February 23rd, 2000  

Profitability and future expansion for Norman ASA

Norman ASA had net revenue of NOK 59.6 million in the 4^th quarter 1999, an increase of 46% compared with the 4^th quarter 1998. In this period, the company achieved an operating profit of NOK 2.5 million and a profit before tax of NOK 3.7 million. In 1999, total net revenues were NOK 199.4 million, and profit before tax was NOK 0.3 million. The clear improvement in both revenue and result is due, mainly, to growth in the virus control market, new strategies and strict cost control. In the coming half year, Norman will expand further and launch products that include a new generation of virus control, virus scanning for firewalls and virus control for WAP-portals.

Norman has thus been turned from loss to profit. The pre-tax profit of NOK 3.7 million and operating profit of NOK 2.5 million in the 4^th quarter 1999 were a significant improvement from the similar period in 1998, when the pre-tax loss, influenced by restructuring costs, was NOK 66.5 million. The cashflow from operating activities in 1999 was NOK 7.5 million, before working capital adjustments.

The reason for the solid growth and strongly improved result is, among other things, the continued healthy growth in the virus control market. At the same time, both Norman and Ibas businesses are increasing market share outside Norway. The company has good cost control, which has resulted in costs being held to about NOK 50 million per quarter throughout the year. Costs in the 4^th quarter 1999 were however somewhat higher due mainly to Norwegian tax rules relating to share option benefits, which added social security charges of ca. NOK 4 million.

Other important events arising in the 4^th quarter 1999 were as follows:

• There has been continued attention given to expanding the distribution of Norman products in new markets. An important agreement was signed with the Norwegian-based Merkantildata as distributer in Norway, Sweden, Denmark and Finland. In addition, a distribution agreement was signed with AEC Ltd. for the Czech Republic and Slovakia.

• In the 4^th quarter, Norman achieved operating profits from all international sales subsidiaries, with the exception of the UK, which nevertheless showed an improvement on the 3^rd quarter 1999. The company's export share is now at 60%.

• The Norwegian operations, including Ibas, have had a very successful year with growth of over 40% compared to 1998. From January 1999, the distribution strategy was transferred from direct to indirect sales, such that the real market value of sales to end-users will be approximately double the revenue that is reflected in the accounts.

• In the 4^th quarter 1999, Norman and Microsoft entered an agreement which allowed Microsoft's customers to download 90-day trial versions of Norman Virus Control directly from Microsoft's web-site. This project proved to be successful and it will also be possible to download Norman Virus Control from Microsoft's web-site for several months of 2000.

• Norman has also entered an agreement with Den Norske Bank, one of the largest Norwegian banks, to deliver virus control products to all of the bank's internet banking customers. Security solutions for internet banking will be a future focus area for Norman.

• In the 4^th quarter, Norman acquired over 90% of its subsidiary, Ibas, and made a voluntary offer to buy out the remaining minority shareholders. At the end of the offer period less than 1% of these shareholders had not accepted the offer, and a compulsory offer has since been made. The Ibas-concept "Expert Eraser" for the secure deletion of hard disks has been very well received in test markets and contracts have already been signed both in Norway and the Netherlands. Norman is convinced that this concept can achieve a breakthrough in the global market.

• Norman again achieved both in November 1999 and later in February 2000 a new "100% award" from Virus Bulletin, and is still one of only two companies in the world that has most "100% awards" over time – proof of Norman's leading edge technology in finding and repairing viruses.

• In the 4^th quarter, Norman acquired the rights to distribute and develop the software product "Norman Risk Analysis". Product will be sold through consulting firms providing IT risk analysis services. The first sales through partners have already taken place in the US and the product will be launched in the Norwegian market in the coming half year. In addition, Norman's subsidiary in the US – Norman Inc. – has improved its results significantly as a result of an OEM agreement with Sybari, which is now generating significant revenues each month.

The board and executive management of Norman have resolved to strengthen the company's focus on data security technology. During the 1^st half of 2000, Norman will announce solution for:

• Virus control for WAP-portals

• Firewalls with integrated virus control scanning

• A new, component-based generation of virus control with, among other things, new technology for easy and effective management of large network environments.

• A new, component-based version of access control/encryption/VPN solutions, incorporating PKI functionality.

During 2000, Norman will furthermore position itself within the field of virus control and access control/encryption for the next generation of mobile data solutions with more or less permanent internet connection, especially PDAs/smartphones. The company will continually evaluate the acquisition of technology that is required to achieve its vision of being a technologically leading vendor within the field of virus control, access control/encryption and reconstruction/erasure of data. During the 1^st half of 2000, Norman will also open its own WAP-portal where customers can continually access updated information about virus alerts.

The organisational structure for the sale and marketing of access control/encryption products has been changed with effect from January 2000. Dedicated sales teams have been established for these products in all major markets. The increasing media reports of "cyber crime" can only help demand for these products to secure internet access. During the 1^st half year, Norman will strengthen its management team and will continue to focus aggressively on expanding its distribution network outside Norway.

Norman is positioned at the start of the new millenium, well-equipped with both products and an organisation structure. The company owns and controls the technology to further develop its products and, armed with its leading technology, to position itself within those areas of data security that attract most demand (virus control, access control, encryption and secure data erasure). The board and executive management will in the 1^st half of 2000 continue to focus on profitability while at the same time maintaining the strong growth.

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Enclosed is a summary of the preliminary financial statements for the 4^th quarter 1999.

For further information, please contact Svein Ramsay Goli, Chairman of the Board of Norman ASA or Bjørn Fosli, President & CEO of Norman ASA, tel +47-67-10-97-00/www.norman.no

Analysis of net financial items

Analysis of research & development costs included in total operating expenses

Notes to the consolidated financial statements

1. Fgures for 1998 have been restated and reclassified in accordance with the new Norwegian Accounting Law effective from 1^st January 1999. There were no material adjustments to the 1998 figures arising from the implementation of the new Norwegian Accounting Law.
2. Norman management have changed the accounting estimate for deferred revenue on net invoiced sales with effect from 1^st July 1999 in order to more correctly reflect the financial obligations associated with the sale of support and update contracts. For accounting purposes, this has been treated as a change in estimate and accordingly, the comparative figures have not been restated.
3. Results from SHARK BV and ESaSS BV, Netherlands, and Norman Data Defense Systems AB, Sweden, have been consolidated from 1 March 1998, 1 April 1998 and 1 August 1998 respectively

Norman ASA Consolidated balance sheets