quarterly report q3 2016. - techstep asa5 quarterly report q3 2016 ceo update professions (~70%) are...

QUARTERLY REPORTQ3 2016.

WE MAKE YOUR WORKLIFE MOBILE

CONTENTTECHSTEP ASA INTERIM REPORT 3CEO UPDATE 4RESULTS OF OPERATIONS 6CASH FLOW 7FINANCIAL STATEMENTS 8NOTES 13RISKS 21FINANCIAL CALENDAR 2016 22

QUARTERLY REPORT Q3 20162

CONTENT


TECHSTEP ASA INTERIM REPORT.

TECHSTEP ASA INTERIM REPORT.

KEY FIGURES

JULY - SEPTEMBER 2016

> Revenue was NOK 0.0 (0.0) million. > EBITDA ended at NOK -5.1 (-1.7) million, representing

an increased loss of NOK 3.4 million over the same period last year.

> Continuing operating earnings per share amounted to NOK -0.07 (-0.03).

> Total net cash flow amounted to NOK 47.3 (-7.7) million. > Cash balance was NOK 83.6 (13.2) million at the end of

period.

JANUARY - SEPTEMBER 2016

> Revenue was NOK 0.0 (0.0) million. > EBITDA ended at NOK -17.4 (-6.7) million, representing

an increased loss of NOK 10.7 million over the same period last year.

> Continuing operating earnings per share amounted to NOK -0.25 (-0.10).

> Total net cash flow amounted to NOK 68.5 (-3.5) million.

SUBSEQUENT EVENTS In November the Teki Gruppen Transaction, where Techstep acquired 53.94% of the shares in Teki Solution AS from Teki Gruppen AS, was completed and a total of 30,053,488 consideration shares have been issued to a sub-scription price of NOK 4.30, increasing the total ownership for Techstep in Teki Solutions to 78.16%.

Gaute Engbakk was appointed as CEO with start date 5th November and Marius Drefvelin was appointed new CFO of Techstep ASA and he will assume the role beginning of 2017.

An Extra General Meeting was held in November approving the Teki Gruppen Transaction and new members of the Board of directors were elected.

HIGHLIGHTS THIRD QUARTER 2016

> A subsequent offering was closed in July and 678,108 offer shares at a subscription price of NOK 2.20 was registered. Techstep gained NOK 1.5 million in cash and the offering was 8 times oversubscribed.

> An Extra General Meeting was held in August, approving the Zono Transaction. > The Zono Transaction, where Techstep acquired 100% of the shares in Zono AS from Zono Holding AS, was

completed in September and 58,181,818 consideration shares at a subscription price of NOK 2.20 was issued to Zono Holding AS. The assets of Zono AS comprise of 24.22% of the shares in Teki Solutions AS, 5.12% of the shares in Kjedehuset AS and NOK 55 million in cash.

> In July Techstep entered into an agreement with Teki Gruppen AS (“Teki Gruppen”) to acquire an additional 53.94% of the shares in Teki Solutions, also this in exchange for shares to be issued in Techstep (the “Teki Gruppen Transaction”). Teki Solutions will be incorporated in the financial statements for the fourth quarter.

With the recently completed transactions we have achieved the following steps:

• In April we sold HetNet business in Birdstep Technology AB (Birdstep AB). As a result we were able to stop the cash drainage, invest in activities and focus on bringing the below transactions to closure.• In September we acquired Zono AS, and strength- ened the balance sheet with over NOK 55 million in cash for further growth.• In November we gained control of 78 percent in Teki Solutions AS, a leading B2B provider of mobility and communications services in Norway.

From the business platform acquired, we have a solid base of 3 600 customers with over 220 000 end-users with a turnover of MNOK 651 and EBITDA ex. invest-ment phase and extraordinary expenses of MNOK 34,8 for 2015.

A majority of revenues are from customers that are among the largest and leading corporations in Norway and the Nordics – many of which are just beginning to implement digitization and mobility. The user pen-etration, i.e. the number of employees using our ser-vices compared to the total number of employees in these companies, is only around 22%. These factors indicate significant growth potential only by securing a broader offering and higher user penetration in the existing customer portfolio.

A key motivational factor for the acquisition is that smartphones and tablets are used to an increasing extent in business life, as well as leisure time. Thus, a more effective use of hardware and business solutions available for mobile, is increasingly important for our customers’ businesses. The end user market is undergoing disruptive shifts where work is increasingly mobile and the power bal-ance is shifting from selling infrastructure to provid-ing value added services. Consider the fact that most


CEO UPDATE

CEO UPDATE.

FIRST, I WOULD LIKE TO EXPRESS MY EXCITEMENT OVER BEING NAMED CEO FOR TECHSTEP IN THE BEGINNING OF THIS NEW ERA FOR THE COMPANY. I AM LOOKING FORWARD TO LEAD TECHSTEP THROUGH THIS MARKET OF DIGITAL TRANSFOR-MATION OF THE MOBILE B2B INDUSTRY, AND WE WILL CONTINUE TO BUILD A SOLID, PROFITABLE AND INNOVATIVE COMPANY.


CEO UPDATE

professions (~70%) are mobile in nature, i.e. being able to go about their business without having to stop their work and type on a pc would greatly improve their ef-ficiency.

With the market shift in mind, we will strengthen the focus on delivering an enterprise mobile solutions platform. We aim to become a fully integrated digital solutions provider to our customers, and by that in-crease the revenue from hardware, solutions and ser-vices.

As an example customer case, I would like to mention an aviation company where we not only deliver the hardware and platform for the digital services, but we also deliver the integration of the digital services into the business. For instance, this means that pilots no longer need to bring paper based documentation, save cabin staff time on check-ins and they even save fuel consumption by helping pilots do estimations on how much fuel they need to load before a flight.

The majority (~90%) of the revenues in 2015, from the acquired business, came from sale of hardware and related services, but an increasing portion (~10%) was solutions revenue. Margins for hardware have de-creased the past years while margin from solution is growing. We have identified the three most important key value drivers going forward that have multiplica-tive effect:

1. Grow the number of end users, with existing customers and gain new market shares by growing geographically and in existing markets.

2. Sell more solutions to existing and new customers and increase revenues per user through solutions sales. Solutions are both in-house organic, from Telenor and through 3rd party partners.

3. Grow the recurring revenue in the company by selling more solutions and services as a service (SaaS). If we succeed with the steps above, the shift in business mix will drive gross margins upwards and the increased customer base will drive growth. Not only will this increase the stickiness of the customers, but it will also make customers less price sensitive and thus create better margins for the hard ware business.

Finally, keeping the cost in control, ideally measured by cost per end user, we will get the revenue to remain in the company as profit, which we can further invest in the business.

As simple as it sounds, the above measures will take some time to materialize and things will not happen overnight. During the remaining of the fourth quarter, we will establish a new management team, which will be highly motivated to execute upon the strategy. We have already started to reorganize the business and the organization to meet the focus towards increasing solutions sales and deliveries. Parts of this restructur-ing can be seen as one-off restructuring costs in the Q3 numbers in the Teki Solutions note in the note section.

We have also started to investigate potential acquisi-tions of companies were we can find synergies. Either adapting our technology on an acquired customer base, or adopting acquired technology into our cus-tomer base, to support our ambition to grow with in-creasing margins. We strongly believe in the opportu-nity we see in the market today, and are ready to act if a suitable opportunity comes along.

Finally, I would like to say I am very comfortable with the business platform I have as the base to start build-ing from. In addition, in combination with a strong bal-ance sheet I think we are in an excellent position to capitalize upon our strategy.

Gaute Engbakk, CEO


RESULTS OF OPERATIONS

RESULTS OF OPERATIONS.

Third quarter revenue was NOK 0.0 (0.0) million. Bird-step AB was the operational unit performing all busi-ness transactions, and hence there are no revenue re-ported in the quarter. Salaries and wages were NOK 1.2 (1.1) million. The number of employees as of 30.09.2016 was 3 (1).

Other operating expenses for the quarter were NOK 3.9 (0.6) million. The majority of the other operating ex-penses in the quarter are related to the Zono Trans-action and the Teki Gruppen Transaction. EBITDA ended at NOK -5.1 (-1.7) million which represents an in-creased loss of NOK 3.4 million compared to the same period last year.

As a result of the above, Income (Loss) from continuing operations before taxes of NOK -4.9 (-2.1) million was recorded in the quarter.

First nine months revenue was NOK 0.0 (0.0) million. As mentioned above there are no revenue reported in the first nine months due to the sale of Birdstep AB. Salaries and wages were NOK 9.8 (3.4) million.

Other operating expenses for the first nine months were NOK 7.7 (3.3) million. The majority of the other operating expenses are related to the Zono and Teki Gruppen transactions and the sale of Birdstep AB. EBITDA ended at NOK -17.4 (-6.7) million which repre-sents an increased loss of NOK 10.7 million compared to the same period last year due to the increase in per-sonell and the transactions.

As a result of the above, an Income (Loss) from contin-uing operations before taxes of NOK -18.1 (-6.9) million was recorded in the nine months period.

THIRD QUARTER 2016 NINE MONTHS 2016

The financial accounts presented below for the nine months 2016 are including Zono AS, which was acquired in September, but excluding Birdstep AB and Birdstep Inc due to discontinued operation following the sale to Smith Micro in April. Assets and liabilities related to Birdstep AB and Inc were reclassified as held for sale, and its profit as profit from discontinued operations. After the close of the period, in November, Techstep acquired the majority in Teki Solutions AS. Teki Solutions will be incorporated into the financial accounts in the fourth quarter. Detailed information on discontinued operations and Teki Solution are presented in the notes section


CASH FLOW

CASH FLOW.

Cash flow for the third quarter was positive and our net cash balance increased by NOK 47.3 million to NOK 83.6 million. The third quarter last year showed a cash balance decrease of NOK 7.7 million. Net cash flow from operating activities for the quarter was NOK -9.2 million. Third quarter last year, net cash flow from operating activities was NOK -7.3 million. Net cash flow from financial activities was NOK 56.5 (0.0) million originating from the NOK 55.0 million ac-quired through Zono AS and the subsequent offering.

Cash flow for the first nine months was positive and our net cash balance increased by NOK 68.5 million. The first nine months last year resulted in a cash bal-ance decrease of NOK 3.5 million. Net cash flow from operating activities for the period was NOK -8.6 million. First nine months last year, net cash flow from operating activities was NOK -16.4 mil-lion. Net cash flow from investing activities was NOK 13.0 (12.1) million and net cash flow from financial ac-tivities was NOK 64.0 (0.0) million for the period.

THIRD QUARTER 2016 NINE MONTHS 2016


FINANCIAL STATEMENTS

FINANCIAL STATEMENTS.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of NOK , except share and per share data) For the three For the nine For the full months ended months ended year 30.09.2016 30.09.2015 30.09.2016 30.09.2015 2015

OPERATING REVENUES - - - - -Cost of Sales - - - - (69)

OPERATING EXPENSES Salaries and wages (1 228) (1 114) (9 758) (3 421) (3 427)Other operating expenses (3 874) (575) (7 670) (3 283) (4 379)TOTAL OPERATING EXPENSES (5 102) (1 689) (17 428) (6 704) (7 807)Operating income loss before depreciation and amortization (EBITDA) (5 102) (1 689) (17 428) (6 704) (7 876) Depreciation and amortization - (1 800) - (1 800) -Write down and impairment of intangible assets - - - - - Operating income loss after depreciation and amortization (EBIT) (5 102) (3 489) (17 428) (8 504) (7 876) OTHER INCOME (EXPENSE)Interest income, net 15 112 93 185 303 Other financial items, net 151 1 312 (755) 1 389 (90) OTHER INCOME, NET 166 1 423 (662) 1 573 213 INCOME(LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES (4 936) (2 066) (18 090) (6 931) (7 663)

Income taxes - (12) - (12) 160

INCOME(LOSS) FROM CONTINUING OPERATIONS (4 936) (2 078) (18 090) (6 943) (7 503) Profit from discontinued operations (52) (40 690) 25 225 (34 902) (35 585)

NET INCOME(LOSS) (4 988) (42 768) 7 135 (41 845) (43 088)

Earnings and diluted earnings per share Continuing operations (0.07) (0.03) (0.25) (0.10) (0.10)Discontinued operations (0.00) (0.56) 0.35 (0.48) (0.49) Total (0.07) (0.59) 0.10 (0.58) (0.59)




CONDENSED CONSOLIDATION STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of NOK , except share and per share data) For the three For the nine For the full months ended months ended year 30.09.2016 30.09.2015 30.09.2016 30.09.2015 2015

Net income (loss) for the period (4 988) (42 768) 7 135 (41 845) (43 088) OTHER COMPREHENSIVE INCOME Currency tranlation effect (including recycled accumu- 151 1 288 (17 020) 1 697 2 029lated translation effects from discontinued operations)TOTAL COMPREHENSIVE INCOME (4 837) (41 480) (9 885) (40 147) (41 059)

Attributable to;Equity holder of the parent company (4 837) (41 480) (9 885) (40 147) (41 059) TOTAL COMPREHENSIVE INCOME (4 837) (41 480) (9 885) (40 147) (41 059)




CONDENSED CONSOLIDATION BALANCE SHEETS

(In thousands of NOK , except share and per share data) As of As of 30.09.2016 30.09.2015 2015

NON-CURRENT ASSETS: Intangible assets - 7 116 - Tangible assets - 319 305 Other non-current assets 73 124 - - TOTAL NON-CURRENT ASSETS 73 124 7 435 305

CURRENT ASSETS:Accounts receivable - 12 558 20 309 Other current assets 1 204 1 014 1 056 Restricted cash - - - Cash & cash equivalents 83 558 13 183 15 090 TOTAL CURRENT ASSETS 84 762 26 755 36 455

TOTAL ASSETS 157 886 34 190 36 760

SHAREHOLDERS’ EQUITY:Share capital 72 422 10 162 10 162 Share premium fund 112 984 38 272 38 272 Retained earnings, including translation reserves (33 386) (22 590) (23 502) TOTAL SHAREHOLDERS’ EQUITY 152 020 25 844 24 932

NON-CURRENT LIABILITIES Deferred tax liabilities - 192 -Other liabilities - - - TOTAL NON-CURRENT LIABILITIES - 192 -

CURRENT LIABILITIESAccounts payable 2 248 1 205 1 319Deferred revenue - 323 5 267 Accrued expenses and other liabilities 3 617 6 626 5 242 TOTAL CURRENT LIABILITIES 5 866 8 154 11 828

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 157 886 34 190 36 760




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of NOK , except share and per share data) For the three For the nine For the full months ended month ended year 30.09.2016 30.09.2015 30.09.2016 30.09.2015 2015

OPERATING ACTIVITIES Income (loss) fr. continuing operations before taxes (4 936) (2 066) (18 090) (6 931) (7 663)Income (loss) fr. discontinuing operations before taxes (52) (40 690) 25 692 (34 902) (35 585) Depreciation and amortization - 2 608 - 6 014 6 983 Write down and impairment of intangible assets - 40 226 - 40 226 47 283 Profit on sales of discontinued operations - - (34 233) (12.863) (12 863) Change in receivables and payables (4 198) (7 422) 18 071 (7 965) (12 283) NET CASH FROM OPERATING ACTIVITIES (9 185) (7 343) ( 8 560) (16 421) (14 128)

INVESTING ACTIVITIESCapitalized development - (453) - (2 354) (3 238)Furniture, Machinery and Equipment and leashold improvments - - - - -Disposal of discontinued operations net of cash disposed off - - 13 021 14.462 14 462 NET CASH FROM INVESTING ACTIVITIES - (453) 13 021 12 108 11 224

FINANCIAL ACITIVITIES Aquisitions of subsidiary 55 001 - 55 001 - - New Issue 1 492 - 8 972 - - NET CASH FROM FINANCIAL ACTIVITIES 56 493 - 63 973 - -

Effect of foreign exchange rate changes 26 110 34 788 1 287 Net increase(decrease) in cash & cash equivalents 47 334 (7 687) 68 468 (3 525) (1 617)Cash & cash equivalents, beginning of period 36 225 20 869 15 090 16 708 16 708 Cash & cash equivalents, classified as held for sale - - - - -Cash & cash equivalents, end of period 83 558 13 183 83 558 13 183 15 090




CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands of NOK, except share and per share data) Share Share Other paid Other Translation Total capital premium equity equity reserves equity

Equity as at 31 December 2015 10 162 38 272 61 232 (102 064) 17 330 24 932 Net income (loss) - - - 7 135 - 7 135Other comprehensive income for the period: Displacements between restricted and unrestricted reservs - - - - - -Recycled accumulated translation effects from discontinuedoperations - - - - (17 330) (17 330) Foreign currency exchange - - - - 310 310 Total comprehensive income - - - 7 135 (17 020) (9 885)Transactions with shareholders: Net issue of ordinary shares 62 260 74 712 - - - 136 972 Reduction in share capital and transfer of share premium - - - - - - Total transactions with shareholders 62 260 74 712 - - - 136 972 Equity as at 30 September 2016 72 422 112 984 61 232 (94 928) 310 152 020

(In thousands of NOK, except share and per share data) Share Share Other paid Other Translation Total capital premium equity equity reserves equity

Equity as at 31 December 2014 10 162 38 272 61 232 (58 976) 15 301 65 991Net income (loss) - - - (41 845) - (41 845)Other comprehensive income for the period: Displacements between restricted and unrestricted reservs - - - - - - Foreign currency exchange - - - - 1 697 1 697 Total comprehensive income - - - (41 845) 1 697 (40 147)Transactions with shareholders: Net issue of ordinary shares - - - - - - Reduction in share capital and transfer of share premium - - - - - - Total transactions with shareholders - - - - - - Equity as at 30 September 2015 10 162 38 272 61 232 (100 820) 16 998 25 844


NOTES

NOTES.

The accompanying consolidated financial statements are prepared under International Financial Reporting Standards (IFRS). Our fiscal year runs from January 1 to December 31.The accompanying condensed consolidated state-ments of operations and cash flows cover the first nine months of 2016, and the related information on Techstep included in these notes to the financial state-ments is unaudited. In the opinion of management, such interim statements include all adjustments, which consist only of the normally recurring adjust-ments necessary for a fair presentation of the consoli-dated results of operations, financial position and cash flows for each period presented. The interim consoli-dated results are not necessarily indicative of results for the full year.The same accounting policies and methods of compu-tation are followed in the interim financial statements as those of the most recent annual financial state-ments.

These interim financial statements are presented in Norwegian crowns (NOK). The functional currency of Techstep’s foreign operations is the currency of the country in which the operations are conducted.The accounts of Techstep are translated into the re-porting currency, NOK, using exchange rates in effect at period-end for assets and liabilities, and at average exchange rates during the period for the results of op-erations.EBITDA is equivalent to operating income (loss) ex-cluding both discontinued operations and non-cash charges, such as depreciation and amortization.Income per share is calculated by dividing net income available to common shareholders for the period by the number of common shares outstanding at the end of the period.As of September 30, 2016, the Company has 72,422,089 shares issued and 72,420,175 shares outstanding, the difference of 1,914 representing treasury shares.

NOTE 1: ACCOUNTING POLICIES

On 1 July 2016, the Company entered into a share exchange agreement with Zono Holding AS for the acquisition of 100 % of the shares in Zono. The Zono Transaction was completed in September 2016. On 1 July 2016, the same day as the Zono transaction, the Company entered into an agreement in principle to acquire 54% of the shares in Teki Solutions AS with Teki Gruppen AS. The Zono transaction was complet-ed in September 2016 and the Teki Group Transaction was completed in November 2016.The Zono Transaction and Teki Gruppen Transaction

are both transactions whereby the consideration is settled by issuance of Techstep consideration Shares. The business in the group will, in majority, be based on the business in Teki Solutions AS. Based on this, Teki Solutions AS is, for accounting purposes , consid-ered to be the acquiring entity and the accounts for the combined entity will be a continuation of the ac-counts for Teki Solutions Group. The year-end report will hence present the consolidated accounts of Teki Solutions Group, and Zono and Techstep will be con-solidated from the acquisition date.

NOTE 2: AQUISITION OF ZONO


NOTES

On 8 March 2016 Techstep signed a share purchase agreement for sale of all shares in Birdstep Technology AB (Bird-step AB) to Smith Micro Software Inc for USD 2.0 million free of cash and net debt before account for transaction costs. As a result of the sale the operations in the US subsidiary, Birdstep Technology Inc (Birdstep Inc), have ceased and the company is under liquidation..

NOTE 3: DISCONTINUED OPERATIONS

Analyzis of the result of discontinued operations is as follows

(In thousands of NOK , except share and per share data) For the three For the nine For the full month ended months ended year 30.09.2016 30.09.2015 30.09.2016 30.09.2015 2015

OPERATING REVENUES - 12 547 1 693 39 053 56 410Cost of Sales - (1 333) (549) (3 119) (3 652) OPERATING EXPENSES Salaries and wages - (7 877) (6 951) (25 822) (32 358)Other operating expenses (52) (3 261) (2 806) (14 573) (17 669)TOTAL OPERATING EXPENSES (52) (11 138) (9 757) (40 396) (50 027) Operating income loss before depreciation and amortization (EBITDA) (52) 76 (8 613) (4 461) 2 730 Depreciation and amortization - (809) (47) (4 215) (6 983)Write down and impairment of intangible assets - (40 226) - (40 226) (47 283) Operating income loss after depreciation and amortization (EBIT) (52) (40 959) (8 660) (48 902) (51 535) OTHER INCOME (EXPENSE) Interest income, net - - - - -Other financial items, net - 269 17 1 143 3 087OTHER INCOME, NET - 269 17 1 143 3 087 INCOME LOSS FROM DISCONTINUED OPERATIONS BEFORE TAXES (52) (40 690) (8 642) (47 759) (48 449) Income taxes - - (365) (6) - Profit from sale of Birdstep OY - - - 12 863 12 864 Profit from sale of Birdstep AB - - 16 903 - - Recycled accumulated translation effects - - 17 330 - -INCOME LOSS FROM DISCONTINUED OPERATIONS (52) (40 690) 25 225 (34 902) (35 585)



NOTE 5: SHARE CAPITAL AND SHAREHOLDERS

The Company’s current share capital is NOK 102,475,577 divided on 102,475,577 ordinary shares with a par value of NOK 1.00. Subject to the below, the shares are issued and fully paid up. Birdstep has only one class of shares and all shareholders have equal rights according to Norwegian law.The total of 30,053,488 consideration shares distrib-uted in November into four equal parts to Skarestrand Invest AS, Dovran Invest AS, Jyst Invest AS and Tinde Industrier AS, following of the demerger of Teki Grup-pen AS, will not be admitted to trading on Oslo Børs until the Financial Supervisory Authority (Finanstil-

synet) has approved and the Company has published a listing prospectus according to Section 7-3 of the Securities Trading Act, but each of these shares gives right to one vote at the Company’s general meeting. All other shares are freely transferable, and each share gives the right to one vote at the Company’s general meeting.As of the date of this report the Company holds 1 914 treasury shares.

The Company’s 10 largest shareholders as of 17 No-vember 2016 are as follow:

Shareholding Holding in % Name62 689 859 61,18 ZONO HOLDING AS 7 513 372 7,33 JYST INVEST AS 7 513 372 7,33 DOVRAN INVEST AS 7 513 372 7,33 TINDE INDUSTRIER AS 7 513 372 7,33 SKARESTRAND INVEST A 1 300 000 1,27 INTELCO CONCEPT AS JPMORGAN CHASE BANK 760 000 0,74 VINTERSTUA AS 752 240 0,73 MP PENSJON PK 485 704 0,47 PETROLEUM INVEST 400 356 0,39 STRØMLAND SIVERT NØTSUND

NOTE 4: RELATED PARTY TRANSACTIONS

The Zono Transaction, where Techstep acquired 100% of the shares in Zono AS from Zono Holding AS, was com-pleted in September and 58,181,818 consideration shares have been issued to Zono Holding AS. Zono Holding AS is the majority shareholder in Techstep and is con-trolled by Middelborg AS.

In connection with the completed purchase of 53.92% in Teki Solutions AS from Teki Gruppen AS, after the end of the period, Middelborg AS has been compensated with NOK 1.2 million related to structural and transac-tion work.


NOTES

ACQUISITION OF A MAJORITY IN TEKI SOLUTIONS COMPLETED

The Teki Gruppen Transaction, where Techstep ac-quires 53.94% of the shares in Teki Solution AS from Teki Gruppen AS, was completed in November and a total of 30,053,488 consideration shares have been is-sued, distributed into four equal parts to Skarestrand Invest AS, Dovran Invest AS, Jyst Invest AS and Tinde Industrier AS, following of the demerger of Teki Grup-pen AS.

After completion of the Teki Gruppen Transaction Techstep will have an ownership of 78.16% in Teki Solutions. Techstep intends to present the remaining shareholders of Teki Solution with an offer to acquire their ownership stake and related shareholder loans at terms equal to those in the Teki Gruppen Transac-tion. Given full acceptance of such offers, which would be fully settled in shares and make Techstep the sole owner of Teki Solutions, Techstep will issue approxi-mately a further 7.3 million shares.

The acquisition of Teki Solutions supports Techstep’s strategy to build on its knowledge and background in mobile technology to establish Techstep as a driver of consolidation within the mobility and communica-tions sector. The mobility and communications market is undergoing disruptive shifts, where work is increas-ingly mobile and the value proposition is changing from telecoms’ infrastructure towards a fragmented ecosystem of software and digital solutions.

In connection with completion of the Teki Gruppen Transaction, Techstep will establish a new manage-ment team to execute and further develop the new group’s revised strategy and growth ambitions.

NOTE 6: SUBSEQUENT EVENTS

KEY FIGURES FOR TEKI SOLUTIONS

JULY - SEPTEMBER 2016

> Revenue was NOK 130.6 million. > EBITDA as reported ended at NOK -9.6 > EBITDA adjusted for one-offs 1) : NOK 2.2 million > Share of services: 12.2 %

In addition to the above one-offs cost, Teki Solutions has, as a part of the ongoing combination of Techstep and Teki Solutions, implemented cost measures with a quarterly effect of approximately NOK 3.7 million. Adjusting for both one-offs and cost measures the normalised EBITDA for Q3 is approximately NOK 6 million.

JANUARY - SEPTEMBER 2016

> Revenue was NOK 407.5 million. > EBITDA as reported NOK -3.1 million > EBITDA adjusted for one-offs 1) : NOK 8.7 million > Share of services: 12.1 %

In addition to the above one-offs costs, Teki Solutions has, as a part of the ongoing combination of Techstep and Teki Solutions, implemented cost measures with a nine month effect of approximately NOK 11.0 million. Adjusting for for both one-offs and cost measures the normalised EBITDA for January-September is approximately NOK 19.7 million.

The group accounts from Teki Solutions group for full year of 2015 and as of the first nine months 2016 is presented on the following pages:


NOTES

TEKI SOLUTION GROUP.

CONDENSED CONSOLIDATED INCOME STATEMENT

(In thousands of NOK) For the twelve months ended For the nine months ended 31.12.2015 30.09.2016

Teki Solutions Teki Solutions Teki Solutions Teki Solutions Teki Solutions Teki Solutions Notes AS NGAAP IFRS effects IFRS AS NGAAP IFRS effects IFRS

(audited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)

OPERATING REVENUES 14 967 633 736 648 702 11 582 395 311 406 893

Other income - 2 722 2 722 73 566 639

REVENUE AND OTHER INCOME 14 967 636 458 651 425 11 655 395 877 407 532

Cost of sales (40) (457 761) (457 801) (178) (284 145) (284 323)

OPERATING EXPENSES

Salaries and wages (13 037) (86 738) (99 775) (12 889) (62 313) (75 202)

Other operating expenses (13 131) (54 586) (67 717) (14 351) (36 746) (51 097)

TOTAL OPERATING EXPENSES 1) (26 169) (141 323) (167 492) (27 240) (99 059) (126 299)

Operating income loss before depreciation

and amortization (EBITDA) (11 242) 37 374 26 132 (15 763) 12 673 (3 090)

Depreciation and amortization (41) (22 303) (22 344) (42) (16 406) (16 449)

Write down and impairment of

intangible assets - - - - -

Operating income loss after

depreciation and amortization (EBIT) (11 283) 15 071 3 788 (15 805) (3 734) (19 539)

OTHER INCOME (EXPENSE)

Share of net income in equity-accounted

investees - (15) (15) - (195) (195)

Interest income, net (6 660) 4 956 (1 704) (1 622) (2 543) (4 165)

Other financial items, net 15 791 (23 300) (7 510) (8) (63) (71)

OTHER INCOME, NET 9 131 (18 359) (9 228) (1 630) (2 801) (4 431)

INCOME(LOSS) FROM CONTINUING

OPERATIONS BEFORE TAXES (2 152) (3 289) (5 441) (17 436) (6 535) (23 970)

Income taxes 520 2 090 2 610 - 3 938 3 938

INCOME (LOSS) FROM CONTINUING

OPERATIONS (1 632) (1 199) (2 830) (17 436) (2 597) (20 033)

NET INCOME(LOSS) (1 632) (1 199) (2 830) (17 436) (2 597) (20 033)

1) During the period one-offs amounting to NOK 11.8 million have been charged to the accounts in connection with the restruc-

turing of the group. Subsequently, the EBITDA and the net income is affected negative by the same amount. EBITDA adjusted

for one-offs is hence NOK 8.7m for the first nine months of 2016.


NOTES

TEKI SOLUTIONS GROUP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of NOK) As of 31.12.2015 30.09.2016

Teki Solutions Teki Solutions Teki Solutions Teki Solutions Teki Solutions Teki Solutions NGAAP IFRS adjustments IFRS 2015 NGAAP Q3 IFRS adjustments IFRS Q3 2016

(audited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)

NON CURRNT ASSETS:

Deferred tax assets 936 1 335 2 271 1 069 1 335 2 404

Intangible asset - 290 750 290 750 - 275 000 275 000

Tangible assets 177 3 474 3 652 135 3 211 3 346

Equity accounted investees - 14 624 14 624 - (209) 14 430

other non-current assets 363 451 (359 132) 4 319 363 451 (342 909) 5 903

TOTAL NON-CURRENT ASSETS 364 565 (48 949) 315 616 364 655 (63 572) 301 083

CURRENT ASSETS:

Inventories - 12 137 12 137 - 10 119 10 119

Accounts receivable 1 448 20 706 22 154 1 979 34 710 36 689

Other current assets 29 062 (17 100) 11 962 19 244 (14 930) 4 313

Restricted cash - - - - - -

Cash and cash equivalents 510 3 170 3 680 1 201 27 294 28 496

TOTAL CURRENT ASSETS 31 020 18 912 49 933 22 424 57 193 79 617

TOTAL ASSETS 395 585 (30 036) 365 549 387 079 (6 379) 380 700

SHAREHOLDERS EQUITY:

Share capital 244 - 244 244 - 244

Share premium fund 199 421 - 199 421 199 421 - 199 421

Retained earnings, incl transportation reserves 43 301 (208 833) (165 533) 24 914 (207 879) (182 965)

TOTAL SHAREHOLDERS EQUITY 1) 242 966 (208 833) 34 132 224 579 (207 879) 16 701

NON CURRENT LIABLILITIES:

Defferred tax liabilities - 10 188 10 188 - 6 250 6 250

Long-term interest bearing debt 43 125 16 875 60 000 21 563 144 399 165 962

Other liabilities 63 814 45 121 108 935 - - -

TOTAL NON CURRENT LIABILITIES 106 939 72 184 179 122 21 563 150 649 172 212

CURRENT LIABILITIES:

Bank loans and other short term interest-

bearing debt - 2 709 2 709 - 44 958 44 958

Accounts payable 1 596 61 174 62 771 955 52 149 53 104

Current tax liabilities - 4 299 4 299 - 9 076 9 076

Defferred revenue - - - - - -

Other short-term provisions - - - - - -

Accrued expenses and other liablilities 44 084 38 432 82 516 139 983 (55 334) 84 649

TOTAL CURRENT LIABILITIES 45 681 106 613 152 294 140 938 50 850 191 788

TOTAL LIABILITIES AND SHAREHOLDERS

EQUITY 395 585 (30 036) 365 549 387 079 (6 379) 380 700

Notes


NOTES

1) The condensed consolidated balance sheet of Teki Solutions include NOK 174 million in shareholder debt which is in large a part of the transactions with Tech-step. Hence, on a consolidated basis, this debt will be treated as internal debt, and the equity in Teki Solu-tion will from a Techstep perspective amount to NOK 190.7 million. Teki Solutions AS has not prepared con-solidated financial statements under NGAAP. The IFRS adjustments previously presented (ref prospectus oct-2016) consists of the consolidation of the subsidiaries based on a preliminary purchase price allocation, in which 50% of the excess value was allocated to cus-tomer relations. The current IFRS adjustments has not altered this view significantly. The customer rela-

tion asset is amortized over a period of 5 years. The remaining excess value is included in goodwill. Due to the fact that no formal group accounts have been prepared, IFRS 1 cannot be applied at the pro-forma balance 01.01.2015. The group accounts have to be restated using IFRS from the time of the formal founding of the group in 2012 and forth. Thus the col-umn “IFRS effects” represent the consolidated group accounts and valuation differences between NGAAP and IFRS especially related to customer relations and goodwill under IAS 36 for the years 2012, 2013 and 2014 rather than implementation effect in 2015

GAUTE ENGBAKK HAS BEEN APPOINTED CHIEF EXECUTIVE OFFICER

Gaute Engbakk is an experienced change leader from working many years in Accenture with large interna-tional companies. In Accenture, he worked in a vari-ety of markets and industries and built up a division within analytics and information management. He led Creuna AS, a significant Nordic player within digital solutions, branding and advertising during 2010-2014, and during 2014-2016 he was the CEO of Gambit Hill &

Knowlton Strategies.Gaute Engbakk has in-depth IT and communications experience from different verticals and disciplines within digital, bigdata and change management. He holds a Master of Science degree from NTNU, and has supplementary courses within business and strategy from the London Business School.

MARIUS DREFVELIN IS APPOINTED NEW CFO OF TECHSTEP ASA, HE WILL ASSUME THE ROLE BEGINNING OF 2017 Mr. Drefvelin is currently the Group CFO of Creuna, a leading Nordic technology and communications consultancy firm with 350 employees. He has been with Creuna since 2012. During 2010-2012, he was a financial advisor at Deloitte, working with mergers, acquisitions and IPOs. Before this, he worked at Jebsen Asset Management from 2007-2009. During 2001-2007, Mr. Drefvelin worked at KPMG, also working with transactions. In addition to his experience with transactions, he has focused on identifying and executing on operational improvements during his time in Creuna.


NOTES

EXTRA GENERAL MEETING HELD NOVEMBER 4, 2016

All proposals to the Extraordinary General Meeting were approved and 86.57 percent of the issued shares were represented.

The acquisition of 53.94 % of the shares in Teki Solutions AS and shareholder’s loans against issuance of 30,053,488 new consideration shares at a price of NOK 4.30 per share was approved.

A new Board of Direcctors was elected in connection with the completed acquisition of Teki Solutions AS.

After the Extra General Meeting the appointed Directors are:

Einar J. Greve ChairmanSvein Ove Brekke Board memberKristian Lundkvist Board memberStein Erik Moe Board memberIngrid Leisner Board memberKristin Hellebust Board memberCamilla Magnus Board member

Amendment of Articles of Association was approved to better reflect the new business operations.


RISKS

This report contains statements regarding the future in connection with the company’s growth expecta-tions, general and specific market outlook and objec-tives. All statements about the future are subject to inherent risks and uncertainties, and many factors can lead to actual profits and developments deviating substantially from that which has been expressed or implied in such statements.

Techstep is exposed to various forms of market, op-erational and financial risk. Techstep´s business is dependent on the success of the aqcusitions of with

Zono and Teki Solutions and also the partnerships un-der establishment between Smith Micro. Any delay or negative development regarding the partnerships or the acquired business may have negative impact. Fi-nancial instruments that potentially subject Techstep to concentrations of credit risk consist primarily of cash.

The company’s various risks have been described in the Annual Report for 2015 and in the Prospectus dated 12 October 2016 in further detail and no other risks has been identified.

RISKS.

TECHSTEP IS HEADQUARTERED IN OSLO, NORWAY

WWW.TECHSTEP.NO

FINANCIAL CALENDAR 2016.Preliminary financial calendar, with reservations for changes:

28.02.2017 QUARTERLY REPORT - Q4 2016

quarterly report q3 2016. - techstep asa5 quarterly report q3 2016 ceo update professions (~70%) are...

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