Anoto Group — Interim / Quarterly Report 2012

Feb 8, 2013

QUARTERLY REPORT

Q4 / 2012

© 2013 ANOTO

Anoto Group AB is a global leader in digital writing solutions, which enables fast and reliable transmission of handwriting into a digital format. Anoto operates worldwide through a global partner network that delivers user-friendly digital writing solutions for efficient capture, transmission, distribution and storage of data. Anoto is currently in use across multiple business segments, e.g. healthcare, banking and finance, transportation and logistics and education. The Anoto Group has around 110 employees and is headquartered in Lund (Sweden). The company also has offices in Guildford and Wetherby (UK), Amsterdam (NL), Boston (US) and Tokyo (Japan). The Anoto share is traded on the Small Cap list of NASDAQ OMX Stockholm under the ticker ANOT.

This report was published January 8, 2013 at 08.30 CET

For more information: www.anoto.com

2012 YEAR END REPORT

• Net sales in the period amounted to MSEK 199 (192) and net sales in the fourth quarter amounted to MSEK 41 (57).
• The gross margin for the period was 72% (71) and gross margin for the fourth quarter was 71% (72). The gross profit for the period was MSEK 144 (137) and gross profit in the fourth quarter was MSEK 29 (41).
• Earnings before depreciations and amortizations (EBITDA) for the period was MSEK -26 (4) and EBITDA for the fourth quarter was MSEK -18 (5).
• The result after tax for the period was MSEK -45 (-244) and the result after tax for the fourth quarter was MSEK -24 (0).
• Earnings per share before and after dilution for the period was SEK -0,33 (-1,89) and for the fourth quarter SEK -0,17 (0,00).
• The cash flow during the period was MSEK -18 (-57) and the cash flow for the fourth quarter was MSEK -5 (-7).
• The Board proposes that no dividend is paid out in relation to 2012

Key\$ratios	2012	2011	2012	2011
	Oct0Dec	Oct0Dec	Jan0Dec	Jan0Dec
Net\$sales,\$MSEK	41	57	199	192
Gross\$profit/loss	29	41	144	137
Gross\$margin,\$%	71	72	72	71
Operating\$profit/loss,\$MSEK	?23	0	?42	?243
Profit/loss\$after\$tax,\$MSEK	?24	0	?45	?244
Earnings\$per\$share
before\$and\$after\$dilution,\$SEK	?0,17	0,00	?0,33	?1,89
Cash\$flow,\$MSEK	?5	?7	?18	?57
Cash\$at\$end\$of\$period,\$MSEK	5	24	5	24

COMMENTS FROM THE CEO

Write Live!

Although the fourth quarter was not satisfactory financially it marked a new milestone for Anoto. The development of the world's first tablet computer with embedded Anoto technology was initiated and the product was launched by Panasonic at the Consumer Electronics Show in Las Vegas on January 8, 2013. This was an important proof of concept for Anoto and the evidence that we can now Write Live on analogue (paper, plastic, ceramic steel) as well as digital surfaces (screens).

Revenues in 2012 were 199 MSEK (192 MSEK). Revenues in Q4 were 41 MSEK (57 MSEK). Cash flow in 2012 was - 18 MSEK (- 57 MSEK). Cash flow in Q4 was -5 MSEK (-7 MSEK).

In Q4 we shipped 3,250 pens to one of the world's largest insurance companies, to be used by insurance sales agents to capture front-end data electronically. In Sweden we expanded an already large installed base of more than 15,000 home healthcare workers with another 1,000 pens in Q4 via our partner Phoniro. In Germany we received the first contract for a potentially large rollout to a major banking organization. In the fourth quarter we established a sales office in Amsterdam and recruited 3 senior sales people, including SVP Global Sales. The team has many years of experience within enterprise software and solutions and will focus primarily on the Benelux area and Germany as well as co-ordinate our global activities.

During 2012 more than 50,000 new business users started to use mobile data capture solutions based upon Anoto digital writing technology sold through our network of partners and system integrators worldwide. This is more than 25% growth over 2011. At the same time we reduced the average selling price of the pen by 20%. The end user price of a data capture solution in the market did not change considerably. Our strategy is to climb the value chain and consolidate with some of our leading software platform partners through closer co-operation and acquisitions. The net effect will be higher revenues per new customer and stable high gross margins.

Sales within education and interactive white boards were significantly lower than expected also in Q4. We continue to believe this is a future growth area with a large potential. Now, with a proven solution for screens and tablets we also see a potential opportunity to combine Anoto technology with larger LCD screens.

In Q4 we received a 2 MEURO payment from a large global partner with whom we are currently developing applications for government, primarily voting.

OUTLOOK

As stated in the Company's interim report for the third quarter 2012, the Company's total amount of cash has decreased during 2012. Recent developments in our business, large global brands adopting our technology within business solutions, partners' expanding within education in Korea and China, a large global partner developing solutions for voting and emerging opportunities to become a real alternative for screen and tablet computer manufacturers for digital writing, has confirmed our belief in several large growth opportunities.

Board and management is of the opinion that the Company will benefit from raising new capital to strengthen the Company's presence in its market segments. The rights issue as communicated to the market on Monday February 4 will provide necessary additional short term liquidity and strengthen the Company's balance sheet, as well as support product development, sales and marketing activities and potential acquisitions.

Stein Revelsby CEO Anoto Group

A PARTNER DRIVEN BUSINESS MODEL

Anoto's business is organized in three applications areas: Business Solutions, Technology Licensing (OEM business) and C Technologies. These three areas generate income in five different categories - licensing, royalty, digital pens, components and NRE (Non Refundable Engineering).

Net\$sales\$per\$product\$group

	2012	2011	2012	2011
MSEK	Oct-Dec	Oct-Dec	Jan-Dec	Jan-Dec
Licenses	6	9	35	34
Royalty	7	8	21	32
Digital pens*	25	29	118	97
Components	0	4	3	10
NRE and other	3	7	21	20
Total	41	57	199	192

* Digital pens include the C-Pen

BUSINESS SOLUTIONS

Business Solutions focuses on systems, products and services that target businesses, primarily in the field of forms processing and data capture. The offering is Pen Solutions which includes solutions for creating a form in digital format, digital processing of handwritten forms and automatic generation of a digital version of a document with handwritten signatures and notes. Anoto has an indirect business model and markets its products through partners, such as system integrators, software developers and IT consulting firms, all of which offer customized solutions with Anoto technology to their customers.

The net sales during the period were MSEK 26 higher than in the same period last year. Excluding entities acquired during 2011/2012 net sales in the period was MSEK 9 lower than in the same period last year. The net sales in the fourth quarter were MSEK 11 lower than during the same period last year. Excluding entities acquired during the 2011/2012 net sales were MSEK 7 lower that the same period last year.

Anoto is focusing on consolidating resources with these software and solutions partners to be able to offer better packaged products and solutions to channel partners, system integrators and resellers within its different market segments. At the same time we are strengthening our sales and marketing to expand our business with larger partners.

Some highlights in the 4th quarter were:

A global insurance company purchased 3,250 pens via our French partner Kayentis. The pens will be rolled out together with their Sales force effectiveness program, with the objective to improve customer qualification and employee satisfaction.

Our Swedish partner Phoniro expanded their Home healthcare market presence within the Swedish Healthcare municipalities with more than 1,000 pens.

XMS' partner in Turkey, Magicturk, was awarded with the first contract of 530 pens to deliver to Turkish municipalities for inspection purposes.

Following a successful pilot our partner Bend-IT received an initial order from a large German banking organization. The use of digital pens significantly reduces the processing time within the bank's financial advisory services. This is a significant opportunity and we expect large volumes to be delivered over the coming year.

In US healthcare "Meaningful use" is an important Electronic Medical Record criterion and Anoto has seen an increase in digital writing solutions in the US, helping healthcare facilities achieving "Meaningful use" status". In addition healthcare specialists find a value in digital writing due to unique clinical documentation needs.

In the UK sales were lower than previous quarters despite a 1,000 pen contract renewal with a large pharmacy group. Despite the poor performance in UK in the second half, there continue to be clear reasons for optimism with pilots underway with major organizations such as VolkerWessels, DB Schenker Rail, Centrica and BAE Systems.

The healthcare sector is showing clear signs of developing into a major opportunity for Anoto in 2013. Through our subsidiaries and partners we already have working solutions for mobile clinicians and maternity workers and these are the functions on which efforts are focused. The addressable market for these functions is estimated at over 85,000 mobile clinicians.

The acceleration of the opportunity in the NHS has been driven by the requirement of the Quality, Innovation, Productivity and Prevention (QIPP) initiative to save £20bn in the NHS in the period up to 2014/2015, together with recent funding support announced by Central Government. This has resulted in a significant increase in incoming interest from NHS Trusts.

	2012	2011	2012	2011
MSEK	Oct'Dec	Oct'Dec	Jan'Dec	Jan'Dec
Net sales	25	36	126	100
Gross profit	18	25	89	75

TECHNOLOGY LICENSING (OEM SALES)

Customers within Technology Licensing develop and sell products based on technology and digital pens provided by Anoto. The main offering is Interactive solutions in the education segment. Interactive solutions create a learning environment that is more oriented towards the individual and where the traditional classroom model is replaced by a more student-centric and interactive approach to teaching. Other end user products are learning toys, visual communication equipment and personal productivity solutions. End product customers are individual consumers as well as enterprises.

The net sales during the period were MSEK 16 below the same period last year and the net sales in the fourth quarter was MSEK 6 lower than the same period last year.

Following the trend from the first three quarters, our partners within both education and interactive whiteboards had a disappointing fourth quarter. Sales were particularly weak within the interactive whiteboard category, an area where we have sold more than 130,000 pens in the last 3 years. Sales are expected to improve during 2013, especially within education where our Korean partner is making good progress.

The development of the world's first tablet computer with embedded Anoto technology was initiated in Q4 and the product was launched by Panasonic at the Consumer Electronics Show in Las Vegas on January 8, 2013. This was an important proof of concept for Anoto and the evidence that we can now Write Live on analogue (paper, plastic, ceramic steel) as well as digital surfaces (screens).

Digital writing on screens and tablet computers are now provided by more and more hardware manufacturers. Anoto sees a large opportunity to become a preferred alternative supplier of embedded technology to these manufacturers based upon the following competitive advantages: high accuracy, easy integration, and no additional electronics in the screen, applicable to all size screens and to different materials (glass, polymer, and flexible material), lower costs and thinner screens.

The development of applications for government as announced in Q3 has started together with a global company with particular focus on voting, census and people registration with the objective of launch later in 2013.

	2012	2011	2012	2011
MSEK	Oct'Dec	Oct'Dec	Jan'Dec	Jan'Dec
Net sales	9	15	47	63
Gross profit	8	13	42	48

C TECHNOLOGIES

C Technologies develops, manufactures and sells C-Pen®, a handheld scanner solution with character recognition software. The C-Pen captures printed information such as text, numbers and codes, decodes the information and transfers it to computers and smartphones. The products are made available through the C-Pen brand and as OEM-branded versions.

Net sales for the period was MSEK 4 higher than the same period last year and Net sales for the fourth quarter was MSEK 4 higher than in the same period last year.

The work to strengthen the product offering and the sales channels is continuously ongoing. Within product development, marketing and sales, our resources are focused towards dyslectics, students in general and schools, where the products are used to simplify reading and enhance understanding and learning.

A new product, C-Pen TS1, was released to the market during the fourth quarter. The TS1 is delivered with software designed to help students in general and auditory learners especially.

Within OEM business, efforts are primarily focused on further development of the business together with existing partners and gradually growing into new markets through new partners. The products are continuously developed in order to increase usability and customer value. The fourth quarter also included delivery of a 2 million SEK order of a new product to one OEM partner.

	2012	2011	2012	2011
MSEK	Oct'Dec	Oct'Dec	Jan'Dec	Jan'Dec
Net sales	7	3	23	19
Gross profit	3	2	11	9

ANOTO GROUP AB

As a pure holding company, Anoto Group AB has a limited number of corporate functions.

ACCOUNTING POLICIES

This interim report was prepared in accordance with IAS 34, Interim Financial Reporting and applicable parts of the Swedish Annual Accounts Act chapter 9. For information about the accounting policies applied, refer to the 2011 annual report. The accounting policies are unchanged from those applied in 2011.

RISK FACTORS AND UNCERTAINTIES

The liquidity risk has increased during the fourth quarter of the year.

At the close of the quarter, the group's total cash amounted to MSEK 5, which is a decrease by MSEK 18 compared to year-end of 2011.

The cash balance at year-end is not sufficient to support the business during 2013. The rights issue as communicated to the market on Monday February 4th will provide necessary additional short-term liquidity and strengthen the Company's balance sheet for the longer term. Therefore no material uncertainty regarding the going concern exists.

Apart from liquidity no significant additional risks are deemed to have arisen beyond those described in the 2011 annual report for the Anoto Group. (Please see Note 4 in the Annual report 2011 for a detailed presentation of the company's risk exposure and management.)

RELATED PARTY TRANSACTIONS

The largest shareholder of Anoto, Aurora Investment Ltd (owned by TStone), has been represented in the board of directors since the Annual Meeting in May 2010. Transactions with companies within the TStone group amounts to MSEK 9,4 during 2012. All transactions have been made on normal commercial conditions and at the end of the quarter there are no overdue receivables on entities within the TStone group.

TRANSACTIONS AND ACTIVITIES AFTER DECEMBER 31, 2012

The most important events after the end of the quarter have been:

The Board and management is of the opinion that the Company will benefit from raising new capital to strengthen the Company's presence in its market segments. The rights issue as communicated to the market on Monday February 4 will provide necessary additional short term liquidity and strengthen the Company's balance sheet, as well as support product development, sales and marketing activities and potential acquisitions.

SHARE DATA

The Anoto share is listed on the NASDAQ OMX Nordic Small Cap List in Stockholm. Including the 6,721,026 shares issued in relation to the acquisition of Ubiquitous Systems Ltd and Xpaper (from Talario LLC) The total number of shares at the end of the period is 137,037,081. See further details in Note 1.

OPTION PROGRAM

The AGM decided on May 10, 2012 on a warrant program. The warrants have not yet been transferred to employees.

Stein Revelsby CEO

This report has not been reviewed by the company auditors.

Anoto Group AB may be required to disclose the information provided herein pursuant to the Securities Markets Act. The information was submitted for publication at0 08.30 on February 8, 2013.

A webcast of the Q4 report will be available from 09.00 on February 8 and a Q&A session via audiocast will be held at 11.00 the same day. For more information, see www.anoto.com/investors.

CALENDAR 2012/2013

Annual report 2012	April 15, 2013 (new date)
Q1 report	May 3, 2013
AGM 2013	May 15, 2013
Q2 report	Aug 16, 2013
Q3 report	Nov 5, 2013

FOR MORE INFORMATION

Please contact:

Stein Revelsby, CEO Phone: +46 (0)733 45 12 05

or

Dan Wahrenberg, CFO Phone: +46 (0)733 45 10 19

Anoto Group AB (publ.), Corp. Id. No. 556532-3929 Box 4106, SE-227 22 Lund, Sweden Phone: +46 46 540 12 00 www.anoto.com

FINANCIAL REPORT

Condensed''statement'of'comprehensive'income

Note	2012	2011	2012	2011
TSEK	Oct-Dec	Oct-Dec	Jan-Dec	Jan-Dec
Net\$sales	40\$593	57\$100	198\$646	192\$286
Cost\$of\$goods\$and\$services\$sold	;11\$746	;15\$880	;55\$083	;55\$719
Gross'profit	28'847	41'220	143'563	136'567
Sales,\$administrative\$and\$R&D\$costs	;52\$364	;44\$702	;188\$050	;159\$266
Other\$operating\$income/cost	646	3\$706	2\$335	;220\$281
Operating'profit/loss	D22'871	224	D42'152	D242'980
Writedown\$of\$shares	0	0	;211	;173
Other\$financial\$items	;679	;606	;2\$451	;696
Profit'before'taxes	D23'550	D382	D44'814	D243'849
Taxes\$	;15	;24	;15	;30
Profit/loss'for'the'period	D23'565	D406	D44'829	D243'879
Other'comprehensive'income'
Translation\$differences\$for\$the\$period	1\$793	;84	2\$811	;1\$253
Other'comprehensive'income'for'the'period	1'793	D84	2'811	D1'253
Total'comprehensive'income'for'the'period	D21'772	D490	D42'018	D245'132
Total'Profit/loss'for'the'period'attributable'to:
Shareholders\$of\$Anoto\$Group\$AB	;21\$557	;361	;42\$235	;246\$274
Non\$controlling\$interest	;2\$008	;45	;2\$594	2\$395
Total'Profit/loss'for'the'period	D23'565	D406	D44'829	D243'879
Total'comprehensive'income'for'the'period'attributable'to:
Shareholders\$of\$Anoto\$Group\$AB	;20\$268	;445	;40\$204	;246\$949
Non\$controlling\$interest	;1\$504	;45	;1\$814	1\$817
Total'comprehensive'income'for'the'period	D21'772	D490	D42'018	D245'132
Key'ratios:'
Gross\$margin	71,1%	72,2%	72,3%	71,0%
Operating\$margin	Neg	0,4%	Neg	Neg
Earnings\$per\$share\$before\$and\$after\$dilution	;0,17	0,00	;0,33	;1,89
Average\$number\$of\$shares\$before\$and\$after\$dilution	137\$037\$081	130\$316\$055	136\$757\$038	129\$161\$263

Consolidated+balance+sheet+in+summary*

TSEK	2012;12;31	2011;12;31
Intangiblefixedassets	128*389	118*739
Tangible*assets	4*493	6*910
Financialfixedassets	3*782	1*486
Total+fixed+assets	136+664	127+135
Inventories	30*916	27*236
Accounts*receivable	24*037	39*138
Othercurrentassets	19*631	18*649
Total+short;term+receivables	43+668	57+787
Liquidassets,includingcurrentinvestments	5*459	23*941
Total+current+assets	80+043	108+964
Total+assets	216+707	236+099
EquityattributabletoshareholdersofAnotoGroup*AB	130*686	152*988
Noncontrollinginterest	M14*883	M13*074
Total+equity	115+803	139+914
Loans	18*235	15*695
LongMterm*liabilities	0	9*903
Total+long;term+liabilities	18+235	25+598
Provisions	152	240
Othercurrentliabilities**	82*517	70*347
Total+current+liabilities	82+669	70+587
Total+liabilities+and+shareholders+equity	216+707	236+099

* Effect on balance sheet from acquisitions, see Note 1

** Including non refundable prepayment from Leapfrog of 9,9 Msek

Changes(in(shareholders(equity

		Other(capital		Profit/loss((for	Shareholders(	Non:controlling	Total
TSEK	Share(capital	contributed	Reserves	the(year	equity	interest	equity
Opening(balance(1(January(2011	2(572	448(508	1(108	:57(425	394(763	:3(160	391(603
Profit/lossforthe*year				/246*274	/246*274	2*395	/243*879
Othercomprehensiveincome			/675		/675	/578	/1*253
Total(comprehensive(income			:675	:246(274	:246(949	1(817	:245(132
Acquisitions					0	/11*731	/11*731
Newshareissue	34	5*140			5*174		5*174
Closing(balance(31(December(2011	2(606	453(648	433	:303(699	152(988	:13(074	139(914
Profit/lossforthe*year				/42*235	/42*235	/2*594	/44*829
Othercomprehensiveincome			2*031		2*031	780	2*811
Total(comprehensive(income			2(031	:42(235	:40(204	:1(814	:42(018
Newshareissue*	135	17*772			17*907		17*907
Closing(balance(31(December(2012	2(741	471(420	2(464	:345(934	130(691	:14(888	115(803

*"See"Note"1

</dec<></dec<></dec<></dec<></dec<></dec<>

	2012	2011	2012	2011
TSEK	Oct <dec< th="">	Oct<dec< th="">	Jan<dec< th="">	Jan<dec< th=""></dec<>	Oct <dec< th="">	Jan<dec< th="">	Jan<dec< th=""></dec<>	Jan <dec< th="">	Jan<dec< th=""></dec<>	Jan <dec< th=""></dec<>
Profit/loss+after+financial+items	<23+550	<382	<44+814	<243+849
Depreciation,,amortisation,and,write1downs	4,492	4,294	16,463	246,929
Other,items,not,included,in,cash,flow	137	1119	188	111
Total+items+not+included+in+cash+flow	4+455	4+175	16+375	246+918
Cash+flow+from+operating+activities+
before+change+in+working+capital	<19+095	3+793	<28+439	3+069
Change,in,working,capital	16,202	19,462	17,996	153,046
Cash+flow+from+operating+activities+	<2+893	<5+669	<10+443	<49+977
Cash,flow,from,investments,activities	11,778	11,069	110,579	17,126
Total+cash+flow+before+financing+activities	<4+671	<6+738	<21+022	<57+103
Cash,flow,from,financing,activities	1452	0	2,540	0
Cash+flow+for+the+period	<5+123	<6+738	<18+482	<57+103
Liquid,assets,at,the,beginning,of,the,period,	10,582	30,679	23,941	81,044
Liquid+assets+at+the+end+of+the+period+	5+459	23+941	5+459	23+941

Consolidated+Cash+flow+statement+in+summary

Key\$ratios

	2012	2011	2012	2011
TSEK	Apr3Jun	Apr3Jun	Jan3Jun	Jan3Dec
Cash\$flow\$for\$the\$period\$	!5#123	!6#738	!18#482	!57#103
Cashflow#/#share#before#and#after#dilution#(SEK)##1##	!0,04	!0,05	!0,13	!0,44
			2012312331	2011312331
Equity/assets#ratio			60,3%	64,8%
Number#of#shares#			##137#037#081	##130#316#055
Shareholders#equity#per#share#(kr)##	################0,95	################1,17

1 """Based"on"the"weighted"average"number"of"shares"and""outstanding"warrants"for"each"period."Only"warrants"for"which"the" """""present"value"of"the"issue"price""is"lower"than"the"fair"value"of"the"ordinary"share"are"included"in"the"calculation.""

Parent'company,'summary'of'income'statement

	2012	2011	2012	2011
TSEK	Oct:Dec	Oct:Dec	Jan:Dec	Jan:Dec
Net\$sales	1\$787	3\$423	6\$561	9\$128
Gross'profit	1'787	3'423	6'561	9'128
Administrative\$costs	91\$624	93\$074	96\$223	98\$264
Operating'profit	163	349	338	864
Profit/loss\$from\$shares\$in\$Group\$companies	929\$500	910\$500	929\$500	9240\$570
Financial\$items				4
Profit'for'the'period	:29'337	:10'151	338	:239'702

Parent'company,'balance'sheet'in'summary

TSEK	2012:12:31	2011:12:31
Intangible\$fixed\$assets	258	381
Tangible\$assets	5	27
Financial\$fixed\$assets	153\$489	180\$135
Total'fixed'assets	153'752	180'543
Other\$short9term\$receivables	13\$973	233
Liquid\$assets,\$including\$current\$investments	56	325
Total'current'assets	14'029	558
Total'assets	167'781	181'101
Equity	161\$476	172\$733
Other\$current\$liabilities	6\$305	8\$368
Total'liabilities'and'shareholders'equity	167'781	181'101

(NJEN)
Intangihle

91 53 Inventory 899 192 $-821$ $-1231$ $-816$ 13 645 12829	Intangible assets	$\Omega$
	Tangible assets
	Current assets
	Liquid assets
	Interest bearing liabilities
	Current liablilities
	Net identifyable assets and liabilities
	Group goodwill
	Consideration

(KSEK)
Credit note	12
Total consideration	12

Consideration
(KSEK)
Shares issued	5077
Total consideration	5077