Highlights of the Consolidated Financial Statements of Flaga Group hf Q1 2007: • Revenue was $7.2m in Q1, a slight decrease of 2.4% compared to same period last year. • EBITDA was a negative $202k in Q1 2007 compared with a negative $71k (before restructuring costs) in Q1 2006. • 3% reduction in operating expenditures in Q1 2007 compared to the same period last year. • Net loss was $605k in Q1 2007 compared to a Net loss of $877k in Q1 2006. Key figures from the consolidated accounts: See attachment. Summary Q1 2007 Sleeptech continued to see strong demand for its services in the North East of the United States. A number of the Company's partner hospital contracts have been renegotiated and Sleeptech remains one of the largest providers of sleep services in its market. With a view to expand the partner base, Sleeptech has established a new marketing position that will be tasked with looking for new business opportunities in the tri-state area. The Embla transition is complete and the Company is now working on cementing relationships with our customers and distribution partners throughout the world, implementing the product road map and continuing to economize and become more efficient. In the United States, Embla and the Embletta unit has been selected as the Study Standard for a recent contract award from the American Academy of Sleep Medicine to examine the effectiveness of home diagnostic testing. This study could be pivotal in the decision to reimburse these types of home studies in the US and could have a significant impact on the sale of the Embletta unit in the US. The Embletta is currently the “gold standard” for this type of ambulatory testing in Europe. Embla continues to look for new opportunities in all its markets throughout the world. Operations in Q1 2007 Revenue for the Flaga Group in Q1 2007 aggregated $7.2m, a slight decrease of 2.4% compared to Q1 2006. The gross profit margin was 61% compared to 63% in the previous year. The company considers this shortfall as a sign of the inherent fluctuations in the market rather than a significant market shift. EBITDA for Q1 2007 was negative $202k or 2.8% compared to EBITDA before restructuring cost of a negative $71k or 1% for Q1 2006 before restructuring costs. Net loss before taxes was $742k for the quarter in comparison to net loss before taxes of $1.1m for the same period last year. Balance Sheet Total assets at the end of Q1 2007 were $61.2m, a decrease of $967k from the end of the year 2006. Deferred tax assets are capitalized and amounted to $4.4 at the end of Q1 2007 and $4.2m at the end of 2006. Shareholders' equity was $39.6m at March 31, in comparison to $40.2m at the beginning of the year. Equity ratio was 65% for Q1 2007 and was the same as year-end 2006. Cash Flow Working capital provided by operating activities was negative of $513k in Q1 2007 compared to negative working capital of $265k in the previous year. Future Prospects As has been stated in the last few Earnings Releases, the transition of Embla has been the focal point of the company's operations, which has now been successfully completed. The tasks ahead are to grow the company and decisive steps have already been taken in that direction. The Executive Management team of Flaga Group remains optimistic that this year's targets will be achieved and that the long term prosperity for the Company remains positive. For further information, please contact: David Baker, CEO, tel: +1 480 236 4705