Techstep ASA — Annual Report 2013

Apr 23, 2014

AnnuAl RepoRt 2013

Content

Quick reading 2013 Summary	4
Message from the CEO	6
This is Birdstep	8
The way we do things is equally important as the results we achieve	10
Employees	14
The Management Team	16
2013 Key Events	20
Market Trends 2014	24
Birdstep Markets	32
Birdstep products > Smart Mobile Data > Secure Mobility	34 35 39
Board of Directors	42
Report of the Board of Directors	44
Annual 2011 Financial Statements	52
Report of Independent Accountants	120

Quick Reading 2013 Summary

Revenue increased by 61.3%

over the same period last year and Birdstep delivered its sixth consecutive quarter of year-over-year growth

Reduced loss of NOK 25.2 million over the same period last year

With 23 million users

Birdstep is the largest solution provider in the market for operator initiated offload

Both Smart Mobile Data and Secure Mobility extended their footprints in new markets

A private placement of new shares was completed

The CEO Update

Lonnie Schilling, CEO

A Year of Growth

At Birdstep, our success is rooted in three core strengths: customers, employees and innovative technology. We have built these capabilities over many years and we believe that the way in which we have brought them together has been fundamental to our growth. While other companies may be strong in one of these areas or seek to extend into another, at Birdstep, we each strive to make sure we understand our customers and their challenges in order to provide innovative technology in a way that competitors find increasingly difficult to match.

Everything starts with the customer

For Birdstep, everything starts with the customer. During 2013 we have continued to establish direct, long-term relationships with our customers around the globe. We do this through trust and accountability; we set expectations and either meet or exceed those expectations. These relationships give us a deep understanding of what our customers' needs and challenges are – today and in the future – and enable us to stay focused on providing the services that best meet their needs. The company has also during the year gained traction among OEMs (Original Equipment Manufacturer), MSO Cable TV Operators (Multiple System Operator) and MVNOs (Mobile Virtual Network Operator). It continues to prove that our innovative and differentiated product portfolio is aligned with the needs of our customers as they look to build the most secure networks and provide their end users with what we call 'EXPERIENCE CONTINUITY'* over cellular and Wi-Fi network services.

What we've delivered

I am proud to look back on the past year. We have remained focused on growing top-line revenue, maintaining healthy margins and strengthening our business model. The majority of our revenue growth has been driven by renewed demand from North American mobile operators for our Smart Mobile Data offering. But also Secure Mobility has strengthened its position globally through extended license contracts and by successfully entering the Utility sector when signing a landmark deal with Scottish Water. The commercial rollout of Sprint's data offload project with Birdstep's EasySmart product family has resulted in a high activation rate throughout the year. Birdstep has, with a total of 23 million clients deployed, the largest market share today for operator initiated offload. In September we announced a global contract with Hewlett Packard for our EasySmart product family. The collaboration with HP represents a major step forward for Birdstep, giving device manufacturers such as HP, the ability to significantly differentiate their products and services in a very tangible way.

Ready to meet the market needs

In North America mobile offload is expected to account for 66 % of total mobile traffic in 2017. As Mobile Operators continue to grow their adaption of Wi-Fi strategies, more exciting business opportunities have opened up for Birdstep. While the business climate in Europe continues to be challenged we have several ongoing trials in Asia and Japan, which is becoming an increasingly important focus for our products. To begin meeting the demands the company has started to invest in local sales organizations in both the US and Japan. Another new market segment and opportunity ahead is the Connected Car ecosystem. This segment is expected to provide connectivity into the vehicles, to control the experience of the vehicle and to deliver service and value to the vehicle. This is very interesting and certainly an opportunity for Birdstep as we look at our core competencies where we today bring value in solutions to the mobile network industry for managing and optimizing the user experience.

Improved financial performance

Our strong operational performance, combined with a continued focus on cost control and efficiency has translated into significantly improved financial performance. Besides our positive EBITDA, a positive net cash flow and NOK 71.2 million in revenue for FY13 we also delivered our sixth consecutive quarter of year-over-year growth in Q4. Our performance reflects our continued ability to execute our strategy in a dynamic market. In Q4 the company carried out a private placement of new shares. The net proceeds from the Private Placement will primarily be used to strengthen the company's financial flexibility and to invest in the necessary growth needed to meet the market demands in 2014.

In closing, our FY13 results reflect continued momentum in revenue and earnings growth. We have also gained market recognition and a new positive interest within the financial market. After our investor tours in Oslo and London, interest in Birdstep has increased significantly. As a result of the feedback and requests, we are planning an investor tour in the US in the spring. With our three core strengths – customers, employees and innovative technology in place, we are ready to meet and hopefully exceed the challenges ahead in 2014.

Lonnie Schilling CEO Birdstep Technology

* The term "Experience Continuity" represents our overall strategy for heterogeneous network (HetNet) maximizing Quality of Service (QoS) for users and ensuring that Wi-Fi and the cellular network interact transparently for the user, with no interruption in service in the event of switching a user's device connection from one to the other.

This is Birdstep

This is Birdstep

Birdstep Technology is a leading provider of Smart Mobile Data and Secure Mobility for operators, enterprises and governmental organizations. We are committed to EXPERIENCE CONTINUITY and to combining the power of Wi-Fi with the coverage of mobile networks through "right loading".

Drawing on extensive experience of successful customer projects and cooperation with operators, enterprise customers and OEM partners around the world, we deliver industry-leading solutions for secure wireless connectivity and service management.

Our Smart Mobile Data services offer advanced solutions for data offload and intelligent network selection, support automation and end user communication to network operators. Our Secure Mobility services offer solutions providing seamless and secure connectivity to business data for corporations and governmental organizations.

Birdstep Technology has a successful track record of creating and deploying innovative connectivity and service-management software solutions with mobile operators, service providers and enterprises throughout the globe. Over the past years Birdstep Technology has developed long-term customer relationships with Tier 1 Mobile Operators. The company is also gaining traction among OEMs (Original Equipment Manufacturer), MSO Cable TV Operators (Multiple System Operator) and MVNOs (Mobile Virtual Network Operator). Our ongoing relationships with many industry leaders including Cisco, HP, Goodmill, FourSystems, Boingo and Thales opens up to interesting business opportunities for both product families.

In order to ensure quality and reduce time to market, Birdstep Technology has established a close working relationship with device manufacturers and other technology partners and resellers. Our dedication to our customers and our ability to adapt to their way of doing business has resulted in our solutions being deployed with more than 40 mobile operators, 80 institutions and organizations within In State Government, Banking & Finance, Healthcare, Cities & Municipals and Enterprise, Tier 1 partnerships and OEM relationships worldwide. Birdstep has, with a total of 23 million users for all its customers, the largest market share on the market today for operator initiated offload. Birdstep Technology was founded in 1996 and has been listed on the Oslo Stock Exchange since 2002. The company is headquartered in Oslo, Norway, with competence centres in Sweden, Finland and the United States. For more information, visit www.birdstep.com and follow @BirdstepTech on Twitter.

Smart Mobile Data Solutions

• > EasySmart provides efficient and transparent offload of data traffic to Wi-Fi with no interruption in service or security.
• > EasyHelp ensures subscriber satisfaction by proactively detecting and automatically fixing the most common problems that face a mobile broadband user.
• > EasyConnect is an advanced connection manager that gives the customers of mobile operators a smooth and easy mobile broadband experience starting from the time of installation and throughout the customer lifecycle. It also provides powerful capabilities for remote support and direct communication with end users, and offers detailed statistics and information about such users.
• > EasyAnalytics offers the mobile operator an insight to and understanding of the true customer needs.
• > SmartANDSF is smart policy management that allows true user experience optimization.
• > Credential Server allows the operator to keep track of networks, manage credentials and provides data about the preferred network of a service and how to manage different authentication schemes.

Secure Mobility Solutions

> SafeMove is a revolutionary mobile VPN software solution, which provides secure connectivity and seamless mobility for laptops, smartphones and PDA's. By the end of 2013, SafeMove had 85 customers divided between state, government, banking and finance, cities and municipals, Healthcare and other enterprises.

The way we do things is equally important as the results we achieve

The way we do things is equally important as the results we achieve

At Birdstep 'the way we do things' is equally important to us as the results we achieve and that's why we put so much emphasis on integrating our values into everything we do – from recruitment and selection, reward and recognition to performance reviews, learning and development.

We don't just talk about our values, we think and act in a way which demonstrates them and our commitment to diversity is deep rooted in our values.

We are committed to a working environment in which individuals are valued for their skills, strengths and perspectives, contribution and individuality. We believe in cultivating "diversity of thought" to boost innovation and creative problem-solving. We focus not only on employing people with the best competencies but also with different personalities, cultures, gender, origin, religion, thinking style and background as this bring diversity in the workplace. In an increasingly competitive economy where talent is crucial to improving the bottom line, pooling from the largest and most diverse set of candidates is increasingly necessary to succeed in the market.

We Are Connected

At Birdstep we use different cultures, backgrounds, personalities and competencies to stimulate creativity, spur insight, and increase efficiency. Diversity is one of our greatest strengths. Our workforce comprises of 17 different nationalities with diverse origins but are connected by common objectives and a continuously strive to provide smart, easy and secure connectivity solutions to our customers.

We Inspire Change

With so many different and diverse minds coming together, additional ideas and solutions arise as every individual brings their way of thinking, operating, solving problems and decision making. Everyone is encouraged to use their diversity and skills to think outside the box in order to identify and introduce positive change into the organization, our solutions and in their own working practice. We inspire change by giving our employees not only the tools they need to perform with confidence but also by providing them a forum where they can share and implement their innovative ideas. We celebrate Inspire Change Day quarterly in which employees present their ideas that becomes a part of our innovation process.

We Are Passionate

The passion for our technology and market is our driving force. It is crucial for us to select employees who are passionate about what they do and what the company wants to achieve. A mix of nationalities from every continent speaking over 20 languages together with a collaborative approach to projects, have created an environment where everyone is very passionate to achieve the company's goals.

We Deliver Excellence

At Birdstep we have a diverse set of skills, competencies, experiences and cultural understanding. All together this has made us capable of delivering excellence and providing services to a broad variety of customers spread across the world. Our customers, suppliers and shareholders are increasingly global and diverse, each expecting us to understand, respond and deliver services that meet their individual expectations. Or multi-cultural, innovative and global cross-functional teams are always striving to deliver excellence in terms of secure & smart connectivity.

We Earn Trust

For us, everything starts with the customer. We are continuously working towards establishing direct, long-term relationships with our customers around the globe. These relationships give us a deep understanding of what our customers want – and don't want – and enable us to stay focused on providing the services that best meet their needs. At Birdstep we maximize the value of our individual talents. We allow and encourage everyone to take responsibility and that has resulted in increased productivity and created a satisfied customer base.

Employees

Nationalities 17

Hungary Greece China Taiwan US Sweden Finland Iraq Iran Pakistan India UK Germany Algeria Russia Ireland Denmark

Gender Distribution

The Management Team

Lonnie Schilling Chief Executive Officer

Lonnie Schilling brings 20 years of experience of equity investment, strategic bus-iness development, architecture sales and marketing within the international communications market. He was most recently Director, Mobile Service Provider Sales & Business Development at Cisco and he has also held leading management positions in other global companies such as Motorola, ITT, Worldview Technology Partners, Bolt Beranek and Newman (BBN). Schilling holds a B.S. in Computer Science from the University of Maryland. He completed graduate and postgra-duate studies at the Swiss Federal Institute of Technology, the International Institute for Management Development, INSEAD and the Marshall School of Business at USC.

Marie-Louise Nilsson-Kanon VP Market Communications

Marie-Louise Nilsson-Kanon brings to Birdstep more than ten years of experience of diversified marketing & communications expertise in the IT and Telecom industry. Prior to Birdstep Nilsson-Kanon served as Marketing Director at Kentor AB and Head of Marketing at Rosenberger Carlberg Group. She has also run her own consulting company offering small business startup marketing services, including web site design, logo design, copywriting, marketing plans etc. Nilsson-Kanon has also a financial background and served in the beginning of her career as Head of Accounting for a subsidiary within Ångpanneföreningen.

Sophie Rabenius Chief Financial Officer

Sophie Rabenius brings to Birdstep more than 10 years of diversified finan-ce experience and in her role as CFO her primary responsibility is to provide leadership and coordination in the business planning, accounting and budgeting efforts of the company. Prior to Birdstep Rabenius has worked at positions at The Absolut Company, several financial institutions and her own consulting company. Since joining Birdstep in February 2010, she has also served as business controller and director of financial planning and analysis, working with both strategic matters and hands-on business controlling with primary focus on sales. Rabenius holds a Degree in Master of Science with a major in Business Administration.

Maria Johansson

Global HR Manager

Maria Johansson brings to Birdstep a diversified expertise within HR with a strong focus on Talent Management, Recruitment and Employer Branding. Johansson was awarded Best Employer Branding person in Sweden by Universum Awards 2010. Prior to Birdstep Johansson has worked as HR specialist for Carnegie Investment Bank and as Program Manager for Africa Health and Community program. Johansson holds a degree in Human Resources from the University of Gothenburg.

Anders Storm VP Engineering & Operations

Anders Storm brings to Birdstep a broad background in operations and engineering within the telecom and mobile communications industry. Storm comes from the position as Head of Development and IT of Tekis AB. Storm has also had an extensive career within Sony Ericsson, having held a number of leading positions, most recently as Head of Program Management. Storm holds a Master of Science in Computer Science and Engineering from Lund Institute of Technology.

Michael O. Jönsson VP Global Sales

Michael O. Jönsson have been active in the Telco arena since 1989 and brings to Birdstep an extensive background in international sales and business development within the IT and Telecommunications sectors world-wide. Prior to Birdstep, Jönsson has worked as VP EMEA for Lavastorm / MDA and prior to that he held several sales management positions within Ericsson Group – most recently responsible for their fixed line business in Americas. Michael Jönsson holds an MsC in Engineering from the Royal Danish Engineering Academy, Copenhagen, combined with later degrees within internal marketing & sales as well as management.

Sanna Tiilikainen VP Global Sales

Sanna Tiilikainen joined Birdstep as VP Sales, SafeMove Finland in September 2011. She brings to Birdstep more than 10 years of experience in international mobile telecom and IT industry and she has held several marketing and sales positions in Nokia, TBWA and Symbio. Prior joining Birdstep, Tiilikainen held the position of VP, Sales in Valimo, a Gemalto Company. Tiilikainen holds a Master of Science in applied mathematics and scientific computing from University of Jyväskylä, Finland.

Tim Bray

VP Sales EMEA, Smart Mobile Data

Tim Bray has 17 years experience in sales, 15 of those in senior sales and sales management from various roles in IT and telecoms. Prior to Birdstep Bray was Sales Director for Edgeware AB and mBlox in EMEA, MessageLabs in the UK and Area Business Manager for Cable & Wireless, also in the UK. Bray's earliest experience however was as a naval aviator in the Royal Navy attaining his flying wings and a 2:1 Strategic Studies.

The Key Events of 2013

The company´s first Global Sales Conference was held in Q1 which emphasized on combining the strengths of its Secure Mobility and Smart Mobile Data teams to prioritize and align all resources on the most strategic business in 2013.

The commercial rollout of Sprint's data offload project with Birdstep's EasySmart solution resulted in Birdstep's highest activation rate per quarter to date.

SafeMove Portable Security was launched in February. First order for SafeMove Connection Tracking module was received from Thames Water, an award winning UK utilities company. First SafeMove Mobile VPN and SafeMove Mobile Router trials were installed together with Goodmill and Four Systems in Saudi Arabia. The company won three SafeMove license upgrade deals and one new SafeMove license deal from four different Finnish ministries.

Birdstep signed a partnership with one of the world´s leading Wi-Fi software and services provider. Several EasySmart trials were started in the US and Asia with Tier 2 & 3 operators.

Birdstep´s attendance at Mobile World Congress in Barcelona resulted in significant media attention and new exciting opportunities.

Birdstep launched EasyAnalytics and Smart ANDSF solutions at the CTIA event in Las Vegas, USA. Birdstep also attended Enterprise Mobility Exchange in the Netherlands and Critical Communication World in France.

Birdstep established the framework for quarterly customer governance.

The commercial rollout of Sprint´s data offload project with Birdstep's EasySmart solution again resulted in a higher than expected activation rate per quarter to date.

Birdstep received its first order for SafeMove Mobile Router Toolkit from a large North American Original Equipment Manufacturer (OEM). The first SafeMove license order was received from reseller Four Systems in Saudi Arabia and first SafeMove Portable Security trial started in Saudi Arabia and Malaysia. Additionally the company won two SafeMove Mobile VPN license extension orders from Finnish State organisations.

Former Cisco executive Massimo Migliuolo was elected to the Board of Directors. Migliuolo brings more than 20 years of experience of strategic business development, architecture sales and go-to-market strategy, especially in the mobile and cloud industry.

The collaboration with HP represents a major step forward for Birdstep, giving device manufacturers such as HP, the ability to significantly differentiate their products and services in a very tangible way. This solution enables device manufacturers to offer enhanced connectivity services, which address real customer frustration. The company´s go-to-market strategy is now being proven in new markets.

Birdstep signed a global contract with Hewlett Packard (HP), a multinational information technology corporation and OEM for its EasySmart solution. iPad iPad

The commercial rollout of mobile operator Sprint's data offload project with Birdstep's EasySmart solution resulted in a high activation rate with 2.37 Million new EasySmart clients in Q3.

Birdstep successfully closed its first license order with the UK Utility company Scottish Water. The company also further strengthened its position in the UK healthcare market with a SafeMove license expansion order from the Rotherham NHS Foundation Trust.

The company attended the third Annual Information Security Summit together with its partner Haynik in Malaysia.

Birdstep signed two new reseller agreements in Bahrain and Vietnam.

Birdstep delivered its sixth consecutive quarter of growth and with 23 million users the company is the largest solution provider in the market for operator initiated offload.

The company carried out a private placement of new shares. The net proceeds from the private placement will primarily be used to strengthen the company´s financial flexibility and to invest in the necessary growth needed to meet the market demands in 2014.

Birdstep had a successful completion of phase one of the Hewlett Packard contract and also entered the final stage of the commercial roaming initiative trial with a large North American operator.

The commercial rollout of Sprint's data offload project with Birdstep's EasySmart solution again resulted in a high activation rate.

The company closed several extension orders proving both its customers loyalty and the company´s product strategy. Among those were a SafeMove Crypto IP license extension contract with a US based OEM in the public safety industry, a SafeMove Mobile VPN license extension contract with a company operating in the UK utility industry and two SafeMove Mobile Router Toolkit license extension contracts; one with a US based OEM customer providing mobile asset management solutions and the other with a US based OEM in the aviation industry.

The company received recognition and attention by attending several events during the quarter: Nordic Small Cell Integration, EHI Live, Broadband World Forum and Next Generation Workforce Management. In the 4th quarter Birdstep was nominated for "The Best Use of Wi-Fi Award" by Telecom.com.

Market Trends 2014

Connected car systems are currently worth €13 billion. By 2018 the market value is expected to increase at least three-fold to €39 billion. Growth is driven partly by an expansion in functionality to include more navigation as well as safety, security and remote tracking or control. But it also comes from the expansion of connected systems expanding from the premium brands into the mass market.

The growth of the connected car system market translates into great opportunities both for mobile and device makers, and mobile data service innovators, including Birdstep since cars on the road can only communicate with external services wirelessly. As the underlying ecosystem continues to evolve, connecting relevant parties such as automobile associations and providers of emergency services, Birdstep has a great opportunity to bring its experience, expertise and voice to the debate. Currently one of the debates is over the exact connectivity model. Some argue mobile communications will be embedded in the vehicle, while others advocate the Bring-Your-Own-Device (BYOD) model where vehicle owners use their own handset to connect to the car using Bluetooth. An alternative hybrid approach is where the owner simply provides the SIM, then uses equipment installed in the car.

Most likely embedded communications will eventually prevail since handsets tethered to the car will not readily be able to support some of the most compelling applications, such as remote control of the vehicle environment, as well as some critical safety and security services.

Managing the Experience

At this stage though it is irrelevant which of these models prevails from the perspective of Birdstep and our customers. Our technology will be equally relevant for all the proposed models and the real issue lies in managing the user experience effectively and ensuring an Always Best Connected service. Many in the automotive industry anticipate that the Connected Car will add a non-trivial amount to the cost of the car and therefore are trying to understand how to deliver the added value necessary to justify the additional cost to the consumer. Birdstep's expertise in Experience Continuity will therefore be fundamental in enabling the automotive Original Equipment Manufacturer (OEM) to deliver a value proposition to the consumer.

Such value will probably come from appealing in-car infotainment services, with research firm SBD predicting news, weather, social networking and music streaming, will be prove particularly popular and be supported by 32.1 million cars sold in 2018 compared with 4.3 million in 2012. Growth in navigation services is predicted to be slightly slower but from a higher base, shipping in 28.5 million cars in 2018, compared with 5.12 million in 2012. SBD expects vehicle management applications, such as remote diagnostics and maintenance, to be supported by 14.8 million cars sold in 2018, compared with 5.5 million in 2012.

SBD predicts more generally that more than 50% of vehicles sold worldwide in 2015 will support some form of connectivity, either embedded, tethered, or through smartphone integration, and that in over 20% it will be fully embedded. Other surveys make similar overall predictions, with disagreements over which model will prevail but strong consensus that the market is going to be big one way or the other. The great thing for Birdstep is that, despite differences in detail, the mobile data requirements for the connected car will be similar in principle to current smartphone services and so our investment in Experience Continuity, intelligent networks selection and smart data will be just as applicable.

For example we often discuss how one of our customers manages six or more terabytes of data a month across its heterogeneous network (HetNet) using Birdstep's EasySmart family of products for their several million smartphone customers. Recently Audi announced that their 50,000 Audi Connect customers had consumed over 75 Terabytes of data since the launch in 2011. This highlights the similarity of the challenges and opportunities between the smartphone and connected car sectors.

A Logical Progression for Birdstep

Birdstep is not abandoning its roots and will continue to innovate and deliver value to its MNO customers and in turn their subscribers. But as part of the product development strategy initiated in 2013, Birdstep is expanding into new market segments with related connectivity requirements, based on the idea of adjacency. The Connected Automobile market segment is very adjacent, since many of the same smartphones or SIMs will be involved, as well as our existing operator customers. This is yet another opportunity for Birdstep to exploit our experience and expertise, bringing EXPERIENCE CONTINUITY to a Connected Car near you.

The realization among mobile operators that they need to combine their cellular data services with Wi-Fi to deliver the best quality of experience has grown rapidly over the last year, irrespective of geography or whether they are Multi-Network Operators (MNOs), Multi-Virtual Network Operators (MVNOs) or Multi-Service Operators (MSOs). Birdstep has had solutions to achieve this for several years, but now we recognize that operators are looking beyond the immediate economic and efficiency benefits of Wi-Fi offload towards delivering the best experience to their customers wherever they are. This means the benefits of a heterogeneous network (HetNet) combining cellular and Wi-Fi now extend beyond cost savings, or even offering customers the better performance of Wi-Fi when available, towards making a high quality experience continuous. Increasingly mobile users are demanding ubiquitous access to their services wherever they and becoming more intolerant of lapses in quality, or worse complete loss of service, in areas where they cannot get a cellular signal for example. For this reason Birdstep has adopted the term Experience Continuity, to represent our overall strategy for HetNets, maximizing Quality of Service (QoS) for users and ensuring that Wi-Fi and the cellular network interact transparently for the user, with no interruption at all in service in the event of switching a user's device from one to the other.

Combining Intelligence with Ease

EXPERIENCE CONTINUITY can harness the Birdstep solution portfolio, but functionally it has two components, or requirements, as far as the user is concerned. Firstly it must ensure that switching between Wi-Fi and cellular really is transparent, requiring no action by the user and taking place totally seamlessly without the merest blip in the service. Secondly EXPE-RIENCE CONTINUITY must enable the concept of "always best connected", meaning that where Wi-Fi and cellular connections are both available the HetNet choses whichever provides the best QoS at the time, according to policy specified by operators but taking account of their customers' quality of experience. In some cases operators may even allow their customers to specify what these rules are, so that one user may, for instance, prefer to prioritize device battery life while another may choose to have the highest data rate at all costs.

Birdstep enables EXPERIENCE CONTINUITY through our Easy Smart Client software combined with a server based on the industry standard ANDSF (Access network discovery and selection function), whose essential role is to enable client devices to discover wireless networks within range, primarily Wi-Fi.

EXPERIENCE CONTINUITY's roots lie in conventional Wi-Fi offloading, which evolved a few years ago to alleviate congestion on mobile operators' infrastructures caused by proliferating data traffic. Wi-Fi offloading in turn reduced costs because the broadband networks connecting Wi-Fi hotspots were more efficient and have greater economies of scale than cellular backhaul infrastructures. While this economic factor is still an important driver for Wi-Fi offload in HetNets, the emphasis has switched to "right loading", with QoS for the user presiding over cost savings for the operator.

Fortunately the two objectives often coincide, so that the best network for QoS will also be the one that is most cost effective for the operator. This can be seen by considering early HetNet deployments, which have shown that correct dynamic network selection works much more efficiently in congested cells than when similar offload/network selection is applied in non-congested cells. This difference in effectiveness of dynamic network selection between congested and non-congested cells is at least 10%. As a consequence, offload is most effective for the operator in the event of congestion in the cellular network and at such times the user is also most likely to benefit through improved QoS.

Operators will in practice implement differing policies and business rules for selecting between Wi-Fi and cellular depending on factors such as geography and customer profile. Whatever choices they make, Birdstep's priority is to ensure that the experience for users is always continuous and secure.

Adding Security to Intelligence and Ease

EXPERIENCE CONTINUITY can harness Birdstep's in-depth experience of providing security solution to mobile workforces around the globe. Leveraging the Secure Mobility part of our product portfolio means that operators can implement any security policies needed to protect their network infrastructure and their subscribers' data. In a post Snowden affair world, we further believe this security capacity will provide an edge when privacy is at stake. Best-in-class security solutions will also help satisfy the stringent requirement of content owners. As bandwidth and mobile device screen resolutions continue to rise, HD content will become the norm for mobile video followed eventually by content at a 4K resolution. Securing this most valuable content will be a key requirement to ensure EXPERIENCE CONTINUITY is also relevant to services including early release box-office cinema or premium live sports.

3. Future Trend: Rightloading Requires Intelligent Network Selection

When Wi-Fi offload emerged as a remedy for mushrooming mobile data traffic five years ago in the early smartphone era, there was no such thing as Intelligent Network Selection. There didn't need to be, since no selection had to be made, with user devices and their traffic being switched in one direction only. Generally if Wi-Fi was available than that is where the data would go.

That is now changing rapidly as mobile operators look to deploy Wi-Fi offload in a more sophisticated way taking account of a growing array of factors. The goal now is to enable "right loading" rather than "offloading", recognizing that the switching may be in either direction, even if it will still more often than not be towards Wi-Fi when that is available. But there are plenty of circumstances where an operator might route users to cellular even when there is a choice. Wi-Fi might be available but the signal may be weak or the hot spot may itself be suffering from congestion. The operator might have an agreement with a video content provider as part of a premium mobile package with a guaranteed Quality of Service (QoS). In both those cases the operator would route to the cellular network. Another emerging possibility is that the operator may deploy the new LTE Broadcast technology to deliver dedicated channels in a given area where a lot of people are congregating, such as in the vicinity of a stadium during a sporting event. In that case users would be routed to the cellular network to access the specified channels, rather than Wi-Fi.

On the other hand for general Over-the-top (OTT) services like YouTube accessed on a unicast basis Wi-Fi would often be preferred as it will reduce the load on the cellular infrastructure, while delivering the best QoS to the user. The primary objective of Intelligent Network Selection will be to provide users with the best QoS at all times, with transparent switching between Wi-Fi and cellular as appropriate.

Always Best Connected

At Birdstep therefore our intelligent network selection strategy is governed by the principle of "always best connected", emphasising the growing focus on the user. Birdstep realized early on that network selection can only be really intelligent if it is based on measurements and data taken from the client's device, even if the execution takes place in the network.

Of course information from the network needs to be considered, such as time, location of the user's device and congestion on the cellular side, but the operator is absolutely dependent on information from the client. This is not just to provide information on the user's application, device status such as battery life and current quality of experience but often for performance data on the Wi-Fi side. It is also important to realize that automatic and secure handover between Wi-Fi and cellular can only take place with the full cooperation of the client device in the process, in conjunction with effective policy management on the network side. There is a standard mechanism for orchestrating this cooperation between the operator's policy management system and the client's connection manager and this is the 3GPP's Access Network Discovery and Selection Function (ANDSF). But for the most effective implementation of policy the client must also obtain the right information and feed this back to the operator, which is where the added value comes in. The key is to give operators full awareness both of the user experience and the status of the Wi-Fi network to optimize control over a device's network selection across a heterogeneous network (HetNet) at the most granular level. This involves also taking into account a growing range of contextual information to make network selection decisions, in addition to the basic parameters. Birdstep has developed our Smart Data analytics software to enable this intelligent network selection as a key part of our Experience Continuity (EXO) strategy to give users the best QoS at all times.

Birdstep markets

Leading position for smart data offload & Intelligent Network Selection in North America. An area of growth opportunities and extended footprints for both product areas

Established presence in Europe

Continuous exciting opportunities in Asia and Middle-East

Birdstep Products

Smart Mobile Data:

Helping operators to assure efficient network usage and improve customer experience.

Drawing on extensive experience of successful customer projects and in cooperation with many operators worldwide Birdstep offers advanced solutions for data offload and intelligent network selection, support automation and end user communication to network operators.

EasyConnect

Birdstep EasyConnect provides a smooth and easy mobile broadband experience starting from the time of installation and throughout the customer lifecycle. It also provides powerful capabilities for data offload, user communication and account management among other things.

The third generation in Birdstep´s leading solution suite for mobile broadband service providers has been designed for the new challenges and opportunities presented in the exciting mobile broadband space. Some of the new features added during the last year include increased support for Wi-Fi network selection and new modules for data analytics.

Service experience begins at first installation, and from this point forward EasyConnect delivers an engaging and simplified user experience ensuring end users get off to the best start every time. With subscriber bases growing, the potential of delivering a best in class mobile broadband user experience through value added services such as data offload, marketing, and engaging direct user communication is enormous. In the user communication area, EasyConnect is designed to provide multiple mechanisms for getting the right messages to the right subscribers at the right time, whether it be a simple data plan update or targeted marketing campaigns.

With the challenges arising from managing the customer experience in a heterogeneous network environment, a simple and powerful network profiling and automated connectivity solution ensures end users are connected to the best network, all the time. Relieving data loads and ensuring an improved customer experience results in benefits for operators and subscribers alike. Of course, the EasyConnect solution wouldn't be complete without our best in class remote management and updating services contained within the EasyConnect Management Suite (EMS). The latest evolution of our product range, higher capacity, improved analytics capabilities and updated settings for network selection ensures complete quality of service.

Drawing on experience from over 40 successful operator deployments globally, Birdstep is able to deliver a connection manager solution ready for immediate deployment, complete with all the leading benefits of the EasyConnect product suite.

EasyConnect in short

• > Providing an automated "best connection" experience
• > Managing the entire mobile broadband consumer experience
• > Enabling pro-active data hand-off
• > Integrated prepaid handling
• > Remote handling of software and firmware updates
• > Bringing operators services directly to the consumer desktop
• > Providing best in class service access and branding
• > Intelligent marketing and communication Channels

EAsySmart

Birdstep EasySmart offers an intelligent client for smartphones and tablets, enabling seamless and intelligent off-loading to Wi-Fi with automatic credential handling.

The increasing maturity in the Smartphone market is leading to new challenges and new opportunities. In order for service providers to both understand and not lose track of their customers in a heterogeneous network environment, the challenge lies in capturing and analyzing data about their customers' user experience. Furthermore, the service providers must provide a great user experience based on what their customers really see by applying smart policies that benefits their customers. The gain for the Service provider lies in creating exiting tariffs, additional services and a profitable network planning based on this knowledge.

EasySmart in short

• > Automatic policy driven off-load and on-load to and from Wi-Fi
• > Battery smart, congestion aware connectivity management
• > Silent provisioning of user credentials with login to hotspots based on WISPr and 802.1x/EAP-SIM/AKA
• > Support for Wi-Fi roaming partners
• > Crowd-sourcing quality data and hotspots

EasyHelp

Birdstep EasyHelp offers advanced trouble shooting and diagnostics designed to minimize operator support costs.

With the success of mobile broadband and mobile internet services being seen as a primary form of internet connectivity, the potential for providers globally is enormous. The market itself shows no signs of slowing down with an ever increasing number of devices and technologies choosing mobile internet as the primary form of connectivity. With concern surrounding overall profitability however, it is important for providers to look closely at operational costs associated with mobile broadband and one key area that shows significant savings potential is in the area of support.

Indeed, real numbers show a massive amount of support calls regardless of issue complexity and this can be largely attributed to the newer generation of users who are far less technically savvy than the early adopters of mobile broadband.

Additional cost is being driven through:

• > The complex nature of the mobile broadband user environment
• > The number of variables in a notebook/netbook environment
• > Mobile Operators are seen as the first point of call regardless of issue
• > Higher level of skills required to solve calls

Drawing on experience from over 40 successful operator deployments globally, Birdstep has expanded its value offering in service access and management to include a best in class support experience for consumers. The EasyHelp support client is designed to provide a great user experience and simultaneously reduce operational expenditure in customer support.

EasyHelp in short

• > Diagnose and self-heal faults
• > Device testing and repair
• > Network testing and repair
• > Computer testing and repair
• > Client testing and repair
• > Provide easy-to-understand feedback
• > Refer issues to correct supplier
• > Enable rapid call center support resolution
• > Reporting and automatic updates of fixes and Information

SmartANDSF

Birdstep's SmartANDSF offers smart policy management that allows true user experience optimization. Heterogeneous networks, Wi-Fi offload and innovative services – these are all areas that require intelligence in the selection of network, how to access a network and when to do it. Initiatives to manage network and service selection has been taken by the major standardization organizations such as IEEE and 3GPP as well as by the mobile operators. Thanks to Birdstep's extensive knowledge from large real world deployments of offload/onload technologies with policy management we support not only basic policies but also offers a large set of augmented policy triggers.

In fact, a mobile operator could select a number of combinations to create the best possible selection for their subscribers or to optimize the use of their own network. Examples of triggers for Birdstep's policies are:

• > Network Congestion
• > Time of day
• > Known locations
• > Power and battery
• > Specified applications

Addressing the same challenges as ANDSF and Hotspot 2.0, Birdstep's well proven solution from millions of live clients out in the market is the perfect solution.

SmartANDSF in short

• > Tailor-made data offload/onload for each customer
• > Integrates client and network policy control for consistency, performance and easy remote updating
• > "SmartANDSF" provides fine-grained policies
• > Optimises device usage across the network

System Mobility Policy Smart Selection Routing Policy Selection Authentication (802.1X) SmartANDSF ANDSF Hotspot 2.0

EasyAnalytics

Birdstep's EasyAnalytics provides ability to really understand customers experience – across all networks. With heterogeneous networks comes the challenge to understand what the customer experiences and needs. When a user drops off the core cellular network they are suddenly "invisible" to the mobile operator.

Even in cases with mobile operators that have their own Wi-Fi footprint, user will sign in and out of other third party networks as well as their home and office connections.

In order to correlate user experience with churn, to follow up on the characteristics of partner Wi-Fi networks or to simply gather knowledge to create the most competitive tariff the mobile operator needs to "see what the subscriber sees". Birdstep's solution, EasyAnalytics, offers the mobile operator an insight to and understanding of the true customer needs.

EasyAnalytics in short

• > Track and optimize session performance
• > Capture poor user experiences in real-time
• > Use metrics and identify the best WiFi partners
• > Keep the customer "ownership"

Credential server

Birdstep's Credential Server allows the operators to connect the dots between foreign networks, partner networks and the mobile operator. A challenge for the mobile operator when selecting a Wi-Fi partner, or introducing other partners such as streaming media services, is how to be able to provide a good user experience and still provide access to a multitude of different user accounts. It is even common that the mobile operator sets up partnerships with more than one partner simply because differences in coverage between the different partners in a part of a country or internationally.

Not only is it necessary to keep track of which these networks are, but it is also necessary provision the users – and – to maintain a mapping between the different identities in order to have working charging mechanisms.

With the Birdstep credential server the mobile operator has the perfect tool to manage these credentials. It allows the operator to silently and automatically provision all their users for all their user accounts via a single point.

Not only does it solve the usability issues that arise when a user has to keep track of many accounts, but it also provides data about the preferred network of a service and how to manage different authentication schemes.

Credential server in short

• > Automates user provisioning
• > Manages multiple user account instances
• > Simplifies a multi partner strategy
• > Increases the success rate of Wi-Fi offload significantly

Credential server

Secure, Seamless Connectivity for mobile workers

Based on a long experience with remote access solutions, we at Birdstep understand not only the needs of mobile workforce, but also the common connectivity, security and productivity challenges that companies face when mobilising workforce. With Birdstep's SafeMove solutions, mobile workers can enjoy the most positive, productive experience possible.

Secure, Seamless Connectivity for mobile workers:

Based on a long experience with remote access solutions, we at Birdstep understand not only the needs of mobile workforce, but also the common connectivity, security and productivity challenges that companies face when mobilising workforce. With Birdstep's SafeMove solutions, mobile workers can enjoy the most positive, productive experience possible.

SafeMove products for Corporate Customers:

Birdstep's SafeMove product suite provides the best-of-breed remote access solutions for corporate users. All SafeMove solutions are also available as managed service.

SafeMove Mobile VPN

SafeMove mobile virtual private network solution (MPVN) enables easy and secure access to the corporate internal network, ensuring an unparalleled user experience for all mobile workers. With SafeMove, all field service personnel can enjoy hasslefree, zero-click access to the best available network wherever their work takes them.

SafeMove is based on open international standards such as IPsec, IKE and Mobile IP. It seamlessly integrates with existing Internet-based applications and leverages existing technology investments.

SafeMove Mobile VPN in brief:

• > Always on, zero-click connectivity
• > Single sign-on to the network and applications
• > Seamless roaming between networks that is transparent to both the user and applications
• > Maintains a secure connection over the best available network
• > Strong authentication, FIPS 140-2 encryption, secure Hotspot login

• > Highly scalable architecture with support for multiple data centers and automatic selection and failover

• > Integration to enterprise infrastructure such as Microsoft Active Directory

• > Based on and compliant with international standards such as IPsec, IKE and Mobile IP

SafeMove Mobile Access

With SafeMove Mobile Access Service, employees can utilize the most modern mobile devices without burdening the company's own IT department. SafeMove Mobile Access leverages built-in IPsec VPN clients on mobile phones and tablets, along with proven SafeMove server infrastructure, to provide easy and secure access from mobile phones and tablets to an organization's network resources. Smart phones and tablets, whether employee owned (BYOD) or issued by enterprise IT, require secure connectivity to the enterprise network in order to realize their full potential as personal communication and productivity tools. SafeMove Mobile Access Service is set to solve the remote access issue in environments with a multitude of different mobile platforms such as Apple iPhone, iPad and Android phones.

SafeMove Mobile Access in brief:

• > Easy and secure access to the enterprise network
• > Supports iOS and Android platforms
• > Operated as a Service
• > Based on strong user authentication (PKI, certificates)
• > Leverages built-in VPN clients on mobile phones and tablets
• > Utilizes existing SafeMove infrastructure

SafeMove for Android™

SafeMove for Android™ is a managed, always-on Mobile VPN app for Android phones and tablets. The solution addresses issues commonly faced when deploying business or missioncritical applications on the Android mobile platform. Connection management and the always-on features maintain a working, secure connection at all times. The IPsec VPN ensures that all connections are strongly authenticated and all traffic is encrypted using industry standards and best practices. All aspects of the application and system can be centrally managed and monitored. Initial installation, configuration provisioning and certificate enrolment are so easy that the task can be performed by the end user.

SafeMove for Android is the natural choice for mobile workforces to enable constant, secure connections to protected network resources.

SafeMove for Android in brief:

• > Customer installable VPN app for Android 4.x and newer
• > Easy provisioning / MDM compatible
• > Automatic, always on VPN
• > Centralized management
• > Connection management, Wi-Fi provisioning
• > IPsec standards compliant
• > SafeMove Analytics system can be used for reporting and analysis
• > Also available as a managed service

SafeMove SSL VPN

SafeMove Clientless SSL VPN offers easy and efficient remote access to the enterprise network. While the full SafeMove Mobile VPN system is designed to secure company-issued equipment and the connections of these devices, SSL VPN is suited for casual connections from home computers and web kiosks, as well as for remote access by external consultants and contractors. The SSL VPN is accessed through a web portal, using a standard web browser. Web applications, such as SharePoint and Outlook Web Access, work directly in the browser and do not require any supporting client software or browser plug-ins. Also, Windows network fi le shares can be accessed directly using a web user interface.

SafeMove SSL VPN in brief:

• > Well suited for occasional connections to the enterprise network
• > Easy to use through a standard web browser
• > Does not require any client software installations
• > User can sign on to the portal with his/her Windows user name and password
• > Access allowed only to the services the account is entitled to

SafeMove Portable Security

SafeMove Portable Security is a secure, special-purpose Linux desktop environment for organisations with high security needs. SafeMove Portable Security is a hardened Linux desktop bootable from a USB memory stick. It is secured with hardware encryption, in ruggedized casing and PIN entry on the device. It is also waterproof and dustproof. The solution integrates Birdstep's high-class SafeMove Mobile VPN to provide instant, zeroclick network connectivity and IPsec security with strong data leak prevention guarantees.

SafeMove Portable Security in brief:

• > Linux desktop bootable from a USB memory stick
• > Hardware encryption and on-board PIN-pad
• > Waterproof & Dustproof
• > Hardened for high security (Optional FIPS 140-2 level 3 certification)
• > Automatic and secure network connections

SafeMove Analytics

SafeMove Analytics is an intelligent tool for collecting and analysing connectivity data from the SafeMove client. It gathers on-going metrics on connectivity such as connection status, signal strength, connection speed, Wi-Fi networks in range and connected cellular networks. This information can be used in reporting and troubleshooting, which gives greater understanding of connectivity performance and issues and allows making fact-based decisions that help to improve productivity and user experience.

SafeMove Analytics in brief:

• > Provides valuable information for troubleshooting, and proactively solving connectivity problems
• > Gives insight and understanding about wireless service provider performance
• > Allows to make fact-based decisions that can help to improve productivity and user experience
• > Possibility for tailor-made reports
• > Can be enhanced with GPS data if available

SafeMove products for OEMs:

SafeMove technology is also offered as comprehensive software toolkits. These toolkits can be used by OEMs for integrating into their own products and solutions, e.g. targeting public safety, government and military.

SafeMove Mobile Router Toolkit

The Mobile Router Toolkit (MRTK) is a Mobile IP compliant software stack, specifically designed to be integrated into Linux based mobile router systems and provides uninterrupted, seamless connectivity for the router and any devices connected behind the router.

The MRTK is a client/server software solution. The client software can be embedded into multi-channel router hardware to provide seamless and reliable switching between the best available broadband data networks including 3G and 4G. The server software consists of standards based Mobile IP Home Agent (HA) which can be clustered for load balancing and high availability. The client software is also interoperable with third party HAs supporting the Mobile IP standard. The solution optionally includes support for IPsec encryption but can interoperate with third party VPN solutions if required.

SafeMove Toolkit for Android

SafeMove toolkit for Android™ provides the benefits of Safe-Move Mobile VPN to Android devices and adds more. SafeMove Toolkit for Android is a unique solution offering a secure operation system for users working in high security environments. SafeMove Toolkit for Android is not available as a user installable application (except for connection management & policy engine), but instead requires integration by the device manufacturer/operator.

SafeMove toolkit for Android is available for e.g. device manufacturers, systems integrators targeting organisations with high security requirements, such as public safety, government and military.

Board of Directors

Tom Nyman Chairman

Nyman is an executive officer at Pod Investment. He holds a Bachelor degree in Business Administration from Stockholm University and brings more than twenty years of operational experience from high growth companies. Nyman has held a number of important positions such as the COO in Jobline, CFO in the Kinnevik group, CEO in Airtime and controller at MTG. He has been a member of boards at several companies within the ICT sector, in media and business service. His currently holds the position as Chairman of the Board for Transmode AB (listed on the OMX Nastaq Stockholm), Adra Match A/S, OP5 AB and Netigate AB.

Kirsten English Board member

English has worked on the strategic development and operational improvement of companies in the ICT sector for over 25 years. She is a non-executive Board Director of eFront and Contis Group and acts as a consultant to private equity companies seeking growth in their portfolio investments. Previously roles were : Terra Firma Capital Partners, CEO of a Fund of Hedge Funds (Grenfell PAI), Entrepreneur in Residence at Warburg Pincus, co founder of Radianz, and spent over a decade with Reuters where, inter alia, she was CEO of the Norwegian and Icelandic operations.

Anna Malm Bernsten Board member

Malm Bernsten brings more than 25 years of international marketing and sales experience. She has held leading management positions in large global companies (Pharmacia, ASSA ABLOY and Baxter) as well as smaller innovative companies (Carmeda, Medivir and Aerocrine). Her latest position was as Chief Marketing Officer at GE Healthcare Life Sciences. Presently she runs her own consultancy company focusing on strategic marketing, business development, communication and branding with clients like Matrisen AB and CEBA/Oatly AB. Her current board positions include Cellvision AB, AB Fagerhult, Medivir AB and Nolato AB, which are all listed on the OMX Nasdaq Stockholm.

Arne Aarnes Board member

Aarnes has experience from the telecom industry and has been Managing Director and Chairman for Nextit Solutions (2006-2007), Managing Director of Briiz Gruppen (2004- 2006) and Managing Director of Iqtele (2003-2004). Currently he is an independent consultant.

Massimo Migliuolo Board member

Migliuolo brings more than 20 years of experience of strategic business development, architecture sales and go-to-market strategy, especially in the mobile and cloud industry. He is an experienced global business leader with a proven track record in building digit growth businesses in innovative markets. He has held Top senior executive positions at Cisco for the last 11 years, most recently being a Vice President of Emerging Markets. In the previous years he covered leading positions in AT&T and Lucent Technologies. Currently he is an entrepreneur in the ICT sector, and also actively involved as Non-Executive Director and Advisor in a number of startup companies.

Report of the Board of Directors

During 2013 Birdstep Technology delivered growth on each quarter year over year. Birdstep Technology's operating revenues increased from NOK 44.1 million in 2012 to NOK 71.2 million in 2013. The results for the year were driven by a strong performance from our Smart Mobile Data segment, with the EasySmart product. Secure Mobility, which has a large customer portfolio of Finnish government customers, experienced very challenging conditions in the international markets.

Statement on the annual financial statements

In accordance with the Norwegian Accounting Act § 3.3a the Board confirms that the company fulfills the requirements necessary to operate as a going concern, and the 2013 financial statements have been prepared on the basis of this assumption. The company's financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the EU, and the parent company financial statements are prepared in accordance with a simplified application of IFRS.

Birdstep Technology Group

Operating Revenues were NOK 71.2 million in 2013, representing an increase of 61.3% compared to NOK 44.1 million in 2012. The increase is mainly driven by a strong performance by our Smart Mobile Data segment, with the EasySmart product. Other operating expenses were NOK 22.1 million for 2013, which is a decrease of NOK 1.5 million from 2012. Total depreciation was NOK 8.6 million in 2013 compared to NOK 10.2 million in 2012. Other income (expenses), net was NOK 0.3 million in 2013 compared with NOK -1.6 million in 2012. The company recorded a net loss of NOK 8.8 million for the year 2013 compared to a net loss of NOK 40.3 million for the year 2012. Net cash flow for the year was NOK 5.4 million compared placement was completed in October 2013. The capital injection is to strengthen the company's financial flexibility and to invest in the necessary growth needed to meet the market demands in 2014. The private placement increased cash by NOK 19.7 million (net of transaction costs) resulting in a cash position in the end of the year of NOK 22.3 million.

Birdstep Technology ASA

Operating Revenues of the parent company were NOK 51.8 million in 2013 compared to NOK 28.4 million in 2012. Other operating expenses were NOK 53.2 million for 2013 compared to NOK 53.2 million in 2012. Other income, net, was NOK 2.0 million in 2013, compared to of NOK -41.9 million in 2012. The difference is due to a write down of investment in subsidiaries loss of NOK 5.5 million for the year 2013. The Board proposes that the loss is transferred to other equity.

Risks related to Birdstep's business

Investing in Birdstep involves a high degree of risk. An investment in the Shares of the Company is suitable only for investors who understand the risk factors associated with this type of investment and who can afford a loss of all or part of the investment. The group's activities expose it to a variety of financial risks, such as price, interest rates, exchange rates, credit and liquidity. The exposure to foreign currency fluctuations can affect its revenue, operating profit and results of operations. Birdstep's exposure to the credit risks of its customers may make it difficult to collect accounts receivables. A significant portion of Birdstep's revenue is generated from a limited number of key accounts. Management of financial risk is performed by the group's central Finance Department and the main principle is to minimize exposure to financial risk, and the group holds no financial assets or liabilities for speculative purposes. The markets that Birdstep operates in are highly competitive and rapidly changing. Birdstep business success therefore depends on its ability to develop new products on a continual basis in the face of rapidly changing needs from mobile operators specifically. The nature of the long customer cycle for testing and integration makes it difficult to manage long term forecasting with accuracy. Competition for qualified personnel is intense and Birdstep must continue to attract and retain skilled and qualified personnel. Claims by others that Birdstep infringe on their proprietary technology could harm Birdstep's business. Birdstep may engage in future acquisitions that could disrupt its business and cause dilution to its shareholders.

Going Concern

At the end of 2013, Birdstep Group had a cash balance of NOK 22.3 million. The company had a negative operating cash flow during the first three quarters of 2013 but a positive operating cash flow for the fourth quarter. It is a substantial financial risk for the company if the negative cash flow trend continues. During 2013, Birdstep's business was heavily dependent on the capital spending patterns of its customers in a period of market uncertainty. Any decrease or delay in capital spending by its customers meant reduced revenues for Birdstep. This coupled with the long sales cycle of some products impeded our ability to forecast accurately. In order to improve visibility and critically to win and retain future business, Birdstep's sales execution model has been restructured completely. By replicating this model across all of our deal-flow, Birdstep's management now has a more realistic view into business opportunities and the growth ahead. New products coupled with a disciplined sales execution are, we believe, key to growing our business. With a reviewed product portfolio, Birdstep is addressing the needs of our customers, creating new opportunities in adjacent markets and growing market share. These developments equate to a very positive step change for business and feed into the financial statements that have been prepared on the going concern assumption. The Board therefore confirms that the company fulfils the requirements necessary to operate as a going concern.

Market Outlook

The following section discusses the market outlook for individual business areas. The board emphasizes that all estimates of future conditions are associated with a high degree of uncertainty.

Secure Mobility

In 2013 Birdstep won several strategically important customer deals for its Secure Mobility solutions.

Secure Mobility extended its footprint in new markets as a leading Original Equipment Manufacturer (OEM) in the development and deployment of public safety networks expanded the license agreement from the US to global coverage. Birdstep also closed its first deal of SafeMove Router Toolkit with a large North American OEM. Additionally the company proved customer satisfaction with Birdstep´s Secure Mobility solutions by closing several expansion orders during the year.

The growing use of mobile data in the workforce, particularly with the trend towards Bring Your Own Device (BYOD) for employees, is continuously generating great interest from both operators and enterprises in the SafeMove product family, which secures customer devices and protects data during transit through standardized encryption technologies. Birdstep expects to continue gaining traction across the EMEA region with its Secure Mobility solutions. But to gain and maintain a competitive edge the company must constantly develop advantage through Go-To-Market strategies. Part of the success with Secure Mobility has been the development of a channel strategy. Strong partners will enable Birdstep to beat the competition by actively pursuing the most cost effective and efficient access to customers. With the expansion of the reseller network Birdstep see increased opportunities to generate revenues also from new business areas.

Smart Mobile Data

In the third quarter of 2013 Birdstep signed a global contract with HP, a multinational information technology corporation and OEM for its EasySmart solution. The HP DataPass service simplifies consumer connectivity by including mobile data for a chosen time on selected HP devices. The nature of the strategic global deployment with HP achieves several goals for Birdstep; first, it further validates the value proposition of delivering the exceptional user experience; second, the company deliver value not only to smartphones, but also the fastest growing device segments such as tablets and convertibles; third, the go-to-market strategy is being proven in new markets such as OEM's and verticals such as enterprise; and fourth, Birdstep has proven to be a global company with a global product strategy.

In the US the focus of the operators has shifted from voice calls to data and video. Mobile broadband has become the most lucrative source of revenue for the wireless operators. The rapidly growing Asian market has become an increasingly important focus for Birdstep´s products and to meet the demands the company has begun to invest in the region to drive sales with its ongoing trial customers. Birdstep has also started to gain significant traction in Japan for its EasySmart solutions. In one of several ongoing trials, the EasySmart client offloaded as much as 87% of the traffic to Wi-Fi. In Europe the environment remains challenging. But even though Europe still needs high levels of investment to deliver next generation networks to EU citizens and businesses, Birdstep has noticed positive signals from mobile operators in the region.

While continuing to see strong demand from mobile operators and enterprise customers the company is now also gaining traction among OEMs, Multiple System Operator Cable TV Operators (MSO), and Mobile Virtual Network Operators (MVNO). It is evident that Birdstep´s innovative and differentiated product portfolio is aligned with the needs of our customers as they look to build the most secure networks and provide its end users with EXPERIENCE CONTINU-ITY over cellular and Wi-Fi network services.

Organization and employees

Birdstep Technology is a global company, with 61 employees as of year-end; 1 in Norway, 29 in Sweden, 17 in Finland, 1 in the United Kingdom and 13 in the United States. At Birdstep Technology we believe that the product we put out into the marketplace is only as good as the know-how within the company that creates it. Our employees are experienced leaders and enthusiastic emerging talents who share a passion for technology. Working at Birdstep offers a challenging and rewarding experience with plenty of growth potential. With offices in 4 countries we are offering our employees an international and stimulating environment. Our employees originate from a number of different nations, with a diverse range of cultural and religious backgrounds. We strive to attract applicants with diverse backgrounds and genders which reflect in our recruitment process. Our workforce consists of 21.3% women and 78.7% men. The management team consists of 50% women and 50% men. Birdstep Technology seeks to provide equal opportunities and rights for our employees. The company offers flexible working to all employees, and equipment that makes it possible to work from home. The company promotes a work environment that is healthy, safe, fair and in accordance with applicable laws and regulations. There have been no injuries in the workplace in 2013. The Group has experienced sickness absence of 1.8 percent, compared with 1.8 percent in 2012. The Board is of the opinion that Birdstep Technology's activities do not have any significant effect on the environment.

Development

Birdstep Technology is running both large and small development projects, both for its own account and arranged by third parties. In 2013, the major focus has been to develop and finalize the new product strategy.

Birdstep Business

Birdstep has bright and ambitious employees and develops cutting edge technologies, services and products to operators and enterprises that need to manage their mobile data traffic and ensure a delighted and loyal client or employee base.

Corporate Governance

Birdstep Technology's principles of good corporate governance will lay the foundation for long-term value creation for the benefit of owners, employees, other stakeholders and society as a whole. These principles cannot replace efforts to continuously promote a healthy corporate culture in all parts of the company, but must be viewed in the context of these measures. Respect, responsibility and equality underpin the confidence of Birdstep Technology, both internally and externally. Birdstep Technology is subject to corporate governance reporting requirements under section 3-3b of the Norwegian Accounting Act and the Norwegian Code of Practice for Corporate Governance, cf. section 7 in the "Continuing obligations of stock exchange listed companies". The Norwegian Code of Practice for Corporate Governance, which was last revised on 23 October 2012, may be found at www.nues.no. This statement of policy is an item of Birdstep Technology's Annual Report. The Board of Directors states that Birdstep Technology has been in compliance with the code throughout 2013.

Equal treatment of shareholders and transactions with related parties

All shareholders of Birdstep Technology have equal rights and equal status. The company has only one class of shares, which can be traded freely and can be transferred without restriction. Birdstep Technology holds itself strictly to the principle of equal treatment of all shareholders. The company's trading in its own shares is carried out in accordance with the Oslo Stock Exchange's guidelines. The company has a cautious attitude with regard to transactions with shareholders, directors, employees and related parties to the above. Birdstep Technology has during 2013 issued an Employee Share Trading Policy, available at www.birdstep.com. Openness and caution should be exercised in the context of investments that may involve close involvement or close relationship between the company and a board member. To ensure that such situations are handled in the best possible way, the board urges the use of transparency and good discernment in any transaction where both the company and a board member or a party to the board member may have interests. Birdstep Technology will follow the principles of equal treatment of related parties and possible related party transactions described in the Norwegian Code of Practice for Corporate Governance.

Freely tradable shares

All Birdstep Technology shares shall have equal rights and are freely transferable.

General Meetings

The Annual General Meeting is the company's highest decision-making body, in which shareholders can exercise their influence. Birdstep Technology encourages all shareholders to attend and use their rights in connection with the company's general meeting. The General Assembly elects the Board. The Board shall, in accordance with the statutes have 3-8 members elected by the shareholders for a period of two years. Birdstep Technology's CEO is not a member of the Board. The Board shall be composed so as to achieve a broad representation of the company's shareholders. At the election of directors, the company's need for expertise, capacity and balanced decisions are also taken into consideration. Birdstep Technology's goal is seeking to conduct general meetings in accordance with the Norwegian Code of Practice for Corporate Governance. This means, among other things, that the summons and supporting documents shall be made available on the company website no later than 21 days before the meeting, and that the deadline for reporting of attendance at the AGM is within legal limits. Shareholders who are unable to attend may vote by a proxy. The company will strive for differentiated voting by proxy, if and insofar as practicable, and it will seek to hold a vote on specific authorizations for capital increases and not as a collective authority. Board members, nomination committee and the auditor shall attend the Annual General Meeting.

Board of directors

In accordance with Norwegian law, the Board holds the responsibility for monitoring and supervising the management of the company and its operation. In addition to statutory requirements, the Board works in accordance with a set of board instructions. The instructions and procedures that apply to the Board include regulations for the preparation of agendas, privacy and confidentiality, competence, responsibility to establish a management system that ensures that activities are run in accordance with the company's core values, ethical guidelines and generally accepted principles of corporate governance, information on the use of committees and evaluation of the Board's activity and competence. In accordance with the said guidelines and procedures, the Board is responsible, to the degree necessary, for determining strategies, business plans and budgets for the company. The Board is also responsible for ensuring that the company has a competent management with clear internal distribution of responsibility and work.

Work of the board

In 2013 there were 5 members of the board. The board met 9 times during 2013. 2 of these were regarding the new issue. In addition to the statutory responsibility, the Board is working according to its rules of procedure. The rules of procedure and guidelines for board work includes the preparation of meeting agendas, privacy and confidentiality, competence, responsibility for establishing a management system which ensures that its operations are managed according to the Company's core values, ethical guidelines and principles for good corporate governance, information about the use of committees and evaluation of the Board of activity and expertise. In accordance with the guidelines and procedures described above, the Board is responsible for approving strategies, business plans and budgets for the company. The Board is also responsible for ensuring the company has a CEO for the company. On an ongoing basis, the Board takes independent advice with respect to its procedures, corporate governance and other compliance matters. With a board of five members, all members are automatically appointed to the audit and remuneration subcommittees. Due to the limited size of the company, the Board has chosen not to establish subcommittees in order to process specific issues. The Board as a whole acts as Remuneration Committee. In this respect, the Board evaluates the total remuneration to the CEO and the policy for remuneration to managers. Furthermore, the Board acts as the Audit Committee for the purpose of identifying, understanding and evaluating operational and financial risks.

Nomination Committee

Birdstep Technology has a nomination committee elected by the Annual General Meeting. Nomination Committee in 2013 consisted of two persons. Nomination Committee works with a mandate and authority from its shareholders. All members are elected by the Annual General Meeting. Nomination Committee in 2013 consisted of:

• > Urban Gillström, leader
• > Axel Roos

Composition and independence in relation to members of the corporate assembly and board The composition of the Board meets the Norwegian Code of Practice for Corporate Governance with regard to members' independence in relation to the company's executive management and in terms of key business relationships. This shall include a thorough evaluation of the company's financial reporting, auditing, and established procedures for advance approval of the auditor's remuneration, and also the handling of complaints from the employees in respect of accounts, control and audits. The Board holds biannual meetings with the company's appointed Auditor, one in the fall to discuss the preparations for the annual accounts and company audit, and one in the spring to discuss the final accounts and other findings.

Remuneration to directors

All remuneration to the directors is described in Note 15 of the accounts of Birdstep Technology. The Board is independent of company management and board members do not receive compensation from the company other than director's fees or fees for participation in any sub-committees to the Board for their work. The Company makes no loans to directors or members of its management. The proposed board fees for 2013 is NOK 135.000 to board members and NOK 300.000 to the chairman.

Remuneration to management

The Board considers and prepares annual guidelines for the remuneration and share-based compensation to its management. These guidelines will be reviewed and submitted to the advisory vote at the Annual General Meeting in 2014.

Information and communication

Birdstep Technology's goal is to provide financial market transparency, timely and equal information, such that market participants will have the best possible basis for the continuous pricing of the shares correctly. Information and communication is handled in full accordance with guidelines from the Oslo Stock Exchange.

Equal treatment

Birdstep Technology publishes all notifications through the distribution system to the Oslo Stock Exchange, which provides for equal treatment of all participants in financial markets.

www.birdstep.com

Birdstep Technology considers www.birdstep.com as the primary IR-tool and makes all press releases, presentations and prospectuses immediately available on the website. The site is regularly updated with the shareholder lists, analyst coverage, increasing development, financial calendar, and other relevant information.

Price-sensitive information, extraordinary events and customer contracts

Birdstep Technology defines price-sensitive information as information which directly or indirectly says something about the current or future financial performance, and is likely to have an effect on the share price, as well as something a rational investor will use as part of their investment decision. The definition applies whether the information is positive or negative. Extraordinary events such as mergers, acquisitions and management changes that will affect the valuation of the company, are published without delay and in full accordance with guidelines from the Oslo Stock Exchange. Customer contracts of major importance will be made public through the stock exchange.

Quarterly Reporting

Birdstep Technology will publish an earnings report on a quarterly basis before or after the Oslo Stock Exchange trading hours on the day of or day after the board approval of earnings report. In conjunction with the earnings report the company will have an open invitation to a telephone conference call. Presentations will be available on www. birdstep.com. The company also announces presentations and related materials through the distribution system to the Oslo Stock Exchange.

Guidance

Birdstep Technology does not provide guidance using direct quantitative measures of the company's potential future results.

Quiet period

Birdstep Technology holds no investor meetings and minimizes contact with investors, analysts and journalists in the last four weeks before the quarterly report. The company will not comment during this period on issues related to the company's financial position, in order to ensure equal treatment of all stakeholders.

Spokespersons

CEO and CFO are the company's spokespersons to the financial market and the press.

Acquisitions

The Board does not seek to impede any takeover bid for the company's assets, activities or shares unless there are special reasons to do this. In a situation of a takeover bid, as discussed in Section 14 of the Norwegian Code of Practice for Corporate Governance, the Board will seek to comply with the recommendation, as well as with relevant laws and regulations.

Auditors

BDO AS was elected by the General Assembly as the company's auditor and the General Assembly confirms Birdstep Technology's financial statements have been prepared and submitted in accordance with applicable laws and regulations. The auditor must be independent of the company. As a consequence, Birdstep Technology chose not to use the auditor for purposes other than to the financial review as required by law. The auditor is engaged in questions that are naturally related to the audit, tax in terms of technical assistance, financial statements, understanding of tax rules and the verification of financial information in different contexts.

Risk management and internal control

The Board of Directors evaluate, at least annually, the company´s most significant risks and the related internal control measures in place. The Board of Directors oversees and evaluates the company´s internal control and risk management functions related to financial reporting. The management is responsible for establishing and maintaining adequate internal control of financial reporting. The objective of the internal control of financial reporting is to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Birdstep Technology´s financial statements for external reporting purposes in accordance with International Financial Reporting Standards. As part of the audit of the financial statements, the external auditor reports on the effectiveness of internal controls related to financial reporting to the Board of Directors at least once every year. In Birdstep Technology, all leaders have a responsibility for risk management and internal control as part of daily operations. This means that major decisions must fulfill the following requirements:

• > use of business case analysis
• > cost effectiveness in the implementation
• > be in accordance with the existing financial reporting system
• > comply with applicable laws and regulations

Birdstep Technology's system of risk management is fundamental to achieving these goals and sets high standards for financial reporting and the systems and processes underlying it.

Corporate social responsibility

Taking overall responsibility is an important core value at Birdstep. The group aspires to be a responsible corporation in terms of labor standards, human rights, environment and anti-corruption. The company promotes a work environment that is healthy, safe, fair and in accordance with applicable laws and regulations. Birdstep Technology is not regulated by environmental licenses or injunctions.

In relation to the new regulation regarding reporting on cor-

porate social responsibility it should be noted that Birdstep today does not have complete guidelines, principles procedures or standards relating to human rights, labor rights and social rights, environment or anti-corruption. However, this is now work in progress as it coincides with Birdstep's core values. So far, Birdstep has recently issued an anti-corruption policy, available at www.birdste.com. Birdstep will, during 2014 strive to implement policies and processes comprising Birdstep's view and goals in relation thereto to be able to meet the new CSR reporting requirements.

Allocation of the result for the year

Birdstep Technology at the end of 2013 held 21.055 treasury shares. The General Assembly is set for 29th April 2014. The company will not pay out any dividend in the foreseeable future as it will be invested in the Company. The Company at the end of 2013 had no distributable reserves.

Declaration by the Board and CEO

We confirm that the financial statements for the period from 1 January to 31 December 2013, to the best of our knowledge, have been prepared in accordance with applicable accounting standards, and that the accounts give a true picture of the assets, liabilities, financial position and results of operations, and that the information in the report includes a fair review of development, performance and position of the entity and the group, together with a description of the principal risks and uncertainties the company faces.

Oslo, 25 March 2014 Board and CEO of Birdstep Technology

Tom Nyman Board member (Chairman)

Kirsten English Board member

Arne Aarnes Board member

Anna Malm Bernsten

Board member

Massimo Migliuolo Board member

Lonnie Schilling CEO

Financial Statements 2013

Content

Birdstep Technology Group

Statements of income	56
Statements of comprehensive income	57
Balance sheets	58
Statements of changes in equity	59
Statements of cash flow	60
Notes 1-25 Birdstep Technology Group	61

Birdstep Technology ASA

Statements of income	98
Statements of comprehensive income	99
Balance sheets	100
Statements of cash flow	101
Notes 1-19 Birdstep Technology ASA	102
Auditing Report	120

Birdstep Technology Group

Statements of income

			Group
	Note	2013	2012
Operating revenues	4	71.185	44.131
Cost of Sales		(4.047)	(4.603)
Operating expenses
Salaries and wages	10, 15	(44.829)	(40.829)
Share-based compensation	16	-	(16)
Other operating expenses	20	(22.148)	(23.687)
Total operating expenses		(66.977)	(64.532)
Operating income loss before depreciation and amortization (EBITDA)		160	(25.004)
Depreciation and amortization	4, 5,6	(8.576)	(10.240)
Write down and impairment of intangible assets	4, 5,6	-	(6.900)
Operating income loss after depreciation and amortization (EBIT)		(8.416)	(42.143)
Other income (expense)
Interest income, net		213	(52)
Other financial items, net	17	67	(1.533)
Other income, net		281	(1.585)
Income(loss) from continuing operations before taxes		(8.135)	(43.729)
Income taxes	11	(701)	(726)
Income(loss) from continuing operations		(8.836)	(44.455)
Gain on disposal of discontinued operation	24	-	4.152
Net income(loss)		(8.836)	(40.303)
Earnings and diluted earnings per share (NOK):
Continuing operations		(0,09)	(0,57)
Discontinued operations		-	0,06
Total		(0,09)	(0,51)

Statements of comprehensive income

		Group
Note	2013	2012
Net income (loss) for the period	(8.836)	(40.303)
Other comprehensive income
Currency translation effect	1.344	(999)
Total comprehensive income	(7.492)	(41.301)
Attributable to:
Equity holder of the parent company	(7.492)	(41.301)
Total comprehensive income	(7.492)	(41.301)

Balance sheets

(Amounts in NOK 1 000)

			Group
	Note	2013	2012
Non-current assets:
Intangible assets	5	50.111	50.734
Tangible assets	6	256	62
Total non-current assets		50.367	50.796
Current assets:
Accounts receivable	7	14.488	11.840
Other current assets		2.278	1.275
Cash & cash equivalents		22.331	16.921
Total current assets		39.096	30.036
Total assets		89.463	80.832

			Group
	Note	2013	2012
Shareholders' equity:
Share capital		10.012	9.198
Share premium fund		36.037	17.165
Retained earnings, including translation reserves		24.767	32.259
Total shareholders' equity	8	70.816	58.622
Non-current liabilities:
Deferred incom tax liabilities		175	158
Other liabilities	2, 22	3.285	3.229
Total non-current liabilities		3.460	3.387
Current liabilities:
Accounts payable	2	3.126	4.139
Deferred revenue		1.405	2.248
Accrued expenses and other liabilities	12	10.656	12.437
Total current liabilities		15.187	18.823
Total Liabilities and Shareholders' Equity		89.463	80.832

Statements of changes in equity

	Group
	Share	Share	Other paid	Other	Translation	Total
	capital	Premium	equity	equity	reserves	equity
Equity as at 1 January 2013	9.199	17.165	61.232	(40.304)	11.330	58.622
Net income (loss)	-	-	-	(8.836)	-	(8.836)
Other comprehehensive income for the period
Foreign currency exchange	-	-	-	-	1.344	1.344
Total comprehensive income	-	-	-	(8.836)	1.344	(7.492)
Transactions with shareholders:
Net Issue of ordinary shares	813	18.873	-	-	-	19.686
Total transactions with shareholders	813	18.873	-	-	-	19.686
Equity as at 31 December 2013	10.012	36.037	61.232	(49.140)	12.675	70.816
Equity as at 1 January 2012	7.137	171	61.217	-	12.329	80.853
Net income (loss)	-	-		(40.304)	-	(40.304)
Other comprehehensive income for the period
Foreign currency exchange	-	-	-	-	(999)	(999)
Total comprehensive income	-	-	-	(40.304)	(999)	(41.303)
Transactions with shareholders:
Net Issue of share capital	2.062	16.994	-	-	-	19.056
Recognition of share-based payments	-	-	15	-	-	15
Total transactions with shareholders	2.062	16.994	15	-	-	19.071
Equity as at 31 December 2012	9.199	17.165	61.232	(40.304)	11.330	58.622

Statements of cash flow

		Group
Note	2013	2012
Operating activities
Income (loss) from continuing operations before taxes	(8.135)	(43.729)
Depreciation and amortization 3, 4	8.576	10.070
Write down and impairment of assets	-	7.069
Share-based compensation	-	16
Write down of intercompany loan	-	-
Gain on disposal of discontinued operations 27	-	-
Change in receivables and payables	(7.213)	(5.940)
Net Cash from operating activities	(6.772)	(32.512)
Investing activities
Capitalized development 3, 4	(6.521)	(9.345)
Earnout from discontinued operations	-	4.152
Change in loan balance with affiliated company	-	-
Net Cash from Investing activities	(6.521)	(5.193)
Finacial activities
New Issue	19.692	19.071
Net cash from finacial activities	19.692	19.071
Effect of foreign exchange rate changes	(990)	773
Net increase(decrease) in cash & cash equivalents	5.410	(17.861)
Cash & cash equivalents, beginning of period	16.921	34.782
Cash & cash equivalents, end of period	22.331	16.921

Note 1: Summary of Significant Accounting Principles

Birdstep Technology is a public limited company registered in Norway and listed on the Oslo Stock Exchange. The company's registered office is located at the Henrik Ibsens Gate 100, 0230 Oslo, Norway.

The consolidated financial statements of Birdstep Technology were approved by the Board on 25 March 2014.

The Group´s subsidiaries include Birdstep Technology AB, Birdstep Technology SanFrancisco Inc and Birdstep Technology Oy. Se more information in note 14.

The Group's operations are described in note 4.

The company has in 2013 annual report changed the presentation of the income statement as the company believes this will give the reader a better understanding for the companies operation. Operating income loss before depreciation and amortization (EBITDA) has therefore been included as well as the name change Operating income loss after depreciation and amortization (EBIT).

The table for Business Segment has also changed so it is aligned with the Income Statement and Balance Sheet of the Group. This to give the reader a clearer picture of how the tables are linked.

1.1 Basis for preparation

The consolidated accounts have been prepared and presented in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU. The financial statements are based on the historical cost principles for similar transactions and events under otherwise similar circumstances.

The consolidated accounts are prepared using consistent accounting principles for similar transactions and events under similar circumstances.

Changes in accounting policy and disclosures

The following standards have been adopted by the group for the first time for the financial year beginning on or after 1 January 2013 and have a material impact on the group:

Amendment to IAS 1 Financial statement presentation, regarding other comprehensive income

The main change resulting from these amendments is a requirement for entities to group items presented in 'other comprehensive income' (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments).

IFRS 10 Consolidated financial statements

The objective of IFRS 10 is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entity (an entity that controls one or more other entities) to present consolidated financial statements. It defines the principle of control, and establishes controls as the basis for consolidation. It sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee. It also sets out the accounting requirements for the preparation of consolidated financial statements.

IFRS 12 Disclosures of interests in other entities

IFRS 12 includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.

IFRS 13 Fair value measurement

IFRS 13 aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRS and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs.

Amendment to IAS 32 Financial instruments

Presentation on asset and liability offsetting. These amendments are to the application guidance in IAS 32 Financial instruments: Presentation, and clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet.

Annual improvements 2011

These annual improvements, address six issues in the 2009 - 2011 reporting cycle. It includes changes to:

• IAS 1, 'Financial statement presentation'
• IAS 16, 'Property plant and equipment'
• IAS 32, 'Financial instruments; Presentation'
• IAS 34, 'Interim financial reporting'

New standards and interpretations not yet adopted

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2013, and have not been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on the consolidated financial statements of the group, except the following set out below:

IFRS 9 Financial instruments

IFRS 9 Financial instruments' addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The group is yet to assess IFRS 9's full impact and intends to adopt IFRS 9 no later than the accounting period beginning on or after 1 January 2015. The group will also consider the impact of the remaining phases of IFRS 9 when completed by the Board.

IFRIC 21, 'Levies'

IFRIC 21 sets out the accounting for an obligation to pay a levy that is not income tax. The interpretation addresses what the obligating event is that gives rise to pay a levy and when should a liability be recognised. The Group is not currently subjected to significant levies so the impact on the Group is not material.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the group.

1.2 Functional and presentation currency

The group presents its accounts in Norwegian kroner (NOK). This is also Birdstep Technology ASA's functional currency.

The figures presented in the annual accounts are in thousands of Norwegian kroner unless stated otherwise.

1.3 Consolidation Principles and subsidiaries

The consolidated financial statements incorporate the financial statements of Birdstep Technology (the Company) and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Subsidiaries are recognized using the historical cost to the parent company.

Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Company. There are no non-controlling interests in the group.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

1.4 Transactions in foreign currency

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity's functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date.

Exchange rate differences on monetary items are recognized in profit or loss in the period in which they arise.

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations, including goodwill, are translated into Norwegian kroner using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange rate differences arising, if any, are recognized in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate).

On the disposal of a foreign operation (i.e. a disposal of the Group's entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a jointly controlled entity that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange rate differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss.

Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange rate differences arising are recognized in equity.

1.5 Revenue recognition and related costs

Revenues

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for licenses or services supplied, stated net of discounts and value added taxes. The group recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the group's activities, as described below. The group bases its estimate of return on historical results taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Sales of licenses

Licenses are sold to resellers in advance for an anticipated future use and are recorded as revenue at the date of delivery. Any purchased license is non-refundable and there is no unfulfilled obligation that could affect the reseller acceptance of the licenses.

Sales of services

Support & Maintenance, Hosting service fee and other services are recognised by reference to the stage of completion of the contract. The stage of completion of the contract is determined as follows:

• > installation fees are reorganised by reference to the stage of completion of the installation, determined as the proportion of the total time expected to install that has elapsed at the end of the reporting period; servicing fees included in the price of products sold are recognised by reference to the proportion of the total cost of providing the servicing for the product sold; and
• > revenue from time and material contracts is recognised at the contractual rates as labour hours and direct expenses are incurred.

Deferred Revenue

Advance payments recorded on the balance sheet as a liability, until the services have been rendered or products have been delivered. Deferred revenue is a liability because it refers to revenue that has not yet been earned, but represents products or services that are owed to the customer. As the product or service is delivered over time, it is recognized as revenue on the income statement.

Dividend and interest income

Dividend income from investments is recognised when the shareholder's right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably). The parents recognise dividends from subsidiaries and associates when it is reasonably certain that it will be received.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.

Costs

Costs are expensed according to the corresponding income. Expenses not directly attributable to income are expensed as incurred expenses. In case of restructuring or closure of operations, all the related expenses are accounted by the time of decision.

1.6 Business combinations and goodwill

Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisitionrelated costs are generally recognized in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value at the acquisition date, except that:

• > deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
• > liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquire are measured in accordance with IFRS 2 Sharebased Payment at the acquisition date (see 3.16.2); and assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured at fair value less cost to sell.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any noncontrolling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bar-gain purchase gain.

Non-controlling interests that represent current ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets.

The choice of measurement basis is made on a transaction by

> transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another IFRS.

When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the 'measurement period' (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in profit or loss.

When a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.

Business combinations that took place prior to 1 January 2010 were accounted for in accordance with the previous version of IFRS 3.

Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.

For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cashgenerating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

1.7 Financial assets

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, an investment in an associate is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group's share of the profit or loss and other comprehensive income of the associate. When the Group's share of losses of an associate exceeds the Group's interest in that associate (which includes any longterm interests that, in substance, form part of the Group's net investment in the associate), the Group discontinues recognising its share of further losses. Additional losses are recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

The requirements of IAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group's investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount, Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

When a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognised in the Group's consolidated financial statements only to the extent of interests in the associate that are not related to the Group.

1.8 Software development costs

An internally generated intangible asset arising from development (or from the development phase of an internal project) is recognised as intangible assets if, and only if, all of the following have been demonstrated:

• > the technical feasibility of completing the intangible asset so that it will be available for use or sale;
• > the intention to complete the intangible asset and use or sell it;
• > the ability to use or sell the intangible asset;
• > how the intangible asset will generate probable future economic benefits;
• > the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
• > the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.

Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in subsequent period.

1.9 Fixed assets

Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

1.10 Intangible assets

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses. Intangible assets, which are acquired separately, are capitalized at their cost. The costs of intangible assets acquired through acquisitions are recorded at fair value at the date of acquisition.

Patents and licenses

Amounts paid for patents and licenses are capitalized and amortized over their estimated useful lifes. Expected life of the patents and licenses vary from 5 to 10 years.

Software

Expenses related to the purchase of new computer program are recorded as an intangible asset, if these expenses are not part of the hardware acquisition costs. Software is normally amortised using the straight line method over 3 years. Expenses incurred as a result of maintaining the software or maintaining the future benefit of software is expensed unless the changes in the software increase the future economic benefits of the software.

1.11 Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

A reversal of an impairment loss is recognised immediately in profit or loss to the extent the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years.

1.12 Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Details' regarding the impairment of the year 2013 is set out in note 3.

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.

For the purposes of impairment testing, goodwill is allocated to each of

the Group's cash-generating units (or groups of cash generating units) that is expected to benefit from the synergies of the combination.

A cash generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

1.13 Trade receivables

Accounts receivable are initially measured at fair value. Allocations for losses are recognized when there are objective indicators that the Group will not receive settlement according to the original terms. Allocations are in the amount of the difference between nominal value and recoverable value, which is the present value of expected cash flows, discounted at the original effective interest rate.

1.14 Taxes

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated [statement of comprehensive income/income statement] because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax for the year

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

1.15 Cash and cash equivalents

Cash and cash equivalents comprise cash, bank deposits, and other short-term readily tradable investments with up to three-month initial terms to maturity, and revolving credit facilities. The revolving credit facilities are presented in the balance sheet under short-term debt.

1.16 Equity

The nominal value of holdings of own shares is reported in the balance sheet as a deduction to share capital. The purchase price in excess of nominal value is charged to other equity. Gains or losses on transactions in own shares are applied directly to equity. If own shares are sold at a price in excess of cost price, the surplus is recognised as other paidin equity. Realised losses related to sale of own shares are recognised against other paid-in equity, if positive, alternatively against other equity. Transaction costs in relation to equity transactions are charged to equity after deducting tax. The fair value reserve includes cumulative net changes in fair value of financial instruments until the investment is disposed of or is judged to be of no value.

1.17 Treasury shares

With the repurchase of shares in the parent company, their costs, including directly attributable transaction costs, are recognized as the change in equity. Treasury shares are presented as reduction of equity. Loss or gain on disposal of treasury shares is not recognized.

1.18 Retirement benefit plan

The group has defined contribution plans. A defined contribution plan is a retirement plan in which the group pays fixed contributions to a separate legal entity. The group has no legal or other obligation to pay additional contributions if the unit does not have sufficient assets to pay all employees benefits associated with earnings in present and previous periods. Pre-paid contributions are recorded in the accounts as an asset to the extent the contribution may be refunded or reduced by future contributions.

1.19 Share-based compensation

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share based transactions are set out in note 16.

The fair value determined at the grant date of the equity settled sharebased payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.

The policy described above is applied to all equity-settled share-based payment transactions that were granted after 7 November 2002 and vested after 1 January 2005. No amounts have been recognised in the consolidated financial statements in respect of other equity-settled shared-based payments.

Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the liability. At the end of each reporting period until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year.

1.20 Cash Flow Statement

The cash flow statement is presented using the indirect method. The group's activities are divided in to operational, financing and investment activities. Investment in new business or sale of business is classified as cash from/to investments, in the cash flow statement, and amounts to the purchase price/sales price less transferred cash and cash deposits at the transaction dates.

1.21 Segment Information

For management purposes the Group is organized into two divisions by product / service range. The divisions form the basis for the primary segment reporting. Financial information about segments and geographic distribution is presented in note 4.

Segment information, presented in note 4, is prepared in accordance with the accounting principles and guidelines that the Group uses for the preparation of consolidated financial statements.

1.22 Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group's general policy on borrowing costs. Contingent rentals are recognised as expenses in the periods in which they are incurred.

Operating lease payments are recognised as an expense on a straightline basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

1.23 Government grants

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the consolidated statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable.

The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.

1.24 Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

1.25 Use of estimates in the preparation of financial statements

Management has used estimates and assumptions that affect the assets, liabilities, revenues, expenses and information regarding potential liabilities. This particularly applies to, share-based compensation, depreciation of fixed assets and intangible assets and allocation of excess value in a business combination. Future events may lead to the estimates change. Estimates and underlying assumptions are assessed continuously. Changes in accounting estimates are recognized in the period when the change occurs. If the changes also apply to future periods, the effects of current and future periods are recognized. See also note 3.

1.26 Interest bearing liabilities

Borrowings are recognized initially at fair value less attributable transaction costs. In subsequent periods, any measurable difference between cost and redemption value over the period is recognized using the effective interest rate method.

1.27 Borrowings and borrowing Costs

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transactions costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Note 2: – Financial risk management

Birdstep Technology ASA is exposed to a variety of financial risks arising from the company's operational and financial activities. The company's risk management is coordinated from headquarters, but still, in a close cooperation with the Board. It focuses on active operations, in the short and medium term, ensuring the company's cash flow by minimizing exposure to the financial markets. Long-term financial investments are made with the intent to generate long term returns.

Birdstep Technology ASA does not participate actively in the trading of financial instruments with speculative intent.

The key financial risks of the Group are related to interest rate risk, liquidity risk, currency risk and credit risk. The group has established leadership, ongoing assessment of these risks and guidelines for how these should be handled.

Interest rate risk

The Group is exposed to interest rate risk through its financing activities. The long-term interest-bearing debt has floating interest rates which means that the Group is affected by changes in interest rates. The group is not into hedging positions and the long-term financing is therefore exposed to fluctuations in interest rates. An interest rate reduction/increase by 1% produces about MNOK 0.02 in reduced/increased financial income related to interest-bearing debt.

Currency Risk

Because of the proportion of international activity, the Group's income and expenses are exposed to exchange-rate fluctuations to a certain extent. Risks of two kinds arise as a result: a transaction risk, that is, the risk that currency fluctuations will have a negative effect on the value of the Group's commercial cash flows in different currencies; and a translation risk, that is, the risk of adverse currency fluctuations in the translation of foreign operation and foreign assets and liabilities into Norwegian kroner (NOK) for the Group's consolidated financial statements.

The Group is exposed to currency risk, especially in relation to the EUR, USD and SEK. A significant portion of its revenues are in foreign currency. However, large parts of the employees and a certain proportion of the Group's operating expenses are in the same currencies, which reduce the net foreign exchange exposure. The group currently uses no instruments to limit currency risk, but this is considered ongoing. The fact that Birdstep does not currently hedge against currency risks and fluctuations between local currencies and NOK may have an adverse effect on the Group's consolidated financial condition and results of operations.

The Group has not entered into forward contracts and options to reduce currency risk in cash flows denominated in foreign currency. Currency risk is calculated for each currency taking into account the assets and liabilities, off-balance sheet liabilities and highly probable purchases and sales in the currency concerned.

The following table includes the lowest and the highest possible exchange rate relative to NOK that was used for 2013.

For EUR:	7.42 and 8.38
For USD:	5.51 and 6.08
For SEK:	0.85 and 0.95
For GBP:	8.66 and 10.05

The table below presents the effect on [net / pre tax] income and other comprehensive income if the relevant currencies would appreciate with the following percentages on the balance sheet date. A similar depreciation would have a similar effect, but in the opposite direction.

Effect on [net / pre tax] value
		2013	2012
EUR	5%	19	109
USD	5%	1.438	346
SEK	5%	-	2
GBP	5%	11	38

Effect on comprehensive income
		2013	2012
EUR	5%	2.119	1.322
USD	5%	94	108
SEK	5%	2.119	2.159

Credit risk

The Group is mainly exposed to credit risk, which is related to accounts receivable and other current assets. Applying the composition of the Group's accounts receivable it can be indicated that the company is exposed to low credit risk related to regular sales.

Maximum risk exposure is related to the carrying values of the financial assets in the balance sheet. The Group considers its maximum risk exposure to be the carrying value of accounts receivable and other current assets.

The company's customer / and other receivables are actively monitored to avoid significant concentrations of credit risk.

Liquidity Risk

Liquidity risk is the risk that the Group will not be able to service its financial obligations as they are due to be serviced. The Group's strategy to manage liquidity risk is to have sufficient liquidity at all times in order to meet its financial obligations when due, both under normal and extraordinary circumstances, without taking risk of unacceptable losses or at the expense of the group's reputation.

Surplus cash holdings will be kept in interest-bearing bank accounts with reputable banks. As of 31 December 2013, the Group has MNOK 22.3 in cash and no significant interest-bearing debt and regards the liquidity situation as satisfactory. The Company considers such cash balances in addition to expected future cash flows from operations will be sufficient to meet the Company's anticipated cash requirements for working capital and capital expenditures for the foreseeable future.

The table below analyses the group's non-derivative financial liabilities and net settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual undiscontinued cash flows.

(Amounts in NOK 1 000)

Liquidity Risk	Group
			Between	Between	Between
	Total	Less than	3 month	1 and	2 and 5	Over
At 31 December 2013	amount	3 month	and 1 year	2 years	years	5 years
Accounts payable	3126	3.126	-	-	-	-
Interest - bearing liabilities	3285	-	-	-	-	3.285
Total	6411	3.126	-	-	-	3.285

(Amounts in NOK 1 000)

Liquidity Risk	Group
			Between	Between	Between
	Total	Less than	3 month	1 and	2 and 5	Over
At 31 December 2012	amount	3 month	and 1 year	2 years	years	5 years
Accounts payable	4.138	4.138	-	-	-	-
Interest - bearing liabilities	3.691	-	462	-	-	3.229
Total	7.829	4.138	462	-	-	3.229

Included in "Interest–bearing liabilities" is a capital loan recorded in Birdstep Technology OY. Capital loans are defined, according to Finnish law of limited liability company, as a loan with a lower priority than other debt. Instalments and interest on a capital loan can only be paid from the company's distributable reserves. In the table above the loan is set to be repaid within 5 years.

Capital structure and equity

The main purpose of the Group's capital structure management is to ensure that the Group maintains a good credit rating and thus has more affordable loan terms from lenders, which is reasonable in relation for the operational business. The group will support the companies' activity and thus maximize the value of its shares by maintaining good debtto-equity ratios.

The Group manages its capital structure and makes necessary changes to it based on current economic conditions of the business and future prospects in the short and medium term. Capital structure management is performed by issuing dividends, performing share repurchase, decreasing the share capital or issuing new shares.

Note 3: – Uncertainty Estimates

While preparing the financial statements according to IFRS, the Company's management used the assumptions that are considered to be realistic. There will be situations or changes in market conditions that may lead to changes in estimates, and thus affect the company's assets, liabilities, equity and profits.

An overview of the significant accounting estimates is provided below:

Depreciation

Fixed assets are depreciated annually. Annual depreciation is based on expected useful lifetime and estimated residual salvage value. Estimated useful lifetimes of fixed assets vary from 3 to 5 years. Residual value is estimated to be zero for all such asset.

Depreciation on fixed-term intangible assets

Intangible fixed-term intangible assets are depreciated annually. Annual depreciation is based on expected useful lifetime and estimated residual salvage value. The estimated useful lifetimes of software and development activities are both up to 5 years while the estimated useful lifetime of customer relationships is valued at 10 years. Residual value is estimated to be zero for all such assets.

Impairment tests for intangible assets, including goodwill

The carrying value of goodwill is tested for impairment at least once per year. Other intangible and tangible assets are tested for impairment if there are indications that the asset is impaired. In order to calculate the recoverable amount of goodwill, the discounted cash flow analysis is used, which has assumptions that predict future revenues, costs, discount rates and growth. These assumptions have significant effect on the estimated recoverable amount.

The fair value of assets and liabilities on acquisition

The acquisition analysis based on fair value is prepared at the time of acquisition in order to allocate the cost of assets acquired and liabilities assumed. If there is no quoted market price for the asset acquired, the fair value is calculated using the present value of the future cash flows method. In order to use the discounted future cash flow method, the assumptions regarding the future growth, discounting rate and future returns were made. These estimates and assumptions do have significant impact on the estimated value.

Share-based compensation

Costs associated with the Company's stock option plan are based on the option's estimated fair value at purchase date and assumptions about the proportion of options purchased will be exercised. Black & Scholes model is used to calculate the real option value. Regarding the calculations made, some assumptions have been made, including future interest rate risk, volatility of the underlying stock and expected future dividends.

Capitalized development costs

Development costs are capitalized in accordance with the guidelines described under the accounting principles note. In assessing whether the criteria for capitalization are met, it is assumed that development projects are economically and technologically feasible. Furthermore, the assessment will be identified, relative to future economic benefits.

Note 4: – Business Segments

The Company is currently divided into two segments; Smart Mobile Data (former Easy Connect) and Secure Mobility (former Safe Move). The namnes were changed in 2012.

Smart Mobile Data segment portfolio includes the following products. EasyConnect, it is an advanced connection manager and service management solution for mobile broadband providers. EasySmart, enables the best wifi offload through Intelligent Network Selection and analytics solutions to provide the end-users with an exceptional user experience. EasyFlash enables the operator who has already deployed a range of devices and Connection Managers to standardize the installed base and reduce support costs.

Secure Mobility product portfolio includes the following products: SafeMove Mobile VPN enables easy and secure access to the corporate internal network, ensuring an unparalleled user experience making it an effective solution for all mobile workers. SafeMove Analytics helps to continuously collect connectivity data. Collected data is periodically uploaded to a central data collection service. SafeMove Portable Security comes as a fully secure end-node bootable from the USB. It is secured with hardware encryption, in ruggedized casing and PIN entry on the device.

Other

Others relate to transactions that are not directly attributable to the above segments and will essentially correspond to costs related to being a listed company.

Business Segments 31 December 2013

(Amounts in NOK 1 000)
	Smart Mobile Data	Secure Mobility	Other	Total
Operating Revenue				-
Sale of licenses	40.888	8.838	-	49.725
Support & Maintenance	4.429	7.150	-	11.579
Hosting service	2.669	-	-	2.669
Consulting services	3.827	3.385	-	7.212
Total Operating Revenue	51.812	19.372	-	71.185
				-
Cost of Sales	(1.091)	(2.957)		(4.047)
Operating Expenses	(48.204)	(18.773)	-	(66.977)
EBITDA	2.518	(2.357)	-	160
Depreciation and amortization	(8.402)	(174)	-	(8.576)
Write down and impairment of intangible assets	-	-	-	-
EBIT	(5.884)	(2.532)	-	(8.416)
OTHER INCOME, NET	-	-	281	281
Income taxes	(701)	-	-	(701)
Income(loss) from continuing operations	(6.585)	(2.532)	281	(8.836)
Gain/loss on disposal of discontinued operations	-	-	-	-
Net income(loss)	(6.585)	(2.532)	281	(8.836)
Assets
Non-current assets	48.626	1.741	-	50.367
Current assets	15.322	6.603	17.171	39.096
Total assets	63.948	8.344	17.171	89.463
Liabilities
Non-current liabilities	175	3.285	-	3.460
Current liabilities	8.898	3.352	2.937	15.187
Total liabilities	9.073	6.637	2.937	18.647

Business Segments 31 December 2012

(Amounts in NOK 1 000)

	Smart Mobile Data	Secure Mobility	Other	Total
Operating Revenue				-
Sale of licenses	18.949	5.313	-	24.262
Support & Maintenance	3.506	7.879	-	11.385
Hosting service	948	-	-	948
Consulting services	5.010	2.526	-	7.536
Total Operating Revenue	28.413	15.718	-	44.131
				-
Cost of Sales	(1.134)	(3.469)	-	(4.603)
Total Operating Expenses	(45.351)	(19.181)	-	(64.532)
EBITDA	(18.072)	(6.932)	-	(25.004)
Depreciation and amortization	(7.553)	(2.686)	-	(10.240)
Write down and impairment of intangible assets		(6.900)	-	(6.900)
EBIT	(25.625)	(16.518)	-	(42.143)
Other income, net	-	-	(1.585)	(1.585)
Income taxes	(726)	-	-	(726)
Income(loss) from continuing operations	(26.352)	(16.518)	(1.585)	(44.455)
Gain/loss on disposal of discontinued operations	-	-	4.152	4.152
Net income(loss)	(26.352)	(16.518)	2.567	(40.303)
Assets
Non-current assets	50.796	-	-	50.796
Current assets	7.388	4.452	18.196	30.036
Total assets	58.185	4.452	18.196	80.832
Liabilities
Non-current liabilities	158	3.229	-	3.387
Current liabilities	14.945	3.878	-	18.823
Total liabilities	15.103	7.107	-	22.210

Segments assets and segment liabilities consist of liabilities to external parties only, i.e., intra-group balances do not appear in the overview above.

Geographical segments

(Amounts in NOK 1 000)

					EMEA
2013						Other	Middle East /
	USA	Asia	UK	Finland	Greece	Europe	Africa	Total
Smart Mobile Data	44.542	-	2.124	2.725	1.213	1.074	133	51.812
Secure Mobility	1.849	-	1.856	15.185	-	483	-	19.372
Total	46.391	-	3.980	17.910	1.213	1.557	133	71.185

					EMEA
2012						Other	Middle East /
	USA	Asia	UK	Finland	Greece	Europe	Africa	Total
Smart Mobile Data	15.635	82	3.943	2.827	2.458	3.227	240	28.412
Secure Mobility	631	49	1.065	13.722	-	251	-	15.718
Total	16.266	131	5.008	16.549	2.458	3.478	240	44.131

Largest customer

One of Birdstep's customers represents 83% of the total revenue in the Smart Mobile Data segment. This amounts to NOK 42.9 million.

The large increase in revenue from 2012 in Smart Mobile Data segment is driven by the increased demand of our products from this customer. The contract is on an onging basis and is automatically extended on a year-by year basis unless either party noties its intention not to renew at least 90 days before the expiration of the term.

Note 5: – Intangible assets

	Group
2013	Development		Customer		Patents
	costs	Software	relationship Goodwill		and rights	Total
Economic life	5 yrs	5 yrs	10 yrs	Indefinite	Indefinite
Amort. schedule	Linear	Linear	Linear
Cost at 31 Dec 2012	45.626	13.499	22.758	155.431	7.667	244.980
Additions	6.521	-	-	-	-	6.521
Currency translation effect	(995)	-	69	7.748	-	261
Cost at 31 Dec 2013	51.152	13.499	22.827	163.179	7.667	251.763
Acc. Depreciation and write-downs by 31 Dec 2012	30.678	13.499	21.901	120.501	7.667	194.246
Depreciation over fiscal year	8.283	-	237	-	-	8.520
Currency translation effect	(741)	-	-	6.188	-	(1.114)
Acc. Depreciation and write-downs by 31 Dec 2013	38.220	13.499	22.138	126.689	7.667	201.652
Carrying amount at 31 Dec 2013	12.933	(0)	689	36.490	-	50.111

2012	Development		Customer		Patents
	costs	Software	relationship Goodwill		and rights	Total
Economic life	5 yrs	5 yrs	10 yrs	Indefinite	Indefinite
Amort. schedule	Linear	Linear	Linear
Cost at 31 Dec 2011	36.281	13.499	23.115	156.549	7.667	237.111
Additions	9.345	-	-	-	-	9.345
Currency translation effect	-	-	(357)	(1.118)	-	(1.475)
Cost at 31 Dec 2012	45.626	13.499	22.758	155.431	7.667	244.980
Acc. Depreciation and write-downs by 31 Dec 2011	19.022	13.458	16.680	120.128	7.667	176.955
Depreciation over fiscal year	8.036	136	1.852	-	-	10.024
Impairment	3.620	-	3.280	-	-	6.900
Currency translation effect	-	(95)	90	373	-	368
Acc. Depreciation and write-downs by 31 Dec 2012	30.678	13.499	21.901	120.501	7.667	194.247
Carrying amount at 31 Dec 2012	14.948	(0)	857	34.930	-	50.734

Intangible assets with finite useful lifetimes are amortized. Amortizations of intangible assets are classified as ordinary amortization in the income statement.

The company capitalize internal develoment cost given the following conditions:

• > that the internal development costs can be demonstrated to generate probable future economic benefits to the company.
• > that the company has the intention and the resources to complete, use and obtain the benefits from the intangible asset.
• > that the specific development project is larger 500 tnok.

The company does not perform any research.

Software

2013

> Previous capitalized software has been amortized for both segments Smart Mobile Data or Secure Mobility and the value is 0 NOK.

2012

• > Smart Mobile Data: there was no change in software value, excluding amortizations, in 2012. At 31.12.2012 all software was amortized and the value was 0 NOK.
• > Secure Mobility: there was no change in software value, excluding amortizations, in 2012. At 31.12.2012 all software was amortized and the value was 0 NOK.

Customer Relations

2013

• > Smart Mobile Data: There has been no change in Customer Relations, excluding amortizations.
• > Secure Mobility: Recognized customer relations was impaired in 2012. There is no indications that previous write down need to be reversed.

2012

• > Smart Mobile Data: There has been no change in Customer Relations, excluding amortizations.
• > Secure Mobility: The company recognized an impairment charge of Customer Relations relating to the Secure Mobility CGU of NOK 3.3 million. The events and circumstances that lead to the impairment

is that the income from the Secure Mobility CGU was not as expected in 2012 and the company had to adjust the budget within this CGU and the impairment, which is based on budgeted cash flow. The CGU experienced a decrease or delay in capital spending which meant reduced revenues for Birdstep. This coupled with the long sales cycle of some products impeded the company's ability to forecast accurately. As a result of this the recoverable amount of the Secure Mobility CGU was estimated to be lower than the carrying value of customer relations and an impairment was done. In 2012 Birdstep's sales execution model was restructured completely and this gave a more realistic view into business opportunities and growth ahead.

Development costs

2013

• > Smart Mobile Data: There has been no change in development costs, excluding amortizations. During the year NOK 4.8 million has been added in capitalized development.
• > Secure Mobility: There has been no change in development costs, excluding amortizations. During the year NOK 1.7 million has been added in capitalized development.

2012

• > Smart Mobile Data: There has been no change in development costs, excluding amortizations.
• > Secure Mobility: The company recognized an impairment charge of Development Costs relating to the Secure Mobility CGU of NOK 3.6 million. The events and circumstances that lead to the impairment is described in detail above under the paragraph related to Customer Relation above.

Goodwill

The company's Goodwill are related to the segments of Smart Mobile Data.

> There have been no change in goodwill value in 2013 except currency effect of re-evaluating goodwill to NOK. The Goodwill have been tested for impairment in accordance with IFRS and the recoverable amount exceeded the carrying amount.

The carrying value of goodwill at 31 December 2013 represents the following:

Group
2013	2012
36.490	34.930
-	-
36.490	34.930

Impairment of goodwill and other intangible assets

The acquired goodwill represented in the transactions above is deemed not to have a limited useful life. There will not be continuous amortization of goodwill, but book value is tested annually for impairment. If the carrying value of goodwill is higher than the estimated recoverable amount, impairments are being made.

The recoverable amount is deemed to correspond to the present value of future cash flows that can be allocated to goodwill. As a result the estimated recoverable amount exceeds the carrying value of goodwill. The recoverable amount of goodwill arising from acquisitions is estimated by discounting budgeted future cash flows. The future cash flows are estimated taking into account the expectation that the acquisition of the subsidiary and the integration of its technology will expand the existing customer base as well as provide a basis for the development of new products in the group.

Test for impairment of goodwill and other intangible assets

Birdstep has used "value in use" to determine the recoverable amounts of the cash generating units. The key assumptions used in the estimation of cash flows and values are:

• > EBITDA and Free Cash Flow
• > Growth rates Capital expenditures
• > Discount rate

Future estimations of cash flows are based on budgets approved by the board in the first five years in addition to a terminal value. An assessment period exceeding 5 years (terminal value) is relevant to use as the assets most likely are going to give a positive cash flow even after 5 years.

Terminal value is calculated with an inflation-adjusted cash flow in year 5, when we assume that the assets will generate at least these cash flows during this period.

Cash flows are determined largely on the basis of budgets and with also taking into account growth of the total market. When estimating the growth in revenues it is management's opinion that there is a significant potential for development of new products and technologies.

Revenue budgeting and the expected EBITDA development

Cash flows are determined largely on the basis of budgets and with the addition of growth of the total market, as well as the Company's market share and prices for the product. The budget was compiled by a bottom up approach. When estimating the growth in revenues, the emphasis is on industry analysis. It is management's opinion that these are reasonable assumptions when there is a significant development of new products and technologies in these areas. The market is also growing and the Company expects its new products will be well received in the market.

Growth rates

The terminal value is estimated using a conservative estimate of 1.5% nominal growth in cash flows. This growth rate is not to exceed the expected growth of the industry and is assumed to be less than expected inflation.

Capital expenditures

Only the capital expenditure necessary to meet the expected growth in revenues is taken into consideration.

Cost of Capital

The pre-tax discount rate used for discounting cash flows is 14.9%. This is based on a risk-free interest rate plus a risk premium estimated using the capital asset pricing model. An appropriate asset beta has been estimated using a peer group of comparable companies. The asset beta is estimated using 104 weekly observations and the Morgan Stanley World Index as the reference index. The pre-tax cost of capital is estimated according to the guidelines in IAS 36 (BCZ85). The post-tax cost of capital for both CGU's was 12.3%.

Sensitivity analysis of Goodwill and other intangible assets

Sensitivity in relations to Smart Mobile Data will provide an impairment of goodwill and sensitivity in relation till Secure Mobility will provide an impairment of development as it is no goodwill or other intangible assets allocated to this segment.

The calculations are based on assumptions about future development in both the macro factors and company specific factors. As a basis for the sensitivity evaluation the company has identified that in order for the necessity of an impairment the following conditions has to occur:

Smart Mobile Data

• > The required growth rate in the terminal value needs to be set to 0% in combination with a required rate of reduced of >20 percentage units for an impairment to take place.
• > The required revenue growth needs to be changed by >7 percentage units for an impairment to take place.

Secure Mobility

• > The required growth rate in the terminal value needs to be <1% for an impairment to take place.
• > The required rate of return needs to be set to >12.5% for an impairment to take place.
• > The required revenue growth needs to be reduced by >1 percentage units for an impairment to take place.

Note 6 – Tangible assets

(Amounts in NOK 1 000)

	Group
2013	Machinery and
	equipment	Inventory	Total
Economic life	3 to 5 years	3 to 5 years
Amortization Schedule	linear	linear
Cost at 1 January 2013	3.481	576	4.057
Additions	124	122	246
Translation differences	-	70	70
Cost at 31 December 2013	3.605	768	4.373
Accumulated depreciation 1 January 2013	3.448	547	3.995
Depreciation	42	14	56
Translation differences	(6)	72	66
Accumulated depreciation 31 December 2013	3.484	633	4.117
Book value 31 December 2013	121	135	256

	Group
2012	Machinery and
	equipment	Inventory	Total
Economic life	3 to 5 years	3 to 5 years
Amortization Schedule	linear	linear
Cost at 1 January 2012	3.683	615	4.298
Additions	-	25	25
Translation differences	(202)	(64)	(266)
Cost at 31 December 2012	3.481	576	4.057
Accumulated depreciation 1 January 2012	3.478	597	4.075
Depreciation	199	17	216
Translation differences	(229)	(67)	(296)
Accumulated depreciation 31 December 2012	3.448	547	3.995
Book value 31 December 2012	33	29	62

Note 7: – Accounts receivable

(Amounts in NOK 1 000)

	Group
	2013	2012
Accounts receivable Provision for doubtful debts	14.488 -	11.840 -
Net accounts receivable	14.488	11.840

Accounts receivable are recorded at face value net of estimated impairment losses. Trade receivables are paid normally within 30-90 days. All accounts receivable are exposed to credit risk.

An aging schedule related to accounts receivable is as follows:

	Carrying amount	Not due		Number of days past due date
			1-29	30-89	>90
Trade receivables as of 31. Dec 2013
Smart Mobile Data	10.897	10.721	135	-	41
Secure Mobility	3.591	3.591	-	-	-
Total	14.488	14.312	135	-	41
	100%	99%	1%	0%	0%

	Carrying amount	Not due		Number of days past due date
			1-29	30-89	>90
Trade receivables as of 31. Dec 2012
Smart Mobile Data	4.451	3.103	688	424	236
Secure Mobility	7.389	5.889	27	1.177	295
Total	11.840	8.993	716	1.601	531
	100%	76%	6%	14%	4%

Note 8: – Share capital and shareholder information

Share capital

The share capital of Birdstep Technology ASA consists only of ordinary shares with a nominal value of NOK 0.1 at 31 December 2013. All shares have equal rights to receive dividends and the repayment of capital, and represent one vote at the Annual General Meeting of Birdstep Technology ASA.

As of December 31, 2013, the Company has 100,121,627 shares issued, with par value of NOK 0.10 per share, included 21,055 treasury shares.

In October 2013 a new issue of 8,137,000 was completed each with a par value of NOK 0.1 and a subscription price of NOK 2.46.

Shareholders of Birdstep Technology ASA at 31 December 2012	Number of shares	Ownership
Skandinaviska Enskilda Banken AB	26.280.196	26,25%
Goldman Sachs & Co Equity Segregat	15.119.755	15,10%
MP Pensjon PK	9.582.850	9,57%
Morgan Stanley & Co Llc	5.717.858	5,71%
Morgan Stanley & Co Llc	3.543.853	3,54%
Triomar AS	2.000.000	2,00%
Aic Invest As	1.672.200	1,67%
Fres AS	984.900	0,98%
Christiania Securities ASA Meglerkonto Innland	918.500	0,92%
Petroleum Invest	899.000	0,90%
Kristiansen, Asbjørn Sten	878.167	0,88%
Øren, Åge	877.601	0,88%
Einarsen, Even Harald	750.000	0,75%
Nordea Bank Finland Plc.	623.104	0,62%
Sandquist, Patricia Rodrigues Da Costa	605.000	0,60%
Nordnet Bank AB	549.864	0,55%
K Vaule Holding AS	523.346	0,52%
Henriksen, Lars Ronny	519.618	0,52%
Hibas Holding AS	487.185	0,49%
V2 Systemer AS	482.000	0,48%
Total 20 largest shareholders	73.014.997	72,93%
Other shareholders	27.106.630	27,07%
Total number of shares	100.121.627	100,00%

2013	2012
91.984.627	71.364.796
8.137.000	20.619.831
100.121.627	91.984.627
21.055	21.055

Note 9: – Earnings per share

Basic earnings per share is calculated as the ratio of net profit attributable to shareholders and the weighted average number of ordinary shares during the financial year.

The calculation of diluted earnings per share includes earnings accruing to the shareholders and the number of weighted average shares outstanding, adjusted for the dilutive effect of stock options. In the "denominator" all the dilutive effects of the exercise of stock options that are "in-the-money" are taken into account. The calculations are based on the assumption that employee options are exercised on the first day of the accounting period.

The dilutive effect of stock options is calculated as the difference between the average market value of the shares and the sum of the exercise price and not expensed portion of the options.

(Amounts in NOK 1 000)

	2013	2012
Net profit attributable to parent shareholders	(8.836)	(40.303)
Number of shares outstanding	100.121.627	91.984.627
Number of diluted shares outstanding (including the effect of stock options)	100.121.627	91.984.627
Earnings per share (NOK)	(0,09)	(0,51)
Diluted earnings per share (NOK)	(0,09)	(0,51)
Earnings and diluted earnings per share (NOK):
Continuing operations	(0,09)	(0,57)
Discontinued operations	-	0,06
Total	(0,09)	(0,51)

Since the result of 2013 and the comparison year both were negative, the calculation of diluted earnings per share will not be taken into account for calculating the effect of stock option as this will provide an unreliable result.

Note 10: – Pensions and provisions for pensions

In the company the pension scheme is defined as a definite contributing plan by the respective subsidiaries while, partly covered by the employees by the deduction from the salary. The contributions to these arrangements are constituted as a certain proportion of the employee's salary. The contributions recognised as expenses equaled NOK 3.8 million for the Group in 2013. As at 31 December 2013, 1, 18 and 29 employees were covered by the plans in Norway, Finland and Sweden, respectively.

The year's pension costs are calculated as follows:

	Group
	2013	2012
Pension expenses, defined contribution scheme	3.784	3.571
Total	3.784	3.571

Note 11: – Taxes

(Amounts in NOK 1 000)

Group
2012
568
158
726
568
-
568

Deferred tax assets/tax assets and liabilities

(Amounts in NOK 1 000)

	Group
		Assets	Liabilities			Net
	2013	2012	2013	2012	2013	2012
Tangible assets	(8.288)	(8.775)	-	-	(8.288)	(8.775)
Receivables	-	-	-	-	-	-
Pensions	-	-	-	-	-	-
Other	(2.462)	(673)	-	-	(2.462)	(673)
Intangible assets	-	-	11.739	12.000	11.739	12.000
Tax loss carried forward	(166.463)	(168.102)	-	-	(166.463) (168.102)
Tax loss caried forward from discontinued operations	-	-	-	-	-	-
Deferred tax (tax asset)	(177.214)	(177.550)	11.739	12.000	(165.474) (165.550)
Deferred tax asset not recognised					165.649	165.708
Net recognised deferred tax					175	158

Deferred tax assets are recognised when it is probable that the company will have a sufficient profit for tax purposes in subsequent periods to utilise the tax asset.

Tax loss carried forward is reduced despite the net loss of taxable income. This is mainly because of the changes in norwegian tax rate from 28 % to 27 %.

The tax loss can be carried forward indefinitely.

		Group
		2013		2012
A reconciliation of the effective rate of tax
Profit for the year	-	(8.135)	-	(39.577)
Total income tax expense	9%	(701)	2%	(726)
Profit excluding income tax		(8.837)		(40.303)
Income tax using the company's domestic tax rate Effect of tax rate in foreign jurisdictions Non deductable expenses and tax exempt income Change in unrecognised temporary differences Unrecognised loss carried forward	28% -3% 1% 19% 20%	(2.278) 248 (96) (1.563) (1.639)	28% 0% 9% -7% -29%	(11.082) (120) (3.744) 2.840 11.378
Change in tax rate	-57%	4.626	0%	-
Effective tax rate	9%	(701)	2%	(726)

Note 12: – Accrued expenses and other current liabilities

Group
2013	2012
4.580	4.855
1.120	1.119
2.976	1.269
1.410	1.733
537	1.987
33	1.475
10.656	12.437

Note 13: – Related parties

Identification of related parties

Related parties include the Board, CEO and members of the management team.

The Group's consolidated financial statements comprise Birdstep Technology ASA and its subsidiaries, Birdstep Technology AB, Birdstep Technology San Francisco Inc and Birdstep Technology Oy. Se more information in note 14.

Transactions / balances with related parties

There have been no transactions between the Group and companies / individuals with significant ownership interests or other related parties.

Internal trading within the Group is carried out in accordance with special agreements on an arm's length basis.

(Amounts in NOK 1 000)

2013	Birdstep ASA Birdstep AB		Birdstep OY	Birdstep Inc
	Parent	Subsidiaries	Subsidiaries	Subsidiaries
Cost compensation	49.213	(33.696)	-	(15.518)
Management fee	(5.650)	-	5.650	-
Loan	16.302	-	(11.077)	(6.253)
Capitalized development	4.790	-	1.731	-
Salaries and wages capitalized as development	-	(3.992)	(2.386)	(143)
Group Balances	(15.906)	21.380	(3.055)	(2.419)

(Amounts in NOK 1 000)

2012	Birdstep ASA	Birdstep AB	Birdstep OY	Birdstep Inc
	Parent	Subsidiaries	Subsidiaries	Subsidiaries
Cost compensation	52.616	(40.203)	-	(12.413)
Management fee	-	-	-	-
Loan	11.721	-	(6.155)	(5.721)
Capitalized development	8.468	-	877	-
Salaries and wages capitalized as development	(289)	(5.835)	(2.412)	(809)
Group Balances	26.996	(19.025)	-	(7.971)

		Group
	2013	2012
Receivables which fall due later than one year	16.302	11.721
Long term liabilities which fall due later than 5 years	-	-

See further description in note 14.

2012

The company recognized an impairment charge relating to the Secure Mobility CGU of NOK 6.9 million for 2012. The recoverable amount for the Smart Mobile Data CGU exceeds the carrying amount. See further description for the reason to the write down in note 5.

Note 14 – Investment in associates and subsidiaries

The Group's subsidiaries include the following:

(Amounts in NOK 1 000) Ownership and Company Number of shares Nominal rate voting interest Birdstep Technology AB (Stockholm, Sweden) 50.143.429 SEK 0.01 100% Birdstep Technology Oy (Espoo, Finland) 1.000 EUR 10 100% Birdstep Technology San Francisco Inc. (San Francisco, U.S.) 40.000.000 USD 0.003522 100%

(Amounts in NOK 1 000)

	31.12.2013	31.12.2012
	Cost basis	Cost basis
Birdstep Technology AB	9.794	9.794
Birdstep Technology Oy	-	-
Birdstep Technology San Francisco Inc.	13.956	13.956
Birdstep Technology International AB AB (Orbyte SF AB)	-	87
Total	23.750	23.837

In 2013 the company terminated the dormant subsidiary Birdstep Technology International AB.

Note 15: Remuneration to management, board of directors and auditors

(Amounts in NOK 1 000)

	2013	2012
Salaries, including bonuses and commissions	38.254	37.511
Salaries and wages capitalized as development	(6.521)	(9.345)
Employer taxes	6.891	7.419
Pension and insurance costs	4.612	3.851
Other benefits	1.593	1.393
Payroll and related costs	44.829	40.829

Employed full time, by business segment (annual average)	2013	2012
Corporate	7	8
Smart Mobile Data	37	36
Secure Mobility	17	17
Total	61	61

Remuneration to Management:

It follows from the statement that the established separate remuneration committee is to determine the remuneration of senior executives. The committee will advise the Board in all matters relating to wages and other remuneration of the CEO and senior executives. Remuneration is based on a fixed and variable part. The fixed component will reflect the individual manager's responsibilities and performance. In addition to the fixed portion there also may be a variable part based on the company's and the individual's responsibility objectives.

A summary of remuneration to key management is provided below.

(Amounts in NOK 1 000)

Remuneration of key management:
		Salary	Benefit	Bonus/	Pension	Total
			in-kind	sales com
Lonnie Schilling	CEO and President	1.886	-	775	126	2.787
Sophie Rabenius	Chief Financial Officer	883	-	112	104	1.100
Anders Storm	VP Engineering & Operations	1.040	-	161	182	1.383
Marie-Louise Nilsson Kanon	VP Market Communications	685	-	93	141	919
Maria Johansson	Global HR Manager	407	-	33	33	473
Michael Jönsson	VP Global Sales, Smart Mobile Data US	907	-	900	178	1.986
Tim Bray	VP Global Sales, Smart Mobile Data EMEA	675	-	167	119	961
Sanna Tiilikainen	VP Global Sales, Secure Mobility	683	103	200	123	1.109
Total		7.166	103	2.441	1.007	10.717

In December 2012 Lonnie Schilling was appointed new CEO in Birdstep. In his agreement he will receive severance pay for 6 months at termination.

Shares owned by management

The following table presents members of the Birdstep management, their positions and the nubers of shares and options that they hold (if any) in the Company as of 31 December 2013:

Name	Position	No. of shares
Anders Storm	VP Engineering & Operations	224.348

Board of Directors:

The table below sets forth the Company´s current board members, the board members holdings of shares (directly or indirectly) and options (if any) in the Company as of 31 December 2013:

List of directors	Position	Director's fee
Tom Nyman	Chairman	300
Kirsten English	Board Member	135
Arne Aarnes	Board Member	135
Anna Malm Bernsten	Board Member	135
Massimo Migliuolo	Board member	135
Total payments to the Board		840

Nomination committee	Director's fee
Urban Gillström	15
Axel Roos	10
Total payments to the Nomination Committee	25

Name	Position	No. of shares	No. of options
Tom Nyman *	Chairman of the Board	26.215.989	-
Kirsten English	Board member	18.700	-
Arne Aarnes **	Board member	1.672.200	-
Anna Malm Bernsten	Board member	-	-
Massimo Milgiuolo	Board member	-	-

* Represents POD Venture Partners AB

** Owns shares via the 100% owned company AIC INVEST AS

It is not granted loans or security for the benefit of the CEO or board members.

	2013	2012
Statutory audit	561	743
Tax advice	109	87
Other non-audit services	340	253
Total	1010	1083

Note 16: – Share-based compensation

The company has no ongoing stock option plan today. The stock option plans initiated in 2009 and 2010 has both expired and no options was exercised in 2012.

Expenses for share-based compensation were separately classified in the income statement with a corresponding increase in additional paidin capital. The cost is the real value of options granted and is assumed to be earned.

	2013	2012
Expensed share-based compensation	-	16

Note 17: – Other financial items

		Group
	2013	2012
Income from foreign exchange	-	2.273
Other financial income	1.120	4.116
Unreal Currency Gain	12.509	9.703
Other financial income	13.629	16.092
Expenses on foreign exchange	39	279
Other financial expenses	442	4.171
Unreal Currency Lost	13.081	13.176
Other financial expenses	13.561	17.625
Other financial items, net	67	(1.533)

Note 18: – Financial instruments

The numbers presented below provide a summary of the group's financial instruments and comparison of the fair value and the carrying amount.

(Amounts in NOK 1 000)

	2013			2012
	Fair	Carrying	Fair	Carrying
	Value	Value	Value	Value
Financial assets
Cash	22.331	22.331	16.921	16.921
Accounts receivable	14.488	14.488	11.840	11.840
Other current assets	2.278	2.278	1.275	1.275
Total	39.096	39.096	30.036	30.036
Financial liabilities
Accounts payable	3.126	3.126	4.139	4.139
Interest - bearing liabilities	-	-	-	-
Other non-current liabilities	3.285	3.285	3.229	3.229
Total	6.411	6.411	7.368	7.368

The carrying amount of all the group financial assets and liabilities is approximately equal to fair value since these instruments have a short term to maturity and thus the time value is not material

Note 19: – Operating leases

		Group
	Within 1 year	1 to 5 years	Total
31/dec/13	3.524	4.063	7.587
31/dec/12	2.987	3.860	6.847

Note 20: – Other operating costs

Operating costs consist primarily of costs related to the operations excluding labor costs and depreciation.

(Amounts in NOK 1 000)

	Group
	2013	2012
Leased premises and related costs	3.723	4.070
Consulting and other external services	9.405	9.205
Insurance	130	310
Office expenses	2.541	2.764
Travel expenses	3.681	3.616
Other expenses	2.668	3.721
Total	22.148	23.687

Note 21: – Restricted bank deposits

	Group
	2013	2012
Restricted bank deposits	2	268
Accounts for restricted funds	-	-
Total	2	268

Note 22: – Interest-bearing loans

(Amounts in NOK 1 000)

				Group
	Effective rate	Date to maturity	2013	2012
Capital loans	7,50%	2011	1.426	1.249
Capital loans	3,00%	2011	638	559
Total			2.064	1.808

The loan is recorded in Birdstep Technology OY, Finland. Capital loans are defined, according to Finnish law of limited liability company, as a loan with a lower priority than other debt. Instalments and interest on a capital loan can only be paid from the company's distributable reserves.

Both loans has a date of maturity on 2011. Since Birdstep Oy has not had a net profit, the loans has not started to be paid off.

In addition to these loans an interest of NOK 959 thousand is accrued for. Birdstep also has a non interest bearing loan of NOK 462 thousand.

Note 23: – Subsequent Events

There have been no major events between the balance sheet data and the approval of the annual accounts for 2013.

Note 24: – Discontinued operations

2013

There has been no discontinued operations during 2013.

2012

In 2011 the sale of Orbyte and Aptilo was finalized, resulting in a gain of NOK 24.8. The cash settlement of these transaction contributed with a positive cashflow of NOK 49.7 million in 2012. Included in the transaction was an Earn Out of NOK 4.2 million that the company received August 2012.

Note 25: – Changes of historical numbers

From the annual report of 2012 the following changes has been done.

Earn out

The earn-out provision from the Orbyte transaction received August 1st 2012 was identified as a financial item and shown in "Other financial item, net". This has been reclassified and is now showed in "Gain/loss on disposal of discontinued operations". Due to this change Earnings per share has been affected and is adjusted accordingly.

Depreciation and amortization

"Write down and impairment of intangible assets" has been extracted from "Depreciation and amortization" and is now shown in a separate line.

Cash flow

2012 year´s figures Net income (loss) have changed and are now based on Net income (loss) before taxes.

The text "change in restricted cash balances" under cash flow from investing activities is changed to "earn out from discontinued operations" as the amount is related to the earn out from the Orbyte transaction.

Birdstep Technology ASA

Statements of income

			Birdstep Technology ASA
	Note	2013	2012
Operating revenues	2	51.812	28.376
Management Fee	7	5.650	-
Cost of Sales		-	-
Operating expenses
Salaries and wages	8	(3.633)	(1.201)
Share-based compensation		-	(15)
Other operating expenses	9	(53.206)	(53.154)
Total operating expenses		(56.839)	(54.370)
Operating income loss before depreciation and amortization (EBITDA)		623	(25.994)
Depreciation and amortization	3,4	(8.113)	(8.107)
Write down and impairment of intangible assets
Operating income loss after depreciation and amortization (EBIT)		(7.490)	(34.101)
Other income (expense)
Share of gains (losses) in subsidiaries/associated company	5	-	(37.545)
Interest income, net		213	336
Other financial items, net	14	1.737	(4.740)
Other income, net		1.950	(41.949)
Income(loss) from continuing Operations before taxes		(5.539)	(76.049,50)
Income taxes	10	-	-
Income(loss) from continuing operations		(5.539)	(76.050)
Gain on disposal of discontinued operation	17	-	4.152
Net income(loss)		(5.539)	(71.897)
Earnings and diluted earnings per share (NOK):
Continuing operations		0,06	(0,85)
Discontinued operations		-	0,06
Total		0,06	(0,79)

Statements of comprehensive income

		Birdstep Technology ASA
Note	2013	2012
Net income (loss) for the period	(5.539)	(71.897)
Other comprehensive income
Currency translation effect	-	-
Total comprehensive income	(5.539)	(71.897)
Attributable to:
Equity holder of the parent company	(5.539)	(71.897)
Total comprehensive income	(5.539)	(71.897)

Balance sheets

(Amounts in NOK 1 000)

		Birdstep Technology ASA
Note	2013	2012
Non-current assets:
Intangible assets 3	11.252	14.575
Property and equipment 4	-	-
Investment in subsidiaries/associated company	23.750	23.837
Other non-current assets	16.302	11.723
Total non-current assets	51.304	50.135
Current assets:
Accounts receivable 6	10.897	8.655
Other current assets 7	5.523	26.996
Cash & cash equivalents 15	17.171	14.985
Total current assets	33.590	50.636
Total assets	84.894	100.771

		Birdstep Technology ASA
	Note	2013	2012
Shareholders' equity:
Share capital		10.012	9.198
Share premium fund		36.037	17.165
Retained earnings, including translation reserves		13.315	18.855
Total shareholders' equity	12	59.365	45.218
Non-current liabilities:
Deferred incom tax liabilities	10	-	-
Other liabilities	7	21.380	-
Total non-current liabilities		21.380	-
Current liabilities:
Accounts payable		196	29.967
Deferred revenue		1.207	1.873
Accrued expenses and other liabilities	13	2.746	23.714
Total current liabilities		4.150	55.553
Total Liabilities and Shareholders' Equity		84.894	100.771

Statements of cash flow

		Group
Note	2013	2012
Operating activities
Income (loss) from continuing operations before taxes	(5.539)	(76.050)
Depreciation and amortization 3, 4	8.113	8.107
Share-based compensation	-	15
Write dwon of investment in subsidiary	-	37.545
Change in receivables and payables	(10.798)	10.120
Net cash from operating activities	(8.224)	(20.263)
Investing activities
Capitalized development 3, 4	(4.790)	(8.468)
Earnout from discontinued operations 18	-	4.152
Sales of subsidiaries - shares 5	87	-
Change in loan balance with affiliated company 7	(4.579)	(9.484)
Net Cash from Investing activities	(9.282)	(13.800)
Finacial activities
New Issue 12	19.692	19.071
Net cash from finacial activities	19.692	19.071
Effect of foreign exchange rate changes
Net increase(decrease) in cash & cash equivalents	2.186	(14.991)
Cash & cash equivalents, beginning of period	14.985	29.976
Cash & cash equivalents, end of period	17.171	14.985

Note 1: – Accounting principles

The financial statements for Birdstep Technology ASA, the parent company, have been prepared and presented in accordance with simplified IFRS pursuant to section 3-9 of the Norwegian Accounting act.

1.2 Use of estimates in the preparation of financial statements

The preparation of financial statements in compliance with the Accounting Act requires the use of estimates. The application of the company's accounting principles also require management to apply assessments. Areas which to a great extent contain such assessments, a high degree of complexity, or areas in which assumptions and estimates are significant for the financial statements, are described in the notes.

Management has used estimates and assumptions that affect the assets, liabilities, revenues, expenses and information regarding potential liabilities. This particularly applies to, depreciation of fixed assets and intangible assets. Future events may lead to the estimates change. Estimates and underlying assumptions are assessed continuously. Changes in accounting estimates are recognized in the period when the change occurs. If the changes also apply to future periods, the effects of current and future periods are recognized.

1.3 Revenue recognition and related costs Revenues

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for licenses or services supplied, stated net of discounts and value added taxes. The group recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the group's activities, as described below. The group bases its estimate of return on historical results taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Sales of licenses

Licenses are sold to resellers in advance for an anticipated future use and are recorded as revenue at the date of delivery. Any purchased license is non-refundable and there is no unfulfilled obligation that could affect the reseller acceptance of the licenses.

Sales of services

Support & Maintenance, Hosting service fee and other services are recognised by reference to the stage of completion of the contract.

The stage of completion of the contract is determined as follows:

• > installation fees are reorganised by reference to the stage of completion of the installation, determined as the proportion of the total time expected to install that has elapsed at the end of the reporting period; servicing fees included in the price of products sold are recognised by reference to the proportion of the total cost of providing the servicing for the product sold; and
• > revenue from time and material contracts is recognised at the contractual rates as labour hours and direct expenses are incurred.

Deferred revenue

Advance payments recorded on the balance sheet as a liability, until the services have been rendered or products have been delivered. Deferred revenue is a liability because it refers to revenue that has not yet been earned, but represents products or services that are owed to the customer. As the product or service is delivered over time, it is recognized as revenue on the income statement.

1.4 Classification of balance sheet items

Assets intended for long term ownership or use have been classified as fixed assets. Assets relating to the trading cycle have been classified as current assets. Other receivables are classified as current assets if they are to be repaid within one year after the transaction date. Similar criteria apply to liabilities. First year's instalment on long term liabilities and long term receivables are, however, not classified as short term liabilities and current assets.

1.5 Intangible assets

An internally generated intangible asset arising from development (or from the development phase of an internal project) is recognised as intangible assets if, and only if, all of the following have been demonstrated:

• > the technical feasibility of completing the intangible asset so that it will be available for use or sale;
• > the intention to complete the intangible asset and use or sell it;
• > the ability to use or sell the intangible asset;
• > how the intangible asset will generate probable future economic benefits;
• > the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
• > the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.

Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in subsequent period.

1.6 Fixed assets

Fixed assets are reflected in the balance sheet and depreciated to residual value over the asset's expected useful life on a straight-line basis. If changes in the depreciation plan occur the effect is distributed over the remaining depreciation period. Direct maintenance of an asset is expensed under operating expenses as and when it is incurred. Additions or improvements are added to the asset's cost price and depreciated together with the asset. The split between maintenance and additions/ improvements is calculated in proportion to the asset's condition at the acquisition date.

1.7 Investment in other companies

The cost method is applied to investments in other companies. The cost price is increased when funds are added through capital increases or when group contributions are made to subsidiaries. Dividends received are initially taken to income. Dividends exceeding the portion of retained equity after the purchase are reflected as a reduction in purchase cost. Dividend income from investments is recognised when the shareholder's right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably). The parents recognise dividends from subsidiaries and associates when it is reasonably certain that it will be received.

1.8 Asset impairments

Impairment tests are carried out if there is indication that the carrying amount of an asset exceeds the estimated recoverable amount. The test is performed on the lowest level of fixed assets at which independent cash flows can be identified. If the carrying amount is higher than both the fair value less cost to sell and recoverable amount (net present value of future use/ownership), the asset is written down to the highest of fair value less cost to sell and the recoverable amount.

1.9 Debtors

Trade debtors are recognised in the balance sheet after provision for bad debts. The bad debts provision is made on basis of an individual assessment of each debtor and an additional provision is made for other debtors to cover expected losses. Significant financial problems at the customers, the likelihood that the customer will become bankrupt or experience financial restructuring and postponements and insufficient payments, are considered indicators that the debtors should be written down.

Other debtors, both current and long term, are recognised at the lower of nominal and net realisable value. Net realisable value is the present value of estimated future payments. When the effect of a write down is insignificant for accounting purposes this is, however, not carried out. Provisions for bad debts are valued the same way as for trade debtors.

1.10 Foreign currencies

Assets and liabilities in foreign currencies are valued at the exchange rate on the balance sheet date. Exchange rate differences on monetary items are recognized in profit or loss in the period in which they arise

1.11 Liabilities

Liabilities, with the exception of certain liability provisions, are recognised in the balance sheet at nominal amount

1.12 Pensions

The pension schemes are financed through payments to insurance companies. The company has defined contribution plans where the company pays contributions to an insurance company. After the contribution has been made the company has no further commitment to pay. The contribution is recognised as payroll expenses. Prepaid contributions are reflected as an asset (pension fund) to the degree the contribution can be refunded or will reduce future payments.

1.13 Taxes

The tax charge in the income statement includes both payable taxes for the period and changes in deferred tax. Deferred tax is calculated at relevant tax rates on the basis of the temporary differences which exist between accounting and tax values, and any carry forward losses for tax purposes at the year-end. Tax enhancing or tax reducing temporary differences, which are reversed or may be reversed in the same period, have been eliminated. The disclosure of deferred tax benefits on net tax reducing differences which have not been eliminated, and carry forward losses, is based on estimated future earnings. Deferred tax and tax benefits which may be shown in the balance sheet are presented net.

Tax reduction on group contributions given and tax on group contribution received, booked as a reduction of cost price or taken directly to equity, are booked directly against tax in the balance sheet (offset against payable taxes if the group contribution has affected payable taxes, and offset against deferred taxes if the group contribution has affected deferred taxes).

Deferred tax is reflected at nominal value.

1.14 Cash flow statement

The cash flow statement has been prepared according to the indirect method. Cash and cash equivalents include cash, bank deposits, and other short term investments which immediately and with minimal exchange risk can be converted into known cash amounts, with due date less than three months from purchase date.

Note 2: – Business Segments

Birdstep Technology ASA contains the segment Smart Mobile Data. See more information about segments in the Company in the section for Birdstep Technology Group Note 4.

Business Segments 31 December 2013

					EMEA
2013						Other	Middle East /
	USA	Asia	UK	Finland	Greece	Europe	Africa	Total
2013	44.542	-	2.124	2.725	1.213	1.074	133	51.812
2012	15.635	82	3.943	2.827	2.422	3.227	240	28.376

Note 3: – Intangible assets

(Amounts in NOK 1 000)

	Birdstep Technology ASA
	Development			Patents
	costs	Software	Goodwill	and rights	Total
Economic life	5 yrs	5 yrs	Indefinite	Indefinite
Amort. schedule	Linear	Linear
Cost at 31 Dec 2012	31.877	397	59.099	27.667	119.040
Additions	4.790	-	-	-	4.790
Currency translation effect	-	-	-	-	-
Cost at 31 Dec 2013	36.667	397	59.099	27.667	123.830
Acc. Depreciation and write-downs by 31 Dec 2012	17.302	397	59.099	27.667	104.465
Depreciation and write-downs over fiscal year	8.113		-		8.113
Currency translation effect	-	-	-	-	-
Acc. Depreciation and write-downs by 31 Dec 2013	25.415	397	59.099	27.667	112.578
Carrying amount at 31 Dec 2013	11.252	-	-	-	11.252
Cost at 31 Dec 2011	23.409	397	59.099	27.667	110.572
Additions	8.468	-	-	-	8.468
Currency translation effect	-	-	-	-	-
Cost at 31 Dec 2012	31.877	397	59.099	27.667	119.040
Acc. Depreciation and write-downs by 31 Dec 2011	10.640	389	59.099	26.238	96.366
Depreciation and write-downs over fiscal year	6.662	8	-	1.429	8.099
Currency translation effect	-	-	-	-	-
Acc. Depreciation and write-downs by 31 Dec 2012	17.302	397	59.099	27.667	104.465
Carrying amount at 31 Dec 2012	14.575	-	-	-	14.575

Intangible assets with finite useful lifetimes are amortized. Amortizations of intangible assets are classified as ordinary amortization in the income statement.

Note 4: – Tangible assets

	Birdstep Technology ASA
	Inventory	Total
Economic life	3 to 5 years
Amortization Schedule	linear
Cost at 1 January 2013	2.494	2.494
Additions	-	-
Disc. Operations	-	-
Translation differences	-	-
Cost at 31 December 2013	2.494	2.494
Accumulated depreciation 1 January 2013	2.494	2.494
Disc. Operations	-	-
Depreciation	-	-
Translation differences	-	-
Accumulated depreciation 31 December 2013	2.494	2.494
Book value 31 December 2013	-	-
Cost at 1 January 2012	2.494	2.494
Additions	-	-
Disc. Operations	-	-
Translation differences	-	-
Cost at 31 December 2012	2.494	2.494
Accumulated depreciation 1 January 2012	2.490	2.490
Disc. Operations	-	-
Depreciation	4	4
Translation differences	-	-
Accumulated depreciation 31 December 2012	2.494	2.494
Book value 31 December 2012	-	-

Note 5: – Investment in associates and subsidiaries

The Group's subsidiaries include the following:

(Amounts in NOK 1 000)

Number of shares	Nominal rate	Ownership and voting interest
50.143.429	SEK 0.01	100%
1.000	EUR 10	100%
40.000.000	USD 0.003522	100%

(Amounts in NOK 1 000)

	31.12.2013	31.12.2012
	Cost basis	Cost basis
Birdstep Technology AB	9.794	9.794
Birdstep Technology Oy	-	-
Birdstep Technology San Francisco Inc.	13.956	13.956
Birdstep Technology International AB (Orbyte SF AB)	-	87
Total	23.750	23.837

2013

In 2013 the company terminated the dormant subsidiary Birdstep Technology International AB.

2012

Due to impairment test the parent company wrote down its investments in Birdstep Technology OY to NOK 0 and wrote down the loans of Birdstep Technology OY with NOK 31.5 million. The remaining loan after the write down is NOK 6.0 million.

Note 6: – Accounts receivable

(Amounts in NOK 1 000)

Birdstep Technology ASA
	2012
	8.655
	- 8.655
	2013 10.897 - 10.897

Accounts receivable are recorded at face value net of estimated impairment losses.

Trade receivables are paid normally within 30-90 days. All accounts receivable are exposed to credit risk.

Note 7: – Related parties

Identification of related parties

Related parties include subsidiaries, the Board, CEO and members of the management team.

Transactions / balances with related parties

There have been no transactions between the Group and companies / individuals with significant ownership interests or other related parties.

Internal trading within the Group is carried out in accordance with special agreements on an arm's length basis.

(Amounts in NOK 1 000)

2013	Birdstep ASA	Birdstep AB	Birdstep OY	Birdstep Inc
	Parent	Subsidiaries	Subsidiaries	Subsidiaries
Cost compensation	49.213	(33.696)	-	(15.518)
Loan	16.302	-	(11.077)	(6.253)
Management fee	(5.650)	-	5.650	-
Group Balances	(15.906)	21.380	(3.055)	(2.419)

2012	Birdstep ASA	Birdstep AB	Birdstep OY	Birdstep Inc
	Parent	Subsidiaries	Subsidiaries	Subsidiaries
Cost compensation	52.616	(40.203)	-	(12.413)
Loan	11.721	-	(6.155)	(5.721)
Management fee	-	-	-	-
Group Balances	26.996	(19.025)	-	(7.971)

		Birdstep Technology ASA
	2013	2012
Receivables which fall due later than one year	16.302	11.723
Long term liabilities which fall due later than 5 year	-	-

Note 8: – Remuneration to management, board of directors and auditors

(Amounts in NOK 1 000)

	2013	2012
Salaries, including bonuses and commissions	3.336	1.009
Employer taxes	171	192
Pension and insurance costs	126	-
Other benefits	-	-
Payroll and related costs	3.633	1.201

Employed full time, by business segment (annual average)	2013	2012
Corporate	1	-
Smart Mobile Data	-	-
Secure Mobility	-	-
Total	1	-

Birdstep Technology ASA is not obliged to follow the Act of mandatory occupational pensions ("lov om obligatorisk tjenestepensjon") in Norway.

Remuneration to Management:

A summary of remuneration to key management is provided below.

(Amounts in NOK 1 000)

Remuneration of key management:
		Salary	Benefit in-kind	Bonus	Pension	Total
Lonnie Schilling	CEO	1.886	-	775	126	2.787
Total		1.886	-	775	126	2.787

Remuneration of the Board of Directors:

The table below sets forth the Company´s current board members.

List of directors	Position	Director's fee
Tom Nyman	Chairman	300
Arne Aarnes	Board Member	135
Anna Malm Bernsten	Board Member	135
Kirsten English	Board Member	135
Massimo Migliuolo	Board Member	135
Total payments to the Board		840

Nomination committee
Urban Gillström	15
Axel Roos	10
Total payments to the Nomination Committee	25

It is not granted loans or security for the benefit of the CEO or board members.

Remuneration of auditor

	2013	2012
Statutory audit	229	299
Tax advice	55	87
Other non-audit services	212	253
Total	495	639

Note 9: – Other operating costs

Operating costs consist primarily of costs related to the operations excluding labour costs and depreciation.

	Birdstep Technology ASA
	2013	2012
Leased premises and related costs	12	14
Consulting and other external services	979	1.154
Services from other group companies	49.359	49.957
Insurance	130	185
Office expenses	156	98
Travel expenses	901	78
Other expenses	1.669	1.668
Total	53.206	53.154

Note 10: – Taxes

(Amounts in NOK 1 000)

Birdstep Technology ASA
2013	2012
-	-
-	-
-	-
-	-
-	-
-	-

Deferred tax assets/tax assets and liabilities

(Amounts in NOK 1 000)

	Birdstep Technology ASA
		Assets	Liabilities			Net
	2013	2012	2013	2012	2013	2012
Tangible assets	(8.289)	(8.798)	-	-	(8.289)	(8.798)
Receivables	34	-	-	-	34	-
Pensions	-	-	-	-	-	-
Other	-	-	-	-	-	-
Tax loss carried forward	(155.803) (159.706)		-	-		(155.803) (159.706)
Deferred tax (Tax asset)	(164.058) (168.504)		-	-		(164.058) (168.504)
Deferred tax asset not recognised	164.058	168.504	-	-	164.058	168.504
Net recognised deferred tax	-	-	-	-	-	-

The tax loss can be carried forward indefinitely.

(Amounts in NOK 1 000)

	Birdstep Technology ASA
	2013			2012
A reconciliation of the effective rate of tax
Profit for the year		(5.539)		(71.897)
Total income tax expense	0%	-	0%	-
Profit excluding income tax		(5.539)		(71.897)
Income tax using the company's domestic tax rate	28%	(1.551)	28%	(20.131)
Change in tax rate	-110%	6.076	0%	-
Non deductable expenses and tax exempt income	1%	(79)	-13%	9.434
Change in unrecognised temporary differences	10%	(543)	0%	(259)
Unrecognised loss carried forward	70%	(3.903)	-15%	10.956
Effective tax rate	0%	0	0%	0

Note 11: – Equity and shareholder information

Share capital

The share capital of Birdstep Technology ASA consists only of ordinary shares with a nominal value of NOK 0.1 at 31 December 2013. All shares have equal rights to receive dividends and the repayment of capital, and represent one vote at the Annual General Meeting of Birdstep Technology ASA.

	Birdstep Technology ASA
	Share	Share Other paid			Total
	capital	premium	equity	equity	equity
Equity as at 31 Dec 2012	9.199	17.165	90.751	(71.897)	45.218
Net income (loss)	-	-		(5.539)	(5.539)
Total comprehensive income	-	-	-	(5.539)	(5.539)
Transactions with shareholders:
Net Issue of share capital	814	18.872	-	-	19.686
Total transactions with shareholders	814	18.872	-	-	19.686
Equity as at 31 Dec 2013	10.012	36.038	90.751	(77.436)	59.365

Equity as at 1 January 2011	7.137	171	90.736	-	98.044
Net income (loss)	-	-		(71.897)	(71.897)
Total comprehensive income	-	-	-	(71.897)	(71.897)
Transactions with shareholders:
Net Issue of share capital	2.062	16.994	-	-	2.062
Recognition of share-based payments	-	-	15	-	15
Total transactions with shareholders	2.062	16.994	15	-	19.071
Equity as at 31 Dec 2012	9.199	17.165	90.751	(71.897)	45.218

As of December 31, 2013, the Company has 100,121,627 shares issued, with par value of NOK 0.10 per share, included 21,055 treasury shares.

In October 2013 a new issue of 8,137,000 was completed each with a par value of NOK 0.1 and a subscription price of NOK 2.46.

Shareholders of Birdstep Technology ASA at 31 December 2012	Number of shares	Ownership
Skandinaviska Enskilda Banken AB	26.280.196	26,25%
Goldman Sachs & Co Equity Segregat	15.119.755	15,10%
MP Pensjon PK	9.582.850	9,57%
Morgan Stanley & Co LLC	5.717.858	5,71%
Morgan Stanley & Co LLC	3.543.853	3,54%
Triomar AS	2.000.000	2,00%
Aic Invest AS	1.672.200	1,67%
Fres AS	984.900	0,98%
Christiania Securities ASA Meglerkonto Innland	918.500	0,92%
Petroleum Invest	899.000	0,90%
Kristiansen, Asbjørn Sten	878.167	0,88%
Øren, Åge	877.601	0,88%
Einarsen, Even Harald	750.000	0,75%
Nordea Bank Finland PLC.	623.104	0,62%
Sandquist, Patricia Rodrigues Da Costa	605.000	0,60%
Nordnet Bank AB	549.864	0,55%
K Vaule Holding AS	523.346	0,52%
Henriksen, Lars Ronny	519.618	0,52%
Hibas Holding AS	487.185	0,49%
V2 Systemer AS	482.000	0,48%
Total 20 largest shareholders	73.014.997	72,93%
Other shareholders	27.106.630	27,07%
Total number of shares	100.121.627	100,00%

	2013	2012
Shares issued fully paid:
- At the beginging of the year	91.984.627	71.364.796
- Issued during the year	8.137.000	20.619.831
Shares issued fully paid	100.121.627	91.984.627
Treasury shares at 31.12	21.055	21.055

Note 12: – Financial instruments

The numbers presented below provide a summary of the group's financial instruments and comparison of the fair value and the carrying amount.

(Amounts in NOK 1 000)

		2013		2012
	Fair	Carrying	Fair	Carrying
	Value	Value	Value	Value
Financial assets
Cash	17.171	17.171	14.985	14.985
Accounts receivable	10.897	10.897	8.655	8.655
Other current assets	5.523	5.523	26.996	26.996
Total	33.590	33.590	50.636	50.636
Financial liabilities
Accounts payable	196	196	29.967	29.967
Interest - bearing liabilities	-	-	-	-
Other non-current liabilities	21.380	21.380	-	-
Total	21.576	21.576	29.967	29.967

The carrying amount of all the group financial assets and liabilities is approximately equal to fair value since these instruments have a short term to maturity and thus the time value is not material.

Note 13: – Accrued expenses and other current liabilities

(Amounts in NOK 1 000)

	Birdstep Technology ASA
	2013	2012
Accrued holiday allowance	40	-
Social security payment liabilities	-	-
Accrued wages commissions and bonuses	1.681	803
Accrued Accounts Payable	1.020	-
Other Current liabilities	6	5
Liabilities to group companies	-	22.905
Other accruals	-	-
Total	2.746	23.714

Note 14: – Other financial items

	2013	2012
Income from foreign exchange	819	71
Other financial income	297	39
Unreal Currency Gain	7.800	893
Other financial income	8.916	1.002
Expenses on foreign exchange	-	267
Unreal Currency Lost	7.179	5.475
Other financial expenses	7.179	5.742
Other financial items, net	1.737	(4.740)

Note 15: – Restricted bank deposits

(Amounts in NOK 1 000)

	Birdstep Technology ASA
	2013	2012
Restricted bank deposits	2	268
Accounts for restricted funds	-	-
Total	2	268

Note 16: – Subsequent Events

There have been no major events between the balance sheet data and the approval of the annual accounts for 2013.

Note 17: – Discontinued operations

2013

There has been no discontinued operations during 2013.

2012

In 2011 the sale of Orbyte and Aptilo was finalized, resulting in a gain of NOK 24.8. The cash settlement of these transaction contributed with a positive cashflow of NOK 49.7 million in 2012. Included in the transaction was an Earn Out of NOK 4.2 million that the company received August 2012.

Note 18: – Changes of historical numbers

From the annual report of 2012 the following changes has been done.

Earn out

The earn-out provision from the Orbyte transaction received August 1st 2012 was identified as a financial item and shown in "Other financial item, net". This has been reclassified and is now showed in "Gain/loss on disposal of discontinued operations".

Cash flow

2012 year´s figures Net income (loss) have changed and are now based on Net income (loss) before taxes.

The text "change in restricted cash balances" under cash flow from investing activities is changed to "earn out from discontinued operations" as the amount is related to the earn out from the Orbyte transaction.

Oslo, 25 March 2014 Board and CEO of Birdstep Technology

Tom Nyman Board member (Chairman)

Kirsten English Board member

Anna Malm Bernsten Board member

Arne Aarnes

Board member

Massimo Migliuolo Board member

Lonnie Schilling CEO

Annual Report 2013

oslo

Birdstep technology AsA henrik ibsens gate 100, 8th Floor p.box. 2877, 0230 oslo, norway phone: +47 24 13 47 00 Fax: +47 24 13 47 01 e-mail: info@birdstep.com

espoo

Birdstep technology oy stella Business park lars sonckin kaari 16 Fi-02600 espoo, Finland phone: +358 20 740 2555 Fax: +358 9 3487 0099 e-mail: safemove.sales@birdstep.com

stockholm

Birdstep technology AB hälsingegatan 32, 7th floor se-113 43 stockholm, sweden phone: +46 8 627 91 40 Fax: +46 8 627 91 42 e-mail: info@birdstep.com

san Francisco

Birdstep technology san Francisco inc. 665 third street suite 305 san Francisco, cA 94107 UsA phone: +1 415 242 1984 Fax: +1 415 543 0250 e-mail: sales@birdstep.com