Serodus ASA. Subscription Period for the Subsequent Offering: From 29 January 2014 at 08:00 CET to 12 February 2014 at 16:30 CET.

Transcription

1 Serodus ASA Prospectus in connection with the Listing of 10,000,000 New Shares issued in connection with a Private Placement completed on 6 December 2013 at a Subscription Price of NOK 3.00 per New Share. Subsequent Offering and listing of up to 3,500,000 Offer Shares at Subscription Price of NOK 3.00 per Offer Share with tradable Subscription Rights for Eligible Shareholders. Subscription Period for the Subsequent Offering: From 29 January 2014 at 08:00 CET to 12 February 2014 at 16:30 CET Manager: Norne Securities AS 28 January 2014

2 Important notice Please see page 95 for definitions, which also apply to the front page. This Prospectus, dated 28 January 2014, has been prepared by Serodus in order to provide a presentation of the Company and its business in connection with the Listing of the New Shares to be issued in the Private Placement and Subsequent Offering, as defined and described herein. This Prospectus has been prepared to comply with the Norwegian Securities Trading Act sections 7-2 and 7-3 and related legislation and regulations including the EC Commission Regulation EC/809/2004. The Prospectus has been prepared solely in the English language. The Financial Supervisory Authority has reviewed and approved this Prospectus in accordance with the Norwegian Securities Trading Act sections 7-7 and 7-8. The Norwegian Financial Supervisory Authority's control and approval in this respect is limited to whether the issuer has included descriptions according to a pre-defined list of content requirements. The Norwegian Financial Supervisory Authority has not verified or approved the accuracy or completeness of the information provided in this Prospectus. It is the Company's responsibility to ensure that the information in the prospectus is accurate and complete. Furthermore, the Norwegian Financial Supervisory Authority has not made any sort of control or approval of the corporate matters described in or otherwise included in the prospectus. The Company has furnished the information in this Prospectus. All inquiries relating to this Prospectus must be directed to the Company or the Manager. No other person is authorized to give any information about or to make any representations on behalf of the Company in connection with the Listing of the New Shares to be issued in the Private Placement or Subsequent Offering. If any such information is given or made, it must not be relied upon as having been authorized by the Company or by the Manager. The information contained herein is of the date hereof and subject to change, completion and amendment without notice. In accordance with section 7-15 of the Norwegian Securities Trading Act, every new circumstance, material error, or inaccuracies which may have significance for the assessment of the New Shares or Offer Shares, and which are brought to light between approval of the Prospectus and admission to trading of the New Shares or Offer Shares, will be included in a supplement to the Prospectus. Such supplementary prospectus shall be approved by the Financial Supervisory Authority and be published. Publication of this Prospectus shall not create any implication that there has been no change in the Company s affairs or that the information herein is correct as of any date subsequent to the date of the Prospectus. The contents of this Prospectus are not to be construed as legal, business, financial or tax advice. Each reader of this Prospectus should consult with its own legal, business, financial or tax advisor as to legal, business, financial or tax advice. If you are in any doubt about the contents of this Prospectus you should consult your stockbroker, bank manager, lawyer, accountant or other professional adviser before making any investment decision. This Prospectus is subject to Norwegian law. Any dispute arising in respect of or in connection with this Prospectus or the Subsequent Offering or the Listing is subject to the exclusive jurisdiction of the Norwegian courts with Oslo District Court as legal venue. Prospective investors are expressly advised that an investment in the Company s shares entails financial and legal risk and that they should therefore read this Prospectus entirely and particularly section 1, entitled Risk Factors, in the Share Securities Note and section 1, entitled Risk Factors, in the Share Registration Document when considering an investment in the Company s shares. The distribution of this Prospectus may in certain jurisdictions be restricted by law. Persons in possession of this Prospectus are required to inform themselves about and to observe any such restrictions. This Prospectus does not constitute an offer of, or a solicitation of an offer to purchase, any of the Offer Shares in any jurisdiction or in any circumstances in which such offer or solicitation would be unlawful. No one has taken any action that would permit a public offering of Offer Shares to occur outside of Norway. The Offer Shares have not been and will not be registered under the U.S. Securities Act of 1933 as amended (the Securities Act ), or with any securities authority of any state of the United States. The Offer Shares may not be offered, sold, resold, transferred or delivered, directly or indirectly, in or into the United States, Canada, Japan or Australia. 2

3 TABLE OF CONTENTS SUMMARY NOTE... 4 SHARE SECURITIES NOTE RISK FACTORS RESPONSIBILITY STATEMENT KEY INFORMATION INFORMATION CONCERNING THE SECURITIES TO BE OFFERED/ADMITTED TO TRADING THE PRIVATE PLACEMENT AND TERMS AND CONDITIONS OF THE SUBSEQUENT OFFERING TRADING AND DEALING ARRANGEMENTS SELLING SECURITIES HOLDERS EXPENSE OF THE ISSUE DILUTION ADDITIONAL INFORMATION SHARE REGISTRATION DOCUMENT RISK FACTORS PERSONS RESPONSIBLE FOR THE SHARE REGISTRATION DOCUMENT STATUATORY AUDITORS SELECTED FINANCIAL INFORMATION INFORMATION ABOUT THE ISSUER BUSINESS OVERVIEW ORGANIZATIONAL STRUCTURE PROPERTY, PLANTS AND EQUIPMENT OPERATING AND FINANCIAL REVIEW CAPITAL RESOURCES RESEARCH AND DEVELOPMENT, PATENTS AND LICENCES TREND INFORMATION PROFIT FORECASTS OR ESTIMATES MANAGEMENT AND SUPERVISORY BODIES REMUNERATION AND BENEFITS BOARD PRACTICES EMPLOYEES MAJOR SHAREHOLDERS RELATED PARTY TRANSACTIONS FINANCIAL INFORMATION CONCERNING THE ISSUER'S ASSETS AND LIABILITIES, FINANCIAL POSITION AND PROFITS AND LOSSES ADDITIONAL INFORMATION MATERIAL CONTRACTS THIRD PARTY INFORMATION AND STATEMENT BY EXPERTS AND DECLARATIONS OF ANY INTEREST DOCUMENTS ON DISPLAY INFORMATION ON HOLDINGS DEFINITIONS AND GLOSSARY...95 APPENDICES

4 Serodus ASA SUMMARY NOTE This Summary Note has been prepared to comply with the Norwegian Securities Trading Act and related legislation and regulations including the EC Commission Regulation EC/809/2004. The Summary Note has been prepared solely in the English language. PLEASE REFER TO PAGE 95 FOR DEFINITIONS AND GLOSSARY, WHICH ALSO APPLY TO THIS SUMMARY NOTE. THIS SUMMARY PROVIDES A BRIEF DESCRIPTION OF THE COMPANY. INVESTORS ARE ADVISED THAT (A) IT SHOULD BE READ AS AN INTRODUCTION TO THE SHARE SECURITIES NOTE AND THE SHARE REGISTRATION DOCUMENT; (B) ANY DECISION TO INVEST IN THE SHARES ISSUED BY THE COMPANY SHOULD BE BASED ON CONSIDERATION OF THE PROSPECTUS AS A WHOLE BY THE INVESTOR; (C) WHERE A CLAIM IN RELATION TO THE INFORMATION CONTAINED IN THE PROSPECTUS IS BROUGHT BEFORE A COURT, THE PLAINTIFF INVESTOR MIGHT HAVE TO BEAR THE COSTS OF TRANSLATION OF THE PROSPECTUS BEFORE THE LEGAL PROCEEDINGS ARE INITIATED; AND (D) NO CIVIL LIABILITY WILL ATTACH TO THOSE PERSONS WHO HAVE TABLED THE SUMMARY, INCLUDING ANY TRANSLATION THEREOF, UNLESS IT IS MISLEADING, INACCURATE OR INCONSISTENT WHEN READ TOGETHER WITH THE OTHER PARTS OF THE PROSPECTUS. 4

5 1. SUMMARY Summaries are made up of disclosure requirements known as Elements. These elements are numbered in Sections A E (A.1 E.7). This summary contains all the Elements required to be included in a summary for this type of securities and Issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements. Even though an Element may be required to be inserted in the summary because of the type of securities and Issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of not applicable. Section A Introduction and warnings Annexes Element Disclosure requirement Comments All A.1 Warning This summary should be read as introduction to the prospectus; any decision to invest in the securities should be based on consideration of the prospectus as a whole by the investor; where a claim relating to the information contained in the prospectus is brought before a court, the plaintiff investor might, under the national legislation of the Member States, have to bear the costs of translating the prospectus before the legal proceedings are initiated; and civil liability attaches only to those persons who have tabled the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the prospectus or it does not provide, when read together with the other parts of the prospectus, key information in order to aid investors when considering whether to invest in such securities All A.2. Consent by the issuer or person responsible for drawing up the prospectus to the use of the prospectus for subsequent resale or final placement of securities by financial intermediaries. Indication of the offer period within which subsequent resale or final placement of securities by financial intermediaries can be made and for which consent to use the prospectus is given. Any other clear and objective conditions attached to the consent which are relevant for the use of the prospectus. Notice in bold informing investors that information on the terms and conditions of the offer by any financial intermediary is to be provided at the time of the offer by the financial intermediary. Not applicable. 5

6 Section B Issuer and any guarantor Annexes Element Disclosure requirement Comments 1, 4, 7, 9, 11 B.1 The legal and commercial name of the issuer. The legal and commercial name of the issuer is Serodus ASA. 1, 4, 7, 9, 11 B.2 The domicile and legal form of the issuer, the legislation under which the issuer operates and its country of incorporation. Serodus ASA is a Norwegian public limited liability company organized under the Norwegian Public Limited Liabilities Companies Act, with organization number Serodus was incorporated on 29 January The Company s registered business address is Gaustadalleén 21, 0349 Oslo, Norway and its telephone number is The Company s website is 1 B.3 A description of, and key factors relating to, the nature of the issuer s current operations and its principal activities, stating the main categories of products sold and/or services performed and identification of the principal markets in which the issuer competes. 1 B.4a A description of the most significant recent trends affecting the issuer and the industries in which it operates. Serodus is a Norwegian research and development company dedicated to the development of products for the treatment of patients with cardiovascular diseases. Serodus was founded based on a discovery of a new disease target in heart failure from the University of Oslo. Today, after acquiring Phlogo and with the inlicensing of SER150, the product pipeline focuses on the following five diseases: Isolated Systolic Hypertension (ISH) - reducing the systolic blood pressure in therapy resistant patients (SER100) Acute Myocardial Infarction (AMI) reducing the scar area after coronary occlusion and reduce reperfusion damage after percutaneous intervention (Balloon dilatation-pci) and stent (SER130) Diabetic Nephropathy reducing amount of 24-hour urinary loss of albumin and preserve kidney function in ACE inhibitor treated diabetics (SER150) Atrial Fibrillation (AF) during intra-thoracical surgery - normalization of heart rhythm (SER120) Type 2 Diabetes reduce the need for insulin or other anti-diabetic treatment (SER140) There have not been any significant trends that are reasonably likely to have a material effect on the Company or the industries in which it operates. 1, 4, 9, 11 B.5 Description of the Group Serodus has a 100% ownership of Phlogo ApS which is a Danish private limited liability company organized under the laws of Denmark (governed by the Danish Companies Act) with organization number

7 1 B.6 In so far as is known to the issuer, the name of any person who, directly or indirectly, has an interest in the issuer s capital or voting rights which is notifiable under the issuer s national law, together with the amount of each such person s interest. Whether the issuer s major shareholders have different voting rights if any. To the extent known to the issuer, state whether the issuer is directly or indirectly owned or controlled and by whom and describe the nature of such control 1 B.7 Selected historical key financial information regarding the issuer, presented for each financial year of the period covered by the historical financial information, and any subsequent interim financial period accompanied by comparative data from the same period in the prior financial year except that the requirement for comparative balance sheet information is satisfied by presenting the year-end balance sheet information. This should be accompanied by a narrative description of significant change to the issuer s financial condition and operating results during or subsequent to the period covered by the historical key financial information. Serodus shareholders do not have different voting rights. Except as set forth below, Serodus is not aware of any shareholder owning more than 5% of Serodus share capital: SERODUS ASA % 1 BJØRNS INVEST AS ,2% 2 VIGGO HARBOE 2006 HOLDING APS* ,2% 3 FUNDS MANAGED BY STOREBRAND ASSET MANAGEMENT AS ,8% 4 HOLBERG NORGE ,5% 5 MP PENSJON ,2% 6 NORTH MURRAY AS ,1% 7 NEWPHARMA.DK APS** ,2% 8 NORSEMETER AS ,8% 9 ROLFS HOLDING AS ,1% 10 INVEN2 AS ,1% 11 NORDEA BANK DANMARK A/S ,0% 12 CAT INVEST 1 AS ,9% 13 ACADIA HOLDING AS ,5% 14 VIOLINA AS ,1% 15 SMERUD MEDICAL RESEARCH INTERNATIO ,1% 16 DATUM AS ,0% 17 DRUG DISCOVERY LABORATORY AS ,9% 18 AASHEIM INVEST AS ,9% 19 DALSETH INVEST AS ,9% 20 MARIN AS ,9% TOTAL TOP ,6% OTHERS ,4% TOTAL ,0% Serodus ASA (NOK 1000) IFRS IFRS Unaudited Unaudited Profit and loss summary Q Q Total revenues Profit/loss from operations Result before tax Result after tax IFRS Unaudited Balance sheet summary Total intangible assets Total tangible assets - Total financial assets - Total receivables Cash and cash equivalents Total assets Total equity Total non-current liabilities 516 Total current liabilities Total equity and liabilities Other Number of shares Dividends 0,00 Serodus ASA (NOK 1000) IFRS IFRS IFRS IFRS Unaudited Unaudited Audited Audited Profit and loss summary Q1-Q Q1-Q Total revenues Profit/loss from operations Result before tax Result after tax IFRS IFRS Audited Audited Balance sheet summary Total intangible assets - - Total tangible assets - - Total financial assets - - Total receivables Cash and cash equivalents Total assets Total equity Total non-current liabilities - - Total current liabilities Total equity and liabilities Other Number of shares Dividends 0,00 0,00 7

8 1, 2 B.8 Selected key pro forma financial information, identified as such. Not applicable The selected key pro forma financial information must clearly state the fact that because of its nature, the pro forma financial information addresses a hypothetical situation and, therefore, does not represent the company s actual financial position or results 1, 4, 9, 11 B.9 Where a profit forecast or estimate is made, state the figure Not applicable 1, 4, 9, 11 B.10 A description of the nature of any qualifications in the audit report on the historical financial information. The audit reports for the historical financial information were issued without qualifications, with the exception of the following: In its auditor report for the 2011 NGAAP accounts of the Company, the Company s auditor stated the following (translated from Norwegian): Without qualifying our opinion in the paragraph above, we emphasize that the continued operation requires additional funding of the company. The company states in note13 and in the report from the Board of Directors that the company will need additional financing. The financial statements are prepared on the going concern basis and realization of assets and settlements of liabilities in course of normal business. There has been no provision for losses that may occur if this assumption will not be present. 3 B.11 If the issuer s working capital is not sufficient for the issuer s present requirements an explanation should be included. Serodus confirms that the working capital available is sufficient for the expected requirements during the next twelve months. 4, 9, 11 B.12 Use only the first paragraph of B.7, plus: There has been no material adverse change in the prospects of the issuer since the Q figures were released. A statement that there has been no material adverse change in the prospects of the issuer since the date of its last published audited financial statements or a description of any material adverse change. A description of significant changes in the financial or trading position subsequent to the period covered by the historical financial information There have not been any significant changes to the Company s financial or trading position subsequent to the end of the fourth quarter 2013, except for the fact that Serodus completed an equity issue of 10,000,000 new shares at a price of NOK 3.00 per share, which was approved by the extraordinary general meeting on 6 January 2014, increasing the share capital by NOK 13,000,000, and yielding added net proceeds to the Company of approximately NOK 28.5 million. 8

9 4, 9, 11 B.13 A description of any recent events particular to the issuer which are to a material extent relevant to the evaluation of the issuer s solvency. Not applicable 4, 9, 11 B.14 B.5 plus: Not applicable If the issuer is dependent upon other entities within the group, this must be clearly stated. 4, 9, 11 B.15 A description of the issuer s principal activities. Serodus is a Norwegian research and development company dedicated to the development of products for the treatment of patients with the following five diseases: Isolated Systolic Hypertension, Acute Myocardial Infarction, Diabetic Nephropathy, Atrial Fibrillation (AF) and Type 2 Diabetes. Section C Securities Annexes Element Disclosure requirement Comments 3, 5, 12, 13 C.1 A description of the type and the class of the securities being offered and/or admitted to trading, including any security identification number. The Company has one single class of shares. Each share in the Company carries one vote. The Shares are registered in VPS under the ISIN NO , 5, 12, 13 C.2 Currency of the securities issue. Norwegian Kroner (NOK) 1 C.3 The number of shares issued and fully paid and issued but not fully paid. The par value per share, or that the shares have not par value 3 C.4 A description of the rights attached to the securities. The share capital of the Company after the Private Placement will be NOK divided into 23,998,842. Shares, each with a nominal value of NOK The shares issued in connection with the Private Placement have been fully paid and issued to a separate ISIN pending final approval of this Prospectus. The Company has one single class of shares which carry equal rights in all respect including the right to dividend and each Share carries one vote in the Company` general meeting. The Offer Shares will confer shareholder rights, including the right to dividend, from such time as the share capital is registered in the Norwegian Register of Business Enterprises and rank pari passu in all respect with the existing Shares. 9

10 3, 5, 12, 13 C.5 A description of any restrictions on the free transferability of the securities. All shares are freely transferable. 3 C.6 An indication as to whether the securities offered are or will be the object of an application for admission to trading on a regulated market and the identity of all the regulated markets where the securities are or are to be traded. Serodus shares are listed on Oslo Stock Exchange under the ticker SER. 1 C.7 A description of dividend policy. The Company is currently focusing on its plan to complete the clinical studies. These clinical studies are assumed to be very capital intensive and company`s Board of Directors is not likely to propose any dividend payments during the short term. Section D Risks Annexes Element Disclosure requirement Comments 1 D.1 Key information on the key risks that are specific to the issuer or its industry The following risks are specific to the issuer or its industry: Operational risks: Clinical studies provide negative conclusion Competition Attraction and retention of key personnel Pricing environment Disputes Inadequate quality and cost/benefit value Loss of reputation Changes in current tax regulations Regulatory requirements and other governmental regulation risk Collaborations and licensing arrangements Intellectual property rights (IPR) Financial risks Operating losses Ability to raise additional capital Macroeconomic fluctuations Changes in interest rates Currency rate fluctuations Serodus is dependent on successful development of its product candidates The cost of clinical trials Market risk Slow market growth Changing markets Other risks Trade barriers Political events Product liability and insurance 10

11 3, 5, 13 D.3 Key information on the key risks that are specific to the securities The following risk factors are specific to the securities being admitted to trading: Price volatility of publicly traded securities Future sales of Shares Limited free float of the Shares Potential dilution of shareholders Nominee accounts and voting rights The ability to bring an action against the Company may be limited under Norwegian law In addition, the following risks are specific to the securities being offered in the Subsequent Offering: Existing Shareholders who do not participate in the Subsequent Offering may experience significant dilution in their shareholding Shareholders outside of Norway are subject to exchange rate risk Section E Offer Annexes Element Disclosure requirement Comments 3, 10 E.1 The total net proceeds and an estimate of the total expenses of the issue/offer, including estimated expenses charged to the investor by the issuer or the offeror. Depending on the amount of subscriptions in the Subsequent Offering, net proceeds to the Company from both the Private Placement and the Subsequent Offering will be in the range NOK million. The Company will cover transaction costs and all other directly attributable costs in connection with the Private Placement and the Subsequent Offering. 3, 10 E.2a Reasons for the offer, use of proceeds, estimated net amount of the proceeds. The Private Placement was carried out in order to attract new investors to the Company based on a capital requirement for its current projects. The successful completion of the Private Placement and the Subsequent Offering will secure the Company sufficient working capital for its current planned activities through

12 3, 5, 10, 12 E.3 A description of the terms and conditions of the offer. The Subsequent Offering consists of up to 3,500,00 Offer Shares, each with a nominal value of NOK 1.30, at a Subscription Price of NOK 3.00 per Offer Shares, corresponding to gross proceeds of up to NOK 10,500,000. The Eligible Shareholders, being existing shareholders as of 5 December 2013 (as recorded in the VPS on the Record Date) and who were not allocated shares in the Private Placement, and are not resident in a jurisdiction where such offering would be unlawful, or for other jurisdictions than Norway, would require any filing, registration or similar action, will be granted tradable Subscription Rights that, subject to applicable laws, provide rights to subscribe for and be allocated Offer Shares in the Subsequent Offering. Funds which are under management by the same company, group of companies, fund manager(s) or similar may be treated as one shareholder when applying these limitations. Over-subscription and subscription without Subscription Rights will be allowed. The timeline for the Subsequent Offer, subject to any extension, is set out below. Last day of trading in the shares including Subscription Rights Ex. rights trading in the shares commenced on the Oslo Stock Exchange 5 December December 2013 Record Date 10 December 2013 Delivery date for the Subscription Rights Trading period for the Subscription Rights commences Trading period for the Subscription Rights ends Subscription Period commences Subscription Period ends 27 January January 2014 at 08:00 CET 6 February 2014 at 16:30 CET 29 January 2014 at 08:00 CET 12 February 2014 at 16:30 CET Allocation of the Offer Shares 13 February 2014 Distribution of allocation letters 13 February 2014 Payment date for the Offer Shares 19 February 2014 Registration of the share capital increased 24 February 2014 Delivery of the Offer Shares 24 February 2014 Listing and commencement of trading in 24 February 2014 the Offer Shares on Oslo Axess... 12

13 3, 5, 10, 12 E.3 A description of the terms and conditions of the offer. Allocation of the Offer Shares will take place on or about 13 February 2014 in accordance with the following criteria: 3, 5, 10, 12, 13 E.4 A description of any interest that is material to the issue/offer including conflicting interests. i) Firstly, to Eligible Shareholders on the basis of their subscription rights ii) Secondly, to Eligible Shareholders who have subscribed for offer shares in excess of their subscription rights (allocation will be made on a pro rata basis based on the number of Subscription Rights exercised by each subscriber. To the extent that pro rata allocation is not possible, the Company will determine the allocation by drawing of lots) iii) Thirdly, to other shareholders, and iv) Forthly, to all other subscribers. Not applicable 3, 10 E.5 Name of the person or entity offering to sell the security. Not applicable Lock-up agreements: the parties involved; and indication of the period of the lock up. 3, 10 E.6 The amount and percentage of immediate dilution resulting from the offer. In the case of a subscription offer to existing equity holders, the amount and percentage of immediate dilution if they do not subscribe to the new offer. The percentage of immediate dilution resulting from the Private Placement for the Company s shareholders who did not participate in the Private Placement was approximately 41.7%. Investors who did not participate in the Private Placement, but does subscribe according to their subscription rights in the Subsequent Offering will be diluted by approximately 29.9 %. The percentage of immediate dilution resulting from both the Private Placement and the Subsequent Offering for the Company s existing shareholders who did not participate in the Private Placement and decide not to participate in the Subsequent Offering will be approximately 49.1%, given a fully subscribed Subsequent Offering. Investors who participated in the Private Placement, but decide not to participate in the Subsequent Offering, will be diluted by approximately 12.7%. All E.7 Estimated expenses charged to the investor by the issuer or the offeror No expenses will be charged to the investor by the Company. 13

14 Serodus ASA SHARE SECURITIES NOTE This Share Securities Note has been prepared to comply with the Norwegian Securities Trading Act and related legislation and regulations including the EC Commission Regulation EC/809/2004. The Share Securities Note has been prepared solely in the English language. 14

15 TABLE OF CONTENTS SHARE SECURITIES NOTE RISK FACTORS RESPONSIBILITY STATEMENT KEY INFORMATION INFORMATION CONCERNING THE SECURITIES TO BE OFFERED/ADMITTED TO TRADING THE PRIVATE PLACEMENT AND TERMS AND CONDITIONS OF THE SUBSEQUENT OFFERING TRADING AND DEALING ARRANGEMENTS SELLING SECURITIES HOLDERS EXPENSE OF THE ISSUE DILUTION ADDITIONAL INFORMATION

16 1. RISK FACTORS Investing in the Company involves inherent risks. This section contains an overview of the risk factors related to the shares of the Company that are known to the Company at the date of this Prospectus. Risk factors specific to the Company and the industry in which it operates are described in Section 1 of the Share Registration Document. If any of the following risks actually occur, this could materially and adversely affect the price of the Shares. A prospective investor should consider carefully the risk factors set forth below in this section, and the risk factors set out in the Share Registration Document before making an investment decision, and should consult his or her own expert advisors as to the suitability of an investment in the Shares of the Company. The order in which risk factors are mentioned is not intended as an indication of the probability or importance of the risk factors. An investment in the Shares is suitable only for investors who understand the risk factors associated with this type of investment and who can afford a loss of all or part of the investment Risk factors material to the securities being admitted to trading The market value of the Shares could experience substantial fluctuations caused by a number of factors. Many of these will be outside the Company s control and may be independent of its operational and financial development. Price volatility of publicly traded securities In recent years, the securities markets in Norway and elsewhere in Europe, have experienced a high level of price and volume volatility, and the market price of securities of many companies have experienced wide fluctuations in price. This is not necessarily related to the operating performance, underlying asset values or future prospects of such companies. There can be no assurance that continual fluctuations in price will not occur in the future. It is likely that the quoted market price, if any, for the Shares will be subject to market trends generally, notwithstanding the financial and operational performance of the Company. Future sales of Shares Sales of substantial amounts of the Shares or the perception that such sales could occur, could have an adverse effect on the market value of the Shares and the Company s ability to raise capital through future capital increases. Limited free float of the Shares Prior to the Private Placement approximately 47 % of the Share Capital of the Company was held by the Company s top 5 shareholders. This may limit the share s free float and such limited free float may have a negative impact on the liquidity of the Shares and result in a low trading volume of the Shares, which could have an adverse effect on the then prevailing market price for the Shares. Potential dilution of shareholders The Company may require additional capital in the future. This could be necessary to execute the outlined strategies, and to flexibly and effectively react to new opportunities and threats arising, as well as to cater for unanticipated liabilities or expenses that may be incurred. If the Company raises capital through issues of new Shares or other equity instruments in the future, such issuances may result in dilution of ownership and/or value for the then existing shareholders of the Company depending on the structure and conditions of such issuances. Nominee accounts and voting rights Beneficial owners of the Shares that are registered in a nominee account (e.g., through brokers, dealers or other third parties) may not be able to vote for such Shares unless their ownership is re-registered in their names with the VPS prior to the Company s general meetings. The Company cannot guarantee that beneficial owners of the Shares will receive the notice for a general meeting in time to instruct their nominees to effect a re-registration of their Shares or otherwise arrange for votes to be cast for such Shares. 16

17 The ability to bring an action against the Company may be limited under Norwegian law The Company is a public limited company incorporated under the laws of Norway. The rights of holders of Shares are governed by Norwegian law and by the Articles of Association. These rights differ from the rights of shareholders in other jurisdictions. In particular, Norwegian law limits the circumstances under which shareholders of Norwegian companies may bring derivative actions. Under Norwegian law, any action brought by the Company in respect of wrongful acts committed against the Company takes priority over actions brought by shareholders in respect of such acts Risk factors material to the Subsequent Offering Existing Shareholders who do not participate in the Subsequent Offering may experience significant dilution in their shareholding Subscription Rights that are not exercised by the end of the Subscription Period will have no value and will automatically lapse without compensation to the holder. To the extent that an Eligible Shareholder does not exercise its Subscription Rights prior to the expiry of the Subscription Period, whether by choice or due to a failure to comply with procedures as set forth in this Prospectus, such Eligible Shareholder s proportionate ownership and voting interests in the Company after the completion of the Subsequent Offering will be diluted. Even if an Eligible Shareholder elects to sell its unexercised Subscription Rights, or such Subscription Rights are sold on its behalf, the consideration it receives on the trading market for the Subscription Rights may not reflect the immediate dilution in its shareholding as a result of the completion of the Subsequent Offering. Shareholders outside of Norway are subject to exchange rate risk The Subscription Rights and the Offer Shares are priced in NOK. Accordingly, investors outside of Norway are subject to adverse movements in NOK against their local currency as the foreign currency equivalent of any dividends paid on the Offer Shares or received in connection with any sale of the Offer Shares could be adversely affected Other risks For information regarding risk factors specific to the Company and or its industry in which it operates, refer to the Share Registration Document, Section 1. 17

18 2. RESPONSIBILITY STATEMENT 2.1 Persons responsible for the Prospectus The members of the Board of Directors hereby confirm that, after having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus is, to the best of our knowledge, in accordance with the facts and contains no omissions likely to affect its import. 28 January 2014 The Board of Directors of Serodus ASA Ingrid Alfheim Ole Peter Nordby Theresa Comiskey Olsen Søren Elmann Ingerslev Svein S. Jacobsen Chairman 18

19 Note Regarding Forward-Looking Statements This Prospectus includes forward-looking statements, including, without limitation, projections and expectations regarding the Company s future financial position, business strategy, plans and objectives. All forward-looking statements included in this document are based on information available to the Company, and views and assessments of the Company, as of the date of this Prospectus. The Company expressly disclaims any obligation or undertaking to release any updates or revisions of the forward-looking statements contained herein to reflect any change in the Company s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, unless such update or revision is prescribed by law. When used in this document, the words anticipate, believe, estimate, expect, seek to and similar expressions, are intended to identify forward-looking statements. Such forwardlooking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company, to materially differ from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company s present and future business strategies and the environment in which the Company will operate. Factors that could cause the Company s actual results, performance or achievements to materially differ from those in the forward-looking statements include but are not limited to global and regional economic conditions, the competitive nature of the market in which the Company operates, growth management, changes in domestic and foreign laws and regulations, taxes, changes in competition and pricing environments, changes in political events, force majeure events and other factors referred to in this Prospectus. Important factors that could cause actual results to differ materially from those in the forward-looking statements are included in Chapter 1 in the Share Securities Note and chapter 1 in the Share Registration Document. 3. KEY INFORMATION 3.1. Working capital statement The Company is of the opinion that the current working capital is sufficient for the Group s present requirements for at least the next 12 months. The raising of up to NOK 10.5 million in the Subsequent Offering will result in the Group further strengthening its working capital. Successful completion of the Subsequent Offering is not a condition for having sufficient current working capital for at least the next 12 months Capitalization and indebtedness The table below lists the Company`s current capitalization and indebtedness. The figures as of are derived from the Company`s last published financial statement (unaudited Q4 report 2013) and are presented on a consolidated basis. Serodus ASA Changes* Date of Prospectus Serodus ASA Changes* (NOK 1000) (NOK 1000) CAPITALISATION INDEBTEDNESS Date of Prospectus Total current debt (A) Cash Guaranteed (B) Cash equivalents Secured (C) Trading securities Unguaranteed/unsecured (D) Total liquidity (A) + (B) + (C) Total current debt (E) Current financial receivables Total non-current debt Guaranteed (F) Current bank debt Secured (G) Current portion of non-current debt Unguaranteed/unsecured (relates to deferred tax) (H) Other current financial debt Total non-current debt (I) Current financial debt (F) + (G) + (H) Total debt (a) (J) Net current financial indebtedness (I) - (E) - (D) Shareholder`s equity (K) Non-current bank loans Share Capital (L) Bonds issued Legal reserve (M) Other non-current loans Other reserves (N) Non-current financial indebtedness (K) + (L) + (M) Total shareholder`s equity (b) (O) Net financial indebtedness (J) + (N) Total Capitalisation (a+b) *The table has been updated to reflect the equity issue completed in the Company as of 6 December 2013 and approved by the EGM on 6 January 2014 There have not been any significant changes to the Company s financial or trading position subsequent to the end of the fourth quarter 2013, except for the fact that Serodus completed an equity issue of 10,000,000 new shares at a price of NOK 3.00 per share, which was approved by the extraordinary general meeting on 6 January 2014, increasing the share capital by NOK 13,000,000 and other reserves by NOK 17,000,000, yielding gross proceeds (increase in cash) to the Company of NOK 30 million. 19

20 There is no indirect or contingent indebtedness in the Company or its subsidiary Interest of natural and legal persons involved in the Offering The Manager (and/or its affiliates) has provided from time to time, and may provide in the future, investment and commercial banking services to the Company during its ordinary course of business, for which it may have received and may continue to receive customary fees and commissions. The Manager will be paid a percentage of the gross proceeds raised in the Private Placement and Subsequent Offering (see section 8 regarding the Company's expected total expenses). The Manager therefore had an economic interest in the successful outcome of the Private Placement and will have so in the Subsequent Offering. Further the Manager, its employees and any affiliate acting as an investor for their own account, may subscribe or purchase Offer Shares and other securities of the Company or other investments for their own account and may offer or sell such securities (or other investments) otherwise than in connection with the Subsequent Offering. The Manager does not intend to disclose the extent of any such investments or transactions other than in accordance with any legal or regularity obligation to do so. The Company is not aware of any person, or group of persons, that has a special interest in the Listing or Subsequent Offering, including interest conflicting with the interests of the Company that relates to the Listing or Subsequent Offering Reasons for the Offering, related Listing and use of proceeds The Private Placement was carried out in order to attract new investors to the Company based on a budgeted capital requirement for its current projects. The size of the Private Placement and Subsequent Offering has been set based on an analysis of capital needs and financing structure going forward (the budgeted capital needs for the Company s current projects through 2015 has been set out below). The successful completion of the Private Placement and the Subsequent Offering will secure the Company sufficient working capital for its current planned activities through The Private Placement alone is sufficient to secure that the current working capital is sufficient for the Group s present requirements for at least the next 12 months, ref. section 3.1. Details of the budgeted capital need for the Company s current projects through 2015 (NOK 1,000): The outlined budget is subject to change and inherent uncertainty given the nature of the projects and the relatively long period going forward in time. 20

21 4. INFORMATION CONCERNING THE SECURITIES TO BE OFFERED/ADMITTED TO TRADING 4.1. Description of the type and the class of the Shares The Company has one single class of shares which carry equal rights in all respect including the right to dividend and each Share carries one vote in the Company` general meeting. The Offer Shares will confer shareholder rights, including the right to dividend, from such time as the share capital is registered in the Norwegian Register of Business Enterprises and rank pari passu in all respect with the existing Shares Legislation The Company is a public limited liability company incorporated under the laws of Norway and the Offer Shares will be issued pursuant to the Norwegian Public Limited Liability Companies Act Registration of Shares, proof of ownership The shares issued under the Private Placement and the Offer Shares will be registered electronically in the Norwegian Central Securities Depository (VPS) under ISIN NO The currency of the securities issued is Norwegian Kroner (NOK). The Company s registrar is Nordea Bank Norge ASA, P.O. Box 1166 Sentrum, NO-0107 Oslo Rights attached to the Shares Shareholders right to dividend Under Norwegian law, any proposal to pay dividend must be recommended or accepted by the Board of Directors and approved by the shareholders at a general meeting. The shareholders may vote to reduce but not to increase the dividends proposed by the Board of Directors. After approval of the audited financial statement for a financial period, the general meeting may grant the Board of Directors an authority to distribute dividends based on the approved audited financial statements. Dividends in cash or in kind are payable to the extent the Company after the distribution of dividends will have net assets covering its share capital and other tied-up equity, after deduction of (a) treasury shares and (b) any credit or security given pursuant to section 8-7 to 8-10 of the Public Limited Liability Companies Act, and provided always that the Company after such distribution will have a sound equity and liquidity.. The Board of Directors will consider the amount of dividend (if any) to recommend for approval by the general meeting, on an annual basis, within the legal restrictions on maximum dividend described above and taking into consideration the financial situation of the Company at the relevant point in time and future plans and capital needs. Hence, the shareholders do not have an entitlement to share in the Company's profits. All shareholders that are shareholders at the time of the general meeting making its resolution are entitled to dividend. The Norwegian Public Limited Companies Act does not provide for any time limit after which the individual shareholders entitlement to a declared dividend lapses. Subject to various exceptions, Norwegian law provides a limitation period of three years from the date on which an obligation is due. There are no dividend restrictions or specific procedures for non-norwegian resident shareholders to claim dividends. For a description of withholding tax on dividends applicable to non-norwegian residents, see Section General meetings Under Norwegian law, the Company s shareholders are to exercise supreme authority in the Company through the general meeting. A shareholder may attend the general meeting either in person or by proxy. The Company includes a proxy form with the summons to general meetings. 21

22 In accordance with Norwegian law, the annual general meeting of the Company is required to be held each year on or prior to 30 June. The following business must be transacted and decided at the Company s annual general meeting: approval of the annual accounts and annual report, including the distribution of any dividend any other business to be transacted at the general meeting by law or in accordance with the Company s articles of association Norwegian law requires that written notice of general meetings are sent to all shareholders whose addresses are known at least three weeks prior to the date of the meeting, unless the Company s articles of association stipulate a longer period. The Company s articles of association do not include any such provision. The notice must set forth the time and date of the meeting and specify the agenda of the meeting. It must also name the person appointed by the Board of Directors to open the meeting. The Company's articles of association do not currently include any provisions requiring shareholders to pre-register in order to participate at general meetings. A shareholder is entitled to have an issue discussed at a general meeting if such shareholder provides the Board of Directors a notice of the issue so that it can be included in the summons to the general meeting. In addition to the Company s annual general meeting, extraordinary general meetings may be held if deemed necessary by the Board of Directors. The notice period for extraordinary general meetings are also three weeks. An extraordinary general meeting must also be convened for the consideration of specific matters at the written request of the Company s auditor or shareholders representing a total of at least five per cent of the share capital. Voting Rights In general, decisions that shareholders are entitled to make under Norwegian law or a company s articles of association may be made by a simple majority of the votes cast. In the case of elections, the persons who obtain the most votes cast are elected. However, certain decisions, including, but not limited to, resolutions regarding: increase or reduce a company s share capital waive preferential rights in connection with any share issue approve a merger or demerger must receive the approval of at least two-thirds of the aggregate number of votes cast, as well as at least twothirds of the share capital represented at the general meeting. In general, in order to be entitled to vote, a shareholder must be registered as the owner of shares in the share register kept by the Norwegian Central Securities Depository, VPS, or, alternatively, report and show evidence of the shareholder s share acquisition to the Company prior to the general meeting. Under Norwegian law, a beneficial owner of shares registered in the name of a nominee is generally not able to vote for the beneficial owner s shares unless ownership is re-registered in the name of the beneficial owner prior to the relevant general meeting. Neither is the nominee able to vote for the beneficial owner`s shares. Amendments to the Company`s articles of association The affirmative vote of two-thirds of the votes cast at a general meeting as well as at least two-thirds of the share capital represented at the meeting is required to amend the Company s articles of association. Certain types of changes in the rights of the Company s shareholders require the consent of all shareholders affected thereby as well as the majority required for amending the articles of association and certain types of changes require the consent 90 per cent of the share capital represented at the general meeting affected thereby as well as the majority required for amending the articles of association. 22

23 Additional issuance and preferential rights If the Company issues any new shares the Company s articles of association must be amended, which requires a two-thirds majority of the votes cast at a general meeting of shareholders as well as at least two-thirds of the share capital represented at the meeting. In connection with an increase in the Company s share capital by a subscription for shares against cash contributions, Norwegian law provides the Company s shareholders with a preferential right to subscribe for the new shares on a pro rata basis in accordance with their then current shareholdings in the Company. The preferential rights to subscribe to an issue may be waived by a resolution in a general meeting passed by a two-thirds majority of the votes cast at the general meeting as well as at least two-thirds of the share capital represented at the meeting. The general meeting may, with a vote as described above, authorize the Board of Directors to issue new shares. Such authorization may be effective for a maximum of two years, and the par value of the shares to be issued may not exceed 50 per cent of the nominal share capital as at the time the authorization is registered. The preferential right to subscribe for shares may be set aside by the Board of Directors only if the authorization includes such a right for the Board of Directors. Minority Rights Norwegian law contains a number of protections for minority shareholders against abuse of power by the majority, including but not limited to those described in this and preceding paragraphs. Any shareholder may petition the courts to have a decision of the Company s Board of Directors or general meeting declared invalid on the grounds that it unreasonably favours certain shareholders or third parties to the detriment of other shareholders or the Company itself. In certain grave circumstances, Shareholders may require the courts to dissolve the Company as a result of such decisions. Shareholders holding in the aggregate five per cent or more of the Company s share capital have a right to demand that the Company holds an extraordinary general meeting to discuss or resolve specific matters. In addition, any shareholder may demand that the Company places an item on the agenda for any general meeting if the Company is notified in time for such item to be included in the notice of the meeting. Rights to share any surplus in the event of liquidation Under Norwegian law, the Company may be wound-up by a resolution of the Company's shareholders in a general meeting passed by the same vote as required with respect to amendments to the articles of association. The shares rank equally in the event of a return on capital by the Company upon a winding-up or otherwise. Rights to redemption and repurchase of shares The Company has not issued redeemable shares (i.e., shares redeemable without the shareholders' consent). The Company s share capital may be reduced by reducing the par value of the shares. Such a decision requires the approval of two-thirds of the votes cast at a general meeting as well as at least two-thirds of the share capital represented at the meeting. Redemption of individual shares requires the consent of the holders of the shares to be redeemed. The Company may purchase its own shares if an authorisation for the board of directors of the Company to do so has been given by the shareholders at a general meeting with the approval of at least two-thirds of the aggregate number of votes cast at the meeting as well as at least two-thirds of the share capital represented at the meeting. The aggregate par value of treasury shares so acquired and held by the Company is not permitted to exceed ten per cent of the Company s share capital, and treasury shares may only be acquired if the Company s distributable equity, according to the latest adopted balance sheet, exceeds the consideration to be paid for the shares. The authorisation by the shareholders at the general meeting cannot be given for a period exceeding two years. 23

24 4.5. Resolutions, authorisations and approvals On 6 January 2014, an extraordinary general meeting of the Company passed the following resolution to issue new shares in the Private Placement (translated from Norwegian): (i) The share capital of the Company shall be increased by up to NOK 13,000,000 through the issuance of up to 10,000,000 new shares, each with a nominal value of NOK (ii) The new shares are issued at a subscription price of NOK 3 per share. (iii) The new shares are issued to the persons who have entered into a separate agreement regarding subscription of shares. The pre-emptive rights of the existing shareholders under 10-4 of the Public Limited Companies Act are set aside. (iv) Subscription for the new shares shall be made no later than 6 January 2014 on a separate subscription form. (v) Payment of the subscription amount shall be made no later than 8 January 2014 to a special share issue account. (vi) The new shares shall carry rights to dividends from the date on which the capital increase is registered with the Register of Business Enterprises (vii) The Company's estimated costs in connection with the capital increase are NOK 2.5 mill. (viii) Section 4 of the articles of association shall be amended so as to reflect the share capital and number of shares after the share capital increase. Conditions for the Private Placement The completion of the Private Placement was subject to (i) all necessary corporate resolutions being validly made by the Company, including without limitation approval by the extraordinary general meeting of the Company held on 6 January 2014 of: (a) the share capital increase and issue of new Shares in the Private Placement; and (ii) successful registration of the increased share capital of the Company related to the Private Placement in the Norwegian Register of Business Enterprises. The conditions set out above are fulfilled as of the date of this Prospectus. In the same extraordinary general meeting, the Board of Directors was authorized to issue up to 3,500,000 Offer Shares at a price of NOK 3.00 per share in connection with the Subsequent Offering through the following resolution: (i) The board of directors is authorized pursuant to the Public Limited Companies Act (1) to increase the Company s share capital by up to NOK 4,550,000. (ii) The authority may only be used to issue shares in connection with the subsequent repair issue in connection with the Private Placement approved by the general meeting under item 4 above and covers share capital increase against contributions in cash. (iii) Shareholders qualified to participate in the Repair Issue shall prior to the subscription period be granted transferrable subscription rights as determined by the board. (iv) The pre-emptive rights of the shareholders under 10-4 of the Public Limited Companies Act may be set aside. (v) The subscription price per share shall be NOK 3. The board will determine the further subscription terms. (vi) The authority is valid until the ordinary general meeting in (vii) The board is granted authority to amend the articles of association of the Company to reflect the new number of shares and share capital after utilisation of the authority. 24

25 (viii) The resolution is conditional upon the general meeting approving the board's proposal in section 4 and 5 above, and the authority can at the earliest be registered in the Norwegian Register of Business Enterprises at the same time as the share capital increase in section 5 above. Based on this resolution, the Board has on 23 January 2014 resolved to carry out a Subsequent Offering of minimum 0 and maximum 3,500,000 Offer Shares with a par value of NOK 1.30 per share. The purpose of the Subsequent Offering is to allow shareholders in the Company as of 5 December 2013, who did not participate in the Private Placement, to subscribe for shares in the Company on equal terms Issue date for the shares in the Private Placement and the Subsequent Offering The issue date for the New Shares in the Private Placement was 27 January The New Shares were issued to a separate ISIN pending approval of this prospectus. At the time of approval of this Prospectus, the New Shares will assume the ISIN number of the Company s existing shares as soon as practically possible. The expected issue date for the Offer Shares issued in connection with the Subsequent Offering is expected to be on or about 24 February Restrictions on the free transferability of Shares There are no provisions in the Articles of Association, which would have an effect of delaying, deferring or preventing transfer of shares or a change of control of the Company. Please see section 4.8 for a description of the requirements under the Norwegian Securities Trading Act for any mandatory take-over bids Mandatory takeover bids and compulsory acquisition rules Pursuant to the Norwegian Securities Trading Act Chapter 6, a mandatory offer currently has to be made in the event an acquirer (alone or together with close associates) becomes the owner of shares representing more than 1/3 of the voting rights in the Company. A mandatory offer must be made within four weeks after the threshold was passed. The only alternative to a mandatory offer at this stage is to sell a sufficient number of shares to fall below the 1/3 threshold. In the mandatory offer, all shareholders must be treated equally and the price to be paid is the higher of (i) the highest price paid or agreed to be paid by the purchaser during the last 6 months, and (ii) the market price when the 1/3 threshold was passed, if it is clear that this price is higher. If the acquirer acquires or agrees to acquire additional shares at a higher price prior to expiration of the mandatory offer period, the acquirer is obligated to restate the offer at such higher price. The offer must be made in cash or contain a cash alternative at least equal in value to any non-cash offer. The obligation to make an offer for all remaining shares in the Company is repeated at both 40 per cent and 50 per cent ownership of shares with corresponding voting rights. Pursuant to the Norwegian Public Limited Liability Companies Act 4-25, compulsory acquisition ( squeeze out ) of the remaining shares may be initiated by a shareholder who owns more than 90 per cent of the shares (and corresponding voting rights). Such compulsory acquisition is initiated through a decision by the board of directors of the shareholder and payment of the price offered. Failing agreement between the parties, the price shall be determined through a valuation by the court, but the acquirer will obtain title to the shares immediately Public takeover bids No public takeover bids have been launched for the Company s Shares during the last or current financial year Taxation of shareholders The summary is based on Norwegian laws, rules and regulations applicable as of the date of this Prospectus, and is subject to any changes in law occurring after such date. Such changes could possibly be made on a retroactive basis. The summary does not address foreign tax laws. The summary is of a general nature and does not purport to be a comprehensive description of all the Norwegian tax considerations that may be relevant for a decision to acquire, own or dispose of shares in the Company. Shareholders who wish to clarify their own tax situation should consult with and rely upon their own tax advisers. Shareholders resident in jurisdictions other than Norway should consult with and rely upon local tax advisors with respect to the tax position in their country of residence. Please note that for the purpose of the summary below, a reference to a Norwegian or foreign 25

26 shareholder or company refers to the tax residency rather than the nationality. The statements only apply to shareholders who are beneficial owners of the shares. Please note that special rules apply for shareholders that cease to be tax resident in Norway or that for some reason are no longer considered taxable to Norway in relation to their shareholding in the Company. Such shareholders are encouraged to consult their own tax advisors. Tax consequences related to the ownership and disposal of shares Norwegian Shareholders This section summarizes certain Norwegian tax rules relevant to shareholders who are residents of Norway for Norwegian tax purposes ( Norwegian Shareholders ). Taxation of dividends Personal shareholders Dividends distributed to Norwegian personal shareholders (i.e. shareholders who are individuals) ( Norwegian Personal Shareholders ) are taxable as general income at a rate of 27 percent to the extent the dividends exceed a statutory tax-free allowance. The allowance is calculated on a share by share basis, and is equal to the tax cost price of the share multiplied with a determined risk free interest rate based on the effective rate after tax of interest on treasury bills (Norwegian: Statskasseveksler) with three months maturity. Any part of the calculated allowance one year exceeding the dividend distributed on the share the same year ( unused allowance ) can be forwarded and deducted when calculating taxable dividend income on the same share a later year. Furthermore, unused allowance can be added to the cost price of the share and included in the basis for calculating the allowance on the same share the following years. The allowance is calculated for each calendar year, and is allocated solely to Norwegian Personal Shareholders holding shares as of 31 December of the relevant calendar year. Norwegian Personal Shareholders who transfer shares will thus not be entitled to deduct any calculated allowance related to the year of transfer. Taxation of dividends Corporate shareholders Norwegian corporate shareholders (i.e. limited liability companies, mutual funds, savings banks, mutual insurance companies or similar entities tax-resident in Norway) ( Norwegian Corporate Shareholders )) are exempt from tax on dividends received on shares in a Norwegian limited liability company. Three percent of the dividends comprised by the participation exemption is to be entered as general income and taxed at the flat rate of 27 percent, implying that such dividends is effectively taxed at a rate of 0.81 percent. Taxation of dividends Shares owned through partnerships Partnerships are as a general rule transparent for Norwegian tax purposes. Taxation occurs at partner level, and each partner is taxed for his or her proportional share of the net income generated by the partnership, regardless of whether such income is distributed to the partners or not. However, dividends from shares covered by the participation exemption are not included in the basis for taxation of the partner s proportional share of the net income generated by the partnership, but are treated as income under the participation exemption. Thus, three percent of tax-free net income under the participation exemption method shall be entered as general income and taxed at the ordinary tax rate of 27 percent ( implying that such dividend is effectively taxed at a rate of 0.81 percent), regardless of whether such income is distributed to the partners or not. Further taxation occurs when the dividends received are distributed from the partnership to the partners. For partners who are Norwegian individuals such distributions will be taxed as general income at a rate of 27 percent. The partner will be entitled to deduct a calculated allowance when calculating their taxable income. For partners that are Norwegian corporations, three percent of such distributions comprised by the participation exemption will be entered as general income and taxed at the flat rate of 27 percent, implying that such distributions are effectively taxed at a rate of 0.81 percent. 26

27 Taxation upon realisation of shares Personal shareholders Sale or other disposal of shares is considered a realisation for Norwegian tax purposes. A capital gain or loss generated by a Norwegian Personal Shareholder through a realisation of shares is taxable or tax deductible in Norway. Such capital gain or loss is included in or deducted from the shareholder's general income in the year of disposal. The tax rate for general income is currently 28 percent. The gain is subject to tax and the loss is tax deductible irrespective of the duration of the ownership and the number of shares realised. The taxable gain/deductible loss on the realisation of shares is calculated per share as the difference between the consideration received and the tax cost price of the share and less costs incurred in relation to the realisation of the share. Any unused allowance on a share (see above) may be set off against capital gains related to the realisation of the same share, but this may not lead to or increase a deductible loss, i.e. any unused allowance exceeding the capital gain upon the realisation of a share will lapse. If the shareholder owns shares acquired at different points in time, the shares that were acquired first will be regarded as the first to be disposed of, on a first-in first-out basis. Taxation upon realization of shares Corporate shareholders Sale, redemption or other types of disposal of shares is considered realisation for Norwegian tax purposes. Capital gains derived from the realisation of shares qualifying for the participation exemption are exempt from taxation for Norwegian Corporate Shareholders. Losses incurred upon realization of such shares are not deductible.. Taxation upon realization of shares Shares owned through partnerships Partnerships are as a general rule transparent for Norwegian tax purposes. Taxation occurs at partner level, and each partner is taxed on a current basis for its proportional share of the net income generated by the partnership, regardless of whether such income is distributed to the partners or not.. For partnerships, realisation of shares in a Norwegian limited liability company is comprised by the participation exemption. Capital gains derived from the realisation of shares qualifying for the participation exemption are exempt from taxation. Losses incurred upon realization of such shares are not deductible. If the shares are acquired at different points in time, the shares that were acquired first will be regarded as the first to be disposed of, on a first-in first-out basis. Taxation occurs when the capital gains received by the partnership are distributed from the partnership to the partners. For partners who are Norwegian individuals, such distributions will be taxed as general income at a rate of 27 percent. The partners are entitled to deduct a calculated allowance when calculating their taxable income from the partnership. For partners that are Norwegian corporations, three percent of such distributions comprised by the participation exemption will be entered as general income and taxed at the flat rate of 27 percent, implying that such distributions are effectively taxed at a rate of 0.81 percent. Net wealth tax Norwegian limited liability companies and certain similar entities are exempt from Norwegian net wealth tax. For Norwegian Personal Shareholders, shares will form part of their basis for calculation of Norwegian net wealth tax. Listed shares are valued at 100 percent of their quoted value as of 1 January in the assessment year (the year following the income year). The current marginal wealth tax rate is 1 percent. Tax consequences related to the ownership and disposal of shares Foreign shareholders This section summarizes certain Norwegian tax rules relevant to shareholders that are not resident in Norway for Norwegian tax purposes ( Foreign Shareholders ). The potential tax liabilities for foreign shareholders in the jurisdiction where they are resident for tax purposes or other jurisdictions will depend on tax rules applicable in the relevant jurisdiction. 27

28 Taxation of dividends Foreign shareholders Dividends paid by a Norwegian limited liability company to Foreign Shareholders, both corporate and individuals, are as a general rule subject to withholding tax in Norway at the rate of 25%, unless otherwise provided for in an applicable income tax treaty or the recipient is covered by the specific regulations for corporate shareholders tax-resident within the European Economic Area (EEA). The withholding obligation lies with the company distributing the dividends. In accordance with the present administrative system in Norway, the Norwegian distributing company will normally withhold tax at the regular rate or reduced rate according to an applicable tax treaty, based on the information registered with the VPS with regard to the tax- residence of the Foreign Shareholder. Dividends paid to Foreign Shareholders in respect of nominee- registered shares will be subject to withholding tax at the general rate of 25% unless the nominee, by agreeing to provide certain information regarding beneficial owners, has obtained approval for a reduced rate from the Central Office for Foreign Tax Affairs (Nw. Sentralskattekontoret for utenlandssaker). Foreign Shareholders who are exempt from withholding tax and Foreign Shareholders who have suffered a higher withholding tax than set out by an applicable tax treaty can apply for a refund of any excess withholding tax. If a Foreign Shareholder is engaged in business activities in Norway, and the shares are effectively connected with such business activities, dividends distributed to such shareholder will generally be subject to the same taxation as that of Norwegian Shareholders, cf the description of tax issues related to Norwegian Shareholders above. Foreign Shareholders should consult their own advisers regarding the availability of treaty benefits in respect of dividend payments, including the ability to effectively claim refunds of withholding tax. Taxation of dividends Foreign Shareholders tax-resident within the EEA Foreign Shareholders who are individuals tax-resident within the EEA ( Foreign EEA Personal Shareholders ) are upon request entitled to a deductible allowance. The shareholder shall pay the lesser amount of (i) withholding tax according to the rate in an applicable tax treaty or (ii) withholding tax at 25% of taxable dividends after allowance. Foreign EEA Personal Shareholders may carry forward any unused allowance, if the allowance exceeds the dividends. Foreign Shareholders that are corporations tax-resident within the EEA for tax purposes ( Foreign EEA Corporate Shareholders ) are exempt from Norwegian tax on dividends distributed from Norwegian limited liability companies, provided that the Foreign EEA Corporate Shareholder in fact is genuinely established within the EEA and manages a real economic activity within the EEA. Taxation upon realization of shares Foreign shareholders As a general rule, capital gains generated by Foreign Shareholders are not taxable in Norway. If a Foreign Shareholder is engaged in business activities in Norway, and the shares are effectively connected with such business activities, capital gains realised by such shareholder will generally be subject to the same taxation as that of Norwegian Shareholders, cf the description of tax issues related to Norwegian Shareholders above. Net wealth tax Foreign shareholders Foreign Shareholders are as a general rule not subject to net wealth tax in Norway on shares unless the shareholder is an individual who is engaged in business activities in Norway, and the shares are effectively connected with such business activities. 28

29 Duties on the transfer of shares No stamp or similar duties are currently imposed in Norway on the transfer or issuance of shares in Norwegian companies. Inheritance tax As of 1 January 2014 the Norwegian Inheritance Tax was abolished. However, the heir acquires the donor's tax input value of the shares based on principles of continuity. Thus, the heir will be taxable for any increase in value in the donor's ownership, at the time of the heir's realisation of the shares. However, in the case of gifts distributed to other persons than heirs according to law or testament, the recipient will be able to revalue the received Securities to market value. 29

30 5. THE PRIVATE PLACEMENT AND TERMS AND CONDITIONS OF THE SUBSEQUENT OFFERING 5.1. The Private Placement On 6 December 2013, the Board of Directors resolved a private placement of 10,000,000 New Shares at NOK 3.00 per share directed towards selected leading Norwegian institutions and private investors, subject inter alia to approval by an extraordinary general meeting of the Company. In the extraordinary general meeting of the Company on the 6 January 2014, it was proposed that the pre-emptive rights of the existing shareholders under 10-4 of the Public Limited Companies Act was set aside in connection with the Private Placement. Such deviation was assumed appropriate to effectively raise new equity and to secure the Company sufficient equity through The Private Placement, which represented a share capital increase of approximately 71 per cent, was completed prior to opening of the Oslo Stock Exchange on the 6 December On the 6 January 2014, the extraordinary general meeting of the Company authorized the Private Placement according to section 4.5. The Private Placement raised gross proceeds of NOK 30 million. In order to ensure that the Company s shareholders to the extent practically possible are treated equally, the extraordinary general meeting also resolved to conduct a Subsequent Offering raising gross proceeds in the amount of up to NOK 10.5 million directed towards the Eligible Shareholders. The Subsequent Offering will be carried out through issuing fully tradable Subscription Rights to the Eligible Shareholders. The size of the Private Placement and Subsequent Offering has been set based on an analysis of capital needs and financing structure going forward. The successful completion of the Private Placement and the Subsequent Offering will secure the Company sufficient working capital for its current planned activities through The Company s registered share capital prior to the Private Placement was NOK 18,198, consisting of 13,998,842 Shares, each with a nominal value of NOK 1.30 fully paid and issued in accordance with Norwegian law. For further information on legislation and rights attached to the Shares, see Sections 4 and 6 of the Share Securities Note. The following allocations were made to investors which were allocated more than 5% of the New Shares issued in the Private Placement. Investor Number of new shares allocated Funds managed by Storebrand Asset Management AS 1,883,000 Holberg Norge 1,318,000 MP Pensjon 1,255,000 Viggo Harboe Holding ApS 933,000 Bjørns Invest AS 583,000 No shares were allocated to members of the Company s management, supervisory or administrative bodies. The New Shares The New Shares will rank pari passu in all respects with the existing shares and carry full shareholder rights in the Company from the time of registration of the share capital increase pertaining to the Private Placement in the Norwegian Register of Business Enterprises, as was completed on 27 January The New Shares became eligible for dividends from the Company from the same date. The New Shares issued in the Private Placement will consist of ordinary Shares in the Company, issued in accordance with the Norwegian Public Limited Companies Act and delivered electronically in registered form in the VPS. The New Shares were issued to a separate ISIN pending approval of this prospectus. At the time of approval of this Prospectus, the New Shares will assume the ISIN number of the Company s existing shares as soon as practically possible and be immediately tradable on the Oslo Stock Exchange. 30

31 5.2. The Subsequent Offering The Subsequent Offering comprises an offering of up to 3,500,000 Offer Shares at a Subscription Price of NOK 3.00 per Offer Share, corresponding to gross proceeds of up to NOK 10.5 million. The Offer Shares are offered on the basis of the resolutions as stated in section 4.5. The Company has no information in regards to whether major shareholders or members of the Group s management, supervisory or administrative bodies intend to subscribe in the Offer or whether any persons intend to subscribe for more than 5% of the offer. The Eligible Shareholders, being existing shareholders as of 5 December 2013 (as recorded in the VPS on the Record Date) and who were not allocated shares in the Private Placement, and are not resident in a jurisdiction where such offering would be unlawful, or for other jurisdictions than Norway, would require any filing, registration or similar action, will be granted tradable Subscription Rights that, subject to applicable laws, provide rights to subscribe for and be allocated Offer Shares in the Subsequent Offering. Funds which are under management by the same company, group of companies, fund manager(s) or similar may be treated as one shareholder when applying these limitations. Over-subscription and subscription without Subscription Rights will be allowed. Subscription Rights and Offer Shares will not be issued or sold in certain jurisdictions or to residents of certain jurisdictions. The timeline for the Subsequent Offer, subject to any extension, is set out below. Last day of trading in the shares including Subscription Rights... 5 December 2013 Ex. rights trading in the shares commenced on the Oslo Stock Exchange... 6 December 2013 Record Date December 2013 Delivery date for the Subscription Rights January 2014 Trading period for the Subscription Rights commences... Trading period for the Subscription Rights ends... Subscription Period commences January 2014 at 08:00 CET 6 February 2014 at 16:30 CET 29 January 2014 at 08:00 CET Subscription Period ends February 2014 at 16:30 CET Allocation of the Offer Shares February 2014 Distribution of allocation letters February 2014 Payment date for the Offer Shares February 2014 Registration of the share capital increase 24 February 2014 Delivery of the Offer Shares February 2014 Listing and commencement of trading in the Offer Shares on Oslo Axess February 2014 Subscription Rights Eligible Shareholders will be granted tradable Subscription Rights giving a preferential right to subscribe for, and be allocated, Offer Shares in the Subsequent Offering. Each Eligible Shareholder will, subject to applicable securities laws, be granted tradable Subscription Rights for each existing Share owned as of 5 December 2013 (as recorded in the VPS on the Record Date). The number of Subscription Rights granted to each Eligible Shareholder will be rounded down to the nearest whole Subscription Right. 31

32 The Subscription Rights will be independently tradable from 29 January 2014 to 16:30 hours (CET) on 6 February 2014 and will be listed on the Oslo Stock Exchange under the symbol SER T and with ISIN NO NO Subscription Rights acquired during the aforementioned trading period carry the same rights to subscribe for Offer Shares during the Subscription Period, as Subscription Rights received and held by Eligible Shareholders. Persons interested in trading in Subscription Rights should be aware that the exercise of Subscription Rights by holders outside of Norway may be restricted or prohibited by applicable laws. Please see section Financial intermediaries for further information. Each Subscription Right will, subject to applicable securities laws, give the right to subscribe for and be allocated one Offer Share in the Subsequent Offering. Over-subscription (i.e. subscription for more Offer Shares than the number of Subscription Rights held by the subscriber entitles the subscriber to be allocated) and subscription without Subscription Rights will be permitted. The Subscription Rights must be traded before 6 February 2014 at 16:30 (CET) or used to subscribe for Offer Shares before the end of the Subscription Period (i.e. 12 February 2014 at 16:30 (CET)). Subscription Rights that are not traded or exercised before said time limits will have no value and will lapse without compensation to the holder. Holders of Subscription Rights should note that subscriptions for Offer Shares must be made in accordance with the procedures set out in this Prospectus and that holding of Subscription Rights in itself should not represent a subscription of Offer Shares. Eligible Shareholders resident in jurisdictions where the Prospectus may not be distributed and/or with legislation that, according to the Company s assessment, prohibits or otherwise restricts subscription for Offer Shares ( Ineligible Shareholders ) will not receive Subscription Rights. Eligible Shareholders should be aware that the exercise of Subscription Rights by holders who are located in countries outside of Norway may be restricted or prohibited by applicable securities laws. Please refer to the section Financial Intermediaries for a further description of such restrictions. The date for determining the Eligible Shareholders who receive Subscription Rights is 5 December 2013, as registered in the shareholders register in VPS at the end of the Record Date. The first day of trading without the right to receive Subscription Rights was 6 December Transactions in the existing Shares made on or before this date, but which have not been registered in the VPS within the Record Date will be disregarded for the purposes of determining the allocation of Subscription Rights. The Subscription Period for the Subsequent Offering will commence on 29 January 2014 and end at 16:30 hours (CET) on 12 February The Subsequent Offering may not be revoked. The Company reserves the right to extend the Subscription Period in the Subsequent Offering. Any such extension will be announced through Oslo Børs information system on or before 12:00 (CET) on 11 February An extension can be made no longer than until 16:30 (CET) on 19 February In event of an extension, the allocation date, first trading date, payment date and the date of delivery of Offer Shares and other relevant dates will be extended accordingly. The last possible date for delivery of the Offer Shares will be 15 March The Subscription Price in the Subsequent Offering is NOK 3.00 per Offer Share, which is the same as the subscription price in the Private Placement. Subscription procedures Subscriptions for Offer Shares must be made by submitting a correctly completed Subscription Form to the Manager during the Subscription Period or may, for Norwegian citizens, be made online as further described below. Subscriptions for Offer Shares must be made on a Subscription Form in the form included in Appendix 5 (Subscription Form). Subscribers who are Norwegian citizens may also subscribe for Offer Shares through the VPS online subscription system (or by following the link on which will redirect the subscriber to 32

33 the VPS online subscription system). All online subscribers must verify that they are Norwegian citizens by entering their national identity number. Correctly completed Subscription Forms must be received by the Manager at the below address or fax number, in the event of online subscription in the VPS, correctly completed subscription must be registered, no later than 16:30 hours (CET) on 12 February The Private Placement and Subsequent Offering was managed and coordinated by the Manager. Norne Securities AS (the Manager ) Oslo Office Parkveien 61 P.O. Box 2507 Solli 0202 Oslo, Norway Phone: Facsimile: Neither the Company nor the Managers may be held responsible for postal delays, unavailable fax lines, internet lines or servers or other logistical or technical problems that may result in subscriptions not being received in time or at all by the Manager. Subscription Forms received by the Manager, or subscriptions registered in the VPS, after the end of the Subscription Period and/or incomplete or incorrect Subscription Forms and any subscription that may be unlawful may be disregarded at the sole discretion of the Company and the Manager without notice to the subscriber. Subscriptions are binding and irrevocable, and cannot be withdrawn, cancelled or modified by the subscriber after having been received by the Manager or registered in the VPS. The subscriber is responsible for the correctness of the information filled into the Subscription Form or registered when subscribing online in the VPS. By signing and submitting a Subscription Form or submitting an online subscription in the VPS, each subscriber confirms and warrants to have read this Prospectus and to be eligible to subscribe for Offer Shares under the terms set forth herein. There is no minimum subscription amount for which subscriptions in the Subsequent Offering must be made. Over-subscription (i.e. subscription for more Offer Shares than the number of Subscription Rights held by the subscriber entitles the subscriber to be allocated) and subscription without Subscription Rights is allowed. Multiple subscriptions (i.e. subscriptions on more than one Subscription Form) are allowed. Please note, however, that each separate Subscription Form submitted by the same subscriber with the same number of Offer Shares subscribed for on both Subscription Forms will only be counted once, unless otherwise explicitly stated in one of the Subscription Forms. In the case of multiple subscriptions through the VPS online subscription system or subscriptions made both on a Subscription Form and through the VPS online subscription system, all subscriptions will be counted. Allocation Allocation of the Offer Shares will take place on or about 13 February 2014 in accordance with the following criteria: i) Firstly, to Eligible Shareholders on the basis of their subscription rights ii) Secondly, to Eligible Shareholders who have subscribed for offer shares in excess of their subscription rights (allocation will be made on a pro rata basis based on the number of Subscription Rights exercised by each subscriber. To the extent that pro rata allocation is not possible, the Company will determine the allocation by drawing of lots) 33

34 iii) Thirdly, to other shareholders, and iv) Forthly, to all other subscribers. No distinction will be made between allocated and acquired/purchased Subscription Rights. No fractional Offer Shares will be allocated. Allocation of fewer Offer Shares than subscribed for by a subscriber will not impact on the subscriber s obligation to pay for the number of Offer Shares allocated. Notifications of allocated Offer Shares in the Subsequent Offering and the corresponding amount to be paid by each subscriber will be set out in a letter from the Manager, which will be distributed on or about 11 February The Company expects to issue a stock exchange notification announcing the results of the Subsequent Offering prior to the opening of the Oslo Stock Exchange on or about the same date. Payment of the Offer Shares The Payment Due Date for the Offer Shares is 19 February When subscribing for Offer Shares, each subscriber with a Norwegian bank account must provide a one-time irrevocable authorization to the Managers to debit a specified bank account with a Norwegian bank for the amount (in NOK) payable for the Offer Shares allocated to such subscriber. The amount is expected to be debited on 19 February 2014 (the Payment Due Date) and an amount to cover payment for the allocated Offer Shares must be available on the specific bank account on this date. The Company and the Managers reserve the right to make up to three debit attempts within seven working days after the Payment Due Date if there are insufficient funds in the account on the first debiting date. The Company and the Managers reserve the right to consider the payment overdue if there are not sufficient funds to cover full payment for the Offer Shares allocated on the account when an attempt to debit the account has been made on or after the Payment Due Date, or if it for other reasons is not possible to debit the bank account. Subscribers who do not have a Norwegian bank account must ensure that payment for the Offer Shares allocated to them is made with cleared funds on or before 12:00 hours (CET) on 19 February 2014 and must contact one of the Managers before making such payment. By signing the Subscription Form, subscribers who subscribe for an amount exceeding NOK 5 million give the Managers an authorization to manually debit the stated bank account on or about the Payment Due Date. Overdue and late payment will be charged with interest at the applicable rate under the Norwegian Act on Interest on Overdue Payment on 17 December 1976 No. 100, currently 8.5% per annum. If the subscriber fails to comply with the terms of payment, the Offer Shares will not be delivered to the subscriber. The Company and the Manager reserve the right to, at the cost and risk of the investor, cancel the allocation and to reallocate, sell, assume ownership of or otherwise dispose of all or parts of the allocated Offer Shares on such terms and in such manner as the Managers may decide in accordance with applicable Norwegian law and otherwise based on the Board of Directors discretion, without further notice to the subscriber in question in accordance with Section 10-12, fourth paragraph of the Public Limited Companies Act if payment has not been received within the third day after the Payment Due Date. The investor will remain liable for payment for the Offer Shares together with any interest, costs, charges and expenses accrued, and the Manager may enforce payment of such amount outstanding in accordance with Norwegian law. The Company and/or the Manager may enforce payment of any amount outstanding in accordance with Norwegian law. The Company and the Manager further reserve the right to have the Manager's advance the payment on behalf of subscribers who have not paid for the Offer Shares allocated to them within the Payment Due Date. The nonpaying subscribers will remain fully liable for the subscription amount payable for the Offer Shares allocated to them, irrespective of such payment by the Manager. If the Offer Shares are sold on behalf of the subscriber, the subscriber will be liable for any loss, costs, charges and expenses suffered or incurred by the Company and/or the Manager as a result of or in connection with such sales. The Company and/or the Manager may enforce payment of any amounts outstanding in accordance with applicable law. 34

35 The subscriber furthermore authorizes the Manager to obtain confirmation from the subscriber s bank that the subscriber has disposal over the indicated account as well as a confirmation that there are sufficient funds in the account to cover the payment. Any excess amount paid by a Subscriber will be returned to the bank account stated in the Subscription Form. If no such bank account is stated, the Manager will contact the Subscriber for obtaining refund details. Delivery and listing of the Offer Shares All subscribers subscribing for Offer Shares must have a valid VPS account (established or maintained by an investment bank or Norwegian bank that is entitled to operate VPS accounts) to receive Offer Shares. Delivery of the Offer Shares will take place following registration of the share capital increase pertaining to the Offer Shares in the Norwegian Register of Business Enterprises which is expected on or about 24 February Assuming that payments from all subscribers are made on the Payment Due Date, delivery of the Offer Shares is expected to take place by registration of the Offer Shares in the VPS on or about 24 February The Offer Shares shall carry rights to dividend and have shareholder rights from registration of the share capital increase with the Norwegian Register of Business Enterprises. The Offer Shares will be listed on the Oslo Stock Exchange as soon as the Offer Shares have been registered in the VPS. The Offer Shares may not be traded on the Oslo Stock Exchange before they are fully paid, issued and registered in the VPS. The Company is not aware of any major existing shareholders or members of the Company s management, supervisory or administrative bodies that intend to participate in the Subsequent Offering. However, certain major existing shareholders and primary insiders were allocated shares in the Private Placement and are therefore ineligible to receive Subscription Rights in the Subsequent Offering. The Offer Shares will be ordinary Shares in the Company with a nominal value of NOK 1.30 each, and will be issued electronically in the VPS in registered form in accordance with the Public Limited Companies Act. The Offer Shares will rank pari passu in all respects with the existing Shares and will carry full shareholder rights in the Company from the time of registration of the share capital increase pertaining to the Subsequent Offering in the Norwegian Register of Business Enterprises, which is expected to occur on or about 24 February The Offer Shares will be eligible for any dividends which the Company may declare after said registration. All Shares, including the Offer Shares, will have voting rights and other rights and obligations which are standard under the Public Limited Companies Act, and are governed by Norwegian law. The Offer Shares will, upon delivery, be registered on the same ISIN as the existing Shares. Financial intermediaries All questions concerning the timeliness, validity and form of instructions to a financial intermediary in relation to the exercise of Subscription Rights should be determined by the financial intermediary in accordance with its usual customer relations procedure; or as it otherwise notifies each shareholder. Neither the Company nor the Manager is liable for any action or failure to act by a financial intermediary through whom shareholders of the Company hold their Shares. If an Eligible Shareholder held the Shares through a financial intermediary on the Record Date, the financial intermediary will customarily give each Eligible Shareholder details of the aggregate number of Subscription Rights to which each Eligible Shareholder will be entitled. The relevant financial intermediary will customarily supply each Eligible Shareholder with this information in accordance with its usual customer relations procedures. Eligible Shareholders should contact their financial intermediary if they have not received information with respect to the Subsequent Offering. 35

36 Subject to applicable law, Eligible Shareholders holding Shares through a financial intermediary may instruct the financial intermediary to sell some or all of their Subscription Rights, or to purchase additional Subscription Rights on their behalf. See below for a description of certain restrictions and prohibitions applicable to the sale and purchase of Subscription Rights in certain jurisdictions outside Norway. Shareholders who hold their Shares through a financial intermediary and who are Ineligible Shareholders will not be entitled to exercise their Subscription Rights transferred to the financial intermediary The time until which notification of exercise instructions may be validly given may be earlier if Shares are held through a financial intermediary. This depends on the financial intermediary. If Eligible Shareholders hold their Subscription Rights through a financial intermediary and wish to exercise their Subscription Rights, they should instruct their financial intermediary in accordance with the instructions received from such financial intermediary. The financial intermediary will be responsible for collecting exercise instructions from the Eligible Shareholders and for informing the Manager of their exercise instructions. Eligible Shareholders holding their Subscription Rights through a financial intermediary should pay the Subscription Price for the Offer Shares that they are allocated in accordance with the instructions received from that financial intermediary. The financial intermediary must pay the Subscription Price to the Managers, who will in turn pay it to the Company. Payment for the Offer Shares must be made to the Managers no later than the Payment Due Date. Accordingly, financial intermediaries may require payment to be provided to them prior to the Payment Due Date. The offering of the Offer Shares and the issue of Subscriptions Rights in the Subsequent Offering may in certain jurisdictions be restricted by law. The distribution of this Prospectus and the offering and sale of the Offer Shares offered hereby may also in certain jurisdictions be restricted by law. Persons in possession of this Prospectus are required to inform themselves about and to observe any such restrictions. This Prospectus may not be used for, or in connection with, and does not constitute, any offer to sell, or an invitation to purchase, any of the Offer Shares offered hereby in any jurisdiction in which such offer or invitation would be unlawful or restricted. No one has taken any action that would permit a public offering of Offer Shares to occur outside of Norway. Shareholders who reside in any country outside EU/EAA may not be permitted to receive Subscription Rights or Offer Shares. The Subscription Rights and the Offer Shares have not been and will not be registered under the US Securities Act, or under the securities laws of any state or other jurisdiction of the Unites States and are being offered and sold under an exemption to registration under the US Securities Act. The Subscription Rights cannot be exercised for Offer Shares by US persons except, under certain circumstances, by US persons who are QIBs as defined under Rule 144A under the US Securities Act. The Subscription Rights and the Offer Shares are being offered to non-us persons under Regulation S under the US Securities Act. The Offer Shares may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in compliance with any applicable securities law of any state or other jurisdiction of the United States. Accordingly, unless an appropriate exemption from relevant securities law requirements is available, the Offer Shares may not be offered or sold, directly or indirectly, in or into the United States. 36

37 5.3. Pricing Subscription Price The Subscription Price is NOK 3.00 per Offer Share, payable in cash. The Subscription Price was determined through a book-building process during the Private Placement between 5 December 2013 at 16:30 CET and 6 December 2012 at 08:30 CET and was set lower than the closing price of the Company s shares as traded on Oslo Børs 5 December 2013 to secure sufficient interest from new investors. One condition for successful completion of the Private Placement was to set aside the existing shareholders preemptive rights in the extraordinary general meeting s decision to issue the new shares. Subsequently, those that subscribed and were allocated shares in the Private Placement will have had an advantage over those who did not subscribe for shares in the Private Placement (including a majority of the Company s existing shareholders). The reason for setting aside the existing shareholders pre-emptive rights were to allow new investors (including institutional investors) to participate in the Private Placement, hence securing the amount of capital required to complete the Private Placement. No expenses or taxes will be carried directly by the Subscribers participating in the Offer Shares acquired by the administrative, Management and the Board of Directors The following table sets out the effective cash cost of Shares acquired in the Company by the current members of the senior management and the Board of Directors or other affiliated persons during 2013, as well as such members total number of Shares as of the date of the Prospectus. Name Position Number of Shares Price per Total number Acquired in 2013 share (NOK) of shares held Svein S. Jacobsen Chairman 35, ,000 Ingrid Alfheim Board member 0 78,340 Søren Elmann Ingerslev Board member 0 0 Ole Peter Nordby Board member 7, ,500 Theresa Comiskey Olsen Board member 0 0 Eva Steiness * CEO 0 594,048 Rolf Olufsen CFO 0 - Trygve Gulbrandsen CSO 0 27,038 Senior project Torben Skarsfeldt manager *Through the wholly owned company NewPharma DK. 0 0 The effective cash contribution of the above persons that have already acquired shares the past year was NOK 0.1 million, yielding an average price per acquired share of NOK 2.67 while the Subscription Price in the Subsequent Offering is NOK 3.00 per Offer Share. 37

38 The table below illustrates subscriptions rights received by the current members of the management and the Board of Directors or other affiliated persons during Name Position Number of Subscription rights received Total number of Subscription rights held Svein S. Jacobsen Chairman 100, ,000 Ingrid Alfheim Board member - - Rolf Olufsen CFO - 40,000 Trygve Gulbrandsen CSO - 40,000 Eva Steiness CEO - 45,000 Søren Elmann Ingerslev Board member - - Theresa Comiskey Olsen Board member - - Ole Peter Nordby Board member - - For details on the subscription rights please refer to section 21.1 in the Share Registration Document. The effective cash contribution of the persons that have acquired the Subscription rights the past year was NOK Manager The Private Placement and Subsequent Offering was managed and coordinated by the Manager. Norne Securities AS (the Manager ) Oslo Office Parkveien 61 P.O. Box 2507 Solli 0202 Oslo, Norway Phone: Facsimile:

39 6. TRADING AND DEALING ARRANGEMENTS The Company s shares are listed on Oslo Axess since 9 April The Shares are not admitted and the Company has not applied for listing at any other stock exchange or regulated market. Oslo Børs was established in 1819 and is the principal market in which shares, bonds and other financial instruments are traded in Norway. The Oslo Stock Exchange operates Oslo Børs and Oslo Axess, which are regulated markets for shares. Trading and settlement Continuous trading on Oslo Børs and Oslo Axess takes place between 09:00 CET and 16:20 CET each trading day with a subsequent closing call from 16:20 CET to 16:25 CET. Orders may be placed in the system beginning at 08:15 CET and ending at the end of post-trade at 17:15 CET. The settlement period for trading on Oslo Børs is three days (T+3). The ability of brokerage houses to trade for their own accounts is restricted to trading that occurs as an integral part of either investment services or general capital management. Trading by individual employees is also restricted. Investment services may be provided only by Norwegian brokerage houses holding a license under the Securities Trading Act, branches of brokerage houses from an EEA-state or brokerage houses from outside the EEA that have been licensed to operate in Norway. EEA-state brokerage houses may also conduct cross-border investment services in Norway. It is possible for brokerage houses to undertake market-making activities in listed Norwegian shares if they have a license to do so under the Securities Trading Act, or in the case of EEA-state brokerage houses, a license to carry out market-making activities in their home jurisdiction. Such market-making activities will be governed by the regulations of the Securities Trading Act covering brokers trading for own account. Such market-making activity, however, does not as such require notification to the Financial Supervisory Authority of Norway (Finanstilsynet) ( FSAN ) or Oslo Børs except for the general obligation of brokerage houses that are members of Oslo Børs to report all trades in stock exchange listed securities. Information, control and surveillance Under Norwegian law, Oslo Børs is required to perform a number of surveillance and control functions. The Surveillance and Corporate Control unit of Oslo Børs monitors market activity on a continuous basis and is responsible for the dissemination of information from listed companies to the market. Market surveillance systems are largely automated, promptly warning department personnel of abnormal market developments. Companies listed on Oslo Børs and Oslo Axess, are subject to disclosure requirements pursuant to the Securities Trading Act and Oslo Børs and Oslo Axess Continuing Obligations. Each listed company is inter alia required to immediately publicly disclose any precise information about the financial instruments, the company or other matters which may have a noticeable effect on the price of the financial instruments or related financial instruments, and which are not publicly available or commonly known in the market, unless there are legitimate reasons for postponement of such disclosure. The VPS and Transfer of Shares The VPS is the Norwegian paperless centralized securities registry. It is a computerized bookkeeping system in which the ownership of, and all transactions relating to, listed shares of Norwegian companies must be recorded. The Company s share register is operated through the VPS. All transactions relating to securities registered with the VPS are made through computerized book entries. The VPS confirms each entry by sending a transcript to the registered shareholder irrespective of any beneficial ownership. To effect such entries, the individual shareholder must establish an account with a Norwegian account agent. Norwegian banks, authorized securities brokers in Norway and Norwegian branches of credit institutions established within the EEA are allowed to act as account agents. 39

40 The entry of a transaction in the VPS is prima facie evidence in determining the legal rights of parties as against the issuing company or a third party claiming an interest in the given security. A transferee or assignee of shares may not exercise the rights of a shareholder with respect to such shares unless such transferee or assignee has registered such shareholding or has reported and shown evidence of such share acquisition, and the acquisition of shares is not prevented by law, the Articles of Association or otherwise. Share Register Under Norwegian law shares are registered in the name of the owner of the shares. As a general rule, there are no arrangements for nominee registration. However, shares may be registered in the VPS in the name of a depository (bank or other nominee) approved by the FSAN, as the nominee of foreign shareholders. An approved and registered nominee has a duty to provide information on demand about beneficial shareholders to the company and to the Norwegian authorities. In the case of registration by nominees, registration with the VPS must show that the registered owner is a nominee. A registered nominee has the right to receive dividends and other distributions, but cannot vote at general meetings on behalf of the beneficial owners. Foreign Investment in Norwegian Shares Foreign investors may trade shares listed on Oslo Børs through any broker that is a member of Oslo Børs, whether Norwegian or foreign. Disclosure Obligations A person or entity which alone or together with close associates acquires Shares, options for shares or other rights to Shares resulting in its beneficial ownership, directly or indirectly, in the aggregate meeting or exceeding the respective thresholds of 5%, 10%, 15%, 20%, 25%, 1/3, 50%, 2/3 or 90% of the share capital or the voting rights in the Company has an obligation under Norwegian law to notify the Company and Oslo Børs immediately. The same applies to inter alia disposal of shares, options, other rights to shares or other circumstances resulting in a beneficial ownership, directly or indirectly, in the aggregate meeting or falling below said thresholds. Insider Trading According to Norwegian law, subscription for, purchase of, sale of or exchange of shares which are listed or in respect of which an application for listing has been submitted, or incitement to such dispositions, must not be undertaken by anyone who has precise information about the financial instruments, the company or other matters which may have a noticeable effect on the price of the financial instruments or related financial instruments, and which are not publicly available or commonly known in the market. The same applies to entry into, purchase, sale or exchange of option or futures/forward contracts or equivalent rights connected with such shares or incitement to such disposition. The Completed Private Placement The Private Placement was completed on 6 December 2013, subject inter alia to approval by an extraordinary general meeting of the Company. The Company's extraordinary general meeting approved the Private Placement and resolved to issue the New Shares on 6 January ,000,000 New Shares were subscribed at a subscription price of NOK 3.00 per New Share and gross proceeds of NOK 30 million were raised. The subscription price was determined through a book-building exercise conducted during 5 December 2013 at 16:30 CET and 6 December 2013 at 08:30 CET. The Private Placement was allocated to selected leading Norwegian institutions (approximately 44 %) and private investors (56 %) Completion of the book-building process for the Private Placement was announced on 6 December Notices of allocation were sent on 6 December The due date for payment of the Placement Shares was 8 January 2014 and delivery of the New Shares is expected to take place on or about 29 January The minimum application and allocation amount in the Private Placement was set to the number of Offer Shares that had an aggregate purchase price of at least EUR , but such that the Manager and the Company could, at their sole discretion, reserve parts of the Private Placement for up to 149 investors applying for a lesser amount in order to utilize the exception from the prospectus requirement set forth in section 7-2 of the 40

41 Norwegian Securities Trading Act. Allocations were made at the sole discretion of the Company, based upon the proposal by the Manager taking into account such factors as perceived investor quality, size of subscriptions, existing shareholding and timeliness of application in accordance with normal market practice. 41

42 7. SELLING SECURITIES HOLDERS There are no selling securities holders. 7.1 Lock-up agreements There exist no lock-up agreements. 8. EXPENSE OF THE ISSUE The gross proceeds to the Company from the Private Placement were NOK 30.0 million. The gross proceeds to the Company from the Subsequent Offering are dependent on the amount of subscriptions, and if fully subscribed gross proceeds will be NOK 10.5 million. Fees and expenses related to the Private Placement and Subsequent Offering, including management fee to the Manager, will be in the range NOK 2.1 million to NOK 2.6 million. Depending on the amount of subscriptions in the Subsequent Offering, net proceeds to the Company from both the Private Placement and the Subsequent Offering will be in the range NOK million. The Company will cover transaction costs and all other directly attributable costs in connection with the Private Placement and the Subsequent Offering. 9. DILUTION The percentage of immediate dilution resulting from the Private Placement for the Company s shareholders who did not participate in the Private Placement was approximately 41.7%. Investors who did not participate in the Private Placement, but does subscribe according to their subscription rights in the Subsequent Offering will be diluted by approximately 29.9 %. The percentage of immediate dilution resulting from both the Private Placement and the Subsequent Offering for the Company s existing shareholders who did not participate in the Private Placement and decide not to participate in the Subsequent Offering will be approximately 49.1%, given a fully subscribed Subsequent Offering. Investors who participated in the Private Placement, but decide not to participate in the Subsequent Offering, will be diluted by approximately 12.7%. 10. ADDITIONAL INFORMATION 10.1 Advisors connected with the issue The Private Placement and Subsequent Offering was managed and coordinated by Norne Securities AS, Fortunen 1, 5013 Bergen, Norway (phone/facsimile/web: / / The Company s legal advisor in connection with the Subsequent Offering was Advokatfirmaet Wiersholm AS, Ruseløkkveien 26, 0251 Oslo, Norway (phone/facsimile/web: / / Information in the Securities Note which has been audited or reviewed by statutory auditors No information in the Securities Note has been audited or reviewed by statutory auditors Statement regarding expert opinions The Company has not relied on the services of experts in the preparation of this Securities Note Third Party Information No information in this Share Securities Note has been sourced from a third party. 42

43 Serodus ASA SHARE REGISTRATION DOCUMENT This Share Registration Document has been prepared to comply with the Norwegian Securities Trading Act and related legislation and regulations including the EC Commission Regulation EC/809/. The Share Registration Document has been prepared solely in the English language. Note Regarding Forward-Looking Statements This Prospectus includes forward-looking statements, including, without limitation, projections and expectations regarding the Company s future financial position, business strategy, plans and objectives. All forward-looking statements included in this document are based on information available to the Company, and views and assessments of the Company, as of the date of this Prospectus. The Company expressly disclaims any obligation or undertaking to release any updates or revisions of the forward-looking statements contained herein to reflect any change in the Company s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, unless such update or revision is prescribed by law. When used in this document, the words anticipate, believe, estimate, expect, seek to and similar expressions, are intended to identify forward-looking statements. Such forwardlooking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company, to materially differ from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company s present and future business strategies and the environment in which the Company will operate. Factors that could cause the Company s actual results, performance or achievements to materially differ from those in the forward-looking statements include but are not limited to global and regional economic conditions, the competitive nature of the market in which the Company operates, growth management, changes in domestic and foreign laws and regulations, taxes, changes in competition and pricing environments, changes in political events, force majeure events and other factors referred to in this Prospectus. Important factors that could cause actual results to differ materially from those in the forward-looking statements are included in Chapter 1 in the Share Securities Note and chapter 1 in the Share Registration Document. 43

44 TABLE OF CONTENTS SHARE REGISTRATION DOCUMENT RISK FACTORS PERSONS RESPONSIBLE FOR THE SHARE REGISTRATION DOCUMENT STATUATORY AUDITORS SELECTED FINANCIAL INFORMATION INFORMATION ABOUT THE ISSUER BUSINESS OVERVIEW ORGANIZATIONAL STRUCTURE PROPERTY, PLANTS AND EQUIPMENT OPERATING AND FINANCIAL REVIEW CAPITAL RESOURCES RESEARCH AND DEVELOPMENT, PATENTS AND LICENCES TREND INFORMATION PROFIT FORECASTS OR ESTIMATES MANAGEMENT AND SUPERVISORY BODIES REMUNERATION AND BENEFITS BOARD PRACTICES EMPLOYEES MAJOR SHAREHOLDERS RELATED PARTY TRANSACTIONS FINANCIAL INFORMATION CONCERNING THE ISSUER'S ASSETS AND LIABILITIES, FINANCIAL POSITION AND PROFITS AND LOSSES ADDITIONAL INFORMATION MATERIAL CONTRACTS THIRD PARTY INFORMATION AND STATEMENT BY EXPERTS AND DECLARATIONS OF ANY INTEREST DOCUMENTS ON DISPLAY INFORMATION ON HOLDINGS DEFINITIONS AND GLOSSARY

45 1. RISK FACTORS Investing in the Company involves inherent risks. This section describes risk factors specific to the Company and the industry in which it operates that are known to the Company at the date of this Prospectus. The order in which risk factors are mentioned is not intended as an indication of the probability or importance of the risk factors. Risk factors related to the Shares are described in Section 1 of the Share Securities Note. If any of the following risks actually occur, the Company s business, financial position and operating results could be materially and adversely affected. A prospective investor should consider carefully the factors set forth below in this Section, and in Section 1 of the Share Securities Note before making an investment decision, and should consult his or her own expert advisors as to the suitability of an investment in the shares of the Company Operational risks Operational risk can be defined as the risk of loss resulting from failed or inappropriate processes or procedures. Clinical studies provide negative conclusion Serodus` pre-clinical and clinical testing may not be predictive of future trial results, and if subsequent studies or trial results are unfavorable, Serodus may be forced to stop developing a product candidate that currently shows promise. In addition the clinical studies may not be finalized within the Company s estimated time frame. Competition The markets for Serodus` planned products are exposed to fierce competition and are subject to rapid change, and competitors are in many cases major international companies. Competitors may develop more effective, more affordable or more suitable products or may achieve earlier patent protection or commercialization of their products. These competing products may render Serodus` product candidates obsolete or limit the ability of Serodus to generate revenues from its product candidates. Attraction and retention of key personnel The Company is highly dependent on its management and key employees. Competition for qualified employees among companies in the biotechnology and medical industry is intense. Serodus future success depends upon Serodus ability to attract, retain and motivate highly skilled employees. Not being able to successfully attract and retain qualified personnel, consultants and advisors may impede the achievement of the Company s objectives and have a material adverse effect on Serodus business, financial condition and results of operations. Pricing environment If the company succeeds in bringing its products through clinical phase I, II and III the degree of success of commercialization will depend upon the Company s ability to market its products at a fair price to the market. Further there is no guarantee that this price eventually will lead to profitable products. Disputes The Company may from time to time be involved in disputes, including disputes regarding its intellectual property rights, with all ensuing risks and costs. Inadequate quality and cost/benefit value The quality and testing costs of the Company s products are key elements in the success of the products. The Company cannot assure that its products will be perceived as having a competitive price/quality balance in the Company s main target markets. Successful completion and commercialization of products may not be achieved. In addition, R&D processes may take longer than projected. It may also result in a lower accuracy improvement than projected. Loss of reputation Any negative publicity related to the Company could adversely affect its reputation and the value of its brand. The Company is exposed, among others, to the risk that litigation, consultants, employee or officer's misconduct, operational failures, disclosure of confidential information, negative publicity, whether or not founded could 45

46 damage its reputation. Any erosion of the Company's reputation may have a material adverse effect on its business, revenues, and results of operations or financial conditions. Changes in current tax regulations The Company s operations are subject to applicable taxes and charges. No assurance can be made that the current tax systems and charges will sustain and that the government will not adopt different policies with respect to taxation and charges. Such change may have a material adverse negative effect on the Company s financial position and results of operations. Regulatory requirements and other governmental regulation risk Failure to comply with regulatory or government requirements can lead to delays, higher development costs and/or loss of commercialization potential. Collaborations and licensing arrangements Serodus is substantially dependent on entering into collaborations and licensing arrangements with third parties in the development and commercialization of certain of its product candidates. Intellectual property rights (IPR) Serodus will maintain an aggressive patent strategy by filing additional patent applications for composition-ofmatter, use, methods of manufacture, dosage levels and formulations for its entire product portfolio. There is a risk that patent applications that the Company has filed, or will file in the future, will not be granted. Furthermore, patents that are already granted may be challenged by other parties. Whether patent protection is available in all cases is uncertain and represents complex legal and scientific issues. In addition, the Company depends on internal know-how and expertise, which may not be subject to regulatory protection and may with time be diluted. There may be substantial costs associated with the protection or enforcement of the Company s intellectual property rights, and the Company may be unable to protect or enforce its intellectual property rights. Litigation may prevent the Company from selling the products over a substantial period of time. The Company may not be able to achieve freedom to operate in markets that are important to the Company s success. In cases where products have been in-licensed, the Company may experience setbacks if licensing partners are unable to protect or enforce the intellectual property rights. Infringement of the Company s intellectual property rights can be costly for Serodus either directly (infringement process) or indirectly (loss of sales). A claim of infringement against Serodus could injure the Company s reputation and adversely affect the ability to sell and develop products and technology. Third parties may claim that the Company's current or future products infringe their proprietary rights, and these claims, whether they have merit or not, could harm the business by increasing costs or reducing Serodus revenue. If the Company infringes third party proprietary rights, such infringement may cease the production and/or development of the products and/or technology infringing third parties Financial risks Operating losses Serodus has since incorporation accumulated losses and expect such losses to continue as it proceeds in bringing its product candidates trough the clinical phases. The Company plans to obtain revenues and a profitable business in the future. However, there is no assurance as to when and if Serodus will achieve revenues and profitability. Ability to raise additional capital In order to successfully execute the outlined strategies, and to flexibly and effectively react to new opportunities and threats arising, the Company may seek to raise additional capital through equity issues, debt financing, collaborative arrangements, strategic alliances or from other sources. However, the Company may prove unable to raise such additional capital on commercially acceptable terms, if at all. If the Company is unable to generate adequate funds from operations or from additional sources, the business, results of operations and financial 46

47 condition may be materially and adversely affected. Moreover, the Company's ability to obtain such additional capital may be significantly affected by the general economic conditions at that particular point in time. Macroeconomic fluctuations Serodus is exposed to the economic cycle, since changes in the general economic situation could affect future demand for the Company s products. Changes in interest rates Serodus may, in the future, require debt financing. In this event the profitability may be adversely affected during any period of unexpected or rapid increase in interest rates. Currency rate fluctuations The Company plans to generate revenues from a range of foreign countries and to purchase goods and services in foreign currencies. The Company s base currency is Norwegian Kroner (NOK). Fluctuations in currency rates towards the NOK can substantially affect the revenues and costs of the Company in the future. As a main rule of the Company's currency policy, the Company does not hedge its foreign exchange exposure, but at a later stage the Company may from time to time enter into arrangements such as forward currency contracts in order to hedge larger single items that affect cash flows. Development Serodus is at an early stage of development and depends on the successful further development of its product candidates, which are subject to uncertainties beyond its control; Serodus may never have any products that generate substantial revenue. The cost of clinical trials Clinical trials are expensive, time- consuming and may be delayed, suspended or terminated at any time Market risk The market for Serodus` products is expected to grow. However, should the demand slow this may hamper the future profitability of the Company. Further, Serodus is a relatively young and small company in a precommercial phase, and there is risk connected to building a sustainable organization capable of adapting to the changing markets and the growing business of Serodus. Therefore, investing in the Company involves inherent risks Other risks Trade barriers Trade barriers (monetary and other) could have an adverse effect on the Company s business, results of operations and financial condition. Political Events Political events could change the business climate and regulation in a way that has a negative impact on the value of the Company s operations. Product liability and insurance Serodus is exposed to potential product liability claims and insurance against these claims may not be available to the Company at a reasonable rate in the future. Serodus is, and will continue to be, subject to the risk of product liability claims alleging that the use of its products has had adverse effects on patients. Moreover, given the seriousness of the medical conditions for which the Company s products will be utilized, any product liability claim could entail substantial compensatory and punitive damages. The assertion of product liability claims against the Company could result in a substantial cost to and diversion of efforts by the Company. There can be no assurance that the Company would prevail in any such litigation or that product liability claim, if made, would not result in a recall of certain of the Company s products or a change in the indications for which they may be used. For information regarding risk factors specific to the Shares, refer to the Share Securities Note, chapter 1. 47

48 2. PERSONS RESPONSIBLE FOR THE SHARE REGISTRATION DOCUMENT The members of the Board of Directors hereby confirm that, after having taken all reasonable care to ensure that such is the case, the information contained in this Share Registration Document is, to the best of our knowledge, in accordance with the facts and contains no omissions likely to affect its import. 28 January 2014 The Board of Directors of Serodus ASA Ingrid Alfheim Ole Peter Nordby Theresa Comiskey Olsen Søren Elmann Ingerslev Svein S. Jacobsen Chairman 48

49 Note Regarding Forward-Looking Statements This Prospectus includes forward-looking statements, including, without limitation, projections and expectations regarding the Company s future financial position, business strategy, plans and objectives. All forward-looking statements included in this document are based on information available to the Company, and views and assessments of the Company, as of the date of this Prospectus. The Company expressly disclaims any obligation or undertaking to release any updates or revisions of the forward-looking statements contained herein to reflect any change in the Company s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, unless such update or revision is prescribed by law. When used in this document, the words anticipate, believe, estimate, expect, seek to and similar expressions, are intended to identify forward-looking statements. Such forwardlooking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company, to materially differ from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company s present and future business strategies and the environment in which the Company will operate. Factors that could cause the Company s actual results, performance or achievements to materially differ from those in the forward-looking statements include but are not limited to global and regional economic conditions, the competitive nature of the market in which the Company operates, growth management, changes in domestic and foreign laws and regulations, taxes, changes in competition and pricing environments, changes in political events, force majeure events and other factors referred to in this Prospectus. Important factors that could cause actual results to differ materially from those in the forward-looking statements are included in Chapter 1 in the Share Securities Note and chapter 1 in the Share Registration Document. 3. STATUATORY AUDITORS 3.1. Current auditor The Company`s independent auditor is Ernst & Young AS, with organization number and with address Dronning Eufemias Gate 6, 0191 Oslo, Norway. Ernst & Young is a member of Den Norske Revisorforeningen (the Norwegian Institute of Public Accountants). Ernst & Young AS has audited the Company s financial statements for 2011 and Ernst & Young AS has not audited, reviewed or produced any other report on any information provided in this Share Registration Document. Ernst & Young AS was appointed as auditor in an extraordinary general meeting on 10 December This was done as a part of the preparation for stock exchange listing of the Company. 49

50 4. SELECTED FINANCIAL INFORMATION The following table presents selected financial information for the Company for the years 2011 through The financial figures have been retrieved from audited financial statements from 2011 and 2012 and unaudited interim reports for Q and Q Serodus ASA (NOK 1000) IFRS IFRS IFRS IFRS IFRS IFRS Unaudited Unaudited Unaudited Unaudited Audited Audited Profit and loss summary Q Q Q1-Q Q1-Q Total revenues Profit/loss from operations Result before tax Result after tax IFRS IFRS IFRS Unaudited Audited Audited Balance sheet summary Total intangible assets Total tangible assets Total financial assets Total receivables Cash and cash equivalents Total assets Total equity Total non-current liabilities Total current liabilities Total equity and liabilities Other Number of shares Dividends 0,00 0,00 0,00 50

51 5. INFORMATION ABOUT THE ISSUER 5.1. History and Development of the Company General Serodus ASA (Serodus) is a Norwegian public limited liability company organized under the Norwegian Public Limited Liabilities Companies Act, with organization number Serodus was incorporated on 29 January The Company s registered business address is Gaustadalleén 21, 0349 Oslo, Norway and its telephone number is The Company s website is Events in the development of the issuer s business The table below highlights the most important historical developments from 2008 to the date of this prospectus. Time Historical milestone 2008 Serodus was incorporated as a demerger from Bio-Medisinsk Innovasjon AS (BMI). Serodus decided to pursue two alternative tracks for development of a heart failure drug: continued clinical development of GlaxoSmithKline s (GSK) drug candidate piboserod and pursue development of its own early-phase drug candidate SER120. Serodus decided to terminate the piboserod development and focus on the development of its own preclinical candidate. The main product focus of Serodus at year-end 2008 was: SER Serodus acquired all remaining IPR related to 5-HT 4 receptor antagonists and heart failure held by the inventors and their technology transfer organization Medinnova. Serodus decided to initiate negotiations with Roche for a possible license to their 5-HT 4 receptor antagonist RO (SER 110). The main product focus of Serodus at year-end 2009 was: SER Serodus decided to extend into a broader portfolio in the cardiovascular area. Serodus and Zealand Pharma A/S (Zealand Pharma) signed a patent transfer agreement transferring all assets related to Zealand Pharma s drug candidate ZP120 to Serodus (SER100), enabling Serodus to move the Isolated Systolic Hypertension (ISH) program directly into clinical phase II. Serodus signed a license agreement with F. Hoffmann- La Roche (Roche) for their selective 5-HT 4 receptor antagonist RO (SER110) enabling Serodus to move its heart failure program directly into clinical phase II. The main product focus of Serodus at year-end 2010 was: SER100, SER110 and SER The company s ambitions to list its shares on Oslo Axess were postponed due to a very difficult financial market In the fourth quarter of 2012, after reshaping the company s strategy towards a focus on Isolated Systolic Hypertension, the company succeeding in raising sufficient financing for its clinical phase IIa of SER

52 The main product focus of Serodus at year-end 2012 was SER The agreement with Roche on RO (SER 110) was terminated due to the changed strategic focus away from heart failure. Early 2013 Serodus was focusing on SER100. Serodus was listed on Oslo Axess on 9 April 2013 and acquired Phlogo ApS as of 8 July Phlogo focused on development of drug candidates for the treatment of diseases where inflammation plays an important role. Serodus acquired the drug candidate Ph8 (now named SER130) intended for treatment of the inflammatory response to Acute Myocardial Infarction With the acquisition of Phlogo Serodus also acquired Ph51 (now named SER140) another antiinflammatory drug candidate intended for treatment of Type 2 Diabetes. This compound will remain in the Serodus 100% owned affiliate Phlogo. On the 6 December 2013, Serodus completed a Private Placement securing NOK 30 million in gross proceeds. Serodus has also signed an license agreement with Evolva Holding SA, a Swiss company for the drug candidate EV-077 intended for treatment of Diabetic Nephropathy with albuminuria Investments Principal investments According to the Company s IFRS reporting routines, no pre-clinical and clinical activities in the years from 2011 until the date of this Prospectus have been classified as investments. All costs related to Serodus products have been classified as R&D expenses. For an overview of the Company s R&D expenses in these years, please refer to section 11. The acquisition of Phlogo ApS was approved and completed by the extraordinary shareholders meeting held 8 July From the time of completion of the transaction, Serodus ASA owned 100 % of Phlogo and therefore consolidated its figures from the date of which control was transferred to Serodus ASA. The acquisition of assets and liabilities in Phlogo ApS were measured at fair value as of the date of the acquisition and were carried out through a total consideration of NOK 5.4 million, through an issue of 2,000,000 shares at a price of NOK 2.57 per share, each with a nominal value of NOK Consideration in connection with the acquisition of Phlogo ApS Cash Patents Deferred tax liability -586 Net fair value of assets and liabilities Consideration issued Goodwill 586 For additional details on Phlogo ApS and its product portfolio, please refer to section 6.1 and 7. 52

53 Investments in progress There are no significant investments in progress that would classify as investments under the IFRS reporting routines of the Company, however the Company s clinical studies that are planned or in progress are as follows: SER 100 is in clinical development and a phase IIa Proof-of-Concept clinical study is ongoing. SER150 is being prepared for a Phase II Proof-of-Concept study. SER130 is in the preclinical development phase and will soon enter the first pre-clinical toxicological studies. SER140 will be tested in a series of experimental pharmacological diabetes models. SER120 has by purpose been put on hold because it is in the very early pre-clinical phase. For details on the budgeted capital requirements for the Company s current projects please refer to section 3.4 in the Share Securities Note. Costs associated with the development of the Company s products are ordinary research and development costs, expensed as they are incurred Investment plan There are currently no additional investments planned. 53

54 6. BUSINESS OVERVIEW 6.1. Principal activities and markets Serodus is a Norwegian research and development company dedicated to the development of products for the treatment of patients with cardiovascular diseases. The Company was founded based on a discovery of a new disease target in heart failure from the University of Oslo. Today, after acquiring Phlogo and with the aim of inlicensing EV-077 (now named SER150), the product pipeline focuses on the following five diseases: Isolated Systolic Hypertension (ISH) - reducing the systolic blood pressure in therapy resistant patients (SER100) Acute Myocardial Infarction (AMI) reducing the scar area after coronary occlusion and reduce reperfusion damage after percutaneous intervention (Balloon dilatation-pci) and stent (SER130) Diabetic Nephropathy reducing amount of 24-hour urinary loss of albumin and preserve kidney function in angiotensin converting enzyme (ACE) inhibitor treated diabetics (EV-077 to be named SER150) Atrial Fibrillation (AF) during intra-thoracical surgery - normalization of heart rhythm (SER120) Type 2 Diabetes reduce the need for insulin or other anti-diabetic treatment (SER140) SER 100 is in clinical development and a phase IIa Proof-of-Concept clinical study is ongoing. EV-077 (now named SER150) is being prepared for a Phase II study Proof-of-Concept study. SER130 is in the preclinical development phase and has entered the first pre-clinical toxicological study. SER140 will be tested in a series of experimental pharmacological diabetes models. SER120 has by purpose been put on hold because it is in the very early pre-clinical phase. All drug candidates are covered by extensive intellectual property (patents and patent applications) held by the Company, by Evolva (SER150 and related compounds) or Copenhagen University (SER130). The order of priority of Serodus is the product SER100 followed by SER150, SER130, SER140 and SER120. The Company does not expect any major development activities with SER120 within the next twelve-month period. Serodus is currently dependent on a limited number of outside suppliers, including clinical research organizations and contract manufacturing organizations. Serodus is not dependent on any material assets necessary for the production not owned by Serodus, with exception of the assets owned by its suppliers. Key suppliers are currently Smerud Medical Research International AS (performing the clinical study on SER100) and Aptuit (Glasgow) Ltd (providing drug substance and drug product on SER100). Furthermore, Bachem AG, Switzerland has been chosen as supplier of SER130. Other suppliers will be recruited for SER150 and SER140. The selection and follow-up of suppliers are conducted according to established internal routines. The main value proposition of Serodus business model is to: utilize its expertise and proprietary know-how to optimize and develop its patent protected compounds from their present states to establish clinical Proof-of-Concept for each of the compounds. continue to use its research and clinical experience to identify products covering significant unmet clinical needs and commercial potential within the cardiovascular area. continue to extend its product portfolio by in-licensing selected drug candidates meeting the above criteria. Revenue generation The product pipeline addresses significant markets with substantial unmet clinical needs, and potential revenue from partnering agreements is estimated to be significant. 54

55 Serodus will pursue partnering agreements with large pharmaceutical companies upon having established positive clinical Phase II outcomes for its products - or alternatively partner at an earlier stage if such collaborations and licensing arrangements would advance the development of the drug candidates. Licensing deals with large pharmaceutical companies often take place on the basis of the results from clinical Phase II. Hence, design of the clinical phase II studies will be essential to support a successful licensing strategy, and Serodus will take this into consideration when entering into the first clinical trial studies for its candidates. The first drug candidate to complete the clinical Proof-of-Concept phase II study will be SER100. Upon partnering, Serodus will target up-front payment and milestone payments based on the further development of the products. Once the compounds have been marketed, Serodus expects to receive sales-based royalties and possibly sales-based milestones. Serodus aims to secure a fast progress of its products at an affordable cost using external providers. Serodus wishes to emphasize the fact that as of the date of this Prospectus it is a company with two products (SER100 and SER150) in Phase IIa, Proof-of-Concept clinical phase. The success of the Company is therefore highly dependent on a positive outcome of the clinical testing and being able to secure a sufficient licensing and/or partnering agreement in the future. The Company s other products, SER130, SER140 and SER 120 will contribute to the company s long-term development. A successful development of either one of the Company s products is expected to have a material positive effect on the Company s results and cash flow, which in turn should be reflected in the future valuation of Serodus. The Drug development process The drug discovery and development process is designed to ensure that only those pharmaceutical products that are both safe and effective are brought to the market. This is traditionally a long and expensive process that requires extensive resources. Before a new drug is marketed, it must undergo extensive testing and be approved by regulatory agencies in the countries where it will be marketed. The traditionally drug development process can be divided into the following stages: Drug development process and Serodus pipeline The R&D phase is normally a long process where novel principles and a vast selection of compounds are studied and tested. A large number of chemical compounds are usually studied for each candidate that reaches the clinical phases. First patent application filing normally takes place during this phase. 55

56 The pre-clinical phase comprises studies on animals to evaluate acute and short term toxicity and often assesses how the drug is absorbed, distributed, metabolized and excreted in animals. The purpose is to determine if the drug is safe for human testing. The clinical studies represent the human trial phases, starting on a small scale to assess safety and tolerability and then expanding to test both safety and efficacy in larger patient populations. The clinical studies normally comprise the following phases: The clinical phase I perform initial human testing in small group of healthy volunteers or patients The drug candidate is tested in humans for the first time. The studies are usually conducted with about subjects. The main goal is to discover if the drug is safe in humans. Researchers look at how the drug is absorbed, how it is metabolized and eliminated from the body, and what dose levels can be given safely before significant side effects occur. These closely monitored trials are designed to help researches determine what the safe dosing range is and if it should move on to further development. The clinical phase II - trials in small and larger groups of patients to show safety and dose efficacy relationship The studies are typically conducted in a controlled population ranging up to a few hundred patients with the target disease or condition. The researchers are looking for the drug candidate`s effectiveness and examine the possible short-term side effects and risk associated with the drug. Researchers are looking to answer questions like is the drug working by the expected mechanism? Does it improve the condition in question? They also analyze optimal dose strength and schedules for using the drug. If the drug continues to show promise, they prepare for the much larger phase III trials. The clinical phase III test in larger group of patients to show safety and efficacy During this phase, extensive trials are executed and the researchers study the drug candidate in a larger number of patients. Normally, 1,000-5,000 patients are involved, in order to generate statistically significant data about safety, efficacy and the overall benefit-risk relationship for the drug. Clinical phase III is key in determining whether the drug is safe and effective. It also provides the basis for labeling instructions to ensure proper use of the drug. During phase III researchers are also conducting many other critical studies including plans for full scale production and preparation for governmental approval. Clinical phase III studies in cardiovascular diseases are generally highly complex endeavors, and Serodus current judgment is that partnering with larger pharmaceutical companies after clinical Phase II is the right strategy forward. Serodus product pipeline Serodus possesses internally developed compounds as well as in-licensed compounds. The present product pipeline consists of the following drug candidates: Product candidate Indication Status Number of patients SER100 Isolated Systolic Hypertension Proof-of-concept. First patient dosed 4Q 2013 Approx. 20 mill. in US and Europe SER150 Diabetic nephropathy Proof-of-concept. First patient dose H2, 2014 Approx. 200 mill. worldwide SER130 Acute Myocardial Infarction Preclinical phase with Safety and Toxicology studies initiated Approx. 7 mill. in US and Europe SER140 Type 2 Diabetes Preclinical phase Global Prevalence Approx

57 mill. (GBI Research 2013) SER120 Post-surgical atrial fibrillation Preclinical phase Approx. 0.5 mill. procedures annually in US and Europe The Company will develop the compounds through outsourcing of the non-clinical and clinical development work to pre-clinical and Clinical Research Organizations (CRO) and Contract Manufacturing Organizations (CMO). For details on this development and outsourcing strategy, please refer to the sections the drug candidate SER100, the drug candidate SER150, the drug candidate SER130, the drug candidate SER140 and the drug candidate SER120 and the section Development strategy in each of these respective chapters below. 57

58 SER100 - Isolated Systolic Hypertension (ISH) Cardiovascular diseases continue to remain the leading cause of global mortality, accounting for 17 million deaths per annum 1. An estimated 30 million people get afflicted from cardiovascular diseases each year. United States represents the largest market in the worldwide cardiovascular disease market, estimated at USD 2.9 billion in Europe represents the second largest market, followed by Japan 2. The disease Hypertension is a chronic condition in which blood pressure in the arteries are elevated. The heart has to work harder to maintain sufficient blood flow to organs. Blood pressure is measured as two pressures, the systolic and the diastolic depending on whether the heart is contracting (systole) or relaxing (diastole). Three subpopulations are described; elevated diastolic and systolic pressure, only elevated diastolic and normal systolic blood pressure and isolated elevated systolic blood pressure (ISH). The definition of ISH is a systolic blood pressure above 140 mmhg and a diastolic blood pressure below 90 mmhg. ISH is characterized by a loss of elasticity and the development of stiffness in the aorta and the major arteries 3. The pattern of blood-pressure elevation changes with age. Before reaching 50 years of age, most people with hypertension have elevated diastolic pressure (diastolic the pressure measured when the heart is relaxed). After the age of 50 years, as systolic pressure continues to rise and diastolic pressure tends to fall, ISH predominates 3. ISH is the most common form of hypertension in people older than 50 years as demonstrated in the figure below. The condition has no subjective symptoms and it is often diagnosed when health professionals examine the patient for other reasons. It is estimated that only approximately 50 % of the patients are diagnosed 3. ISH can lead to serious health problems such as stroke, heart disease, chronic kidney disease and dementia. These patients have also a significant higher incidence of Frequency of untreated hypertension (US) heart failure than those with only increased diastolic according to subtype and age pressure. The evidence based recommended medicine for treatment of ISH is the same as for treatment of the combined diastolic and systolic hypertension, a thiazide and/or an ACE inhibitor and/or an angiotensin receptor blocker. These drugs were all developed for reduction of the diastolic blood pressure. Their mechanism of action is to inhibit the renin-angiotensin system which is very important in the day-to-day regulation of blood pressure. When these drugs, or combinations thereof, reduce the diastolic pressure, the systolic pressure follows. However, in a substantial number of patients this decrease is not sufficient to bring the systolic blood pressure below 140 mmhg. Other drugs with different mode of actions such as calcium channel blockers are used in treatment of diastolic hypertension but have not been found efficacious enough in ISH. Lowering the systolic pressure in patients with ISH has demonstrated a significant reduction in stroke, heart failure, renal failure and myocardial infarction. However, these drugs are all developed or proven to decrease an elevated diastolic blood pressure. Since patients with ISH are characterized by a normal diastolic blood pressure, a concern is that treatment may lower the diastolic pressure too much increasing the risk of dizziness, fall 1 WHO disease statistics, Cause-Specific Mortality G. Stephens, 13 th Annual Supply Chain East, May Chobamian AV: N Engl J M, 2007:357:789 (source of above figure) 58

59 accidents, heart attack or stroke. Thus, treatment of ISH is a prophylactic treatment paradigm aiming at normalizing the increased systolic blood pressure without interfering with the diastolic blood pressure preventing stroke, renal failure and heart diseases. ISH is a difficult condition to treat and despite aggressive treatment with current antihypertensives the treatment goals are not reached in up to 30 % of the patients 4 and these patients are described as therapy resistant. The medical treatment is continued although not efficacious enough. This patient population is our target and SER100 will be an add-on drug to the existing treatment schedule. The drug candidate SER100 SER100 is the code name of Serodus drug candidate to be developed for treatment of patients with ISH, in treatment with one to three other antihypertensives. The product represents a key commercial asset for the Company, addressing an increasing market potential due to the aging population and increasing awareness of the risks of systolic hypertension. Serodus has acquired the patent, all rights and know-how to SER100 from Zealand Pharma A/S (Denmark), and holds the sole right for the development and commercialization of the product. Serodus has paid a minimal upfront payment to acquire the compound and will pay a certain percentage of future development income as well as royalties from potential partners and own sales. SER100 (ZP120) reduces the systolic pressure (bold circles) and not affecting the diastolic blood pressure (open circles) to the same extent. 5 The product has obtained pre-clinical and clinical phase I in healthy volunteers and Phase IIa in patients with heart failure carried out by Zealand Pharma either in their laboratories or by contract laboratories. The preclinical testing has demonstrated that SER100 binds to only one specific receptor, the ORL-1 receptor among the common receptor test battery. No toxicological findings or safety pharmacological findings have been identified. The current toxicological testing comprise of 4 weeks treatment which allow up to four weeks treatment in patients. When dosing period shall be longer in the later development program clinical trials shall be preceded by toxicological studies with longer SER100 exposure. During the previous clinical studies, the possibility of using SER100 as a treatment for ISH was hypothesized on the basis of data from two of the clinical studies in acute and chronic heart failure, respectively. Among the patients in the treated groups, who in the two studies were normotensive before entering the studies, about 50 % had a reduction of systolic blood pressure by more than 10 mmhg with only minor effect on the diastolic pressure. The compound has now entered the clinical phase IIa Proof-of-Concept study, with the primary goal to demonstrate that the compound reduces the elevated systolic blood pressure in patients with ISH in treatment with one to three other antihypertensives and still having a systolic blood pressure above 140 mmhg (therapy resistant). Based on clinical experience the reduction in blood 4 Lawes CMM et al. Lancet 2008, 371, Zealand Pharma A/S, Clinical Study Report No

60 Hypertension Prevalence pressure increases with the baseline pressure through the use of anti-hypertensives. Serodus therefore expects that in therapy resistant ISH patients, the reduction of systolic blood pressure will be equal or larger than that observed in the two studies already performed in normotensive heart failure patients. Development strategy For the ISH indication, Serodus has initiated a phase IIa study in Finland, Norway and the UK. The study will also be performed Hungary. The SER100 dose is the maximum tolerable dose subcutaneously, as previously identified in the Phase I study in healthy volunteers. 50 % of the maximum tolerated doses is given twice daily for two consecutive days. The study is a randomized, placebo controlled, cross-over design including a cohort of patients in treatment with one to three antihypertensives and still with a systolic blood pressure above 140 mmhg (therapy resistant). SER100 will thus be an add-on to other antihypertensives. Study design and number of patients will allow Serodus to obtain clinical Proof-of-Concept. Clinical trials have previously been performed in both USA and in Europe under an IND and a CTA, respectively. The Phase IIa study will be followed by a Phase IIb study, a so-called dose-finding study, where different doses are given in a parallel study design to patients with therapy resistant ISH for a longer period of time and to a larger number of patients. Larger phase III studies follow after the dose-finding study, as well as studies in special groups like patients with reduced kidney and liver function and heart failure. The Phase IIb study will be carried out either by a partner or by Serodus. If Serodus is involved in further pharmacological or toxicological studies these will be carried out at contract research laboratories and Serodus has the competences to manage these laboratories. During the phase II studies, novel patient convenient formulations will be investigated. More on Isolated Systolic Hypertension (ISH) ISH is not as well recognized as diastolic hypertension, but represents the most common form of hypertension in patients above the age of 50 years. The disease is seen more often in females than in males and is a major risk factor leading to stroke, renal failure and myocardial infarction. Approximately 80 % of people above 70 years are suffering from ISH. The potential market segment for this indication is increasing due to the aging population 3. Age 100% 80% 60% 40% 20% 0% Based on NHANES data. Isolated Systolic Hypertension is defined as blood pressure 140/90 mmhg. The lifetime risk of hypertension for individuals of 55 years of age is approximately 90 %. ISH is currently increasing in prevalence also among young adults and is more common than the combined systolic/diastolic hypertension. Prevalence data for ISH is only publicly available for the United States, although the World Health Organization provides estimates of the prevalence of ISH in elderly patients on a global basis, and it is widely accepted that the prevalence of ISH increases dramatically with age. According to the clinical NHANES III study, approximately 50 % of the American patient population suffering from hypertension has ISH, whilst 87% of hypertensive patients over the age of 60 suffer from ISH. 6 From the figure it can be seen that (48% are hypertensive) of which 58% have Isolated Systolic Hypertension (65 % are hypertensive) of which 87 % have Isolated Systolic Hypertension + 75 (78 % are hypertensive) of which 87 % have Isolated Systolic Hypertension The estimated ISH population of patients aged above 50 in US and Europe combined is % 16% 31% 48% ISH 58% 65% ISH 87% 78% ISH 86% Fields et al. Hypertension 2004:44;

61 The number of elderly is rising rapidly. At the beginning of the 21st century, only 4 % of the US population was older than 65 years of age. By 2040, the comparable figure is estimated to be 21 %. As a consequence, ISH will be an important issue for the health care system in the years to come, and ISH is believed to be the most prominent hypertension that remains untreated 61

62 SER150 Diabetic Nephropathy The disease Type 2 diabetes affects a significant proportion of the world s population and has reached epidemic proportions. Worldwide, the estimated prevalence of diabetes in 2011 was 366 million and is estimated to grow to 552 million in Diabetes is associated with significant morbidity and excess mortality and has a major impact on national healthcare budgets. The spending on diabetic healthcare was USD 465 billion (11% of total world healthcare expenditure). Approximately 4.6 million deaths per year are estimated to be due to diabetes 7. Type 2 diabetes mellitus (T2D) comprises an array of dysfunctions characterized by hyperglycemia resulting from the combination of resistance to insulin action, inadequate insulin secretion, and excessive or inappropriate glucagon secretion. Since the 1950s, kidney disease has been clearly recognized as a common complication of T2D, with as many as 50% of patients with more than 20 years duration having this complication. Diabetic nephropathy is a major cause of increased morbidity and mortality due to development of chronic vascular inflammation caused by hyperglycemia, especially the glucose spikes following meals that promote oxidative stress and subsequently drive inflammatory processes in the vascular bed 8, 9. Proteinuria is a marker of this inflammatory process in the kidney and is an indicator of renal function. The lower the kidney function the more protein is excreted to the urine. Thus, proteinuria is a predictor of morbidity and mortality. Loss of kidney function is a progressive condition and if not stopped, it ends with chronic dialysis and in some cases kidney transplantation 7. Although the progression of diabetic nephropathy may be delayed by treatment with both an antihypertensive drug which normalize an elevated blood pressure (preferably with an angiotensin converting enzyme inhibitor) and a strict control of the plasma glucose concentration, many patients still progress to end-stage renal disease Important determinants of progression include the absolute amount of proteinuria The drug candidate SER150 SER150 is the code name of Serodus drug candidate to be developed for treatment of patients with diabetic nephropathy, in treatment with anti-diabetic drugs and an ACE inhibitor (angiotensin converting enzyme inhibitor). The product represents a key commercial asset for the Company, addressing an increasing diabetic market potential due to the aging population and change in life style. Serodus has signed a contract to develop and will have all development and commercial rights and know-how to SER150 from Evolva Holding SA (Switzerland). Serodus has paid a reasonable down payment at the time the contract was signed. In addition Serodus will pay a certain percentage of future development income from potential partners as well as royalties on own sales. The product has obtained pre-clinical and clinical phase I documentation, and a small multiple dose Phase IIa documentation data. The preclinical testing has demonstrated that SER150 is binding specifically to the human thromboxane receptor (as an antagonist) and inhibits thromboxane synthase. The current toxicological testing comprises 13 weeks treatment which allows up to three month treatment in patients. In the later development program clinical trials with longer duration shall be preceded by toxicological 7 IDF Diabetes Atlas, 4th ed Node K, Inoue T. Postprandial hyperglycemia as an etiological factor in vascular failure. Cardiovasc Diabetol 2009;8: Ceriello A, Testa R. Antioxidant anti-inflammatory treatment in type 2 diabetes. Diabetes Care 2009 Nov;32 Suppl 2:S232- S Finne P, Reunanen A, Stenman S, et al. Incidence of end-stage renal disease in patients with type 1 diabetes. JAMA 2005; 294: Rosolowsky ET, Skupien J, Smiles AM, et al. Risk for ESRD in type 1 diabetes remains high despite renoprotection. J Am Soc Nephrol 2011; 22: JAMA. Jun ;305(24): Ruggenenti P, Gambara V, Perna A, et al. The nephropathy of non-insulin-dependent diabetes: predictors of outcome relative to diverse patterns of renal injury. J Am Soc Nephrol 1998; 9: HovindP, Tarnow L, Parving H-P. Remission and Regression of Diabetic Nephorpathy. Current Hypertension Reports 2004; 6:

63 studies with longer SER150 exposure. During the previous clinical studies, the possibility of using SER150 for treatment of diabetic nephropathy has been hypothesized on the basis of the anti-inflammatory mode of action and effect of SER150 in the Phase IIa study where exercise induced proteinuria was reduced in diabetic patients compared to placebo. The compound will enter the clinical phase IIa Proof-of-Concept study, with the primary goal to demonstrate that the compound reduces the amount of protein in 24 hour urine in diabetic patients with nephropathy in treatment with anti-diabetics and an ACE inhibitor. Based on clinical experience, the reduction of protein in urine will delay progression of loss of renal function in diabetic patients with nephropathy. During the toxicological testing the liver was identified to be the most sensitive organ after very high doses. No other significant toxicological findings or safety pharmacological findings have been identified. In the clinical studies high multiple doses also indicated liver as the most sensitive organ. Development strategy For the Diabetic Nephropathy indication, Serodus plans to perform a phase IIa study in Germany. The SER150 dose will be based on the documentation obtained from previous clinical studies performed by Evolva. The dose is given orally and will be given twice daily for a number of days not yet defined. The study will be a randomized, placebo controlled, design including diabetic patients in treatment with anti-diabetics and an ACEinhibitor and still with significant amount of proteinuria (therapy resistant). SER150 will thus be an add-on to ACE inhibitor treatment. Study design and number of patients shall allow Serodus to obtain clinical Proof-of-Concept. Clinical trials have previously been performed in Europe under a CTA. SER150 Phase IIa study will be designed by Serodus after discussions with our clinical advisor. A qualified Clinical Research Organization (CRO) with experiences in studies in patients with diabetic nephropathy will be chosen. The CRO will on Serodus behalf be responsible for compiling documents, write the documents for the CTA application to the authority and ethical committee for acceptance to perform the Phase IIa study, the contract with the clinical centers involved in the study, educating staff involved in the study, monitoring both screening of patients and execution of the study, including laboratory testing. The CRO will be responsible for quality control and after the study they will do the statistical analysis and write the full report. Serodus controls all the documents needed for the CTA and will carefully comment progress reports during the study and comment on draft report which finally will be Serodus responsibility. Serodus has the competences to guide and manage the contract organization throughout the study. The Phase IIa study may be followed by a Phase IIb study, a so-called dose-finding study where different doses are given in a parallel study design to patients with diabetic nephropathy for a longer period of time and to a larger number of patients. Larger phase III studies follow after the dose-finding as well as studies of SER150 in special patient groups such as patients with reduced kidney and liver function and patients with heart failure. The Phase IIb study will be carried out either by a partner or by Serodus dependent on a partnership agreement and the degree of collaboration between Serodus and the partner. The coming Phase IIa study will be carried out by a CRO not yet identified. If Serodus is involved in further pharmacological or toxicological studies these will be carried out at contract research laboratories and Serodus has the competences to manage these laboratories. 63

64 SER130 - Acute Myocardial Infarction (AMI) The disease Acute myocardial infarction (AMI) remains a leading cause of morbidity and mortality worldwide. Myocardial infarction occurs when myocardial ischemia, caused by a diminished blood supply to the heart, exceeds a critical threshold. Ischemia at this critical threshold results in irreversible myocardial cell damage or death. Many post AMI patients develop heart failure and atrial fibrillation as late long term complications. The larger the infarct the more functional myocardial tissue is lost and the more severe will the heart failure be. Heart failure is a debilitating condition which compromise quality of life significantly and is costly for the both the patient and for the society. Approximately 450, 000 people in the United States die from coronary diseases every year. The survival rate for U.S. patients hospitalized with AMI is approximately 95%. In the European countries (eg UK) the average incidence of myocardial infarction is per 100,000 inhabitants. The incidence of AMI increases with age. In the future, as demographics shift and the mean age of the population increases, a larger percentage of patients presenting with AMI will be older than 65 years and the prevalence will increase. A patient experiencing an AMI is suffering from severe pain and maybe unstable cardiovascular function. The diagnosis is verified from an electrocardiographic recording, which may demonstrate characteristic changes. Blood analysis will reveal a high concentration of a protein, troponin, coming from the damaged myocardial cells. Troponin is used as biomarker within the hour after an AMI. The goals of therapy in acute AMI are first of all to introduce pain relief and stabilized heart function. Secondarily to restore normal coronary blood flow. Restoration of coronary blood flow in an AMI patient can be accomplished mechanically by PCI (Percutaneous coronary intervention by the use of a so-called balloon dilatation). PCI can successfully restore coronary blood flow in 90% to 95% of AMI patients. Also inserting of stents with PCI is often used. The Drug Candidate SER130 Some components of the body s immune system are not constitutively expressed in the normal heart. Upregulation and production of these components represent a stress response against myocardial injury. Experimental models of myocardial infarction have demonstrated an up-regulation of these intra-myocardial components such as tissue necrosis factor alpha (TNF. Many studies have suggested an imbalance between components that stimulate inflammation and components that inhibit inflammation in acute myocardial infarction (AMI). In patients experiencing an AMI significantly increased serum levels of interleukin-4 IL-4 are observed immediately before and shortly after PCI. It is concluded, that IL-4, a potent anti-inflammatory cytokine detected during the acute phase of AMI, may be a new and early determinant of post AMI cardial function. SER130 is a novel synthetic peptide which mimics the action of one of the anti-inflammatory component, the protein IL-4. SER130 stimulates the IL-4 receptor and thereby demonstrate the same anti-inflammatory effect as IL-4 itself which has been demonstrated both in vitro and in vivo. Serodus intends to develop SER130 through pre-clinical safety and toxicology and subsequently, to test SER130 for its cardio-protective potential in a clinical Phase I/IIa study in patients diagnosed with AMI. A successful clinical Phase I/IIa may be followed by a Phase IIb dose-finding study where different doses are given in a parallel study design to patients for a longer time period and a larger number of patients. 64

65 SER140 Type 2 Diabetes (T2D) The disease Diabetes, often referred to as diabetes mellitus, describes a group of metabolic diseases in which the person has high blood glucose (blood sugar), either because insulin production is inadequate, or because the body's cells do not respond properly to insulin, or both. According to WHO (2013): 347 million people worldwide have diabetes In 2004, an estimated 3.4 million people died from consequences of high fasting blood sugar More than 80% of diabetes deaths occur in low- and middle-income countries WHO projects that diabetes will be the 7th leading cause of death in 2030 Healthy diet, regular physical activity, maintaining a normal body weight and avoiding tobacco use can prevent or delay the onset of type 2 diabetes The prevalence of diabetes for all age groups worldwide has been estimated to be 2.8% in 2000 and 4.4% in The total number of people with diabetes is projected to rise from 151 million in 2000 to 439 million in 2030 (see figure below). The urban population in developing countries is projected to double between 2000 and The most important demographic change to diabetes prevalence across the world appears to be the increase in the proportion of people >65 years of age. The number of people with diabetes is increasing due to population growth, aging, urbanization, and increasing prevalence of obesity and physical inactivity. 15 Due to the increased prevalence diabetes is described as a diabetes epidemic that will continue to rise. Given the increasing prevalence of obesity, it is likely that these figures provide an underestimate of future diabetes prevalence. There are two main types of diabetes: 1) Type 1 Diabetes where the body does not produce insulin. Some people may refer to this type as insulin-dependent diabetes, juvenile diabetes, or early-onset diabetes. Type 1 diabetes develops when the body's own immune system destroys pancreatic beta cells, the only insulin producing cells in the 15 K. Schultz, Novo Nordisk, 2011, t_cmd2011.pdf 65