660,637 483,702 -Patent - - -

Total intangible fixed assets 4,660,637 483,702 -

Tangible fixed assets Machinery and equipment 281,547 408,745 519,202

Total tangible fixed assets 281,547 408,745 519,202

Financial assetsShares in group companies 16,128,375 6,100,000 150,000Long-term receivables from group companies 11,770,769 12,051,689 5,345,072

Total financial assets 27,899,144 18,151,689 5,495,072

Total fixed assets 32,841,328 19,044,136 6,014,274

Current assets Short term receivables Other receivables 356,533 233,043 741,737Prepaid expenses and accrued income 277,319 395,037 814,341

Total short term receivables 988,939 628,080 1,556,078

Cash and bank balances 101,963,730 28,603,699 68,684,673

Total current assets 102,597,582 29,231,779 70,240,751

TOTAL ASSETS 135,438,910 48,275,915 76,255,025

Balance sheet, Parent Company

EPISURF MEDICAL YEAR END REPORT 201516

SEKDec 31

2015Dec 31

2014Dec 31

2013

EQUITY AND LIABILITIES EquityEquity Restricted equity Share capital 4,788,991 2,386,974 2,386,196

Total restricted equity 4,788,991 2,386,974 2,386,196

Unrestricted equity Share premium reserve 235,844,614 123,360,235 123,210,878Loss brought forward -80,546,687 -53,969,350 -31,126,515Loss for the period -28,763,809 -26,577,337 -22,842,835

Total unrestricted equity 126,534,118 42,813,548 69,241,528

Total equity 131,323,109 45,200,522 71,627,724

LiabilitiesCurrent liabilities Accounts payable 640,962 458,247 1,891,600Other liabilities 586,574 394,728 316,091Accrued liabilities and deferred income 2,888,265 2,222,418 2,419,610

Total current liabilities 4 ,115,801 3,075,393 4,627,301

Total liabilities 4 ,115,801 3,075,393 4,627,301

TOTAL EQUITY AND LIABILITIES 135,438,910 48,275,915 76,255,025

Pledged assets None None NoneContingent liabilities None None None

Balance sheet, Parent Company

EPISURF MEDICALYEAR END REPORT 2015 17

SEK Share capital

Share premium

reserve

Loss brought forward

Loss for the period

Total equity

Opening equity Jan 1, 2014 2,386,196 123,210,878 -31,126,515 -22,842,835 71,627,724Comprehensive loss for the periodLoss for the period - - - -26,577,337 -26,577,337Disposition according to AGMLoss brought forward - - -22,842,835 22,842,835 -Other - - - - -

Total comprehensive loss for the period - - -53,969,350 -26,577,337 45,050,387

Transactions with shareholdersNew share issue, net after issue expenses 778 149,357 - - 150,135

Total transactions with shareholders 778 149,357 - - 150,135

Closing equity Dec 31, 2014 2,386,974 123,360,235 -53,969,350 -26,577,337 45,200,522

Opening equity Jan 1, 2015 2,386,974 123,360,235 -53,969,350 -26,577,337 45,200,522Comprehensive loss for the periodLoss for the period - - - -28 763 809 -28 763 809 Disposition according to AGMLoss brought forward - - -26,577,337 26,577,337 -Other - - - - -

Total comprehensive loss for the period - - -80,546,687 -28,763,809 16,436,713

Transactions with shareholdersNew share issue, net after issue expenses 2,402,017 112,484,379 - - 114,886,396

Total transactions with shareholders 2,402,017 112,484,379 - - 114,886,396

Closing equity Dec 31, 2015 4,788,991 235,844,614 -80,546,687 –28,763,809 131,323,109

Statement of changes in equity, Parent Company

EPISURF MEDICAL YEAR END REPORT 201518

Condensed�cash�flow�statement,�Parent CompanySEK

Oct-Dec 2015

Oct-Dec 2014

Jan-Dec 2015

Jan-Dec 2014

Jan-Dec 2013

Current operations Operating loss -6,585,773 -4,531,989 -22,125,310 -23,703,823 -23,264,564Adjustments�for�items�not�included�in�cash�flowDepreciation -6,557,502 -3,413,775 -6,464,003 -3,319,270 1,075,755Interest received 121,925 132,472 415,906 577,725 424,475interest paid -281 -111 -405 -5,239 -2,746

Cash flow from current operations before change in working capital -13,021,631 -7,813,403 -28,173,812 -26,450,607 -21,767,080

Change in working capital Decrease/increase in current receivables 995,855 343,687 -5,779 927,998 634,274Decrease/increase in current liabilities -758,097 937,787 1,040,414 -1,551,908 1,106,968

Change in working capital 237,758 1,281,474 1,034,635 -623,910 1,741,242

Cash flow from current operations -12,783,873 -6,531,929 -27,139,177 -27,074,517 -20, 025,838

Investing activities Acquisition of subsidiaries Acquisition of intangible assets -1,781,174 -483,702 -4,643,111 -483,702 -3,174,136Acquisition of tangible assets 3,378 - 3,378 -16,274 -467,888Changes�in�financial�assets 1,559,941 3,151,024 -9,747,455 -12,656,617 -801,077

Cash flow from investing activities -217,855 2,667,322 -14,387,188 -13,156,593 -4,443,101

Financing activities New share issue -188,601 - 114,886,396 150,135 70,078,604

Cash flow from financing activities -188,601 - 114,886,396 150,135 70,078,604

Cash-flow for the period -13,190,329 -3,864,607 73,360,031 -40,080,975 45,609,665Cash and cash equivalents at beginning of period 115,154,059 32,468,305 28,603,699 68,684,673 23,075,008

Cash and cash equivalents at end of period 101,963,730 28,603,698 101,963,730 28,603,698 68,684,673

EPISURF MEDICALYEAR END REPORT 2015 19

Notes

NOTE 1Accounting principles

The�consolidated�financial�statements�have�been�prepared�in accordance with the Annual Accounts Act, Supplementary Accounting Rules for Groups and the International Financial Reporting Standards (IFRS) and interpretation statements from the International Financial Reporting Interpretations Committee (IFRIC), as endorsed by the EU.

The group’s accounting policies are unchanged from the previous year.

Capitalized�expenditures�for�development�of�productsExpenditure for development, where research results or other knowledge are applied to achieve new or improved products or processes, is recognized as an asset in the Statement of Financial�Position�only�if�the�following�conditions�are�satisfied:

1) It is technically possible to complete the intangible asset and use or sell it,

2) The Company intends to complete the intangible asset and use or sell it,

3) The conditions to use or sell the intangible asset are in place,4) The Company demonstrates how the intangible asset will

generate�likely�future�economic�benefits,5) There are adequate technological, economic and other

resources to complete development and to use or sell the intangible asset, and

6) The expenditure relating to the intangible asset during its development can be measured reliably.

Directly related expenditure that is capitalized mainly consists of expenditure from subcontractors and expenses for employees.

Other development expenditure that does not satisfy these criteria is expensed when it arises. Development

expenditure previously expensed is not recognized as an asset in subsequent periods.

After�first-time�reporting,�capitalized�development�expenditure is recognized at cost after deducting for accumulated amortization and potential accumulated impairment. Amortization of capitalized expenditure for product development started in October 2014.

NOTE 2Transactions with closely related parties

Shareholder and Board member Leif Ryd has received consulting fees of SEK 540,000 (810,000)

Serendipity Professionals AB has received a consulting fee of 1 629 951 SEK (180 000) of which 662 875 SEK was recharged costs and Serendipity Communications AB has recevied a consulting fee of 613 265 SEK (210 500). Serendipity Professionals AB and Serendipity Communications AB are related parties to Episurf Medicals largest shareholder Serendipity Ixora AB.

Styrelse 2015 2014 2013

Saeid Esmaeilzadeh, chairman 100,000 100,000 100,000Jeppe Magnusson, member 100,000 110,000 125,000

Leif Ryd, member 640,000 910,000 521,000Thomas Nortoft, member 100,000 100,000 100,000Robert Charpentier, member 100,000 100,000 -

TOTAL 1,040,000 1,320,000 846,000

NOTE 3Intangible fixed assets

Patent, Group Dec 31 2015 Dec 31 2014 Dec 31 2013

Opening cost 9,477,901 6,647,062 3,472,927

Purchases during the year 2,604,666 2,347,137 3,174,135

Capitalized development costsCapitalisation during the year 4,643,111 483,702 -

Closing accumulated cost 16,725,678 9,477,901 6,647,062

Opening depreciation -3,582,892 -1,953,067 -946,590

Depreciation for the year -1,630,256 -1,629,825 -1,006,477

Capitalized development costsDepreciation for the year -466,176 - -

Closing accumulated depreciation -5,679,324 -3,582,892 -1,953,067

Total intangible fixed assets 11,046,354 5,895,009 4,693,995

Episurf�Medical�AB�(publ)Company No 556767-0541

Stora Skuggans Väg 11, SE-115 42 Stockholm, Sweden

www.episurf.com