ANNUAL REPORT / 2015

CONVENIENT AND SECURE IDENTITY AUTHENTICATION FOR EVERYONE, EVERYWHERE

This report contains forward-looking information based on Precise Biometrics' current expectations. Even if company management considers expectations based on such forward-looking information to be reasonable, no guarantee can be given that these expectations will prove to be correct. Consequently, actual future results may vary significantly compared with what is set out in the forward-looking information, for reasons including changed conditions in respect of the economy, market and competition, changes in legal requirements and other political measures, exchange rate variations and other factors. The Annual Report is published in Swedish and English. The Swedish version is the original version and has been audited by Precise Biometrics' auditors.

Important events during the year	4
This is Precise Biometrics	6
CEO comments	8
Fingerprints open up a market worth 35 billion US dollars	11
Secure mobility, a growth opportunity for Tactivo	14
Our business	16
Fingerprint Technology	18
Mobile Smart Card Solutions	24
Desktop & Physical Access Solutions	29
A rewarding workplace	30
Sustainability	31
Administration Report	32
Allocation of profit/loss	38
Corporate Governance Report 2015	39
Income Statement	46
Balance Sheet	50
Cash Flow Statement	52
Change in Equity	54
Notes	56
Assurance	75
Audit Report	76
Financial glossary	78
Annual General Meeting	79
Financial calendar	80
Five year overview	82
The share and shareholders	84
Share capital development	86
Shareholder statistics	88

IMPORTANT EVENTS DURING THE YEAR

Precise Biometrics is a market leading supplier of solutions for convenient and secure authentication of people's identity. The company offers fingerprint software and mobile smart card readers that gives the market's best user experience and security. The company's solutions are used hundreds of millions of times every day by people all over the world and are marketed together with strong business partners.

PRECISE BIOMATCH MOBILE WAS INTEGRATED INTO MORE THAN 55 MOBILE PHONES

THE COMPANY SIGNED AGREEMENTS WITH EIGHT ADDITIONAL SENSOR MANUFACTURERS

THE US DEPARTMENT OF DEFENSE EXTENDED ITS INVESTMENTS IN MOBILITY WITH TACTIVO

FINANCIAL RESULTS AND SIGNIFICANT EVENTS 2015

Net sales for the group increased to SEK 4,5 million The operating loss at EBITDA level totalled SEK -7,7 million The loss after tax totaled SEK -8,8 million

Precise BioMatch Mobile was integrated into two mobile phones

Q1 Q2

Net sales for the group increased to SEK 10,0 million The operating loss at EBITDA level improved to SEK -4,7 million The loss after tax improved to SEK -7,9 million

Precise BioMatch Mobile was integrated into eight mobile phones

Precise Biometrics received the 2015 Frost & Sullivan Award for Global Customer Value Leadership in the field of fingerprint recognition for mobile devices

Tactivo was approved for use with the national Swedish healthcare system Pascal

Order for Tactivo from leading NHS Trust in the UK

Follow-on order for Tactivo from the Defense Logistics Agency (DLA)

Licensing agreement signed with sensor manufacturer Silead

KEY DATA 2015

0 5 10 15 20 25 -8 -6 -4 -2 0 2 4 6 8 Q1'15 Q2'15 Q3'15 Q4'15 Q1'15 Q2'15 Q3'15 Q4'15 GROSS MARGIN OPERATING CAPITAL, SEK MILLION EQUITY/ASSETS RATIO AVERAGE CAPITAL EMPLOYED, SEK MILLION EARNINGS PER SHARE, SEK EBITDA, SEK MILLION EQUITY PER SHARE, SEK NUMBER OF SHARES, MILLION OPERATING CASH FLOW PER SHARE, SEK NUMBER OF EMPLOYEES AT END OF YEAR 85 % 69,8 84 % 87,5 -0,03 0,5 0,24 345 -0,01 22 SEK million EBITDA Net sales Gross profit/loss SEK million

THE COMPANY WON SIGNIFICANT ORDERS FOR TACTIVO FROM THE UK AND SWEDISH HEALTHCARE SECTORS

PRECISE BIOMATCH MOBILE WAS INTEGRATED INTO GOOGLE'S NEW NEXUS PHONES

0,5

PRECISE BIOMETRICS REPORTS AN OPERATING PROFIT (SEK 0.5 MILLION) AT EBITDA LEVEL FOR THE FULL YEAR

Q3 Q4

Net sales for the group increased to SEK 18,3 million The operating profit at EBITDA level improved to SEK 5,4 million The profit after tax improved to SEK 3,0 million

The company achieved profit at EBITDA level

Precise BioMatch Mobile was integrated into 26 mobile phones

Licensing agreements signed with sensor manufacturers Elan Microelectronics and JP Sensor

Order for Tactivo from the US Navy, the Defense Logistics Agency and Oxleas NHS Trust

Net sales for the group increased to SEK 23,4 million The operating profit at EBITDA level improved to SEK 6,7 million The profit after tax improved to SEK 4,3 million Liquid assets totalled SEK 52,3 million

Precise BioMatch Mobile was integrated into more than 20 mobile phones

Licensing agreements signed with five sensor manufacturers: Cypress, Oxi Technology, FocalTech, Gingytech and J-Metrics

Follow-on order for Tactivo from the Defense Logistics Agency (DLA)

THIS IS PRECISE BIOMETRICS

Precise Biometrics is a market leading supplier of solutions for convenient and secure authentication of people's identity. The company develops and sells fingerprint software and mobile smart card readers that gives the market's best user experience and security. The company's solutions are used hundreds of millions of times every day by people all over the world and are marketed together with strong business partners.

The company has almost 20 years' experience of developing fingerprint software for small fingerprint sensors. Precise Biometrics' competence and understanding of both image processing, user experience and security are decisive in terms of enhancing the company's technical leadership in the field of products with small sensors for limited platforms.

Business areas

6 | THIS IS Precise Biometrics

Fingerprint Technology

This business area features Precise Biometrics' software for convenient and secure fingerprint recognition for mobile devices, smart cards and products with small fingerprint sensors. The company's fingerprint software for secure authentication of an individual's identity consists of advanced algorithms that are key to the user experience.

Precise Biometrics' fingerprint software is sold primarily to sensor manufacturers for inclusion in mobile devices, tablets and other products with fingerprint technology, which generates royalties based on their sales. The company has licensing agreements with twelve sensor manufacturers that between them cover most of the global market for mobile devices, encompass several different sensor technologies and hold a strong position in new product areas that are expected to grow rapidly in the future.

Mobile Smart Card Solutions

This business area consists of Tactivo, a product portfolio of smart card readers for smartphones and tablets. Tactivo enables convenient and secure mobility in organizations that require smart cards to log in to IT systems and thus contributes to a more efficient and better working environment, increased information security and reduced operating costs.

Tactivo is marketed through a network of carefully selected partners in America, Europe, the Middle East

and Asia as a component in complete integrated solutions for mobile access to information and resources. The business model enables broad-based, cost-efficient sales, distribution and installation of the products in companies, organizations and government agencies that require smart cards to log in to IT systems. Since 2016, the previous separate business area Desktop & Physical Access Solutions has become part of the Mobile Smart Card Solutions business area.

Customers and partners

Precise Biometrics' fingerprint software is sold through sensor manufacturers and used by 30 mobile phone manufacturers, many of them leading manufacturers such as Coolpad, Google, Huawei, HTC, Lenovo, LG, Oppo, Sony, ZTE and Xiaomi. The company's algorithm solutions are also marketed to companies in other industries, such as manufacturers of smart cards, wearables, locks, access control systems and cars.

The company's biggest customers for Tactivo are within the US Department of Defense. The US Navy and the Defense Logistics Agency use smart card readers for convenient and secure access to email and information. More and more organizations in the UK and Swedish healthcare sectors are using Tactivo to increase their efficiency, to enhance the working environment and patient safety, and to reduce costs.

Research and development

Precise Biometrics has reinforced its research and development resources as a consequence of market growth. The company is continuously developing the functionality and performance of the fingerprint software for current and new product areas. Precise Biometrics has established a technological edge that is based on extensive experience of developing algorithm solutions for fingerprint recognition for products with small sensors and limited platforms. The company's portfolio of patents is extensive, designed to protect the company's technology and products on selected markets.

Organization

Precise Biometrics has its headquarters in Lund, Sweden. The company has research and development offices in Karlstad, Sweden, as well as local sales representatives in China, the US, Taiwan and South Korea.

A GOOD PLATFORM FOR CONTINUED, PROFITABLE GROWTH

We have established the company as the leading supplier of fingerprint software for the mobile market. The company is stronger than ever and is well positioned for continued growth in the areas of both Fingerprint Technology and Mobile Smart Card Solutions.

The trend in 2015 reflects strong sequential growth in both net sales and profit, which resulted in Precise Biometrics reporting an operating profit at EBITDA level for the full year. It is very pleasing that all the efforts we have made over the last two years are now bearing fruit.

Sales in the Fingerprint Technology business area increased by 414 % during the year. Fingerprint technology for mobile phones made its big breakthrough in 2015, and this is laying the foundation of the company's growth. Fingerprint readers have become standard in almost all premium models, and demand is also rising rapidly for phones in the medium- and low-price segments. Approximately one third of all smartphones sold in 2015 had fingerprint technology. Industry analysts expect this proportion to increase in 2016 to one half of all smartphones. There was also a positive trend in the Mobile Smart Card Solutions business area, with a sales increase of 98 %. We won a large number of orders from customers in the US government agency market, where we see interest in Tactivo continuing to grow. The increase in demand for Tactivo in the UK and Swedish healthcare sectors resulted in a number of important reference projects, and we are optimistic that this area will continue to see healthy growth in 2016.

"THE COMPANY IS STRONGER THAN EVER AND IS WELL POSITIONED FOR CONTINUED, PROFITABLE GROWTH"

Change in sales mix gives higher margins

In summer 2014 we implemented a necessary refocusing of operations, with investments in the Fingerprint Technology business area and a more efficient utilization of the company's network of partners to sell Tactivo in the Mobile Smart Card Solutions business area. The more clearly defined emphasis is one important explanation of the positive sales trend. Most of the company's revenues now come from fingerprint software with good margins and we have an effective sales structure for Tactivo. By focusing our operations, we have succeeded in changing the sales mix and have steadily increased the gross margin, which was 85 % at the year-end. This, combined with good cost control, meant that we were able to report a profit at EBITDA level for the full year 2015.

Sales by business area

Desktop & Physical Access Solutions

Market leader in fingerprint software

Our fingerprint software is integrated into mobile devices from virtually all major manufacturers and we have established a strong foothold in the important Chinese mobile market, which accounts for around one third of global smartphone sales. Precise BioMatch Mobile has been integrated into more than 80 mobile phones from 30 mobile phone manufacturers. These include leading brands such as Google, Huawei, HTC, Lenovo, LG, Sony and Xiaomi. As volumes in the market grow, there is also increased interest from new players to win market share. We are working actively to enhance our local market presence in Asia and are conducting discussions with both sensor manufacturers and other subcontractors in their ecosystem. In 2015 we concluded licensing agreements with another eight sensor manufacturers, primarily Asian companies, but also in the US. We now have agreements with twelve sensor manufacturers in total, covering a number of different kinds of technologies, which further reinforces our position as the leading supplier of fingerprint software and gives us good conditions to continue to grow and secure a high market share.

Interest in fingerprint technology in product areas other than mobile phones is growing rapidly. The technology has been accepted and will soon be available to more or less anyone, which also lowers the threshold for integration into other kinds of products. As sensors become smaller and thus cheaper, and new sensor technologies gain a foothold in the market, the conditions are created for growth in new product areas such as smart cards, wearables, locks, cars and products that can be defined as "Internet of Things". Our software is already integrated into several products in the market, e.g., national ID cards, locks, electronic wallets and PC accessories. In addition to this, we are involved in a number of interesting projects that we feel can provide good support for our growth in the years to come.

Increased interest in mobility drives demand for Tactivo

The positive trend is continuing in the Mobile Smart Card Solutions business area. We are experiencing increasing interest in Tactivo, driven by increased demand for secure mobility solutions as well as improved accessibility to mobile applications with smart card support. Several branches within the US Department of Defense have started major implementations of Tactivo, and we expect continued orders as a consequence of their efforts to roll out mobile solutions for secure access to email and the Internet.

The healthcare markets in Sweden and UK have developed well, with both increased sales and an increased number of pilot projects for secure mobility with Tactivo. To meet demand, we have been working intensively with our partners to package attractive solutions with Tactivo that enable convenient and secure mobility with smart cards. The feedback has been very positive from both healthcare personnel and business managers, and we therefore estimate that sales of Tactivo will continue to increase in both the UK and Sweden.

Equipped for continued growth

The company is stronger than ever and is well positioned for continued, profitable growth. Precise Biometrics is the leading supplier of fingerprint software for the mobile market. Our software provides the best user experience for products with small fingerprint sensors for platforms with limited processing power and memory, regardless of sensor technology, operating system or platform. The volume in the market and the number of application areas for fingerprint technology are increasing rapidly. By extending collaboration with existing sensor manufacturers and initiating new collaborations, we are creating the conditions for achieving our goals of increased sales and market share in the mobile devices segment, as well as establishing a leading position in new product areas.

We also see good opportunities to grow within the Mobile Smart Card Solutions business area. Interest in Tactivo is increasing in existing markets and there is an opportunity to develop new markets, primarily in the public sector, where a smart card is required for secure mobile access to information.

Håkan Persson, CEO of Precise Biometrics

FINGERPRINTS OPEN UP A MARKET WORTH 35 BILLION US DOLLARS

It is believed that the high level of interest in recent years in convenient and secure authentication of identity through fingerprint technology will continue. Leading market analysts expect the biometrics market to be worth a total of 35 billion US dollars, equivalent to approx. SEK 300 billion. This strong growth is being driven by a combination of smarter technology and user demand for convenient and secure solutions.

The world is becoming increasingly connected. One of the driving forces is the dramatic increase in mobile devices being used in more and more contexts. As the areas of application increase, so does demand for convenient and secure access to various functions. Passwords and PIN codes have long been the accepted security method for logging in, but these are questioned because of their inadequate convenience and security. Manufacturers of mobile devices have therefore chosen to include biometric systems to replace passwords, with fingerprint technology becoming the preferred choice.

*All market data comes from Acuity Market Intelligence: The Global Biometrics and Mobility Report: The Convergence of Commerce and Privacy, June 2015

1.6 4.1

Fingerprint technology growing rapidly

It is estimated that the market for mobile devices with biometrics will be worth 35 billion US dollars by the year 2020*, which means average annual growth of 67 % during the period 2014-2020. This figure includes biometric sensors, software, apps and financial transactions that require biometric authentication. The share for sensors is expected to total 6.2 billion US dollars in 2020.

It is believed that the strong sales increase in mobile devices with fingerprint sensors in recent years will continue. At present consumers encounter this technology in mobile phones. In a few years it will be in more kinds of mobile devices, leading market analysts to expect the number of devices sold in 2018 to reach almost two billion.

Strong trends driving developments

Several strong trends are combining to drive developments; increased mobility resulting in increased demand for products and solutions that work together, increased demands for authentication of identity and increasing global e-commerce. The fact that major platforms such as Google's "Android Pay" and Apple's equivalent support fingerprint technology will in all probability increase the acceptance and expectation of consumers and financial institutions that the technology will be integrated into mobile devices of the future.

The significant increase in devices with biometric authentication paves the way for a rapid, strong increase in financial transactions during the period 2018-2020. By the end of the year 2020 it is expected that more than 60 % of all transactions will be performed via biometric authentication, primarily through fingerprint sensors in mobile devices.

"IT IS BELIEVED THAT THE STRONG SALES INCREASE IN MOBILE DEVICES WITH FINGER-PRINT SENSORS IN RECENT YEARS WILL CONTINUE"

A focus on the user experience

The convenient and secure user experience is the explanation why fingerprint technology is gaining ground over other alternatives. Regardless of which technical solution is used, users want the authentication of identity to be handled quickly and securely. They are not prepared to wait more than a few tenths of a second to access applications on their phone. The user experience depends on the phone's sensor and fingerprint software. The most important part of the fingerprint software is the algorithm solution that processes, analyzes and matches images of fingerprints.

Continued growth in mobile phones

Acuity Market Intelligence believes that biometrics will be standard in the three billion or so mobile devices that will be sold in 2020. In addition to this are the downloads of more than 5.5 billion apps every year that use biometrics and 807 billion transactions that are conducted after biometric authentication.

In the years to come mobile phones will be the most common mobile device with fingerprint sensors. It is estimated that annual sales of mobile devices with biometrics will increase from close to 500 million devices during 2015 to 3 billion devices during 2020. Revenues from mobile phones sold are expected to peak in 2018 and then level out as a consequence of reduced sales primarily in Asia. The price per integrated sensor is expected to fall during this period, from 7 to 2 US dollars per device.

Integrity and other biometric modalities

One important aspect of the development of biometric solutions is the handling of and respect for personal integrity. The individual's personal information must be handled securely while at the same time it must happen quickly and easily. In virtually all mobile phones the fingerprint recognition process is carried out in a secure zone in the phone, which guarantees a very high level of security.

Apart from fingerprints, there are opportunities to identify an individual via biometric modalities such as voice, facial, eye movement, heart and user patterns. All technologies can be combined with one another and with other validation data, such as for example geographical location. Fingerprint recognition has proven to be the most successful modality for products aimed at consumers. End users have embraced the technology, which is considered easy to use and to provide a high level of security.

Innovative force is key

The biometrics market is developing rapidly. The challenge for hardware and software manufacturers is to be at the forefront of technical developments in order to meet new user behavior and the needs of players in the market. In 2015 the major sensor manufacturers invested resources in developing smaller, more sensitive fingerprint readers, primarily to reduce costs, but also to make new areas of application possible.

The biometric solutions of the future must be even faster and more secure in order to meet consumers' demands for a good user experience. As sensors become smaller, tougher demands are made of the software that processes the fingerprint recognition process. To meet the manufacturers' tough demands for performance and at the same time work in a secure zone with limited processing power and memory, there are strong demands for advanced algorithm solutions that provide high levels of efficiency and accuracy.

WHAT IS BIOMETRICS?

The word biometrics comes from the Greek words bi'os (life) and me'tron (measure). The Biometrics Research Group defines biometrics as measurable physical and behavioral properties that make it possible to authenticate an individual person's identity. Biometrics is used as a collective term for the technologies used to measure a person's unique characteristics and thus authenticate his or her identity.

BIOMETRIC TECHNOLOGIES

Biometrics involves measuring either an individual's personal attributes (e.g., fingerprint, iris) or something they do (e.g., movement patterns, speech). Biometric technologies are automatic systems set up in order to: (A) collect biometric information (e.g., fingerprints) from a person; (B) extract information from the material for a template; (C) compare information from templates saved previously; (D) determine whether the biometric information is identical. Biometric technologies therefore consist of both Hardware (e.g., fingerprint sensor), which can physically read the biometric information, and Software, which together with the hardware gathers biometric information in order to extract, compare and match the information.

USER EXPERIENCE

The key to the user experience of a biometric solution is that it works to the highest possible level of security (accuracy) and that it achieves the highest possible speed for processing the information so that the individual can be authenticated. This means that the time from the point when a person's unique physical characteristics start to be read until the person is either given access or rejected must be as short as possible.

FAR/FRR

The terms FAR (False Acceptance Rate) and FRR (False Rejection Rate) are used to describe the security of a solution. These terms have a symbiotic relationship with one another and are determined by the limits in the software. A low FAR means a more secure solution (no unauthorized persons are allowed in), but it can result in a high FRR (more authorized persons are denied). A high-quality biometric system with a good user experience provides rapid authentication and has a high level of accuracy (low FAR and FRR values). A four-digit PIN code corresponds to a security level of 1/10,000, which means that one person in 10,000 gains unauthorized access. This can be compared with the high level of security commonly used for fingerprint technology in modern mobile phones, where one user in 50,000 gains unauthorized access. This level of security is even higher in some phones on the market.

SECURE MOBILITY, A GROWTH OPPORTUNITY FOR TACTIVO

Government agencies and healthcare providers have many years' experience of smart card-based systems for secure access to information. They are now recognizing the opportunity to securely enhance their efficiency and information security and make savings through access to information from mobile devices.

In these organizations, each employee has a personal smart card containing information about who the person is, which functions they have access to and which information they are permitted to read. Authentication of a person's identity takes place using two-factor authentication, i.e., the card combined with a PIN code provides access to the information and functions needed at work.

Convenient and secure login with Tactivo at US govern-ment agencies

With raised awareness of security and the benefits of mobile working becoming increasingly clear, there is increased interest in a convenient and secure login from mobile devices with smart cards. Tactivo meets the strict requirements of government agencies and defense organizations for mobile login through two-factor authentication with smart cards, as well as contributing to a more efficient and better working environment, enhanced information security and reduced operating costs.

The US Department of Defense continued to implement Tactivo in 2015. There is tremendous potential, with the US Department of Defense currently having more than ten million users of smart cards for identification and login to systems. Other government agencies have also been tasked with introducing systems that authenticate identity. President Obama has issued instructions* to all government agencies that provide personal data about US citizens to use secure systems based, at a minimum, on the same level as two-factor authentication.

More efficient healthcare

The Swedish public healthcare service has set a goal that each individual shall be able to access all information about themselves and be actively able to become involved in their health and social care. Healthcare providers shall have access to all the information required to be able to provide highquality health and social care.

The breakthrough for secure mobile services with smart cards in Swedish healthcare came when Tactivo was approved for use with the Pascal healthcare system. The solution with Tactivo provides personnel with direct access to patient information and guarantees that the right person gets the right medicine. This allows personnel to spend more time with patients to provide care and update records, which not only saves time spent on administration but also enhances patient safety. At present more than 500,000 healthcare employees in Sweden are using smart cards for secure desktop login to patient records and healthcare systems. A mobile solution brings a strong combination of enhanced efficiency, increased patient safety and lower costs.

The UK healthcare sector is run by local NHS Trusts, which have an objective to be paperless by the year 2020. Mobile access to healthcare systems is a driving factor in order to dramatically reduce the need for forms and notes. Secure mobile systems enable healthcare personnel to visit more patients at home and offer more qualified advice when they meet patients and their relatives. According to a report from the accountancy firm PwC, better and more secure IT systems should save the UK healthcare sector around GBP 4.4 billion. At present more than one million employees in 300 hospitals are using their smart cards to provide care to around 50 million citizens.

* Executive Order, October 17, 2014

"THE US DEPARTMENT OF DEFENSE CONTINUED TO IMPLEMENT TACTIVO DURING 2015"

OUR BUSINESS

OBJECTIVES

Precise Biometrics shall increase sales and market share within the fingerprint technology for mobile devices segment.

Precise Biometrics shall offer the best fingerprint software for small fingerprint sensors and platforms with limited processing power and memory, regardless of sensor technology, operating system or platform.

3

Precise Biometrics shall establish a leading position in the field of fingerprint software for new product areas that require small sensors.

Profitable growth in a fast growing market

The company's business experienced a positive trend during the year with a sales increase of 79 %. This strong growth is based on sales in the Fingerprint Technology business area, which increased by 414 %. This growth is a result of the company's leading position in the fast growing market for fingerprint technology for mobile phones. The Mobile Smart Card Solutions business area developed strongly during the year, with a growth rate of 98 % due to an increased interest in mobile solutions primarily from the US government agency market.

Strategy for continued growth

Precise Biometrics' strategy is to further strengthen the company's leading market position by means of product development that creates added value for the company's customers and to expand and develop the company's strong network of partners in order to increase sales and meet growth in the market. The company's experience and knowledge of the market and market operators creates the conditions to strengthen and develop the company's position as a market leader.

The company works actively and strategically with patents, pattern protection and trademarks in order to guarantee the rights to its own technology, to create value for future business transactions and to increase the company's competitive strength. The company has an extensive portfolio of patents and trademarks designed to protect the company's technology and products on selected markets.

Organization

Since 1 January 2016 the company is organized in two business areas, Fingerprint Technology and Mobile Smart Card Solutions.

Fingerprint Technology

Mobile Smart Card Solutions

This business area consists of Tactivo, a product portfolio of smart card readers for smartphones and tablets. Tactivo enables mobility in organizations that require smart cards to log in to IT systems and thus contributes to a more efficient and better working environment, increased information security and reduced operating costs.

Business concept

Precise Biometrics' business concept is to work together with strong partners to offer authentication of digital identities that enable convenient and secure access to systems, information and resources.

Precise Biometrics shall be the leading supplier of smart card readers for organizations and companies that require smart cards for mobile access to IT systems.

Precise Biometrics shall increase sales in the Mobile Smart Card Solutions business area and investigate opportunities for growth in new markets, primarily in the public sector.

VISION

CONVENIENT AND SECURE AUTHENTICATION OF IDENTITY FOR EVERYONE, EVERYWHERE

MISSION WE PROVIDE CONVENIENT AND SECURE AUTHENTICATION OF DIGITAL IDENTITY, ENABLING ACCESS TO SYSTEMS, INFORMATION AND RESOURCES

FINGERPRINT TECHNOLOGY

In this business area, the company develops and sells fingerprint software for convenient and secure authentication of people's identity in mobile phones, smart cards and products with small fingerprint sensors. Precise Biometrics' software provides the best user experience for products with small sensors for platforms with limited processing power and memory, regardless of sensor technology, operating system or platform. The company's fingerprint software consists of advanced algorithms that process, analyze and match images of fingerprints and are key to the user experience of fingerprint technology.

THE COMPANY OFFERS THREE ALGORITHM SOLUTIONS IN THIS BUSINESS AREA:

PRECISE BIOMATCH™ MOBILE

Algorithm solution for integration into mobile phones and tablets.

PRECISE BIOMATCH™ EMBEDDED

Algorithm solution for integration into products with small sensors and limited platforms, such as smart cards, wearables, locks and cars.

PRECISE MATCH-ON-CARD™

Algorithm solution for integration into national ID cards.

Precise Biometrics has almost 20 years' experience of developing fingerprint software for small sensors and has set the standard for the best user experience in mobile devices. The company's software is used every day by millions of people and is integrated into more than 80 models of mobile phones and more than 100 million national ID cards.

Business focus

Precise Biometrics shall strengthen the company's position as market leader in the field of fingerprint software, increase sales and market share in the fingerprint technology for mobile devices segment and establish a leading position in new product areas that require small sensors. By making sure that the company can offer fingerprint software that offers the best user experiences for mobile devices and new products, extending collaboration with existing partners and initiating new partnerships with sensor manufacturers that offer other technologies, the company is creating good conditions to increase sales and market share.

Business model

Precise Biometrics develops and sells fingerprint software primarily to sensor manufacturers, which generates royalties based on their sales. Precise Biometrics also markets solutions directly to mobile phone manufacturers and suppliers in their ecosystems.

THE ECOSYSTEM FOR FINGERPRINT TECHNOLOGY

Algorithm solutions for convenient and secure ngerprint recognition

The ecosystem surrounding mobile phone manufacturers

In 2015 almost 1.5 billion smartphones were sold, about 30 % of which had a fingerprint reader. About half of these were Android smartphones, which represent the company's addressable market. The other half consists of Apple iPhones, which use proprietary fingerprint sensors and software.

The ecosystem surrounding mobile phone manufacturers is a global, multi-billion dollar business characterized by a high rate of innovation. Precise Biometrics has established a position as the market-leading supplier of fingerprint software and has partnership agreements with the leading companies that supply sensors to mobile phone manufacturers. Because of the fast-changing nature of the industry, the company works consciously to strengthen its position in respect of both mobile phone manufacturers and the entire ecosystem that is relevant for fingerprint technology.

The company's software solutions can be integrated into all kinds of sensors, operating systems, platforms or end products with fingerprint technology. This means that the company's business model is scalable and creates opportunities to grow in line with the fast-growing market for fingerprint sensors.

Customers – and our partners

Precise Biometrics has agreements with twelve sensor manufacturers and one security company for licensing of the company's fingerprint recognition software, eight of these being new agreements that were signed in 2015. Between them, the company's customers cover most of the current market for fingerprint technology, encompass several different sensor technologies and hold a strong position in new product areas that are expected to grow rapidly in the future. Precise Biometrics works in close collaboration and has partnerships with our customers in order to meet demand from both mobile phone manufacturers and other suppliers of products with fingerprint technology. This collaboration involves a degree of joint development and marketing aimed at, for example, manufacturers of mobile phones and other products with small sensors.

OUR CUSTOMERS CHIPONE, CYPRESS, ELAN FINGERPRINT CARDS, FOCALTECH, GEMALTO, GINGYTECH, J-METRICS, JP-SENSOR, MSTAR, OXI TECHNOLOGY, SILEAD, SYNAPTICS

"THE RAPID MARKET DEVELOPMENT OF FINGERPRINT TECHNOLOGY IS OPENING UP NEW AREAS OF APPLICATION"

CHOSEN BY 30 MOBILE PHONE MANUFACTURERS

2015 was a breakthrough year for Precise Biometrics' fingerprint software for mobile phones, Precise BioMatch Mobile. The solution is now integrated into more than 80 mobile phones from 30 manufacturers, many of them leading manufacturers such as Coolpad, Google, Huawei, HTC, Lenovo, LG, Oppo, Sony, ZTE and Xiaomi. COOLPAD DAZEN NOTE 3 HUAWEI MATE S LENOVO X3 ZTE AXON MAX ZTE AXON MAX

HUAWEI MATE S

LeTV MAX	NEXUS 5X GIONEE ELIFE 8 GIONEE ELIFE 8	NEXUS 6P HUAWEI HONOR 7 HUAWEI HONOR 7 HUAWEI HONOR 7	HTC ONE A9	OPPO R7 PLUS	XIAOMI XIAOMI NEXTBIT ROBIN NEXTBIT ROBIN	REDMI NOTE 3 REDMI NOTE 3 SONY XPERIA Z5 GOOGLE NEXUS 5X	SONY XPERIA Z5 PREMIUM SONY XPERIA Z5 COMPACT GOOGLE NEXUS 6P
GIONEE ELIFE 8 SONY XPERIA Z5 SONY XPERIA Z5 PREMIUM	COOLPAD NOTE 3 COOLPAD NOTE 3 COOLPAD NOTE 3	MEIZU MEILAN METAL MEIZU MEIZU	HTC ONE ME HTC ONE ME LENOVO X3		XIAOMI REDMI NOTE 3	HUAWEI HUAWEI HUAWEI MATE 8 MATE 8 MATE 8	ZTE AXON MAX

A selection of mobile phones with Precise BioMatch Mobile that were launched during 2015.

Fingerprint Technology | 21 FOUR OF THE FIVE BIGGEST MOBILE PHONE MANUFACTURERS ARE THE COMPANY'S CUSTOMERS

SAMSUNG / HUAWEI / LENOVO-MOTOROLA / XIAOMI / ZTE

Source: Sales of Android smartphones Q4 2015, Strategy Analytics

Market development

The market for fingerprint technology made its major breakthrough in 2015. Sales in the business area rose by 414 % to SEK 42.6 million. The sales increase is due to strong growth in royalties for Precise BioMatch Mobile from several sensor manufacturers, with Fingerprint Cards currently being the company's biggest customer.

Virtually all mobile phone manufacturers launched one or more phones with fingerprint technology during 2015, and Precise BioMatch Mobile was integrated into most of these. In total more than 400 million mobile phones with fingerprint sensors were sold. The technology offers the consumer enhanced convenience and security, which has meant that it has quickly become valued and in a short period of time spread to hundreds of millions of users.

The number of phones with fingerprint technology is expected to increase to around 750 million in 2016. As the market grows and becomes increasingly competitive, the company is improving its opportunities for growth through agreements with both market-leading and fast-growing sensor manufacturers.

In the fall of 2015 Google launched a new version of its operating system for mobile devices, Android Marshmallow 6.0, which includes a standardized framework for implementing fingerprint technology. This makes it easier for both mobile phone manufacturers and application developers to use the technology, which will contribute to the continued positive growth of phones with fingerprint technology.

The rapid market development of fingerprint technology is opening up new areas of application. There is tremendous potential in new product areas such as payment cards, wearables, locks, access control systems, cars and products that can be defined as "Internet of Things", which are entering a period of rapid growth. The company's products are already integrated into products available on the market, such as national ID cards, electronic wallets and PC accessories. The company is also involved in a number of interesting projects in new product areas that are expected to generate revenues in the years ahead.

"THE COMPANY'S CUSTOMERS CHOOSE PRECISE BIOMETRICS' FINGERPRINT SOFTWARE TO ENABLE THEM TO PROVIDE THE BEST USER EXPERIENCE AND SECURITY IN THEIR PRODUCTS" The algorithm solution Precise

SMARTPHONE WITH FINGERPRINT TECHNOLOGY

Biomatch Mobile extracts the unique characteristics of a ngerprint to create a template/original. The template is stored in a safe place in the smartphone. 1 When the nger is placed on the ngerprint reader, Precise Biomatch Mobile matches the unique characteristics of the ngerprint with the stored template/original. 2 If it's a match, the phone opens/the person is given access to the chosen application. 3

Product development

Precise Biometrics' fingerprint software consists of advanced algorithms that are key to the user experience of fingerprint technology. Thanks to them, users can quickly open a phone, for example, conveniently and securely or authenticate themselves for applications by means of a fingerprint.

The company's customers choose Precise Biometrics' fingerprint software to enable them to provide the best user experience and security in their products. Precise Biometrics was founded with a vision to offer fingerprint technology for mobile phones, and the company's software has been developed to provide optimal performance in products with small fingerprint sensors for platforms with limited processing power and memory, regardless of sensor technology, operating system or platform, for example, mobile phones and smart cards. Precise Biometrics has established a technological edge that is based on extensive experience of developing algorithms for fingerprint recognition, and the company's portfolio of patents and trademarks is extensive and designed to protect the company's technology and products on selected markets.

How the technology works

The company's fingerprint software consists of advanced algorithm solutions that process, analyze and match images of fingerprints and are key to the user experience of fingerprint technology. In simple terms, the company's algorithm solutions do the following: Enhance and analyze the image produced by the fingerprint sensor of the fingerprint. Extract unique properties from the image and create a template, an original, which is stored in a secure location in the device. This template is then matched against the images and unique properties that are extracted each time a fingerprint is read. If the fingerprint's unique properties match the template, the user is authenticated and is given access to the device, for example, a mobile phone or a selected application. Precise Biometrics' algorithm solutions interact with other software and algorithms from the company's customers in a total solution.

Precise Biometrics has reinforced its research and development resources as a consequence of strong customer growth. The company is continuously developing the functionality and performance of the fingerprint software for both current and new product areas.

Biometrics, the key to growth in mobile payments

Fingerprint readers in mobile phones made their major breakthrough in 2015. It is primarily the convenience of being able to open their mobile phone and gain access to applications quickly and easily that is driving consumer interest in fingerprint technology. But the technology is improving not only convenience, but also security as the PIN code is replaced by biometric authentication. Fingerprint technology is expected to play a major role in, among other things, the fast-growing market for mobile payments.

Mobile payment services such as Android Pay and Apple Pay are expected to continue to grow rapidly. Net sales in financial services are still relatively modest, but will increase exponentially in the next few years. Acuity Market Intelligence believes that the value of the market for mobile biometric payments will grow from USD 45 million in 2016 to no less than USD 6.7 billion by 2020, when more than 800 billion transactions will take place globally. This expected growth is supported by a survey from the credit card company VISA, in which two thirds of consumers questioned would pay using their fingerprint if it were possible now, believing that it would make their lives easier.

As payments increase in terms of both quantity and size, the secure authentication of individuals' identities will become increasingly important. Biometrics, and especially fingerprint technology, is expected to play a key role in this development through the reliable authentication of individuals' identities that this technology allows.

In 2015 many of the major mobile payment services developed support for fingerprint technology, and there is a clear trend that more and more apps are supporting the technology. Many banks have made fingerprint authentication an alternative method of accessing their mobile services, a way of increasing both security and convenience for their customers. The Bank of America allows its customers to log in to their Android app using fingerprints, and most banks in Sweden now give their customers the option of logging in to mobile banking using fingerprint technology.

One precondition for the increased security and convenience is the reliability of the biometric solution. Precise BioMatch Mobile enables convenient and secure access to mobile devices as well as applications and services. The product has been developed for the small sensors used in modern phones and meets the high technical requirements set for the software to be able to provide end users an excellent user experience together with a high degree of security in the authentication of a person's identity.

MOBILE SMART CARD SOLUTIONS

Mobile Smart Card Solutions

TACTIVO PRODUCT PORTFOLIO

Tactivo for iPad

Tactivo for iPhone

Tactivo mini for iOS

Tactivo mini Tactivo Guardian Case

for Android

Tactivo for iPhone and iPad is designed as a case for the devices, which while enhancing the user experience, also protects the device. There is also extra protection (Guardian Case) that can be fitted outside the smart card reader for use in harsh environments.

Business focus

Precise Biometrics shall be the leading supplier of smart card readers for organizations and companies that use smart cards. The company's strategy is to work together with partners to offer complete smart card solutions that enable convenient and secure mobility in organizations that require smart cards to log in to IT systems. Tactivo makes sure that the right people have access to the right information at the right time, for example, in the home help service sector when in contact with a patient at home.

"THE HEALTHCARE SECTOR IS LOOKING FOR SOLUTIONS WITH TACTIVO IN ORDER TO REDUCE COSTS, IMPROVE INFORMATION SECURITY AND INCREASE EFFICIENCY"

Business model

Tactivo is sold through a network of partners as an element of integrated solutions for mobile access to IT systems. The business model enables broad-based, cost-efficient sales and distribution through relevant channels and the installation of products in companies, organizations and government agencies that use smart cards.

Partners

Precise Biometrics has agreements with partners that integrate Tactivo into mobile applications and also manages distribution and sales in prioritized markets – the US, the UK and Sweden. The company's partners are operators that have distinguished themselves by either an ability to achieve strong local sales or a system solution that is particularly suitable for integration with Tactivo.

Customers

Precise Biometrics focuses on three market segments, which consist of US government agencies, the healthcare sectors in Sweden and the UK, and international companies.

There is growing interest in the US from federal and military authorities in implementing solutions with Tactivo, partly because of demands to use the smart card for mobile login and partly because of the improved availability of mobile applications that use smart cards.

The healthcare sector is demanding solutions with Tactivo to achieve mobile access to healthcare systems in order to reduce costs, improve information security and increase efficiency. These solutions also improve patient's safety and save time that can be devoted to the care takers. Customers are primarily NHS Trusts in the UK, and municipalities and county councils in Sweden.

"SALES INCREASED BY 98 % IN THE MOBILE SMART CARD SOLUTIONS BUSINESS AREA"

The business market consists of major international companies and banks that use smart cards. Tactivo enables convenient and secure access to documents and email by means of two-factor authentication.

Market development

There were positive developments in this business area's priority markets during the year. Sales in the business area rose by 98 % to SEK 10.1 million. This rapid sales increase is primarily due to increasing demand in the US.

The US government agency market consists of two sectors, the military and the federal sectors, which between them have an existing infrastructure of smart cards held by several million users, with Tactivo providing secure mobile access to email and information. During the year the company won significant repeat orders from the DLA (Defense Logistics Agency) and the US Navy, both of them branches within the Department of Defense. Smart cards will be one of the most significant methods of authenticating identity within this segment in the foreseeable future.

There is a high level of interest in mobile solutions in the Swedish healthcare sector. For many healthcare facilities it is a requirement that personal smart cards be used to log in to IT systems, and the same also applies for mobile access. In total there are more than 500,000 smart card users in the Swedish healthcare sector. To meet demand, the company has been working intensively with its partners to package attractive solutions with Tactivo that enable convenient and secure mobility with smart cards. Many systems, primarily in the area of care for the elderly, are now available and are starting to be installed by our partners. The company expects a gradual sales increase for Tactivo in Sweden in 2016.

The healthcare market in the UK has grown strongly with a number of important implementations during the year. Two of the most innovative and influential NHS Trusts in the UK healthcare market, Imperial College Healthcare NHS Trust and Oxleas NHS Trust, have implemented Tactivo. The solutions with Tactivo have been very well received by both business managers and personnel. The projects have resulted in enquiries from a number of other healthcare trusts. In total there are more than one million smart card users in the UK healthcare sector. The National Health Service also has an aim to digitize healthcare administration and make it paperless by the year 2020, which creates good conditions for mobility projects and increased sales of Tactivo. The company expects to see continued growth in the UK healthcare market.

The company is receiving enquiries and seeing opportunities to develop new markets, primarily in the government agency sector, where smart cards are often required for secure mobile access to information.

Product development

The company did not launch any new models of Tactivo during 2015. Apple's new iPhone 6S was compatible with the existing Tactivo range and did not need to be updated. Product development of Tactivo will continue to follow launches of Apple's iOS models and on a contract basis for devices used within the company's prioritized target groups.

Imperial Hospital improves healthcare efficiency with Tactivo

The Imperial College NHS Trust's maternity unit in London has replaced a time-consuming, paper-based process with an efficient, user-friendly mobile solution featuring Tactivo.

28 | Mobile Smart Card Solutions

The Imperial College NHS Trust took part in a pilot project for mobile access to Isosec's MIA Maternity healthcare system. Personnel used Apple's iPad with Tactivo for six months. The trial was so successful that the hospital provided all 105 midwives with the solution.

The background to the project was that the department had for some time been aware of that the paper-based system had become too inefficient. Far too much time was spent on duplicated work and travel between people receiving care and the hospital, which reduced the time that should have been spent with patients. They experienced a lack of continuity in their work and the inefficient paper process not only meant that it all took a long time, but also that important patient information risked being lost.

The solution was a mobile application for midwives and administrative personnel, which improved efficiency and enhanced the working environment for personnel. By using the MIA Maternity mobile solution for iPad, Tactivo and the SPINE smart card (which is used within the NHS), these problems were addressed and significantly improved. The quality of data was improved by replacing paper forms with an intuitive mobile application. The system guarantees that all information is filled in correctly and that no information is overlooked. The web-based synchronization of patient data means that there is no longer a need to travel back to the hospital to report. Personnel can instead use the time freed up to visit more patients and to spend more time with each patient.

The Imperial College NHS Trust has seen operational benefits on many levels. Costs have been reduced while productivity and employee motivation have increased. They spend one hour a day less on travel and administration, while patients' involvement in their treatment has increased. The hospital estimated that the project would pay for itself (ROI) within only four months, and after a three-year period they expect to save no less than SEK 15 million. In addition to these direct savings, the need for doctors' appointments has been reduced, resulting in fewer missed appointments and a reduction in the number of overnight stays in healthcare facilities.

DESKTOP & PHYSICAL ACCESS SOLUTIONS

The Desktop & Physical Access Solutions business area includes the company's traditional product offering, such as fingerprint readers for desktop workplaces and physical access to premises. This includes products such as combined fingerprint and smart card readers for secure login to systems, networks and physical access control.

Customers and market development

The company's strategy has been to offer secure and proven fingerprint readers, primarily to government agencies and existing customers. The products have been sold to established customers through a network of partners. Revenues during the year came from sales to customers that use the Precise Biometrics 200MC and 250MC fingerprint readers for secure login.

Business area integrated into Mobile Smart Card Solutions

In line with the company's stated strategy to focus on the Fingerprint Technology and Mobile Smart Card Solutions business areas, there is no new development of products in this business area. Existing products will be sold as long as there is demand. The remaining business was transferred to the Mobile Smart Card Solutions business area as of January 1, 2016.

A REWARDING WORKPLACE

The engagement, competence, insights and loyalty of employees are crucial for the innovation required for Precise Biometrics to be the market leader. It is therefore important to be an attractive workplace where creative people are happy, inspired and can develop.

Precise Biometrics has a culture that values competence, initiative and employees with ambitions, and the company promotes personal development. The goals of the company is clearly communicated to ensure that everyone knows what is important, which creates engagement and reinforces the sense of community. Creativity and a constant desire to develop as employees are highly valued and constitute an important success factor. All employees are proud of the fact that the company's products and solutions are used hundreds of millions of times every day.

Precise Biometrics has five core values, which are deeply embedded in employees and represent the foundation on which the company is governed:

OPENNESS: We are open, honest and responsive.

INNOVATION: We seek, strive and work together to create innovative ideas that meet our customers' needs.

RELIABILITY: We assume responsibility and keep our promises.

QUALITY: Everything we deliver is well-considered, carefully designed and of the highest quality.

DEDICATION: We always do our best and the work we produce has a direct impact on the success of our customers and our company.

The company works actively to attract and retain employees with the right competence. Precise Biometrics encourages further education and offers benefits such as an occupational healthcare scheme, a pension scheme, results-based variable pay and a stock option scheme. Several employees have worked for the company for many years and have extensive experience developing and selling solutions featuring fingerprint technology and smart cards.

EMPLOYEES' COMMENTS: What's the best thing about working at Precise Biometrics?

Henrik Wettin, Product Manager - Fingerprint Technology, employee since 1998

"My colleagues. As long as I can remember, we've always had really nice, competent personnel, we've a strong sense of community. I think it's positive that personal development is highly valued in the company, and not just on the technical side."

SUSTAINABILITY

A HEALTHY BUSINESS FOR SUSTAINABILITY

Precise Biometrics has a responsible approach and the determination to achieve long-term sustainability. The company acts with the same respect for customers, owners and employees as for other stakeholders, the world at large and the environment.

Minimizing the environmental impact

For Precise Biometrics, sustainability is an integral part of the development of the business. The company strives continuously to choose the most efficient and sustainable alternatives possible to reduce its impact on the environment.

The company's biggest revenues come from sales of software, where development has very little impact on the environment. The company's hardware products are manufactured and fitted at carefully selected, well-established manufacturers. These partner manufacturers purchase components for the products according to the specifications of Precise Biometrics. The company strives to manufacture products as resource-efficiently as possible in order to minimize its environmental impact through efficient production and optimal material recycling at the end of their life cycle. The products are CE and FCC marked, which guarantees high quality and compliance with current regulations and standards.

Secure identity and preservation of integrity

In today's information society information is processed, stored, communicated and reproduced in greater volumes than ever before. This involves a challenge to the integrity of both private persons and organizations. The right to feel safe and secure, and to be able to identify yourself and protect your integrity and property, is one of the most important fundamental principles in a well-functioning society. It becomes increasingly important in the transition to a mobile world. People all over the world use Precise Biometrics' solutions every day to authenticate their identities and gain access to information in a secure and convenient way.

The company's Code of Conduct

The Code of Conduct highlights the fundamental principles that Precise Biometrics observes when conducting its business operations, and supports the company's employees in their relations with business partners and other stakeholders. All employees are expected to support and uphold the company's values and responsibilities. Precise Biometrics also encourages its suppliers and other business partners to follow these principles. The Code of Conduct includes a policy structure that helps employees to act and make decisions in accordance with the code.

Sandra Åberg, Area Sales Manager – Mobile Smart Card Solutions, employee since 2014

"Being able to work with products that are of high value for the end customer. The business is a dynamic one, there's so much happening all the time, progress is made every day, that inspires me."

Arun Jayadharan, TEE Integration Specialist, employee since 2016

"Being able to develop the technology with the very best at a company with many years of experience. Being the best also brings great challenges. I see that as an opportunity for me to learn and to develop, which motivates me."

ADMINISTRATION REPORT

The board of directors and the CEO of Precise Biometrics (publ), CIN 556545-6596, with headquarters in Lund Municipality, Sweden, hereby submit their Annual Report and consolidated financial statements for the fiscal year 2015.

ACTIVITIES

Precise Biometrics is a market leading supplier of solutions for convenient and secure authentication of people's identity. The company develops and sells fingerprint software and mobile smart card readers that offer the market's best user experience and security. The company's solutions are used hundreds of millions of times every day by people all over the world and are marketed together with strong business partners.

Precise Biometrics' business concept is, together with strong partners, to offer authentication of digital identities that enables convenient and secure access to systems, information and resources. The products include both software and hardware for verification of the identity of individuals through fingerprint technology and smart cards. The company sells its products in a global market through a strong network of partners consisting of sensor manufacturers, smart card manufacturers, systems integrators and resellers.

In the Fingerprint Technology business area, the company develops and sells fingerprint software for convenient and secure authentication of people's identity in mobile phones, smart cards and products with small fingerprint sensors. As a result of the company's sharper focus on this business area, more resources have been allocated to sales.

The Mobile Smart Card Solutions business area consists of Tactivo, a product portfolio of smart card readers for smartphones and tablets. Tactivo enables mobility in organizations that require smart cards to log in to IT systems and thus contributes to a more efficient and better working environment, increased information security and reduced operating costs.

The business area Desktop & Physical Access Solutions includes the company's traditional product offering, fingerprint readers for desktop workplaces and physical access to premises. This includes products such as combined fingerprint and smart card readers for secure login to systems, networks and physical access control.

In line with the company's stated strategy to focus on the Fingerprint Technology and Mobile Smart Card Solutions business areas, there is no new development of products in the business area Desktop & Physical Access Solutions. Existing products will be sold as long as there is demand. The remaining business was transferred to the Mobile Smart Card Solutions business area as of January 1, 2016.

FUTURE PROSPECTS

The company is stronger than ever and is well positioned for continued, profitable growth. Precise Biometrics has established a position as the leading supplier of fingerprint software for the mobile market. The volume in the market and the number of areas of application for fingerprint technology are increasing rapidly. The company's objective is to increase sales and market share in the fingerprint technology for mobile devices segment and establish a leading position in new product areas that require small sensors. Precise Biometrics shall make sure that the company's software provides the best user experience for products with small fingerprint sensors for platforms with limited processing power and memory, regardless of sensor technology, operating system or platform. By extending collaboration with existing customers and initiating new partnerships with more sensor manufacturers, the company is creating the right conditions to achieve its objectives.

The company also sees good opportunities to grow within the Mobile Smart Card Solutions business area. Interest in Tactivo is increasing in existing markets and there is an opportunity to develop new markets, primarily in the public sector, where a smart card is often required for secure mobile access to information.

IMPORTANT EVENTS DURING 2015

· Precise BioMatch Mobile was integrated into over 55 mobile phones from more than 25 manufacturers.
· Licensing agreements were signed with eight sensor manufacturers: Silead, JP Sensor, Elan, Cypress, Oxi Technology, Focaltech, Gingytech and J-Metrics.
· Several follow-on orders for Tactivo from the Defense Logistics Agency (DLA), an agency of the U.S. Department of Defense.
· Order for Tactivo from the US Navy for secure mobile access to email and the Internet on iOS devices.
· Orders for Tactivo from Imperial College Healthcare NHS Trust and Oxleas NHS Trust in the UK for secure mobile access to healthcare systems.
· Precise Biometrics was awarded the 2015 Frost & Sullivan Award for Global Customer Value Leadership in Fingerprint Biometrics for Mobile Devices.

IMPORTANT EVENTS AFTER THE YEAR END

· Precise Biometrics extended its licensing agreement with Fingerprint Cards to include smart cards.
· Precise Biometrics signed a licensing agreement with Chipone.
· Precise BioMatch Mobile has been integrated into more than ten mobile phones and tablets.
· Follow-on order for Tactivo from the Defense Logistics Agency (DLA), an agency of the U.S. Department of Defense.
· Precise Biometrics signed a licensing agreement with MStar.

PATENTS

The company's overall patent strategy has the objective of securing the rights to our own technology and products in selected markets, creating value for future business and enhancing the company's competitiveness. The portfolio of patents has been gradually reinforced to include 78 different registered patents and 14 patent applications within 19 different patent families at the end of 2015.

BRANDS

Precise Biometrics works actively and strategically with a brand portfolio consisting of a small number of carefully selected brands:

TACTIVO™ - the brand for Precise Biometrics' smart card readers. The brand is registered in the EU, the US and Australia, and patents are pending in Canada, China and Russia.

PRECISE BIOMETRICS™ - registered as both a brand image and brand name in several countries.

PRECISE BIOMATCH™ - the overall brand for the technology, and also used as the basis for the naming of software products. The brand is registered in both the EU and the US.

BIOMATCH™ - the overall brand for Precise Biometrics' technology. The brand is registered in both the EU and the US.

PRECISE MATCH-ON-CARD™ - the established and very well-known brand for Precise Biometrics' technology to save and match a fingerprint on a smart card. The brand is registered in the EU.

PRECISE SENSE™ - the brand for the version of biometric readers developed in 2011.

SALES AND EARNINGS

Sales during the year increased to SEK 56.3 (31.4) million. The largest share of sales came from the Fingerprint Technology business area, which accounted for SEK 42.6 million (8.3). Revenues consisted primarily of deliveries of the company's fingerprint technology to Fingerprint Cards and license sales for the ongoing NID project in Portugal. Sales in the Mobile Smart Card Solutions business area (Tactivo) increased during the year to SEK 10.1 million (5.1). Sales in the Desktop & Physical Access Solutions business area fell to SEK 3.6 million (18.0), which reflects the company's strategy to change its sales mix.

The gross margin for the full year was 85 % (55 %), representing a gross profit of SEK 47.9 million (17.2). This improvement is due to a higher proportion of software sales.

Operating expenses for the full year fell to SEK 57.3 million (61.7). Of these, selling and administration expenses accounted for SEK 26.3 million (34.2). This reduction is a consequence of an increased focus on the Fingerprint Technology and Mobile Smart Card Solutions business areas. The operating loss improved to SEK -9.4 million (-44.5) as a consequence of increased sales and a lower cost level. An operating profit at EBITDA level of SEK 0.5 million (-31.7) was achieved for the full year 2015.

Net financial items for the full year were SEK -0.1 million (0.5).

Earnings per share (average number of shares) for the full year amounted to SEK -0.03 (-0.13).

Cash flow for the full year improved to SEK -7.4 million (-42.1).

FINANCING AND LIQUIDITY

As of 31 December 2015, equity amounted to SEK 83.0 million (92.0) and equity per share to SEK 0.24 (0.27).

Liquid assets at the end of the year amounted to SEK 52.3 million (59.7).

CAPITALIZATION AND AMORTIZATION OF DEVELOPMENT WORK

Research and development costs during the full year were capitalized in the total amount of SEK 2.4 million (6.6). Amortization of capitalized research and development expenses amounted to SEK 8.6 million (8.5) for 2015.

RESEARCH AND DEVELOPMENT (R&D)

Research at Precise Biometrics is of fundamental importance for the company and enables it to remain competitive in an industry that is continuously developing. The main objective of research and development is to further develop the fingerprint algorithms on which the company's products are based. Precise Biometrics' research and development department works with the development of existing products and patents, and to develop new solutions.

ORGANIZATION AND STAFF

The organization consists of Precise Biometrics AB, with its head office in Lund and an office in Karlstad, Sweden, and Precise Biometrics Inc. in Virginia, USA. Sales consultants are hired in the US, Taiwan, China and South Korea to secure a local presence in key markets.

As of December 31, 2015, the Group had 35 staff members, consultants included. The number of employees were 22 (22), of which 22 (21) in Sweden and 0 (1) in the USA.

THE SHARE

As of December 31, 2015, the company had 345,306,094 shares listed on the Nasdaq Stockholm Small Cap list, Sector Industrial Goods & Services. A standard trading unit is one share.

The short name is PREC and the ISIN code is SE0001823303.

Reduction of share capital

In July 2015 the Swedish Companies Registration Office registered the reduction of share capital that was adopted at the 2015 AGM. Following this reduction, the share capital amounts to SEK 10,359,183. The reduction represents a fall in the nominal value of the shares by SEK 0.25 from SEK 0.28 to SEK 0.03.

Share price development

In 2015 there was a total turnover of 5,096,839,883 PREC shares, i.e., an average turnover of 20,306,135 shares per day of trading. The closing price on December 30, 2015, was SEK 6.10. During the year the share price fluctuated from SEK 0.93 to 9.45.

Ownership structure

The number of shareholders at the end of the year was 25,533 (12,760). The proportion of foreign owners was 14.6 % (11.7). Refer to shareholder statistics under "The share & the shareholders", which shows the ownership structure as of December 31, 2015.

Transferability of shares

There are no limits on the transferability of shares. Nor are there any agreements known to the company between shareholders that can involve limitations on the right to transfer shares.

FIVE YEAR SUMMARY

See the Five year Summary on pages 82-83.

The following specification of risk factors does not claim to be complete, nor are the risks ranked in their order of importance.

RISKS RELATED TO OPERATIONS

Technological development

The market in which the company operates is subject to rapid changes. New technology and new players are constantly emerging. The company's technology must therefore to a large extent be accepted by the leading players in the market, both by suppliers and customers. The market must be mature enough to understand and accept the new technology supplied by the company.

Market development

As the market in which the company operates grows and the number of players increases, there is a risk that alternative technologies will be developed and that the price of comparable products will thereby be reduced. This can mean that major investment in marketing and sales may be required to achieve the expected sales volumes.

Production capacity

The company relies on external production capacity. If the demand for components and production capacity should increase, the manufacturing costs for the company's products will also increase. An increase in the demand for components could also lead to delayed deliveries, which could result in the displacement of earnings.

Staff

There are a number of key persons in Precise Biometrics who are important for operations, especially in research and development, where they possess unique competence. If one or more of these key persons should leave the company it could, in the short term, have a negative impact on the business. There is also a risk that the recruitment of new staff for these positions could take time and result in additional costs for the company.

Partners

The company cooperates with several partners. They include smart card manufacturers, sensor manufacturers and suppliers of applications. The company relies on these partnerships so that it can offer end customers complete security solutions. There is a risk of closure for one or more of these partnerships, or that they fail to achieve the expected results, which would lead to a loss in expected future revenues.

Patents and industrial and intellectual property rights

It is important for the company to protect its technology and products through patents or other intellectual property rights in order to create opportunities for future revenues. The company therefore pursues an active patent strategy, which involves applying for patents for strategically important inventions in selected countries. Nevertheless, it cannot be guaranteed that the company will obtain patents in the countries where it has submitted applications, or that patents will not be declared invalid. There is also a risk that the company's patent may be circumvented (a so-called design around) or that the company's technology may be used in countries where the company has no patent protection. The company cannot guarantee that its products will not be considered to infringe on other patents granted or other industrial and intellectual property rights, and if such is the case, the company's business, profits, opportunities to deliver products and financial position may be negatively affected.

Competitors

The company is active in the market for biometrics. The competition in this market is severe. The competing companies can have substantially larger financial and industrial resources at their disposal than the company, and it cannot be ruled out that competition from players like this will lead to diminished market shares and/or a reduction in Precise Biometrics' profitability.

Sales

The biometrics market is an emerging industry. Judgments and decisions in a rapidly developing emerging industry are made with the reservation for uncertainty factors. There is a dependency on partners and the development of competitors, as well as the market's acceptance of biometrics. Another important factor is the development rate and penetration of services that biometric solutions will be used in, which leads to difficulties in predicting the future development of the business. The development of the company depends on the continued expansion of the market for biometrics. A delay in the penetration of more applications and markets will affect sales and profits. For the Fingerprint Technology business area there are risks involved in the fact that Precise Biometrics has been dependant on a small number of hardware partners for its sales. These risks diminish by having more customers and a platform-independent product portfolio.

Forecasting problems

The company operates in a rapidly changing market. The market for Fingerprint Technology products is in an early stage of development and revenues are to a large extent based on royalties from customers using them. All products are characterized by long selling-in processes. Earlier or later submissions of orders can have a significant effect on sales and profits. These factors make forecasting very difficult.

FINANCIAL RISKS

Future capital

The company has not yet achieved a positive cash flow over a 12-month period. There is no guarantee that new capital can be raised if the need should arise, or that such capital can be raised on favorable terms.

Currency exposure risks

The main part of the company's costs is in Swedish kronor (SEK), while a significant part of revenues and production costs are generated in foreign currency (mainly USD), which increases the company's currency exposure risks. The company has adopted a risk policy for currency exposure in order to minimize the risks to the business.

Credit risk

The company has guidelines for issuing credit to its customers. The company is of the opinion that there is a concentration of credit risk in relation to a customer or counterparty.

Cash flow

The company works hard to minimize the time capital is tied up, for example, in inventories and accounts receivable. To reduce the risk involved in tied-up capital, the company works actively to improve the internal process for forecasting and production planning.

CHANGE OF CONTROL CLAUSE

The company is not a party to any agreement that takes effect or is amended or ceases to be valid if control over the company is changed as a consequence of a public takeover bid.

GUIDELINES FOR REMUNERATION TO LEADING EXECUTIVES

A decision was made at the annual general meeting in 2015 on the establishment of guidelines for remuneration to leading executives, with the effect that remuneration and terms of employment shall be in line with the market and competitive, and that there will be a predetermined cap on remuneration. The variable salaries will not exceed 75 per cent of the fixed annual salary for the CEO, and 50 per cent for other executives. Remuneration will also be provided in the form of options or other share-related incentive schemes.

The CEO is subject to a mutual term of notice of 6 months, and the other executives to a term of notice of 3-6 months. Severance pay for the CEO may not exceed 6 months' salary if employment is terminated at the initiative of the company. Other executives are not entitled to severance pay.

The retirement age is 65, and pension premiums are calculated on a scale based on age and salary, and may amount to a maximum of 25 per cent of the fixed salary. The proposal implies a level of remuneration that basically corresponds to the one from the previous year.

THE BOARD'S PROPOSAL ON GUIDELINES FOR REMUNERATION TO LEADING EXECUTIVES

The board proposes that the AGM 2016 make a decision on guidelines for remuneration to leading executives that corresponds to the guidelines decided by the AGM 2015.

PARENT COMPANY

Parent company sales for the fiscal year amounted to SEK 49.7 million (26.4). The loss before tax for the fiscal year amounted to SEK -43.9 million (-36.8). At the end of the fiscal year there were 22 persons employed in the parent company. Liquid assets at the end of the year amounted to SEK 46.9 million (57.0).

In July, the Swedish Companies Registration Office registered the decrease in share capital pursuant to a resolution at the annual general meeting 2015. A write-down of the receivable from the subsidiary Precise Biometrics Inc. was carried out during the second half of the year for a total of SEK 35.9 million.

ALLOCATION OF PROFIT/LOSS

PROPOSED TREATMENT OF PROFIT/LOSS

Parent Company

The following assets are at the disposal of the AGM:

Share premium reserve, SEK	27,044,289
Balanced result carry forward SEK	86,326,523
Net loss for the year, SEK	-43,889,128

Total non-restricted equity 69,481,685

The board of directors proposes that SEK 69,481,685 be carried forward to the new year.

The board proposes that the AGM should not issue dividends for the fiscal year 2015.

CORPORATE GOVERNANCE REPORT 2015

The Corporate Governance Report has been prepared as part of the administration report and provides a general description of how Precise Biometrics works, how the company's decision-making functions, and how the company applies the Swedish Corporate Governance Code ("the Code"). Certain disclosures in accordance with Chapter 6, Section 6 of the Annual Accounts Act can be found in the Administration Report on pages 32-37 in the Annual Report.

CONTROL OF PRECISE BIOMETRICS

Corporate governance is the system through which the owners, directly or indirectly, govern and control a company. In a limited company like Precise Biometrics, governance, control and management is allocated between the shareholders, auditors, board of directors and the CEO in accordance with current legislation, regulations and instructions. The governance of Precise Biometrics is based on the Swedish Companies Act, the company's articles of association, the Nasdaq Stockholm rules for issuers, the Code, and internal control documents such as the financial policy and communication policy (see webpage at Investors/Corporate Governance).

ANNUAL GENERAL MEETING

The AGM is Precise Biometrics' highest ranking decision-making body and the forum through which shareholders can exercise their influence over the company. There are no limitations in Precise Biometrics with regard to how many votes each shareholder can submit at the AGM, and each shareholder can vote for their full number of shares. Nor are there any special provisions in the company's articles of association concerning the appointment or dismissal of board members, or concerning amendments to the articles of association.

At the AGM the shareholders exercise their right to vote by appointing board members and external auditors, making decisions on the adoption of the income statement and balance sheet, express an opinion on the discharge of liability for board members and the CEO in relation to the company, determine principles for how the nomination committee is to be elected, and establish guidelines for remuneration to leading executives.

Shareholders also have the opportunity at the AGM to ask questions concerning the company and normally all the members of the board, the group executive team and the auditors must be present to answer such questions.

Precise Biometrics' AGM 2015 was held at the company's head office in Lund, Sweden on April 27, 2015. At the AGM Torbjörn Clementz, Anders Harrysson, Torgny Hellström, Matts Lilja, Mats Lindoff and Eva Maria Matell were re-elected to the board and Torgny Hellström was appointed chairman. The meeting also confirmed the level of remuneration for the board and the committee, and established guidelines for remuneration to leading executives to the effect that such remuneration and terms of employment should be in line with the market and competitive. In addition the board was authorized, as in previous years, to make a decision on the new issue of a maximum of 34.5 million shares and/or convertibles, with or without departure from the preferential rights of shareholders, for the purpose of enabling the company to receive a capital infusion from new owners, which are considered to be strategically important from an operational, financial, structural or other perspective.

For further information on the decisions made at the AGM 2015, please refer to the company's website under Corporate Governance/Annual General Meeting.

Precise Biometrics' AGM 2016 will take place on May 17 at 4:00 pm at Mobilvägen 10 in Lund, Sweden. Notice of the meeting was issued on April 6, 2016. Shareholders who wish to participate in the meeting should be registered in the company's share register no later than May 11, 2016, and applications to participate in the meeting should be submitted as indicated in the notice.

NOMINATION COMMITTEE

According to the principles for the organization of the nomination committee adopted at the AGM 2015, the nomination committee shall consist of representatives from two of the three largest shareholders as of August 31, 2015, and the chairman of the board.

The nomination committee prior to the AGM 2016 consists of Robert Andersson (Bengt Andersson och Limhamns Förvaltning AB), Hans Ek (SEB Fonder) and Torgny Hellström (chairman of the board). In addition to the chairman of the board, the members represent three large shareholders in the company as of August 31, 2015, who have agreed to participate in the nomination committee.

The nomination committee is assigned to submit proposals at the AGM to the chairman and other board members, including a motivating statement concerning the proposals, propose remuneration for board members and auditors, propose compensation for committee work where appropriate, and submit a proposal for a person to be chairman at the AGM. In addition the nomination committee shall also express an opinion on the independence of the board members in relation to the company and major shareholders.

COMPOSITION OF THE BOARD

Precise Biometrics' board of directors shall, in accordance with the articles of association, consist of a minimum of three, and a maximum of seven members. After the 2015 AGM the board consisted of six members: Torgny Hellström (chairman), Torbjörn Clementz, Eva-Maria Matell, Anders Harrysson, Matts Lilja and Mats Lindoff. All of the board members are independent in relation to Precise Biometrics AB and to corporate management, and also to major shareholders. There are no shareholders in the company whose direct or indirect holding in the company represents at least one tenth of the voting rights of all shares in the company on the date on which the Annual Report is issued. The age, education and other assignments of board members, including holdings of financial instruments in the company, are indicated in the table below.

THE BOARD'S ACTIVITIES

The work of the board of directors complies with annual rules of procedure. The rules of procedure include instructions for the company's CEO, the assignments incumbent on the chairman, the agenda of board meetings, and decision-making procedures. In accordance with the rules of procedure, six ordinary board meetings shall be held in addition to the statutory board meeting. In addition to these meetings, the board convenes whenever necessary. In 2015 the board held 12 board meetings at which minutes were taken, of which two were held per capsulam.

TORGNY HELLSTRÖM EVA MARIA MATELL TORBJÖRN CLEMENTZ

POSITION	Chairman	Board member	Board member
YEAR OF SELECTION	2013	2007	2009
YEAR OF BIRTRH	1958	1958	1961
EDUCATION	LL.B	M.Sc.	MBA
OTHER ASSIGNMENTS	Board member at DDM Holding AG, Switzerland and True Heading AB (publ).	Board member at STI, Stockholms Technological Institute and Crisp AB	Board member at ONE Nordic Group, Sport and Rehab in Ängel holm, Euro Football Partners
CURRENT POSITION	Founder of and senior management consultant at Ruddex International AB	General manager at Cintos Consul ting	CFO at One Nordic AB
PREVIOUS ASSIGNMENTS	CEO and other leading positions within Anoto Group, Vice Presi dent at Ericsson, leading positions at Ericsson, IBM Europe and IBM Nordic legal departments	CEO at Kaspersky Lab AB, Sales and Marketing manager at XponCard AB	CFO and Vice President at BE Group
SHARES IN PRECISE BIOMETRICS	25,000	31,939	59,555
ATTENDANCE/BOARD MEETINGS	12/12	11/12	10/12
COMMITTEE WORK	Audit committee & Compensation committee	Audit committee	Audit committee
ATTENDANCE/COMMITTEE MEETINGS	13/13	7/7	7/7
INDEPENDENT OF THE COMPANY AND ITS MANAGEMENT	yes	yes	yes

The chairman organizes and leads the work of the board. Issues dealt with during the year included strategy and long-term focus, organization, corporate governance, financing, and interim and year-end reports.

The board has conducted a board evaluation in which the members submitted their views in writing about the company and the work of the board. The results were discussed in individual meetings between each board member and the Chairman of the Board, and jointly with the entire board. The Chairman of the Board presented the results of the board evaluation to the nomination committee.

The CEO keeps the board of directors up-to-date at all times on the development of the business. In addition to the ordinary meetings, the chairman and other directors have been in continuous contact with leading executives in the company, primarily the CEO and CFO. In addition to meetings where minutes were taken, the board has received monthly updates on the company's financial results and position..

Attendance at board meetings, year of election, etc. and independence is reported in the table below. Remuneration to the Board Members can be found in Note 5 on page 64 of the annual report.

AUDIT COMMITTEE

Since the AGM 2015 the company's audit committee has consisted of board members Torbjörn Clementz (committee chairman), Eva Maria Matell and Torgny Hellström. The audit committee is assigned to exercise supervision and prepare a number of questions to the board in support of their work to fulfill their responsibility within auditing, internal control and financial reporting. In 2015 the committee focused primarily on reporting (quarterly reports, annual financial reporting

ANDERS HARRYSSON MATTS LILJA MATS LINDOFF

Board member	Board member	Board member
2013	2013	2014
1959	1965	1961
M.Sc.	Technical college graduate	M.Sc.
Chairman of the board at Ewalie AB and Qmatic. Board member at NetInsight	Board member at Feedkit AB	Board member at Enea, Combain and Spiideo AB
	CEO at Strainlabs AB	Consultant in own business Lindoff Technology AB
CEO at Birdstep Technology ASA, VP North Europe Sun Microsystem and various positions within IBM both in Sweden and internationally	CEO at Ammeraal Beltech AB, ISG Systems AB, Opax A/S and Opax AB. Business Developer at SAAB Security	CTO at Sony Ericsson, CEO at C Technologies, Product Development Manager at Ericsson
0	0	0
9/12	10/12	11/12
Compensation committee	Compensation committee	Compensation committee
6/6	6/6	6/6
yes	yes	yes

and internal reporting), business-related risks and internal control. The committee holds meetings two or three times a year and in conjunction with the compilation of each interim report. The committee held seven meetings during the year, of which four were in conjunction with the quarterly reports.

COMPENSATION COMMITTEE

Since the 2015 AGM Precise Biometrics' compensation committee has consisted of board members Torgny Hellström (chairman of the committee), Mats Lindoff, Matts Lilja and Anders Harrysson. The duties of the compensation committee include issues concerning salaries, pension terms and conditions, incentive schemes and other terms and conditions for the employment of company executives. In 2015 the committee has primarily focused on remuneration to leading executives, including incentive schemes and option programs. The committee has also prepared board proposals for guidelines for remuneration to leading executives, which can be found in the Administration Report. The committee held six meetings during the year.

GROUP EXECUTIVE TEAM

Precise Biometrics' group executive team is based at the headquarters in Lund, Sweden. At the end of 2015 the group executive team consisted of the CEO, CFO, COO, R&D Director and Corporate Marketing Manager. The composition of the group ensures short decisionmaking channels. The group held formal weekly meetings during the year and a strategy and budget meeting. The table below provides a more detailed presentation of the group executive team.

AUDITORS

At the AGM 2015 Ernst & Young AB (EY), with Johan Thuresson as head auditor, was elected to be Precise Biometrics' auditor for the period until the AGM 2016. The auditors undertake assignments for other listed companies, but not to such an extent that the time required is not allocated for Precise Biometrics. None of the auditors has any assignments that would question their independence. As part of his audit assignment Johan Thuresson participated in one board meeting and three audit committee meetings, and has been in regular contact with the CEO, the CFO and the chairman of the board.

HÅKAN PERSSON PATRIK LINDEBERG

TOMMY NILSSON

POSITION	CEO	COO	CFO
EMPLOYED SINCE	2014	2007	2015
BORN	1961	1973	1957
EDUCATION	MBA	M.Sc.	MBA
PREVIOUS ASSIGNMENTS	CEO at Scalado AB, Country Manager at IBM Software Group, President Market Division at EMEA Telelogic AB	VP R&D and CTO at Precise Biome trics, Manager Technical Account Management at Teleca and Obigo	Management positions as Director/ VP Finance at Electrolux, Ericsson, Pharmacia and Masterfoods
SHARES IN PRECISE BIOMETRICS	0	0	0
WARRANTS IN PRECISE BIOMETRICS	1,000,000	150,000	0

Information on remuneration to the auditors, both for the parent company and the group, can be found in Note 6 on page 66 in the Annual Report.

POLICIES (WITHIN THE FRAMEWORK OF CORPORATE GOVERNANCE)

The board of Precise Biometrics has adopted several policies that form the basis for the way in which the board and the group executive team govern the organization. The policies adopted by the company are reported below. They are evaluated and revised on an annual basis.

FINANCE POLICY

This policy has the objective of establishing guidelines concerning how the company manages financing, currency exposure, investments, insurance, accounting and financial reporting.

COMMUNICATION POLICY

The information policy ensures that the company issues consistent and correct information on its business activities and complies with stock exchange requirements for the disclosure of information.

INSIDER POLICY

This policy ensures that there is no insider trading with the company's shares. The company keeps a log of all circumstances that can affect the share price and who in the company, on the board, or externally, is aware of such circumstances.

INFORMATION SECURITY POLICY

This policy covers all information processing within the group, i.e., within IT, mobile communication, emails, phones, physical access and archiving of hard copy, etc. It simplifies work within the group involving the security of information and is binding on all employees.

ENVIRONMENTAL POLICY

The company's environmental policy has the objective of ensuring that all its work, investments and other activities pay due attention to environmental impact.

RUTGER PETERSSON DANIEL EDLUND

R&D Director	Corporate Marketing Manager
2007	2014
1975	1979
M.Sc.	MBA
Several technical positions at Preci se Biometrics, Ericsson and Teleca Mobile, primarily within project management	Management positions within the ICT industry as Director of Commu nications, Marketing & Account Manager at Huawei Technologies Nordics, Axicom Cohn & Wolfe, and Porter Novelli
0	25,000
150,000	200,000

REPORT SUBMITTED BY THE BOARD ON INTERNAL CONTROL FOR THE FISCAL YEAR 2015

Under the Swedish Companies Act, and the Code, the board is responsible for internal control. In compliance with the Code the board shall ensure that the company maintains a satisfactory level of internal control and is regularly informed of, and evaluates, how the company's system for internal control is working. The board's report has been restricted to the inclusion of only the internal control for financial reporting.

CONTROL ENVIRONMENT

In order to create and maintain a functional control environment the board has prepared several important documents for the financial reporting. These documents consist of the rules of procedure as applied by the board and instructions for the CEO. The CEO keeps a check on the guidelines the board puts out to make sure they are implemented on a daily basis. The CEO briefs the board on a fixed regular basis at board meetings and more informal meetings focusing on updates. In addition to this, the company's auditors report to the board at least once every fiscal year and at least twice to the audit committee. It should also be noted that the review of internal control was performed within the framework of the external audit. The head auditor also maintains regular contact with the chairman.

The most important parts of the control environment are the documents that govern accounting and financial reporting. The company follows a well-defined procedure in relation to annual and monthly financial reporting. The closing financial statements are presented to the board every month according to a predetermined template.

The organization of the company and the way in which the business is run also form an important basis for internal control. All areas of responsibility and employees have clearly defined roles. The policies of the company are an important foundation to ensure that the control environment works.

RISK ASSESSMENT AND INSPECTION ACTIVITIES

Precise Biometrics constantly assesses the current risk situation applying to financial reporting. The company pays special attention to risks in the financial reporting, i.e., whether there are any accounting errors, how assets and liabilities are valued, and their completeness. The management of internal transactions within the group can also be subject to risks. These risks are considered, however, to be of minor importance in that the company has a well-defined monthly financial reporting process and established follow-up procedures and policies. It should also be noted that the company continuously updates its financial handbook.

Manual inspections are carried out to prevent errors in the financial reporting. These inspections are also integrated into the accounting and other IT systems.

INFORMATION AND COMMUNICATION

The board of directors receives monthly reports from the CEO and CFO about the company's financial position, development and projects in progress.

The company continuously informs the staff of updates to accounting principles, policies and other changes in reporting requirements.

All external information and communication is regulated by the company's information policy.

FOLLOW-UP

The board and the auditing committee continually assess the information submitted by the group executive team. The company's financial position is discussed at every board meeting, and at more informal monthly update meetings. Budget comparisons and forecasts, including analysis of any deviations, are described in the monthly reports.

The board of directors examines interim and year end financial statements before they are published.

The assignments of the external auditors also include auditing internal control in the group.

In this context the board of directors has not found it necessary to establish a separate internal audit process.

INCOME STATEMENT

GROUP

SEK thousands	Note	2015	2014

Net sales	2	56,337	31,387
Cost of goods and services sold	3	-8,415	-14,208
Gross profit		47,921	17,179

Selling expenses		-12,685	-19,907
Administration expenses		-13,587	-14,343
R&D expenses		-31,275	-28,984
Other operating income		219	1,508
	3,4,5,6,7	-57,328	-61,726

Operating profit/loss		-9,407	-44,547
Interest income		15	510
Interest expenses	12	-77	-8
		-62	502

Profit/loss before tax		-9,469	-44,045

Income tax	8	-	-
LOSS FOR THE YEAR		-9,469	-44,045

Loss attributable to holders of participations
in the parent company		-9,469	-44,045
Earnings per share, SEK (before/after dilution)	9	-0.03	-0.13

REPORT ON COMPREHENSIVE INCOME

LOSS FOR THE YEAR	-9,469	-44,045
Other comprehensive income:
Components that can be reversed in Income statement
Exchange rate differences that arise when translating foreign operations	545	1,220
Other comprehensive income for the year	545	1,220
Total comprehensive income for the year, attributable to holders of participations in the	-8,924	-42,825
parent company

INCOME STATEMENT

PARENT COMPANY

SEK thousands	Note	2015	2014

Net sales	2.10	49,755	26,394
Cost of goods and services sold	3	-5,499	-13,933
Gross profit		44,256	12,461

Selling expenses		-11,082	-15,373
Administration expenses		-13,586	-14,342
R&D expenses		-31,275	-28,984
Other operating income		3,140	8,291
	3,4,5,6,7	-52,804	-50,408

Operating profit/loss		-8,548	-37,947

Interest income	12	643	1,130
Result from participations in group companies	15	-35,911	-
Interest expenses	12	-73	-8
		-35,341	1,122

Profit/loss before tax		-43,889	-36,825

Income tax	8	-	-
LOSS FOR THE YEAR		-43,889	-36,825

REPORT ON COMPREHENSIVE INCOME

LOSS FOR THE YEAR	-43,889	-36,825
Other comprehensive income:
Other comprehensive income for the year	-43,889	-36,825

BALANCE SHEET

GROUP

SEK thousands
ASSETS	Note	Dec 31, 2015	Dec 31, 2014
Fixed assets
Intangible fixed assets	13	11,152	17,360
Tangible fixed assets	14	2,132	2,784
Total fixed assets		13,284	20,144
Current assets
Inventories	16	8,503	11,860
Accounts receivable	17	8,830	6,759
Other receivables		419	3,988
Prepaid expenses and accrued income	18	15,557	3,791
Liquid assets		52,356	59,659
Total current assets		85,665	86,056
TOTAL ASSETS		98,949	106,200
EQUITY & LIABILITIES
EQUITY
Share capital		10,359	96,685
Other capital contributed	19	775,969	689,643
Premium reserve		2,441	1,896
Losses brought forward		-696,241	-652,196
Loss for the year		-9,469	-44,045
Total equity		83,059	91,983
Total equity attributable to the parent company's owners		83,059	91,983
Current liabilities
Accounts payable		4,167	2,897
Other liabilities		3,545	1,118
Accrued expenses and prepaid income	21	7,870	9,798
Other provisions	20	308	404
Total current liabilities		15,890	14,217
TOTAL EQUITY AND LIABILITIES		98,949	106,200
Pledged assets		None	None
Contingent liabilities		None	None

PARENT COMPANY

SEK thousands
ASSETS	Note	Dec 31, 2015	Dec 31, 2014
Fixed assets
Intangible fixed assets	13	11,152	17,360
Tangible fixed assets	14	2,132	2,784
Financial fixed assets	15	10,135	1,058
Total fixed assets		23,419	21,202
Current assets
Inventories	16	5,746	7,437
Accounts receivable	17	4,848	4,435
Receivables from group companies	15	-	39,605
Other receivables		273	3,855
Prepaid expenses and accrued income	18	15,517	3,719
Liquid assets		46,860	56,979
Total current assets		73,244	116,030
TOTAL ASSETS		96,663	137,232
EQUITY & LIABILITIES
EQUITY
Share capital		10,359	96,685
Statutory reserve		1,445	1,445
Total restricted equity		11,804	98,130
Premium reserve		27,044	63,869
Balanced result		86,326	-
Loss for the year		-43,889	-36,825
Total unrestricted equity		69,481	27,044
Total equity		81,285	125,174
Provisions
Other provisions	20	78	212
Total provisions		78	212
Current liabilities
Accounts payable		3,279	2,825
Liabilities to Group companies		1,780	-
Other liabilities		3,490	996
Accrued expenses and prepaid income	21	6,751	8,025
Total current liabilities		15,300	11,846
TOTAL EQUITY AND LIABILITIES		96,663	137,232
Pledged assets		None	None
Contingent liabilities		None	None

CASH FLOW STATEMENT

GROUP

SEK thousands	Note	2015	2014
Cash flow from operating activities
Operating profit		-9,407	-44,547
Reversal of depreciations and write-downs		9,864	12,774
Finance net	12	-61	502
Cash flow from operating activities		396	-31,271
before change in operating capital
Change in operating capital
Change in inventory		3,683	3,082
Change in operating receivables		-10,106	35,428
Change in provisions		-109	-151
Change in operating liabilities		1,678	-41,584
		-4,854	-3,225
Cash flow from operating activities		-4,459	-34,496
Cash flow from investing activities
Capitalization of development		-2,434	-6,657
Investments in material fixed assets		-570	-1,213
Cash flow from investing activities		-3,004	-7,870
Cash flow from financing activities
Liquid assets from options		-	261
Cash flow from financing activities		-	261
Cash flow for the year		-7,463	-42,105
Cash and cash equivalents at beginning of the year		59,659	101,197
Translation differences in cash and cash equivalents		160	567
Cash and cash equivalents at the end of the year		52,356	59,659

PARENT COMPANY

SEK thousands	Note	2015	2014
Cash flow from operating activities
Operating profit		-8,548	-37,946
Reversal of depreciations and write-downs		9,864	12,774
Finance net	12	570	1,122
Cash flow from operating activities		1,886	-24,050
before change in operating capital
Change in operating capital
Change in inventory		1,692	3,475
Change in operating receivables		-12,233	-6,134
Change in provisions		-134	112
Change in operating liabilities		1,674	-5,530
		-9,001	-8,077
Cash flow from operating activities		-7,115	-32,127
Cash flow from investing activities
Capitalization of development		-2,434	-6,657
Investments in material fixed assets		-570	-1,213
Cash flow from investing activities		-3,004	-7,870
Cash flow from financing activities		-	-
Cash flow for the year		-10,119	-39,997
Cash and cash equivalents at beginning of the year		56,979	96,976
Cash and cash equivalents at the end of the year		46,860	56,979

CHANGE IN EQUITY

GROUP

SEK thousands	Attributable to parent company's owners
	Share capital	Other capital contributed	Translation differences	Losses brought forward / Loss for the year	Total equity
Opening balance as of January 1, 2014	96,685	689,382	676	-652,196	134,547
Comprehensive income
Loss for the year	-	-	-	-44,045	-44,045
Other comprehensive income
Exchange rate differences	-	-	1,220	-	1,220
Total other comprehensive income	-	-	1,220	-44,045	-42,825
Total comprehensive income	-	-	1,220	-44,045	-42,825
Transactions with shareholders
Option program	-	261	-	-	261
Total transactions with shareholders	-	261	-	-	261
Closing balance as of December 31, 2014	96,685	689,643	1,896	-696,241	91,983
Opening balance as of January 1, 2015	96,685	689,643	1,896	-696,241	91,983
Comprehensive income
Loss for the year	-	-	-	-9,469	-9,469
Other comprehensive income
Exchange rate differences	-	-	545	-	545
Total other comprehensive income	-	-	545	-	545
Total comprehensive income	-	-	545	-9,469	-8,924
Transactions with shareholders
Reduction of the quota value of the shares	-86,326	86,326	-	-	-
Total transactions with shareholders	-86,326	86,326	-	-	-
Closing balance as of December 31, 2015	10,359	775,969	2,441	-705,710	83,059

PARENT COMPANY

SEK thousands		RESTRICTED EQUITY	UNRESTRICTED EQUITY
	Share capital	Statutory reserve	Premium reserve	Losses brought forward / Loss for the year	Total equity
Opening balance as of January 1, 2014	96,685	1,445	106,962	-43,093	161,999
Comprehensive income
Loss for the year	-	-	-	-36,825	-36,825
Other comprehensive income
Total comprehensive income	-	-	-	-36,825	-36,825
Transactions with shareholders
Transfer of the loss for the year	-	-	-43,093	43,093	-
Total transactions with shareholders	-	-	-43,093	43,093	-
Closing balance as of December 31, 2014	96,685	1,445	63,869	-36,825	125,174
Opening balance as of January 1, 2015	96,685	1,445	63,869	-36,825	125,174
Comprehensive income
Transfer of annual loss	-	-	-	-43,889	-43,889
Other comprehensive income	- -	-	-	-
Total comprehensive income	-	-	-	-43,889	-43,889
Transactions with shareholders
Transfer of the loss for the year	-	-	-36,825	36,825	-
Reduction of the quota value of the shares	-86,326	-	-	86,326	-
Total transactions with shareholders	-	-	-36,825	123,151	-
Closing balance as of December 31, 2015	10,359	1,445	27,044	42,437	81,285

NOTES

NOTE 1 - GENERAL ACCOUNTING POLICIES NOTE 2 - BUSINESS AREA INFORMATION NOTE 3 - COSTS ALLOCATED PER TYPE NOTE 4 - EMPLOYEES AND PERSONNEL EXPENSES NOTE 5 - REMUNERATION TO LEADING EXECUTIVES NOTE 6 - AUDITORS' REMUNERATION NOTE 7 - OPERATIONAL LEASING AGREEMENTS NOTE 8 - INCOME TAX AND DEFERRED TAX NOTE 9 - EARNINGS PER SHARE NOTE 10 - PURCHASES AND SALES BETWEEN GROUP COMPANIES NOTE 11 - FINANCIAL RISK FACTORS NOTE 12 - INTEREST INCOME AND INTEREST EXPENSES NOTE 13 - INTANGIBLE FIXED ASSETS NOTE 14 - TANGIBLE FIXED ASSETS NOTE 15 - FINANCIAL ASSETS NOTE 16 - INVENTORIES NOTE 17 - ACCOUNTS RECEIVABLE NOTE 18 - PREPAID EXPENSES AND ACCRUED INCOME NOTE 19 - EQUITY NOTE 20 - OTHER PROVISIONS NOTE 21 - ACCRUED EXPENSES AND PREPAID INCOME NOTE 22 - WRITE-DOWNS NOTE 23 - RELATED PARTY TRANSACTIONS

NOTE 1 - GENERAL ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance with the Swedish Annual Accounts Act, RFR 1 Supplementary Accounting Regulations for Groups and the International Financial Reporting Standards (IFRS) as adopted by the EU. The parent company observes the Swedish Annual Accounts Act and RFR 2, Accounting Regulations for Legal Entities.

The consolidated financial statements have been prepared in accordance with the acquisition method.

All amounts are given unless otherwise stated in SEK thousands, and unless otherwise stated amounts in brackets refer to the previous fiscal year.

NEW AND AMENDED IFRS THAT HAVE NOT YET BEEN APPLIED

A number of new and amended IFRS have not yet come into force and have not been applied in advance when preparing the group's and the parent company's financial statements. Below is a description of the IFRS that may affect the group's or the parent company's financial statements. None of the other new standards, amended standards or IFRIC interpretations that IASB has published are expected to have any effect on the group's or the parent company's financial statements.

IFRS 15 "Revenue from contracts with customers" regulates how revenues should be reported. The principles on which it is based should give users of financial reports more useful information on the company's revenues. The augmented disclosure obligation means that information on the type of revenues, date of regulation, uncertainties related to revenue reporting and cash flows attributable to the company's contracts with customers, must be disclosed. Revenue in accordance with IFRS 15 must be reported when the customer receives control over the product or service sold and has the opportunity to use or derive benefit from the product or service.

IFRS 15 replaces IAS 18 Revenues and IAS 11 Contract Agreements, including other related SIC and IFRIC. IFRS 15 comes into force in 2018 and application in advance is permitted. The group has not yet evaluated the effects of the introduction of the standard.

IIFRS 16 comes into force on January 1, 2019. So far there is no information about when the EU is expected to approve the standard. The standard is to be applied retrospectively.

CONSOLIDATED ACCOUNTS

The consolidated statements are prepared using the acquisition method. Subsidiaries are included in the consolidated financial statements as of the date controlling influence is transferred to the parent company.

Intergroup transactions, balance sheet items, earnings and expenses

between group companies are eliminated. Profit and loss resulting from intergroup transactions, and which are reported in assets, are also eliminated. The accounting policies for subsidiaries have, where appropriate, been amended to ensure consistent application of group policy.

SEGMENT REPORTING

Operating segments are reported so as to correspond with the internal reporting submitted to the chief executive. The chief executive is the function responsible for allocation of resources and assessment of operating segment profits. In the group this function has been identified as the board.

As of January 1, 2014, the business has been divided into three different business areas. Mobile Smart Card Solutions, Fingerprint Technology (licensing of algorithms) and Desktop & Physical Access Solutions (fingerprint readers and access solutions for premises and computers). Segment reporting for 2015 took place in the same way, but as from 1 January 2016 Desktop & Physical Access Solutions will become part of the Mobile Smart Card Solutions business area.

The group executive team does, however, also follow business activities from a product perspective. The group has three types of product categories, which are products, licenses and services. See also Note 2, Segment information.

The group executive team evaluates the business segments on the basis of results defined in Note 2, Segment information.

TRANSLATION OF FOREIGN CURRENCY

Functional currency

Items included in the financial statements of the different units in the group are valued in the currency of the economic environment in which each company primarily operates (functional currency). Swedish kronor (SEK) is used in the consolidated financial statements, which is the parent company's functional currency and reporting currency.

Transactions and balance sheet items

Transactions in foreign currency are converted to the functional currency according to the exchange rates applicable on the transaction date. Exchange rate gains and losses incurred upon payment of such transactions and during the conversion of monetary assets or liabilities in foreign currency to the year-end rate are reported in the income statement under Cost of products and services sold. Foreign exchange differences on financial transactions which are classified as net investment in foreign activities are reported in other comprehensive income.

Group companies

The earnings and financial position for all group companies (none of which has a high inflation currency) that have a functional currency other than the reporting currency are reported in the group's reporting currency as follows:

· Assets and liabilities for each of the balance sheets are translated at the closing rate.
· Income and expenses for each of the income statements are converted at average exchange rates for the period. Insofar as this average rate is a reasonable approximation of the accumulated effect of the rates applicable on the transaction date, income and expenses are converted at the rate prevailing on the transaction date.
· All accumulated exchange rate differences are reported as a separate part of shareholders' equity.

TANGIBLE FIXED ASSETS

Tangible fixed assets are valued at the acquisition value, reduced by accumulated depreciation. The acquisition value includes charges that can be directly attributed to the acquisition of the asset.

Additional expenditures are added to the asset's reported value or are reported as a separate asset, depending on which is appropriate, only when it is likely that the future economic benefits associated with the asset will benefit the group and the asset's acquisition value can be reliably measured. All other forms of repair and maintenance are recorded as expenses in the income statement in the period in which they are incurred.

In order to reduce their acquisition value to the estimated residual value, tangible fixed assets are depreciated on a straight-line basis according to plan over the estimated period of use as follows:

Computers 3 years Equipment 5 years

Depreciation of tangible fixed assets is included in Selling expenses, Administration expenses and R&D expenses in the income statement. The allocation of functions is carried out using a formula based on the number of employees per function.

The residual values and useful life of the assets are assessed on the balance sheet date, and adjusted when necessary.

In the event the reported value of an asset is considered to exceed its estimated recovery value, the asset is immediately written down to its recovery value. Gains and losses on disposals are determined through a comparison of the proceeds of sale and the reported value, and are reported in the income statement.

INTANGIBLE ASSETS

Research and development

Research expenses are recognized as they arise. Development expenses consist of expenses for the further development of equipment and software for biometric fingerprint identification. These are reported as intangible assets when it is likely that the project will be successful in terms of its commercial and technical potential, and if the costs can be reliably measured. Other development expenses are recognized as they arise. Previously reported development expenses are not carried forward to the subsequent period. Development expenses have a limited useful life and are amortized on a straight-line basis from the date when the commercial production of the product can begin. The estimated useful life is two to five years.

Depreciation of capitalized development costs is included in R&D expenses in the income statement.

Software

Expenses for the maintenance of software are reported as expenses as they arise. Expenses for the acquisition and development of software are capitalized as intangible fixed assets if the criteria in accordance with IAS 38 and IFRS 3 are met. Expenses are capitalized on the basis of the expenses incurred when the actual software was acquired and used, or when expenses for development are incurred. These expenses are written off over the estimated useful life, which extends to five years.

Patents

Patents have a limited useful life and are therefore reported at the acquisition value minus accumulated amortization. Amortization is recorded on a straight-line basis over ten years.

WRITE-DOWNS

Assets that are depreciated are evaluated fora reduction in value whenever events or changed conditions indicate that the reported value is not recoverable. Write-downs are recorded for the amount by which the asset's reported value exceeds its recovery value, which is the higher of the net sales value and the utility value. When calculating the utility value, future cash flows are discounted using an interest rate that takes into consideration the market assessment of risk-free interest and risk associated with the specific asset. For an asset, the recovery value is calculated for the cash-generating unit that the asset belongs to, i.e., the lowest levels where there are identifiable cash flows.

FINANCIAL INSTRUMENTS

Loans and receivables

Trade receivables are non-derivative financial assets with fixed or determinable payments that are not listed in an active market. One of their distinguishing features is that they are incurred when the group supplies products or services directly to a customer without the intention of trading the resulting claim.

Trade receivables are recognized initially at fair value and subsequently at amortized cost reduced by any provision for impairment. A provision for impairment of trade receivables is made when there is objective evidence that the group will not be able to receive all the amounts due in accordance with the original conditions for the receivable. The amount of the provision is the difference between the asset's reported value and the present value of estimated future cash flows, discounted using the effective interest rate.

Other financial liabilities

A financial asset is recognized in the balance sheet when the company becomes a party to the contractual terms of the instrument. A liability is recorded when the counterparty has delivered and there is a contractual obligation to pay, even if the invoice has not yet been received. Suppliers' invoices are recorded when an invoice has been received.

A financial liability is derecognized when the obligation in the agreement is honored or settled in any other way.

Other financial liabilities consist primarily of accounts payable, which are reported at amortized cost.

CAPITAL STOCK

Common stock is classified as equity. Transaction costs directly attributable to the issue of new common stock or options are reported in equity as a deduction from issue liquidity.

INCOME TAXES

Tax expenses for the period include current and deferred taxes. Tax is reported in the income statement, except when it refers to items reported in other comprehensive income, or directly in equity.

In such cases the tax is also reported in other comprehensive income and equity. The valuation of all tax liabilities/receivables is recorded at nominal amounts and the actual tax cost is calculated on the basis of the tax regulations enacted on the balance sheet date, or enacted in practice in the countries where the parent company and its subsidiaries operate and generate taxable income. The executive regularly assesses the claims made in tax returns concerning situations where the applicable tax regulations are subject to interpretation. When appropriate, it allocates provisions for amounts that will in all probability be paid to the tax authority.

In accordance with the balance sheet method, deferred tax is reported as all temporary differences arising between the taxable value of assets and liabilities and their reported values in the consolidated financial statements. However, deferred tax is not reported if it has arisen as a result of a transaction that involves the first reporting of an asset or liability that is not a business acquisition, and which at the time of the transaction neither affects reported nor taxable income. Deferred income tax is calculated by applying tax rates (and laws) enacted or published on the balance sheet date and which are expected to apply when the deferred tax asset is realized or the deferred tax liability is settled. Deferred tax assets relating to loss carryforwards are reported to the extent that it is probable that deductions can be offset against future profits for tax purposes. Against the backdrop of past development in group earnings, no deferred tax assets relating to loss carryforwards have been reported. Deferred tax on temporary differences for investments in subsidiaries is not reported as the parent company can control the date for reversing temporary differences and it is not considered likely that reverses will occur in the foreseeable future.

INVENTORIES

Inventories are valued according to the first-in/first-out (FIFO) method at the lesser of the acquisition value and the net sales value.

REMUNERATION TO EMPLOYEES

Pensions

The group only has defined-contribution pension plans. Pension plans are financed through payments from respective group companies. For defined-contribution pension plans, the group pays contributions to privately managed pension insurance plans on a contractual basis. The group has no additional payment obligations after the contributions have been paid.

Severance pay

Compensation upon termination of employment is paid when an employee is given notice prior to the normal retirement date, or when an employee accepts voluntary retirement from employment in exchange for such compensation. The group reports severance pay when it is clearly obligated either to terminate an employee in accordance with a detailed, formal plan without any possibility of recall, or to pay compensation when serving notice as a result of an offer having been made to encourage voluntary redundancy. Benefits that fall due more than 12 months after the balance sheet date are discounted to the current value.

Flexible pay

The group reports a liability and cost for flexible pay on the basis of the result for the year when an obligation exists.

Share-based compensation

Precise Biometrics has an outstanding options program for employees in Sweden. Warrants have been issued to employees in Sweden (see Note 5 - Remuneration to leading executives) and the US as part of the program on ordinary market terms. On acquisition of subscription options by employees, the payments received are reported in other paid-in capital. The capital stock is increased by each newly issued share's nominal value upon utilization of the options, and the corresponding share premium is reported in other paid-in capital.

ACCOUNTS PAYABLE

Accounts payable are initially valued at fair value and thereafter at amortized cost using the effective rate method.

PROVISIONS

Provisions are reported when the group has an existing legal or informal obligation as a result of previous events, and it is more likely that an outflow of resources will be necessary to settle the commitment than otherwise, and the amount has been calculated reliably.

Provisions are established for expected warranty requirements relating to products that have been sold in the last fiscal year. Provisions are currently set at approx. 2 % of booked revenues, reflecting the estimate of the amount that will be paid out. Expenses are estimated to be incurred in the following fiscal year.

REVENUE

The group's revenues consist primarily of revenues from licenses and sales of products and are reported on delivery of the products to the customer, in accordance with the terms and conditions of delivery. Sales are posted net of VAT and discounts.

License revenues are reported when license agreements, without interruption clauses, have been signed and delivery has taken place, and when price and payment plans have been determined without any other commitments in addition to the provision of licenses. Licenses sold in combination with hardware, which are a prerequisite for the functioning of the software, are reported as revenue when the hardware has been delivered. License revenues are normally invoiced for a twelve-month period at a one-time amount, while royalties are reported as income for the period during which customers report the use of licenses and are based on a royalty report that is received (see Note 2). Consultancy services performed on account are reported as the work is completed. Support and Maintenance revenues are reported as revenue based on the length of the agreement. Revenues from sales of services are reported in the period in which the services are carried out. The revenues are calculated on the basis of the degree of completion for the specific transaction based on the proportion of expenses incurred in relation to the total cost of the project.

LEASING AGREEMENTS

Leasing where an essential part of the risks and advantages of ownership are retained by the lessor is classified as operational leasing. Payments made during the term of the lease (after deductions for any incentives from the lessor) are reported as an expense in the income statement on a straight-line basis over the term of the lease. The group has no finance leasing contracts.

IMPORTANT ESTIMATES AND EVALUATIONS FOR ACCOUNTING PURPOSES

In order to prepare the financial statements in accordance with generally accepted accounting principles, it is necessary to make estimates and assumptions that affect the income statement, balance sheet and other disclosures. Actual outcomes may differ from the estimates made..

A) Important estimates and assumptions for accounting purposes

Capitalization of development expenses

The area where estimates and assumptions could involve the risk of adjustments to reported values for assets and liabilities during the next fiscal year is mainly related to capitalized development expenses. The group regularly examines whether there is a need for writedowns of capitalized development expenses in accordance with the accounting policies described under Intangible assets. This examination is carried out through an assessment of the project in relation to future cash flows. Projects that will not bring the company any future financial benefits are written down. Forecasts for future cash flows are based on the best possible estimates of future revenues and expenses.

Income tax

The group has to pay taxes in two countries. In view of the historical development of the group's earnings, an assessment has been made that the group's tax expense is limited, at least in the short term.

The group makes ongoing estimates related to opportunities to utilize loss deductions in the future, based on its historical and expected future development of earnings.

B) Important assessments during the application of the group's accounting policies

Assessment concerning the future survival of the company

In the fall of 2014 the company implemented a reorganization and focusing of its activities to achieve profitability in 2015, which was duly achieved. A further investment was made in the Fingerprint Technology business area, including a reinforcement of sales resources in Asia. This reorganization enabled the company to reduce its operating costs substantially and resulted in a reported profit at EBITDA level for 2015.

Within the business area Fingerprint Technology the company sees an important potential to increase its sales of software licenses, primarily to the mobile phone industry. The strong positive trend in 2015 is expected to continue during 2016 and thereafter. The company has signed partnership agreements with the two largest sensor manufacturers, and therefore its market positioning is considered to be good.

The parent company has a net group receivable in the US subsidiary, which was to a large extent written down during the year. The remaining receivable is now on par with the equity in the US subsidiary. Further investments were also made in 2015 in the Mobile SmartCard Solutions business area and the proprietary product Tactivo™. Sales almost doubled compared with 2014 and the company believes that sales of Tactivo will continue to develop strongly during 2016. This increase is taking place primarily in the US, with a focus on the government agency market as well as the European health care and corporate markets.

The company considers the liquidity situation to be satisfactory.

DEVIATIONS BETWEEN THE ACCOUNTING POLICIES FOR THE GROUP AND THE PARENT COMPANY

Financial fixed assets

Shares and participations in subsidiaries are reported at the acquisition value, after deductions for depreciation. The acquisition value is included in acquisition-related costs and, where appropriate, supplementary purchase prices. Dividends received are recorded as financial revenues. Dividends that exceed the subsidiary's comprehensive income for the period, or that result in the book value of the holding's net assets in the consolidated financial statements being less than the book value of the participations, are an indication that there is a writedown requirement.

When there is an indication that shares and participations in a subsidiary have diminished in value, an estimate is made of the recovery value. A write-down is recorded if this is lower than the reported value. Write-downs are reported in the item Results from participations in group companies.

NOTE 2 - BUSINESS AREA INFORMATION

Business areas are reported in such a way that they correspond with the internal reporting submitted to the management.

The management is monitoring the result per segment.

		MOBILE SMART CARD SOLUTIONS		FINGERPRINT TECHNOLOGY		DESKTOP & PHYSICAL ACCESS SOLUTIONS		UNALLOCATED		TOTAL
	2015	2014	2015	2014	2015	2014	2015	2014	2015	2014
Revenues
External sales	10,141	5,147	42,559	8,289	3,637	17,951	-	-	56,337	31,387
Earnings per segment 1)	-6,504	-33,812	5,818	-9,439	-1,546	3,580	-7,176	-4,876		-9,408 -44,547
Interest net									-61	502
Net loss for the year										-9,469 -44,045

1) Earnings per segment consist of revenues minus costs of goods sold and direct costs, and a proportion of indirect, costs.

REVENUES ARE ALLOCATED TO PRODUCT TYPE AS FOLLOWS:

		PRODUCTS		ROYALTY LICENSE		SERVICES		TOTAL
	2015	2014	2015	2014	2015	2014	2015	2014	2015	2014
Revenues
External sales	13,796	18,616	30,426	1,350	11,616	7,752	499	3,669	56,337	31,387

The group's revenues from external sales in Sweden amount to SEK 35.9 million (12.4) and revenues from external sales in Europe amount to SEK 7.7 million (19.0), revenues from the US account for SEK 8.4 million (6.7) and from Asia SEK 4.3 million (4.2)

The group has 1 (1) larger client that represent over ten percent of the revenue. Sales to this client can be attributed to 55 % (43 %) of the revenues. The revenues are reported in the business areas Fingerprint Technology 2015 and Desktop & Physical Access Solutions 2014. It relates to different clients 2015 respectively 2014.

BUSINESS AREA SALES PARENT COMPANY

	MOBILE SMART CARD SOLUTIONS					FINGERPRINT TECHNOLOGY DESKTOP & PHYSICAL ACCESS SOLUTIONS
	2015	2014	2015	2014	2015	2014	2015	2014
Revenues
External sales	2,049	2,429	46,020	8,289	1,686	15,676	49,755	26,394

The parent company's revenues from external sales in Sweden amount to SEK 35.9 million (12.4) and revenues from external sales in other countries amount to SEK 12.0 million (10.5), of which revenues from the US account for SEK 1.8 million (2.9).

NOTE 3 - COSTS ALLOCATED PER TYPE

		KONCERNEN		MODERBOLAGET
	2015	2014	2015	2014
Depreciation and write-downs	9,864	12,774	9,864	12,774
Personnel expenses	25,790	28,696	24,868	25,680
Goods for resale	8,415	14,209	5,499	13,933
Travel expenses	1,573	1,544	1,566	1,464
Telephone costs	218	536	190	473
Insurance expenses	398	960	333	888
Consultancy costs	6,973	5,721	6,711	5,173
Premises costs	3,172	3,897	2,727	3,224
Development costs	4,353	4,835	4,353	4,835
Other sales expenses	1,156	2,073	1,121	2,050
Management expenses	2,365	1,606	2,354	1,606
Exchange rate adjustments	-115	-1,507	-3,036	-8,291
Other external income & costs	1,581	590	1,754	531
TOTAL	65,743	75,934	58,304	64,340

NOTE 4 - EMPLOYEES AND PERSONNEL EXPENSES

Gender balance in group

		2015		2014
	MEN	WOMEN	MEN	WOMEN
Precise Biometrics AB, Sweden	17	5	19	6
Precise Biometrics Inc, USA	0	0	1	1
	17	5	20	7
Gender balance in corporate management		GROUP		PARENT COMPANY
Proportion of women	2015	2014	2015	2014

The board of directors	17 %	22 %	17 %	22 %
CEO and leading executives	0 %	19 %	0 %	19 %

Salaries and remuneration are allocated as follows:

		GROUP	PARENT COMPANY
	2015	2014	2015	2014
Board and CEO, Sweden
Salaries and other remuneration	3,857	4,191	3,857	4,191
Pension expenses	450	188	450	188
Payroll overhead, incl. payroll tax	1,212	602	1,212	602
Total	5,519	4,980	5,519	4,980
Others, Sweden
Salaries and other remuneration	13,726	17,621	13,726	17,621
Pension expenses	2,228	3,109	2,228	3,109
Payroll overhead, incl. payroll tax	4,389	6,390	4,389	6,390
Total	20,343	27,120	20,343	27,120
TOTAL, SWEDEN	25,862	32,101	25,862	32,101
Others, USA
Salaries and other remuneration	756	1,777	-	-
Pension expenses	31	18	-	-
Payroll overhead	109	191	-	-
Total	896	1,987	0	0
TOTAL	26,758	34,088	25,862	32,101

NOTE 5 - REMUNERATION TO LEADING EXECUTIVES

Principles

Remuneration is paid to the chairman and board members in accordance with the decision of the annual stockholders' meeting.

Remuneration to the CEO and other leading executives consists of their basic salary, flexible remuneration and pension benefits. Håkan Persson was elected as new CEO November 8, 2013, but he was employed first at August 8, 2014. He has a notice period of 6 months, and a severence payment of 6 months in addition.

Other leading executives are the persons who together with the CEO constitute the corporate management. During the year other leading executives have on average amounted to four people. For the composition of the corporate management, see The Management.

The division between basic salary and flexible remuneration must be proportional to leading executives' responsibilities and powers. For the CEO, the flexible remuneration is a maximum of 75 per cent of the basic salary. For other leading executives, the flexible remuneration is a maximum of 50 per cent of the basic salary.

REMUNERATIONS AND OTHER BENEFITS IN 2014

	BASIC SALARY/	COMMITTEE	FLEXIBLE	OTHER	PENSION	OTHER	TOTAL
	BOARD REMUN.	FEE	REMUN.	BENEFITS	EXPENSES	REMUN.
Lisa Thorstedt, Chairman	70	8	-	-	-	-	78
Torgny Hellström, board member	192	25	-	-	-	-	217
Matts Lilja, board member	135	25	-	-	-	-	160
Mats Lindoff, board member	100	17	-	-	-	-	117
Eva-Maria Matell, board member	135	25	-	-	-	-	160
Anders Harrysson, board member	135	25	-	-	-	-	160
Torgny Hellström, board member	43	-	-	-	-	-	43
Torbjörn Clementz, board member	135	25	-	-	-	-	160
CEO, Håkan Persson	718	-	113	-	187	2,263	3,281
Other leading executives, 4 persons	3,857	-	323	112	851	36	5,179
Total	5,521	150	436	112	1,038	2,299	9,555

REMUNERATIONS AND OTHER BENEFITS IN 2015

	BASIC SALARY/ BOARD REMUN.	COMMITTEE FEE	FLEXIBLE REMUN.	OTHER BENEFITS	PENSION EXPENSES	OTHER REMUN.	TOTAL
Torgny Hellström, board member	500	50	-	-	-	-	550
Matts Lilja, board member	175	25	-	-	-	-	200
Mats Lindoff, board member	175	25	-	-	-	-	200
Eva-Maria Matell, board member	175	25	-	-	-	-	200
Anders Harrysson, board member	175	25	-	-	-	-	200
Torbjörn Clementz, board member	175	25	-	-	-	-	200
CEO, Håkan Persson	1,800	-	487	40	450	19	2,796
Other chief executives 4 persons (see below)	2,959	-	790	44	638	1,530	5,961
Total	6,134	175	1,277	84	1,088	1,549	10,307

Notes on the table:

The amounts in the table are exclusive of payroll overhead. Payment of remuneration to the board takes place monthly from May 2003 with 1/12 of the remuneration decided by the AGM. As from April 23, 2013, payment of remuneration to the committee took place monthly with 1/12 of the remuneration decided by the AGM. Payment remuneration paid has been reported as an expense. The above remuneration refers to expenses that have affected net profit/loss for the year. During part of the year a leading executive was replaced by a consultancy fee before a transition took place to an employment arrangement. See also information in Note 23, Related party transactions.

The group only has defined contribution pension plans. Pension expenses refer to the expenses that have affected net profit/loss for the year. The chairman has not received any remuneration in addition to the board remuneration.

Flexible remuneration

Flexible remuneration for the CEO and group executives is based on group earnings and individual targets. These targets are set by the board for the CEO, and by the board and the CEO for leading executives. The maximum amount for flexible remuneration that may be paid to the CEO is 75 % of basic salary. For other leading executives the flexible remuneration can amount to a maximum of 50 per cent of basic salary. In 2015 the flexible remuneration to leading executives was between 25 and 30 %.

Other benefits

Other benefits consist of benefits for cars and insurance.

Share-based compensation

A new option program was issued in 2014 where a total of 2,610,000 options were subscribed by employees, of which the CEO had 1,000,000 options and other group executives 700,000 options. Precise Biometrics received an infusion of SEK 261,000 into liquid funds. Subscription of shares with the utilization of subscription options can take place during the period 1 June – 31 December 2017 at a price of SEK 2.50. At full utilization of the subscription options the capital stock will increase by SEK 730,800, which corresponds to approx. 0.7 per cent of the company's current equity. Payments received by Precise Biometrics have been reported in other added contributed capital.

Precise Biometrics currently has an ongoing option program. Of the 2,610,000 outstanding options (4,400,000 options). It was not possible to utilize any of the options (0 options) during the year.

The nominal value of one share is SEK 0.03.

The weighted average actual value for options that were allocated in 2014 was established with the help of an external valuer and the Black&Scholes valuation model and amounts to SEK 0.10 per option. Important input data in the model is the volume-weighted average share price during the period 5 May 2014 to 16 May 2014 at SEK 1.12, the above redemption price, volatility at 40 per cent, an expected option term of 3 years and an annual risk-free interest of 2.63 per cent. The volatility is measured as the standard deviation for the expected return on the share price is based on a statistical analysis of daily share prices during the last 7 years.

No cost has been reported in the income statement since the allocated options have been paid for by employees.

The subscription price corresponded to 220 per cent of the volume-weighted average price at the time of valuation.

Pensions

The retirement age for the CEO is 65. Pension premiums shall amount to a maximum of 25 % of the fixed salary from the parent company. For other leading executives the retirement age is 65. In accordance with the pension agreement, premiums are calculated according to a scale based on age and salary. For the highest current age interval the premium amounts to 7 % of the pension-based salary up to 7.5 of the base amount, 42 % of the pension-based salary between 7.5 and 20 of the base amount and pension-based salary for salaries over 20 base amounts.

For further information on accounting, see Note 1 in the "Pensions" section.

Severance pay

There is a mutual period of 6 month's notice for the company and the CEO. Severance pay of 6 monthly salaries will also be paid if the CEO is given notice by the company. A period of notice of 3-6 months is applicable for the company and other leading executives. No severance pay is paid for other leading executives.

Change in control

There are no agreements between the company and its employees, with the exception of the employment contracts commented on above, under which compensation must be paid to employees if their employment is terminated as a result of a public takeover bid.

Preparation and decision-making process

The compensation committee is assigned to consider issues related to salaries, pension conditions, incentive schemes and other terms and conditions of employment for the executive. In 2015 the committee focused primarily on remuneration to the CEO and leading executives, including incentive schemes.

The board makes decisions on remuneration to the CEO, based on the recommendations of the compensation committee within the framework of the guidelines decided at the AGM. Remuneration to other leading executives has been decided by the CEO following consultation with the compensation committee and the board. At the AGM 2015 guidelines were adopted for the determination of salaries and other remuneration to the CEO and other leading executives.

NOTE 6 - AUDITORS' REMUNERATION

		GROUP		PARENT COMPANY
	2015	2014	2015	2014
Ernst & Young
Audit assignment	200	-	200	-
Audit other	82	-	82	-
Total Ernst & Young	282	-	282	-
PwC
Audit assignment	220	335	176	320
Audit other	170	218	170	218
Consulting tax	-	20	-	20
Consulting other	-	30	-	30
Total PWC	390	603	346	588
TOTAL	672	603	628	588

NOTE 7 - OPERATIONAL LEASING AGREEMENTS

		GROUP		PARENT COMPANY
	2015	2014	2015	2014
Leasing costs during the year	2,772	2,859	2,327	2,235
Other leasing	287	305	287	305
Total	3,059	3,164	2,614	2,540
Nominal value of agreed future leasing charges
Due for payment in 1 year	807	2,283	795	1,868
Due for payment after 1 year, but within 5 years	5,072	443	5,060	443
Due for payment after 5 years	-	-	-	-
Total	5,879	2,726	5,855	2,311

Operational leasing agreements mainly refer to office rent

NOTE 8 - INCOME TAX AND DEFERRED TAX

		GROUP		PARENT COMPANY
	2015	2014	2015	2014
Profit/loss before tax	-9,469	-44,045	-43,889	-36,825
Tax calculated as per national tax rates
applicable for profit in respective countries	2,083	9,690	9,655	8,102
Tax effect on taxable income	-	-	-	-
Tax effect on non-deductable costs	42	22	-7,943	22
Tax deficit for which no deferred	-2,125	-9,712	-1,712	-8,124
tax claim can be reported
Tax expenses	-	-	-	-

The accumulated tax deficit amounted to SEK 628,670,000 as of December 31, 2014.

Tax on group profit before tax differs from the theoretical amount that would have resulted from a balanced average tax rate in the consolidated companies by above.

The parent company does not have any deferred tax assets.

Against the background of past evolution in group earnings, no deferred tax assets relating to loss carried forwards have been reported. There is no time limit regarding the possibility to use future loss carry forwards.

Deferred tax relating to temporary differences attributable to investments in subsidiaries is not reported, since the parent company can control the date for reversing temporary differences, and it is not considered likely that reverses will be made in the foreseeable future.

NOTE 9 - EARNINGS PER SHARE

Before dilution

Earnings per share before dilution are calculated in that the earnings referable to parent company owners are divided by a balanced average number of outstanding common shares during the period.

		GROUP
	2015	2014
Profit/loss attributable to parent company stockholders	-9,469	-44,045
Weighted average number of outstanding ordinary shares (thousands)	345,306	345,306
Profit/loss per share before dilution (SEK per share)	-0.03	-0.13

Profit/loss per share after dilution

To calculate earnings per share after dilution, the balanced average number of outstanding common stock is adjusted for the dilution effect of all potential common stock. The parent company only has one category of potential common stock with a dilution effect, i.e. stock options.

For stock options, a calculation is made for the number of shares that could have been purchased at fair value (calculated as the average market price for year for the parent company stock), for an amount corresponding to the monetary value of the subscription rights linked to outstanding stock options.

The number of shares calculated as per the above is compared with the number of shares that would have been issued on the assumption that the stock options were utilized. If all outstanding subscription option programs were redeemed in their entirety, the maximum dilution would amount to 2,610,000 shares.

Outstanding subscription options have been taken into consideration in the calculation below, since the redemption price was lower than the market price as at December 31, 2015 and also since the Result attributable to parent company shareholders is improving.

		GROUP
	2015	2014
Profit/loss attributable to parent company stockholders	-9,469	-44,045
Weighted average number of outstanding ordinary shares (thousands)	345,306	345,306
Weighted average number of common stock for calculation of earnings per share after dilution (thousands)	345,306	345,306
Profit/loss per share after dilution (SEK per share) 1)	-0.03	-0.13

NOTE 10 - PURCHASES AND SALES BETWEEN GROUP COMPANIES

Parent Company sales to other group companies amounted to SEK 2.1 million (4.7). Purchases from group companies amounted to SEK 2.8 million (4.7).

Transfer pricing between the parent company and foreign subsidiaries is based on the Transactional Net Margin Method and the level of profit as Return on Sales, which for 2015 amounted to 2 per cent. Internal sales in Sweden are subject to market conditions.

NOTE 11 - FINANCIAL RISK FACTORS

The following specification of risk factors does not claim to be complete, nor are the risks ranked in their order of importance.

Management of capital

The group's target concerning capital structure is to safeguard the group's ability to continue its operations, so that it can provide returns for shareholders and benefit for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

Capital risk and future capital

So far the company has generated losses and therefore been dependent on funding from shareholders. There is no guarantee that the capital will be sufficient until the company achieves a positive cash flow. Neither is there any guarantee that new capital can be acquired if the need should arise, or that such capital can be acquired on preferential terms.

Forecasting problems

The company operates in a rapidly changing market. The market for Fingerprint Technology products is in an early stage and revenues have been largely royalties based on customer usage. All products are charactized by long sales processes. The advanced issue or postponement of an order can have a significant effect on sales and earnings, all of which makes forecasting very difficult.

Currency exposure risks

A large part of the company's expenses are in Swedish kronor (SEK), while a significant part of earnings and production costs are generated in foreign currency (mainly USD), which increases the company's currency exposure risks. The company has adopted a currency exposure policy in order to minimise currency exposure in the business.

Sensitivity analysis

If the Swedish krona (SEK) increases/decreases 5 % in value compared

with the USD while all other variables remain constant, annual income as at December 31, 2015 would have been K SEK 2 173 thousand (859) higher/lower, mainly as a result of gains/losses when translating internal and external receivables as well as loan receivables in USD.

Equity would have been approx. K SEK 1 626 (751) lower/higher, mainly as a result of exchange rate differences when translating the above items and translating subsidiaries.

Credit risk

Credit risks are mainly incurred through receivables and agreed transactions. The company has guidelines on issuing credit to its customers. An external credit assessment is made for large orders to new customers. An individual assessment is made for orders from known customers. No new orders are delivered if customers have accounts receivable due for payment. If there are doubts regarding a credit rating, advance payment shall be applicable before delivery is made. The company believes that there is a concentration of credit risk in relation to a certain individual client or other party.

Cash flow

The company puts a lot of effort into minimizing the time capital is tied up, for example in inventory and accounts receivable. To reduce the risk involved in tied up capital, the company works actively to improve the internal process for forecasting and production planning.

Liquidity risk

Cash flow forecasts are established by the finance department. The board and the executive pay close attention to the liquidity situation to ensure that the group has adequate liquidity to meet demands in current business activities. Forecasts measure how long liquidity will last, or alternatively when the business is expected to achieve a positive cash flow. Excess liquidity is placed in interest bearing bank accounts and can quickly be converted to cash to handle liquidity risks.

NOTE 12 - INTEREST INCOME AND INTEREST EXPENSES

		GROUP		PARENT COMPANY
	2015	2014	2015	2014
Interest income	15	510	643	1,130
Total	15	510	643	1,130
		GROUP		PARENT COMPANY
	2015	2014	2015	2014
Other interest expenses	77	8	73	8
Total	77	8	73	8

NOTE 13 - INTANGIBLE FIXED ASSETS

CAPITALIZED DEVELOPMENT		GROUP		PARENT COMPANY
	Dec 31, 2015	Dec 31, 2014	Dec 31, 2015	Dec 31, 2014
Opening acquisition value	95,502	88,845	93,187	86,530
Acquisitions during the year	2,436	6,657	2,436	6,657
Sales / disposals	-66,745	-	-66,745	-
Closing acquisition value	31,193	95,502	28,878	93,187
Opening accumulated depreciation	-67,833	-59,313	-65,519	-56,999
Depreciation for the year	-8,642	-8,520	-8,642	-8,520
Sales / disposals	58,154	-	58,154	-
Closing accumulated depreciation	-18,321	-67,833	-16,007	-65,519
Opening accumulated write-down	-10,309	-8,213	-10,309	-7,958
Write-downs for the year	-	-2,096	-	-2,351
Sales / disposals	8,589	-	8,590	-
Closing accumulated write-down	-1,720	-10,309	-1,719	-10,309
Residual value	11,152	17,360	11,152	17,359

	PATENT
--	---------------	--	--

PATENTS GROUP				PARENT COMPANY
	Dec 31, 2015	Dec 31, 2014	Dec 31, 2015	Dec 31, 2014
Opening acquisition value	11,563	11,563	8,721	8,721
Acquisitions during the year	-	-	-	-
Closing acquisition value	11,563	11,563	8,721	8,721
Opening accumulated depreciation	-11,563	-11,563	-8,721	-8,721
Depreciation for the year	-	-	-	-
Closing accumulated depreciation	-11,563	-11,563	-8,721	-8,721
Residual value	-	-	-	-

CAPITALIZED DATA EXPENSES GROUP			PARENT COMPANY
	Dec 31, 2015	Dec 31, 2014	Dec 31, 2015	Dec 31, 2014
Opening acquisition value	4,214	4,214	972	972
Acquisitions during the year	-	-	-	-
Closing acquisition value	4,214	4,214	972	972
Opening accumulated depreciation	-4,214	-4,214	-972	-972
Depreciation for the year	-	-	-	-
Closing accumulated depreciation	-4,214	-4,214	-972	-972
Residual value	-	-	-	-

Comments to the note:

Depreciation is included in the income statement user R&D expenses.

The company has reviewed the assets and removed products that are no longer saleable.

See comment in Note 22 regarding write-downs for the year.

NOTE 14 - TANGIBLE FIXED ASSETS

EQUIPMENT AND TOOLS		GROUP		PARENT COMPANY
	Dec 31, 2015	Dec 31, 2014	Dec 31, 2015	Dec 31, 2014
Opening acquisition value	14,370	13,157	12,965	11,752
Acquisitions during the year	570	1,213	570	1,213
Sales / disposals	-2,387	-	-2,387	-
Closing acquisition value	12,553	14,370	11,148	12,965
Opening accumulated depreciation	-10,740	-9,682	-9,335	-8,277
Depreciation for the year	-1,222	-1,058	-1,222	-1,058
Sales / disposals	2,387	-	2,387	-
Closing accumulated depreciation	-9,575	-10,740	-8,170	-9,335
Opening accumulated write-down	-846	-	-846	-
Write-downs for the year	-	-846	-	-846
Closing accumulated write-down	-846	-846	-846	-846
Residual value	2,132	2,784	2,132	2,784

Comments on the table:

Depreciation is included in the items Selling expenses, Administration expenses and R&D expenses in the income statement. The basis for the allocation consists of the number of employees per function.

See comment in Note 22 regarding write-downs for the year.

NOTE 15 - FINANCIAL ASSETS

RECEIVABLES FROM GROUP COMPANIES

		PARENT COMPANY
	Dec 31, 2015	Dec 31, 2014
As of January 1	-	-
Transfer of current group receivables	44,988	-
Write-down of group receivable	-35,911	-
As of December 31	9,077	-

SHARES IN SUBSIDIARIES PARENT COMPANY

	Dec 31, 2015	Dec 31, 2014
Precise Biometrics Services AB
Corporate Identity Number 556582-9347, headquarters: Lund municipality.
No. of shares	1,000	1,000
Share of equity	100 %	100 %
Book value	100	100
Precise Biometrics Inc
Reston, Virgina, USA
No. of shares	10	10
Share of equity	100 %	100 %
Book value	958	958
Total book value	1,058	1,058

NOTE 16 - INVENTORIES

		GROUP
	Dec 31, 2015	Dec 31, 2014
Components	3,786	6,400
Goods for resale	4,717	5,460
Total	8,503	11,860

The cost of goods sold for the group includes write-down of inventories at SEK thousands 425 (4,299). There were no significant reversals of previously recorded write-downs during 2015 ands 2014. Obsolescence provision in the Group amounts to SEK thousands 4,086 (6,045).

PARENT COMPANY

	Dec 31, 2015	Dec 31, 2014
Components	3,786	6,400
Goods for resale	1,960	1,037
Total	5,746	7,437

The cost of goods sold for the parent company includes write-down of inventories at SEK thousands 425 (3,236). There were no significant reversals of previously recorded write-downs during 2015 and 2014.

Obsolescence provision in the parent company amounts to SEK thousands 2,933 (4,909).

See comment in Note 22 regarding write-downs for the year.

NOTE 17 - ACCOUNTS RECEIVABLE

		GROUP	PARENT COMPANY
	Dec 31, 2015	Dec 31, 2014	Dec 31, 2015	Dec 31, 2014
Accounts receivable	8,830	6,849	4,848	4,526
Reserve for impairment of receivables	-	-91	-	-91
Total	8,830	6,759	4,848	4,435

As at December 31, 2015, accounts receivable amounting to SEK 1,689 thousand (1 807) were due without any write-down requirement being considered necessary. These refer to a number of independent customers which have not previously had payment difficulties.

The age analysis of all accounts receivable is as follows:

		GROUP	PARENT COMPANY
	Dec 31, 2015	Dec 31, 2014	Dec 31, 2015	Dec 31, 2014
Not due	7,117	4,952	4,732	3,794
Less than 3 months	1,275	1,807	42	641
3 to 6 months	131	-	91	-
Of which written down	-	-	-	-
More than 6 months	307	91	-17	91
Of which written down	-	-91	-	-91
Total	8,830	6,759	4,848	4,435

The remaining categories in accounts receivable and other receivables do not include any assets for which there is a write-down requirement. The maximum exposure to credit risk on balance sheet date is the fair value for each category of receivable. The group has no collateral as security.

The reported amounts, per currency, for the group's accounts receivable and other receivables are as follows:

	Dec 31, 2015	Dec 31, 2014
SEK	510	1,700
USD	1,016	491
EUR	-2	129

NOTE 18 - PREPAID EXPENSES AND ACCRUED INCOME

		GROUP		PARENT COMPANY
	Dec 31, 2015	Dec 31, 2014	Dec 31, 2015	Dec 31, 2014
Prepaid rents	313	513	312	513
Prepaid insurance	209	39	170	39
Accrued income 1)	14,089	2,300	14,089	2,300
Prepaid car lease	59	129	59	129
Prepaid pension costs	146	241	146	241
Prepaid patent charges	247	141	247	141
Other items	495	428	495	356
Total	15,557	3,791	15,517	3,719

1) Accrued income is primarily income from royalties, which is reported retrospectively.

NOTE 19 - EQUITY

	NUMBER OF SHARES
As at December 31, 2014	345,306,094
As at December 31, 2015	345,306,094

WARRANTS TO EMPLOYEES

During 2014, an option program was initiated for all employees under which a maximum of 8,000,000 options may be allocated as authorized by the annual stockholders' meeting in 2014. A total of 2,610,000 number of options was subscribed to and Precise Biometrics received additional liquid assets of SEK 261,000. Stock may be subscribed to through the exercise of subscription rights between July 1 and December 31, 2017 at a price of SEK 2.50. The Market value has been established by external consultants by the application of the Black & Scholes valuation method. At the time of valuation the share price was SEK 1.13, which is based on the volume weighted share price from May 5, 2014 to May 16, 2014. The subscription price equaled to 220 per cent of the volume weighted average price at the time of valuation.

Full exercise of subscription rights will increase the capital stock with SEK 730,800, which corresponds to approx. 0.7 per cent of the company's present capital stock. The liquid assets received from the acquisition of options have been transferred to other paid in capital.

The nominal value of a share is SEK 0.03.

A reduction of share capital was carried out during 2015 to the order of SEK 86,326,523. Following this reduction, share capital at the year-end amounts to SEK 10,359,182.82.

NOTE 20 - OTHER PROVISIONS

GUARANTEE PROVISIONS

		GROUP	PARENT COMPANY
	Dec 31, 2015	Dec 31, 2014	Dec 31, 2015	Dec 31, 2014
As at January 1, 2015	404	508	212	100
Change in guarantee provisions for the year	-96	-104	-134	112
As at December 31, 2015	308	404	78	212

Provisions consists solely of a short-term portion.

NOTE 21 - ACCRUED EXPENSES AND PREPAID INCOME

		GROUP		PARENT COMPANY
	Dec 31, 2015	Dec 31, 2014	Dec 31, 2015	Dec 31, 2014
Accrued payroll costs	2,230	5,152	2,230	5,152
Payroll overhead and other taxes	1,075	2,271	1,075	2,271
Other accrued expenses	4,565	2,375	3,446	602
Total	7,870	9,798	6,751	8,025

NOTE 22 - WRITE-DOWNS

No write-downs were made in 2015, retirements of intangible fixed assets amounted to SEK 66,745 million (see Note 13).

A total net write-down amount of SEK 7.4 million affected the group in 2014. This amount reduced intangible fixed assets by SEK 2.3 million, tangible fixed assets by SEK 0.8 million and inventories by SEK 4.3 million.

NOTE 23 - RELATED PARTY TRANSACTIONS

One board member had a consultancy assignment for the company, which started and ended in 2015. The compensation for the assignment was on market terms and amounted to SEK 137,500.

Internal pricing between the parent company and foreign subsidiaries is based on the Transactional Net Margin Method and the profit level is determined in accordance with Return on Sales, which for 2015 amounted to approx. 2 %. There are no sales between business areas.

ASSURANCE

The board of directors and the CEO give their assurance that the consolidated financial statements have been prepared in accordance with international accounting standards (IFRS) as adopted by the EU and give a fair view of the group's financial position and results.

The Annual Report has been prepared in accordance with generally accepted accounting standards and gives a fair view of the parent company's financial position and results.

The Administration Report for the group and the parent company gives a fair view of the group's and the parent company's activities, financial position and results, and describes the essential risks and uncertainty factors faced by the parent company and the companies in the group.

The income statements and balance sheets, including the consolidated financial statements, will be presented for the approval of the Annual General Meeting on May 17, 2016.

April 5th, 2016

Torgny Hellström Torbjörn Clementz Chairman of the board Board member

Anders Harrysson Mats Lindoff Board member Board member

Eva Maria Matell Matts Lilja Board member Board member

Håkan Persson CEO

Our audit report has been submitted on April 8th, 2016

Ernst & Young AB Johan Thuresson Authorized Public Accountant

AUDITOR'S REPORT

TO THE ANNUAL MEETING OF THE SHAREHOLDERS OF PRECISE BIOMETRICS AB (PUBL), CORPORATE IDENTITY NUMBER 556545-6596

REPORT ON THE ANNUAL ACCOUNTS AND CONSOLIDATED ACCOUNT

We have audited the annual accounts and consolidated accounts of Precise Biometrics AB (PUBL) for the year 2015 except for the corporate governance statement on pages 39-45. The annual accounts and consolidated accounts of the company are included in the printed version of this document on pages 32-75.

Responsibilities of the Board of Directors and the Managing Director for the annual accounts and consolidated accounts

The Board of Directors and the Managing Director are responsible for the preparation and fair presentation of these annual accounts in accordance with the Annual Accounts Act and of the consolidated accounts in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act, and for such internal control as the Board of Directors and the Managing Director determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on these annual accounts and consolidated accounts based on our audit. We conducted our audit in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the annual accounts and consolidated accounts are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts and consolidated accounts. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the annual accounts and consolidated accounts, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company's preparation and fair presentation of the annual accounts and consolidated accounts in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors and the Managing Director, as well as evaluating the overall presentation of the annual accounts and consolidated accounts.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions

In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the parent company as of 31 December 2015 and of its financial performance and its cash flows for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 December 2015 and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act. Our opinions do not cover the corporate governance statement on pages x1-y1. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.

We therefore recommend that the annual meeting of shareholders adopt the income statement and balance sheet for the parent company and the group.

Other information

The audit of the annual accounts for 2014 was performed by another auditor who submitted an auditor's report dated 20 March, 2015 with unmodified opinion in the Report on the annual accounts.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

In addition to our audit of the annual accounts and consolidated accounts, we have also audited the proposed appropriations of the company's profit or loss and the administration of the Board of Directors and the Managing Director of Precise Biometrics AB (PUBL) for the year 2015. We have also conducted a statutory examination of the corporate governance statement.

Responsibilities of the Board of Directors and the Managing Director

The Board of Directors is responsible for the proposal for appropriations of the company's profit or loss. The Board of Directors and the Managing Director are responsible for administration under the Companies Act and that the corporate governance statement has been prepared in accordance with the Annual Accounts Act.

Auditor's responsibility

Our responsibility is to express an opinion with reasonable assurance on the proposed appropriations of the company's profit or loss and on the administration based on our audit. We conducted the audit in accordance with generally accepted auditing standards in Sweden.

As a basis for our opinion on the Board of Directors' proposed appropriations of the company's profit or loss, we examined [the Board of Directors' reasoned statement and a selection of supporting evidence in order to be able to assess] whether the proposal is in accordance with the Companies Act.

As a basis for our opinion concerning discharge from liability, in addition to our audit of the annual accounts and consolidated accounts, we examined significant decisions, actions taken and circumstances of the company in order to determine whether any member of the Board of Directors or the Managing Director is liable to the company. We also examined whether any member of the Board of Directors or the Managing Director has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.

We believe that the audit evidence which we have obtained is sufficient and appropriate in order to provide a basis for our opinions.

Furthermore, we have read the corporate governance statement and based on that reading and our knowledge of the company and the group we believe that we have obtained a sufficient basis for our opinion. This means that our statutory examination of the corporate governance statement is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden.

Opinions

We recommend to the annual meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year.

A corporate governance statement has been prepared, and its statutory content is consistent with the other parts of the annual accounts and the consolidated accounts.

Malmö April 8, 2016 Ernst & Young AB

Johan Thuresson

Authorized Public Accountant

FINANCIAL GLOSSARY

BALANCE SHEET TOTAL

The value of all assets on the balance sheet date.

CAPITAL EMPLOYED

Balance sheet total minus non interest-bearing liabilities and reserves. Average capital employed has been calculated as opening plus closing capital employed, divided by two.

DEBT/EQUITY RATIO

Interest bearing liabilities divided by equity.

DIVIDEND

Dividend per share during the year.

EARNINGS PER SHARE

Earnings after net financials divided by the average number of shares. The calculation has been made in accordance with IAS 33 Earnings per share. In accordance with IAS 33, recalculation after dilution must not produce a better earnings per share compared with before dilution.

EBITDA

Operating profit/loss before depreciation.

EQUITY

Equity at the end of the year. The average equity has been calculated as opening equity plus closing equity divided by two.

EQUITY/ASSETS RATIO

Equity on the balance sheet date divided by total assets on the balance sheet date.

EQUITY PER SHARE

Equity at the end of the year divided by the number of shares at the end of the year. Average number of outstanding shares during the year Number of shares at the beginning of the year plus the number of shares at the end of the year divided by two.

GROSS MARGIN Gross profit/loss divided by net sales.

LIQUID RATIO

Current assets minus inventories, divided by current liabilities.

NUMBER OF SHARES The number of shares at the end of the year.

OPERATING CASH FLOW Cash flow from operating activities after change in operating capital.

OPERATING MARGIN

Operating profit/loss divided by net sales.

PROPORTION OF RISK-BEARING CAPITAL

Equity and deferred tax liabilities divided by closing balance.

RETURN ON CAPITAL EMPLOYED

Earnings after net financials plus financial expenses, divided by average capital employed.

RETURN ON EQUITY

Profit/loss for the year divided by average equity.

SHARE PRICE

The last price paid during the period.

WORKING CAPITAL

Current assets minus current liabilities.

ANNUAL GENERAL MEETING

The Annual General Meeting for shareholders in Precise Biometrics AB (publ) will be held at 4.00 pm CEST on Tuesday May 17, 2016, at Precise Biometrics' headquarters in Lund, Mobilvägen 10.

Shareholders who wish to participate in the AGM must be registered in the share register kept by Euroclear Sweden AB on Wednesday May 11, 2016, and also notify their participation to Precise Biometrics AB no later than Wednesday May 11, 2016 at 4.00 pm CEST.

REGISTRATION IN THE SHARE REGISTER

Shareholders who have their shares registered through a bank or in the name of an authorized agent must in order to participate in the meeting temporarily register the shares in their own name in the share register kept by Euroclear Sweden AB no later than Wednesday May 11, 2016.

Shareholders must inform the administrator in good time.

REGISTERING TO ATTEND THE AGM

Shareholders must notify their intention to attend the AGM no later than Wednesday May 11, 2016 at 4.00 pm CEST. Registration can be done by mail or email:

Email: [email protected] Mail: Precise Biometrics AB, "Årsstämma", Mobilvägen 10, 223 62 Lund

APPLICATIONS MUST INCLUDE:

Name Social security number/Corp ID number Address Phone number Number of shares Assistants, if appropriate

REPRESENTATIVES

Shareholders who are represented by an agent must issue a power of attorney to the agent. If powers of attorney are issued by legal entities, a copy of the registration certificate (or if such a document does not exist, an equivalent official document) for the legal entity must be enclosed.

The document must not be more than one year old. These documents must be forwarded to no later than Wednesday May 11, 2016. Precise Biometrics

FINANCIAL CALENDAR

INTERIM REPORT, FIRST QUARTER

May 17, 2016 (8.00 am)

ANNUAL GENERAL MEETING

May 17, 2016 (4.00 pm)

INTERIM REPORT, SECOND QUARTER

August 16, 2016 (8.00 am)

INTERIM REPORT, THIRD QUARTER

November 15, 2016 (8.00 am)

YEAR-END REPORT 2016

Februari 14, 2017 (8.00 am)

Financial reports are published in Swedish and English at precisebiometrics.com

CONTACT

Precise Biometrics AB Mobilvägen 10 223 62 Lund Sweden + 46 46 31 11 00

INVESTOR CONTACT

Håkan Persson, CEO of Precise Biometrics [email protected] +46 46 31 11 05

FIVE YEAR OVERVIEW

SEK thousands	2015	2014	2013	2012	2011
Net sales	56,337	31,387	34,944	28,281	21,615
Cost of goods and services sold	-8,415	-14,208	-15,976	-12,495	-9,548
Gross profit	47,922	17,179	18,968	15,786	12,067
Selling expenses	-12,686	-19,907	-24,777	-25,812	-18,543
Administration expenses	-13,587	-14,343	-14,706	-13,909	-11,489
R&D expenses	-31,275	-28,984	-21,307	-18,239	-15,157
Other operating income and expenses	219	1,508	-358	-728	-290
Operating profit/loss	-9,407	-44,547	-42,180	-42,902	-33,412
Finance net	-62	502	-1,092	-4,050	208
Profit/loss before tax	-9,469	-44,045	-43,272	-46,952	-33,204
Income tax	-	-	-	-	-12
LOSS FOR THE YEAR	-9,469	-44,045	-43,272	-46,952	-33,216

BALANCE SHEET

SEK thousands	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Assets
Intangible fixed assets	11,152	17,360	21,574	18,358	12,778
Tangible fixed assets	2,132	2,784	3,475	1,829	1,070
Current assets	85,664	86,056	127,875	65,464	50,557
of which liquid assets and current investments	52,356	59,659	101,197	37,584	28,930
Total assets	98,948	106,200	152,924	85,651	64,405
Equity and liabilities
Equity	83,059	91,983	134,547	48,195	46,988
Current liabilities and provisions	15,889	14,217	18,377	37,456	17,417
Total equity and liabilities	98,948	106,200	152,924	85,651	64,405

CASH FLOW STATEMENT

SEK thousands	2015	2014	2013	2012	2011
Cash flow from operating activities before change in operating capital	395	-30,664	-36,942	-44,620	-32,147
Change in operating capital	-4,853	-3,265	2,723	-4,252	-4,099
Cash flow from investing activities	-3,005	-7,870	-11,749	-9,143	-8,679
New issue and/or warrants	0	261	129,580	48,016	49,015
Cash flow from financing activities	0	0	-20,000	18,653	0
Cash flow for the year	-7,463	-41,538	63,612	8,654	4,090

KEY FIGURES

	2015	2014	2013	2012	2011
Gross margin	85 %	55 %	54 %	56 %	56 %
Working capital, KSEK	69,775	71,839	109,498	28,008	33,140
Liquid ratio	495 %	522 %	618 %	145 %	235 %
Equity/assets ratio	84 %	87 %	88 %	56 %	73 %
Return on equity	neg	neg	neg	neg	neg
Average capital employed, KSEK	87,521	113,265	91,371	58,297	40,447
Return on capital employed	neg	neg	neg	neg	neg
Earnings per share, SEK	-0.03	-0.12	-0.14	-0.23	-0.20
EBITDA, KSEK	456	-31,773	-35,293	-40,100	-31,213
Equity per share, SEK	0.24	0.27	0.39	0.18	0.25
No. of shares, thous.	345,306	345,306	345,306	264,523	188,945
Average number of shares during period, thous.	345,306	345,306	306,147	207,840	166,452
Operating cash flow per share, SEK	-0.01	-0.10	-0.10	-0.18	-0.19
Number of employees at the end of the year	22	22	29	37	35
Average number of employees	21	27	34	37	34

THE SHARE & SHAREHOLDERS

HISTORY

Precise Biometrics' share was listed on the Stockholm Stock Exchange on October 3, 2000, at a quotation price of SEK 63.19.

As of 30 December 2015 the company had 345,306,094 shares listed on the Small Cap list of the Nasdaq OMX Nordic. A standard trading unit is one share. The short name is PREC and the ISIN code is SE0001823303.

SHARE PRICE DEVELOPMENT

In 2015 there was a total turnover of 5,096,839,883 PREC shares, i.e. an average turnover of 20,306,135 shares per day of trading. The closing price on December 30, 2015, was SEK 6.10. During the year the share price fluctuated from SEK 0.93 to 9.45.

OWNERSHIP

The number of shareholders at the end of the year was 25,533 (12,760). Foreign shareholders accounted for 14.6 per cent (11.7). See table, for shareholder statistics as of December 30, 2015.

OPTION PROGRAM

In 2014 an option program was initiated for all employees of the company. Subscription options have been transferred to the employees at market rates as part of the program. The allocated volume was contained within an authorization for a maximum of 8,000,000 subscription options issued at the Annual General Meeting in 2014.

The market value has been established by an external valuer using the Black & Scholes model. At the time of the valuation the share price was SEK 1.12, which is based on the volume-weighted share price during the period May 5, 2014, to May 16, 2014.

The subscription price was set to SEK 2.50.

A total of 2,610,000 were subscribed to by employees in 2014, which provided Precise Biometrics with liquid assets in an amount of SEK 261,000. No options were subscribed in 2015.

Shares may be subscribed to through the exercise of subscription options during the period July 1 - December 31, 2017.

See also Note 19 for additional information.

SHAREHOLDER INFORMATION

Previously published annual reports, interim reports and other information can be found at www.precisebiometrics.com. It also possible to order information by calling +46 (0)46 31 11 00.

Questions can be addressed directly to the company via email to [email protected].

SHARE CAPITAL DEVELOPMENT

	INCREASE IN	TOTAL	CHANGE IN	TOTAL	NOMINAL AMOUNT, SEK
	NUMBER OF SHARES	NUMBER OF SHARES	SHARE CAPITAL, SEK	SHARE CAPITAL, SEK
1997 - Company registered	1,000	1,000	100,000	100,000	100
1997 - New issue	220	1,220	22,000	122,000	100
1998 - Split	1,218,780	1,220,000	-	122,000	0.10
1998 - New issue	180,000	1,400,000	18,000	140,000	0.10
1998 - New issue	223,700	1,623,700	22,370	162,370	0.10
1999 - Bonus issue	-	1,623,700	487,110	649,480	0.40
1999 - New issue	720,000	2,343,700	288,000	937,480	0.40
2000 - New issue 1)	250,000	2,593,700	100,000	1,037,480	0.40
2000 - Redemption of share warrants	74,000	2,667,700	29,600	1,067,080	0.40
2000 - New issue 2)	600,000	3,267,700	240,000	1,307,080	0.40
2000 - Redemption of share warrants	204,500	3,472,200	81,800	1,388,880	0.40
2001 - Redemption of share warrants	54,500	3,526,700	21,800	1,410,680	0.40
2002 - New issue 3)	350,000	3,876,700	140,000	1,550,680	0.40
2002 - Redemption of share warrants	80,000	3,956,700	32,000	1,582,680	0.40
2002 - New issue 4)	7,913,400	11,870,100	3,165,360	4,748,040	0.40
2003 - New issue 5)	23,740,200	35,610,300	9,496,080	14,244,120	0.40
2004 - New issue 6)	5,000,000	40,610,300	2,000,000	16,244,120	0.40
2004 - New issue 7)	20,305,150	60,915,450	8,122,060	24,366,180	0.40
2005 - New issue 8)	1,050,000	61,965,450	420,000	24,786,180	0.40
2005 - New issue 9)	1,053,750	63,019,200	421,500	25,207,680	0.40
2005 - New issue 10)	8,700,000	71,719,200	3,480,000	28,687,680	0.40
2005 - New issue 11)	71,250	71,790,450	28,500	28,716,180	0.40
2006 - New issue 12)	1,125,000	72,915,450	450,000	29,166,180	0.40
2006 - New issue 13)	24,305,150	97,220,600	9,722,060	38,888,240	0.40
2007 - New issue 14)	4,000,000	101,220,600	1,600,000	40,488,240	0.40
2009 - New issue 15)	33,740,200	134,960,800	13,496,080	53,984,320	0.40
2011 - New issue 16)	53,984,320	188,945,120	21,593,728	75,578,048	0.40
2012 - New issue 17)	75,578,048	264,523,168	30,231,219	105,809,267	0.40
2012 - Reduction of share capital 18)	-	264,523,168	-31,742,780	74,066,487	0.28
2013 - New issue 19)	58,782,926	323,306,094	16,459,219	90,525,706	0.28
2013 - New issue 20)	22,000,000	345,306,094	6,160,000	96,685,706	0.28
2015 - Reduction of share capital 21)	22,000,000	345,306,094	-86,326,523	10,359,183	0.03

1) Issue directed to institutional investors. The subscription rate amounted to SEK 160 and Precise Biometrics received an issue amount of SEK 40 million.
2) Issue directed to institutional investors. The subscription rate amounted to SEK 225 and Precise Biometrics received an issue amount of SEK 135.3 million.
3) Issue directed to institutional investors and small number of large private investors. The subscription rate amounted to SEK 87 and Precise Biometrics received an issue amount of SEK 30.5 million.
4) Issue with preferential rights to existing shareholders. The subscription rate amounted to SEK 4 and Precise Biometrics received an issue amount of SEK 31.7 million.
5) Issue with preferential rights to existing shareholders. The subscription rate amounted to SEK 1.70 and Precise Biometrics received an issue amount of SEK 40.4 million.
6) Issue directed to institutional investors and small number of large private investors. The subscription rate amounted to SEK 3.10 and Precise Biometrics received an issue amount of SEK 15.5 million.
7) Issue with preferential rights to existing shareholders. The subscription rate amounted to SEK 2.25 and Precise Biometrics received an issue amount of SEK 45.7 million.
8) Issue directed to the Japanese partner Silex Technology Inc. The subscription rate amounted to SEK 7.04 and Precise Biometrics received an issue amount of just over SEK 7 million.
9) Issue directed to Loqware Sweden AB's main shareholders for acquisition of the company for a value of SEK 8.3 million.
10) Issue directed to European institutional investors. The subscription rate amounted to SEK 7.25 and Precise Biometrics received approx. SEK 63 million before deductions for issue costs.
11) Issue for acquisition of remaining shares in Loqware Sweden AB. Precise Biometrics received approx. SEK 580,000.
12) Non-cash issue for acquisition of 30 per cent of Smart Unicorn Solutions.
13) Issue with preferential rights to existing shareholders. The subscription rate amounted to SEK 3.50 and Precise Biometrics received an issue amount of SEK 85 million.
14) Non-cash issue for acquisition of 8 per cent of Smart Unicorn Solutions.
15) Issue with preferential rights to existing shareholders. The subscription rate amounted to SEK 1.60 and Precise Biometrics received an issue amount of SEK 54 million.
16) Issue with preferential rights to existing shareholders. The subscription rate amounted to SEK 1.00 and Precise Biometrics received an issue amount of SEK 54 million.
17) Issue with preferential rights to existing shareholders. The subscription rate amounted to SEK 0.72 and Precise Biometrics received an issue amount of SEK 54.4 million.
18) Reduction of share capital. The AGM decided, in accordance with the board's proposal, that the company's share capital will be reduced by SEK 31,742,780.16 to cover the loss. The reduction means a reduction in the nominal value of the shares by SEK 0.12 from SEK 0.40 to 0.28.
19) Issue with preferential rights to existing shareholders. The subscription rate amounted to SEK 0.93 and Precise Biometrics received an issue amount of SEK 54.7 million.
20) Special issue of 22 million shares. The subscription rate amounted to SEK 3.90 and Precise Biometrics receive an issue amount of SEK 85.8 million.
21) Reduction of share capital. The AGM decided, in accordance with the board's proposal, that the company's share capital will be reduced from SEK 96,685,706 to SEK 10,359,183. The reduction represents a fall in the nominal value of the shares by SEK 0.25 from SEK 0.28 to SEK 0.03.

SHAREHOLDER STATISTICS

SHAREHOLDER REGISTER

	NUMBER OF SHARES	NO. IN % OF CAPITAL STOCK AND VOTES
Avanza Pension Försäkring AB	35,044,528	10.1 %
Nordnet Pensionsförsäkring AB	6,661,112	1.9 %
Robur Försäkring	6,524,477	1.9 %
Bengt Andersson	2,920,269	0.8 %
Torgils Bonde	2,175,219	0.6 %
Camilla Andersson	1,862,582	0.5 %
Netfonds ASA, NQI	1,774,335	0.5 %
Clearstream Banking SA	1,735,057	0.5 %
Svenska Handelsbanken	1,728,727	0.5 %
Christer Jönsson	1,720,479	0.5 %
Others	283,159,309	82.0 %
Total	345,306,094	100.0 %

ALLOCATION OF SHAREHOLDERS

	NUMBER OF SHARES	NO. IN %
Foreign owners	50,544,121	14.6 %
Swedish owners	294,761,973	85.4 %
of which
Institutions	74,575,749	21.6 %
Unit trusts	1,078,812	0.3 %
Private persons	219,107,412	63.5 %

ALLOCATION OF SHARES

	NO. IN %
10 largest shareholders	18.0 %
25 largest shareholders	23.8 %
100 largest shareholders	37.1 %

SHAREHOLDER STATISTICS (NUMBER OF SHARES OWNED)

	NO. OF SHAREHOLDERS	NO. IN %	NUMBER OF	PROPORTION OF
			SHARES	VOTES
1-2,000	11,933	46.7 %	6,547,380	1.9 %
2,001-10,000	9,759	38.2 %	27,759,426	8.0 %
10,001-100,000	3,282	12.9 %	112,733,654	32.7 %
100,001-1,000,000	528	2.1 %	143,245,723	41.5 %
1,000,001-50,000,000	31	0.1 %	55,019,911	15.9 %
Total	25,533	100.0 %	345,306,094	100.0 %

GEOGRAPHIC DISTRIBUTION OF SHAREHOLDINGS IN PER CENT

	SHARE
Sweden	85.4 %
Denmark	6.3 %
Great Britain	1.7 %
Luxembourg	1.6 %
Switzerland	1.3 %
Norway	1.0 %
Finland	0.9 %
US	0.5 %
China	0.2 %
Italy	0.1 %
Ireland	0.1 %
Others	0.9 %
	100.0 %

Sources: EuroClear per December 31, 2015.

AI assistant

Precise Biometrics — Annual Report 2015

3189_10-k_2016-04-15_ca488080-62d2-4d22-8a20-83f63c0642f4.pdf

ANNUAL REPORT / 2015

CONVENIENT AND SECURE IDENTITY AUTHENTICATION FOR EVERYONE, EVERYWHERE

CONTENTS

IMPORTANT EVENTS DURING THE YEAR

FINANCIAL RESULTS AND SIGNIFICANT EVENTS 2015

Q1 Q2

KEY DATA 2015

Q3 Q4

THIS IS PRECISE BIOMETRICS

Business areas

Fingerprint Technology

Mobile Smart Card Solutions

Customers and partners

Research and development

Organization

A GOOD PLATFORM FOR CONTINUED, PROFITABLE GROWTH

"THE COMPANY IS STRONGER THAN EVER AND IS WELL POSITIONED FOR CONTINUED, PROFITABLE GROWTH"

Change in sales mix gives higher margins

Sales by business area

Market leader in fingerprint software

Increased interest in mobility drives demand for Tactivo

Equipped for continued growth

Håkan Persson, CEO of Precise Biometrics

FINGERPRINTS OPEN UP A MARKET WORTH 35 BILLION US DOLLARS

Fingerprint technology growing rapidly

Strong trends driving developments

"IT IS BELIEVED THAT THE STRONG SALES INCREASE IN MOBILE DEVICES WITH FINGER-PRINT SENSORS IN RECENT YEARS WILL CONTINUE"

A focus on the user experience

Continued growth in mobile phones

Integrity and other biometric modalities

Innovative force is key

WHAT IS BIOMETRICS?

BIOMETRIC TECHNOLOGIES

USER EXPERIENCE

FAR/FRR

SECURE MOBILITY, A GROWTH OPPORTUNITY FOR TACTIVO

Convenient and secure login with Tactivo at US govern-ment agencies

More efficient healthcare

"THE US DEPARTMENT OF DEFENSE CONTINUED TO IMPLEMENT TACTIVO DURING 2015"

OUR BUSINESS

OBJECTIVES

3

Profitable growth in a fast growing market

Strategy for continued growth

Organization

Fingerprint Technology

Mobile Smart Card Solutions

Business concept

VISION

FINGERPRINT TECHNOLOGY

THE COMPANY OFFERS THREE ALGORITHM SOLUTIONS IN THIS BUSINESS AREA:

PRECISE BIOMATCH™ MOBILE

PRECISE BIOMATCH™ EMBEDDED

PRECISE MATCH-ON-CARD™

Business focus

Business model

THE ECOSYSTEM FOR FINGERPRINT TECHNOLOGY

The ecosystem surrounding mobile phone manufacturers

Customers – and our partners

CHOSEN BY 30 MOBILE PHONE MANUFACTURERS

Fingerprint Technology | 21 FOUR OF THE FIVE BIGGEST MOBILE PHONE MANUFACTURERS ARE THE COMPANY'S CUSTOMERS

SAMSUNG / HUAWEI / LENOVO-MOTOROLA / XIAOMI / ZTE

Market development

"THE COMPANY'S CUSTOMERS CHOOSE PRECISE BIOMETRICS' FINGERPRINT SOFTWARE TO ENABLE THEM TO PROVIDE THE BEST USER EXPERIENCE AND SECURITY IN THEIR PRODUCTS" The algorithm solution Precise

Product development

How the technology works

Biometrics, the key to growth in mobile payments

MOBILE SMART CARD SOLUTIONS

Mobile Smart Card Solutions

TACTIVO PRODUCT PORTFOLIO

Business focus

"THE HEALTHCARE SECTOR IS LOOKING FOR SOLUTIONS WITH TACTIVO IN ORDER TO REDUCE COSTS, IMPROVE INFORMATION SECURITY AND INCREASE EFFICIENCY"

Business model

Partners

Customers

"SALES INCREASED BY 98 % IN THE MOBILE SMART CARD SOLUTIONS BUSINESS AREA"

Market development

Precise Biometrics Annual Report 2015