Techstep ASA — Annual Report 2016

Mar 24, 2017

ANNUAL REPORT 2016

Contents

Techstep ASA in brief	3
Key figures	5
Message from CEO	5
Board of Directors	7
Executive Management	9
Board of Directors report	10
Corporate governance report	15
Responsibility statement	21
Consolidated financial statements	22
Notes to the financial statements	27
Techstep ASA Financial statements	65
Techstep ASA Notes to the financial statements	70
Auditor's report	75

Techstep ASA in brief

• A leading B2B provider of mobility and communications services in Norway and Sweden
• An ambition of becoming a complete provider of the digital workplace and enterprise mobility solutions in the Nordics
• Techstep, together with its partners and customers, will digitize people's workday by enabling access to data and information provided by business applications in mobile channels. The goal is to make it possible for people to work on any device, anytime and anywhere
• Strategy of being a consolidator in the market, and will build its solutions platform through organic innovation, acquisitions, and partnerships
• Techstep has two main business segments: Hardware, represented by Nordialog Oslo, and Solutions, represented by SmartWorks and Mytos. Nordialog Oslo is one of the mobile operator Telenor's largest distribution channels of devices and mobile subscriptions to the Norwegian business segment. All three companies are wholly owned by Techstep. In addition, Techstep has entered into binding agreements to acquire the telecom mobility hardware company Apro Tele og Data AS and the Swedish Enterprise Mobility Management provider InfraAdvice Sweden AB
• The Teki Solutions companies represent a combined customer base of ~3,600 companies and ~220,000 end users. Customers include SAS, DNB, Statnett, Accenture, DNV GL and Bama
• Backed by long-term investors, known for creating value through transformation
• Techstep is listed on the Oslo Stock Exchange with the ticker "TECH"

Simplified (future) company structure per mid-March 2017

Key Figures (adjusted)

(amounts in NOK 1 000)	2016	2015
Revenue	573 498	630 325
Adjusted EBITDA 1) Adjusted EBITA 1) Adjusted EBIT 1)	13 078 12 175 (6 808)	24 443 23 093 437
Employees	122	124

1) Includes adjustments for transaction costs and one-offs of NOK 17.5 million in 2016.

Key Figures (actual reported)

(amounts in NOK 1 000)	2016	2015
Revenue	573 498	630 325
EBITDA	(4 433)	24 443
EBITA	(5 336)	23 093
Operating profit/ loss (EBIT)	(24 319)	438
Total assets	508 409	454 578
Cash	81 692	18 982
Equity	260 294	42 326

Techstep ASA and the Techstep Group were restructured in 2016 (see note 4 for details), and at the same time, the accounting principles for the operating unit, Teki Solutions Group, was changed from NGAAP to IFRS. Consequently, no actual reported figures for the Techstep Group were previously reported, and the operating result and financial position for previous years was compiled pro-forma from the inception of the group in 2012. Please see note 26 for information about the transition and the basis for the opening balance of Techstep ASA group accounts for 2016.

Letter from the CEO

We make the work life mobile

We have taken significant steps in positioning Techstep as a leading provider of digital workplace solutions. Techstep is well underway to become a complete provider of the digital workplace and enterprise mobility solutions in the Nordics.

A total revenue of NOK 573 million in 2016 marks our foundation for further developing our business. Supported by a solid market position, a pool of competent professionals and committed cornerstone investors, we are ready to grasp opportunities for growth.

In collaboration with our partners and customers, Techstep digitizes people's workday by enabling access to data and information provided by business applications in mobile channels. We seek to promote interaction and grow mobility between different platforms. Our goal is to make it possible for people to work on any device, anytime and anywhere.

Techstep operates in an attractive enterprise mobility market with strong demand and growth opportunities. Since the first acquisitions were made in the summer and fall of 2016, we have taken significant steps to position ourselves as a digital workplace provider delivering integrated enterprise mobility solutions in the Nordics.

We have made several strategic acquisitions to complement Techstep's offerings and increase the customer base. Planned initiatives will have a positive effect in the second half of 2017.

the revised strategy. Consequently, Techstep will concentrate on development in five key areas in 2017:

• 1. Establish "Mobile as a Service" (Maas), an integrated service that bundles hardware, a mobile platform, support and service, and business applications tailored to the customer, and sell this as a monthly fee per user.
• 1. Change the sales focus from one-off hardware sales to recurring income by establishing a "solution hub" that will ensure packaging of solutions to sales.
• 1. Expanding geographically in the Nordic region by establishing presence in Sweden.
• 1. Streamline distribution by establishing selfservice and package solutions for the products and services that are offered to customers.
• 1. Strengthen partnerships through increased sales and closer cooperation with selected partners.

Most importantly, the business and our organization is currently undergoing a restructuring and transformation to deliver on

A major part of our customers are large and prominent corporations in Norway and the Nordics. They are in the early days of implementing digitization and mobility solutions. Only 5% percent of the employees' devices in these companies have currently deployed on our platform solutions. Work life is becoming increasingly more mobile, and smartphones and tablets are used to an increasing extent in everyday life. The more successful we are in increasing the efficiency of employees by facilitating an efficient workday, the more opportunities will open up for us in the market place.

To speed up the process on how we take new and existing products and services to the market, we will establish a so-called "Techstep Solutions Hub". This is a virtual organization that will consist of people from the various product houses supporting the sale and distribution channels, and also include marketing and project management

professionals. The purpose is to ensure integration and synergies between the companies we acquire and strengthen our offering to the market.

In a short time, we have succeeded in broadening our product portfolio and increased our customer base. Looking ahead we will focus on growing the number of end users, both from existing customer base and from new geographic markets, and we will increase sales per user by introducing solutions and concepts, and thereby ensuring long-term agreements with our customers.

I firmly believe that Techstep is well underway to become a complete provider of the digital workplace and enterprise mobility solutions in the Nordics, and I am looking forward to an exciting journey!

Gaute Engbakk CEO

Board of Directors

Einar J. Greve – Chairman of the board

Mr. Greve has served on the Board of Techstep since November 2016. Mr. Greve works as a strategic advisor at Cipriano AS, and has previously worked as partner of Wikborg Rein & Co and as Partner of Arctic Securities ASA. Mr. Greve has held and holds various positions in listed and unlisted companies, including but not limited to Weifa ASA (chairman), Solon Eiendom ASA (Vice chairman), Vistin Pharma ASA (board member), Elliptic Labs AS (board member), Future Group (board member) and Hæhre and Isachsen Holding AS (board member). He holds a degree in law (cand.jur) from the University of Oslo.

Kristian Lundkvist – Board member

Mr. Lundkvist has served on the Board of Techstep since November 2016. Mr. Lundkvist is the CEO and founder of Middelborg AS, a corporation with roots from the retail business in the telecom industry, which has grown into a diversified holding company including investments in real estate, equities, and shipping. Middelborg AS is a long-term industrial owner who actively participates in the value creation of the companies in the portfolio, especially business development, optimization of capital structures and networking. His directorships are including but not limited to NRC Group ASA (board member), Middelborg AS (chairman), Folksom (board member) and Kjedehuset AS (board member).

Ingrid E. Leisner - Board member

Ms. Leisner has served on the Board of Techstep since January 2016. Ms. Leisner's directorships over the last five years include current board positions in Vistin Pharma ASA, Spectrum ASA, Maritime and Merchant Bank ASA. Ms. Leisner has a background as a trader of different oil and gas products in her 15 years in Statoil ASA. Her years of experience and skills within business strategy, M&A, management consulting and change management has been very valuable when serving on the board of several companies listed on Oslo Børs. She holds a Bachelor of Business degree with honors from the University of Texas in Austin.

Camilla Magnus - Board member

Ms. Magnus has served on the Board of Techstep since November 2016. Ms. Magnus is a partner in Advokatfirma Selmer DA and heads the firm's Corporate and Finance Department. Her area of expertise includes M&A, contract law and corporate law. Ms. Magnus graduated with a law degree from University of Oslo in 2011. She regularly holds lectures and seminars on transaction related legal subjects for Norwegian and foreign lawyers, business community and students.

Stein Erik Moe - Board member

Mr. Moe has served on the Board of Techstep since November 2016. Mr. Moe is the CEO and cofounder of Gture AS, a digital services company. Mr. Moe has over 27 years of experience with Accenture, and was a global lead in the Technology, Media and Communication division. He has led large-scale projects and transformations, cross strategy, technology, organization and business processes. His directorships are including but not limited to Gture AS (Chairman), Gvalueinvest AS (Deputy Chairman), GoDigital AS (Board member) and Digitread AS (Board member). He holds a Honours degree in Computer Science from the University of Strathclyde in Glasgow, and has supplementary courses within board management from BI Norwegian Business School.

Kristin Hellebust - Board member

Ms. Hellebust has served on the Board of Techstep since November 2016. Ms. Hellebust is the CEO of Nordisk Film Shortcut AS, a position she has held since 2010. Ms. Hellebust was CEO of Storm Studios AS from 2005 until 2015. Prior to this, she practiced as an attorney at Advokatfirmaet Selmer DA (2001-2005). Ms. Hellebust holds board positions in the listed companies, NEL ASA and Saga Tankers ASA. She holds a law degree from University of Oslo.

Svein Ove Brekke - Board member

Mr. Brekke has served on the Board of Techstep since November 2016. Mr. Brekke is one of the founders of Teki Gruppen AS, co-founders of Telekiosken (consumer retail business), Smartworks AS & Nordialog Oslo AS, both part of the Techstep group. He has investment in real estate, insurance and other fields of business. His directorships are including but not limited to Skarestrand AS (Chairman), Kjedehuset AS (Board member), Brewa AS (Chairman).

Executive Management

Gaute Engbakk – CEO

Mr. Engbakk is an experienced transformation leader from working many years in Accenture with large international companies. In Accenture, he worked in a variety of markets and industries and built up a division within analytics and information management. Mr. Engbakk led Creuna AS, one of the larger Nordic players within digital solutions, branding and advertising during 2010-2014, and during 2014- 2016 he was the CEO of Gambit Hill & Knowlton Strategies.

Mr. Engbakk has in-depth IT and communications experience from different verticals and disciplines within digital, big data and change management. Mr. Engbakk holds a Master of Science degree from NTNU, and has supplementary courses within business and strategy from London Business School.

Marius Drefvelin – CFO

Mr. Drefvelin was previously the Group CFO of Creuna, a Nordic technology and communications consultancy firm with 350 employees. He has been with Creuna since 2012. During 2010-2012, he was a financial advisor at Deloitte, working with mergers, acquisitions and IPOs. Before this, he worked at Jebsen Asset Management from 2007-2009. During 2001-2007, Mr. Drefvelin worked at KPMG, also working with transactions.

In addition to his experience with transactions, he has focused on identifying and executing on operational improvements during his time in Creuna. Mr. Drefvelin has a B.Sc. in Finance and a B.Sc. in Economics from the University of Utah, USA. Moreover, he is a Certified European Financial Analyst from the Norwegian School of Economics.

Mads Vårdal – Chief Innovation Officer

Mr. Vårdal has been with companies within the Techstep sphere for more than eleven years. He came from a central position in Teki Solutions AS and has been a leading figure for the development of Smartworks. He has previously worked at Nordialog Skøyen AS and has been CEO in Buskerud Tele AS.

Board of Directors Report

Introduction

Throughout 2016 and thus far in 2017, Techstep has positioned itself to become a leading provider of the digital workplace and enterprise mobility solutions in the Nordics.

In the spring of 2016, the Birdstep business was sold to Smith Micro and a distribution agreement with Smith Micro was entered into. The Company was later renamed Techstep. The Company's strategy was redefined, while the companies Zono AS and Teki Solutions AS were acquired. This gave Techstep a controlling interest in Nordialog Oslo and SmartWorks. Together, these two companies represent a visible supplier of mobility and communications services to the corporate market in Norway and Sweden. A new organization and a new management group were established in parallel to this, with the support of a new Board of Directors and new long-term owners known to create value through transformation. Last, but not least, the balance sheet was strengthened to finance acquisitions, further development and growth.

Going forward, the operational activities in Techstep will take place through Nordialog Oslo, SmartWorks, Mytos and other subsidiaries. Both Techstep as a group company and the subsidiaries will follow an overarching strategy for the sale of solutions and services with products as an integral part of this. In addition, consolidation of the market is part of Techstep's strategy. It is expected that the group structure and the operational activities will adapt to how Techstep chooses to serve customer needs for services, solutions and products, and how the Company will develop organically and structurally.

During the first months of 2017, the Company has strengthened its position through new strategic acquisitions, including the acquisition of the software company Mytos AS, in addition to entering into binding agreements to acquire the hardware supplier Apro Tele og Data AS and the Swedish Enterprise Mobility Management provider InfraAdvice Sweden AB. In addition, further equity has been raised.

Business activities and strategy

Techstep has ambitions to become a leading provider of the digital workplace and enterprise mobility solutions in the Nordics. This means that Techstep will digitize people's workday by enabling access to data and information provided by business applications in mobile channels, promoting interaction and grow mobility between different platforms. Techstep aims to give people access to work tools regardless of the work surface used in the relevant work situation. This will translate into efficiency gains and more satisfied employees.

Techstep's total customer base includes approximately 3,600 companies and 220,000 end-users. A number of these companies are major companies in Norway and the Nordics, which have started to digitize their work processes. Among all the employees in these companies, there are fewer than a fourth of them that use services from Techstep, and only five percent of the total number of employees in these companies have implemented Enterprise Mobility Management (EMM) delivered on mobile units. This indicates a significant potential for growth within the existing customer base.

Within a relatively short period of time, Techstep has acquired a broad product portfolio and a substantial customer base. Going forward, our focus will be on delivering digital workplaces with the associated solutions and interfaces. Techstep shall promote consolidation of the communications, mobile and IT industries, and part of the Company's growth strategy is to build a solution platform through organic innovation, acquisitions and partnerships.

Techstep has identified five key areas that it will focus on in the coming years to achieve the ambition of becoming a leading provider of the digital workplace and enterprise mobility management in the Nordics; geographic expansion, primarily in Sweden; increasing the customer base by 20%, increasing the revenue per user and introducing new products to the portfolio; industrializing the value chain, transforming the sales team, making interaction with customers more efficient by establishing a

"solutions hub"; and improving the Company's operations in general.

Key events in 2016

In March 2016, an agreement was signed to sell the wholly owned subsidiary Birdstep Technology AB to the US company Smith Micro Software, Inc. for a total purchase price of USD 2.0 million. The sale was finalized in April 2016.

A private offering of NOK 7.48 million was made at the same time to the Company's largest shareholder, Middelborg Invest, and a letter of intent was signed with Middelborg to merge their partly-owned subsidiary Teki Solutions AS and Birdstep Technologies ASA. Teki Solutions, represented by the subsidiaries Nordialog Oslo and SmartWorks, is a supplier of mobility and communications services to the corporate market in Norway.

As a result of these changes, Birdstep Technology ASA changed its name to Techstep ASA in June.

In July, an agreement was signed to acquire all the shares in Zono AS; which owned 24.22% of the shares in Teki Solutions, 5.12% of the shares in Kjedehuset AS, and approximately NOK 55 million in cash reserves. Kjedehuset is the main distribution channel to the corporate market in Norway for the mobile company Telenor, in partnership with Techstep. The transaction was carried out in September, with settlement by consideration shares in Techstep.

In the fourth quarter, a new management group was established with Gaute Engbakk as the CEO. Engbakk brings to us managerial experience from change management, digitization, IT and communications from managerial positions in Accenture, Creuna AS and Gambit Hill & Knowlton Strategies. Marius Drefvelin took office as the CFO in January 2017. He came to us from the position of CFO at Creuna AS, and he has previous experience with transactions and M&A from various positions at Deloitte, Jebsen Asset Management and KPMG. Mads Vårdal was appointed as the Chief Innovation Officer (CInO), and brings to us over eleven years of experience from managerial positions from companies in the Techstep domain.

A new Board of Directors was elected at the Extraordinary General Meeting in November, with six new board members and the re-election of one former board member.

In the fourth quarter, a restructuring of the business and organization was initiated to capitalize on the new strategy for Techstep. At the same time, ongoing evaluations of potential acquisition candidates that can introduce new synergies to the Group have been made.

For further details on the various events, reference is made to stock exchange notices throughout 2016, which are available from www.newsweb.no.

Subsequent events

In February 2017, an agreement to acquire the software company Mytos AS for NOK 120 million was signed and concluded, in addition to a binding agreement to acquire the hardware supplier Apro Tele og Data AS for NOK 15.5 million. Mytos brings market-leading software and a cloud-based solution for control of mobile expenses for businesses to us, while Apro is a supplier of fixed network IP and mobile solutions with special expertise in the public sector. In addition, the remaining 21.84% ownership interest in Teki Solutions AS and the remaining 50% ownership interest in Nordialog Asker were acquired, which secured Techstep full ownership of the companies. The acquisitions were settled by a combination of cash, consideration shares, and the settlement of shareholder and supplier loans. For further details, see Note 24 in the annual financial statements and the stock exchange notice dated 2 Februar 2017.

In February 2017, an agreement was concluded to establish Techstep Finance, a joint venture with an experienced financing and operations partner, which will be a key part of Techstep's future delivery of MaaS (Mobility as a Service).

In connection with these transactions, and to finance future acquisitions and further growth, a successful, oversubscribed private offering of NOK 100 million was carried out. For more information, see the stock exchange notice dated 2 February 2017.

In March 2017, an agreement was signed to acquire the Swedish enterprise mobility management specialist InfraAdvice Sweden AB for SEK 18.5 million. InfraAdvice brings a complementary customer portfolio with it and strengthens the delivery capability of Techstep in Sweden.

Operations

The operations are managed through the two operative segments hardware and service. For accounting purposes, these segments are represented by Nordialog and its subsidiaries, which are the primary contact for customers and responsible for all hardware sales, and SmartWorks, which provides services and solutions related to mobility. A great deal of the revenue of SmartWorks is channeled through Nordialog. For information, see Note 5 to the annual financial statements for 2016.

Financial review

The financial statements represent the continuing business of Teki Solutions AS. The figures for 2015 are stated in parentheses.

Profit and loss

Techstep reported total revenues of NOK 573.5 million (630.3 million) for 2016. The decline in revenues is primarily attributed to a reduction in Nordialog's hardware sale.

Total operating expenses in 2016 were NOK 597.9 million (629.9 million), which gives a negative EBITDA result of NOK 4.4 million (24.4 million). Operating expenses include transaction costs and non-recurring costs of NOK 17.5 million in 2016, which are related to the ongoing restructuring of Techstep. The EBITDA adjusted for non-recurring costs was NOK 13.1 million.

Total depreciation and write-downs for Techstep were NOK 19.9 million (24.0 million) in 2016, and the ordinary operating result was a loss of NOK 24.3 million (profit of NOK 0.4 million).

Net finance costs totaled NOK 26.3 million (10.2 million) in 2016. The result for the year 2016 was a loss of NOK 44.7 million (loss of NOK 8.1 million).

Cash flow

Net cash flow generated from operating activities was negative NOK 30.9 million (35.0 million). Net cash flow used in investment activities was NOK 0 million (17.8 million). The investment activities in 2016 are related to the acquisition of Zono AS in the third quarter and Teki Solutions in the fourth quarter. Net cash flow used in financing activities was NOK 93.6 million (negative NOK 15.4 million) and represents the issuance of new capital stock linked to the acquisition of Zono AS and Teki Solutions.

Cash and cash equivalents increased by NOK 62.7 million (1.8 million) in 2016. As of December 31, 2016, the Group's cash and cash equivalents totaled NOK 81.7 million (19.0 million).

Financial position

In 2016, Techstep issued 88,205,306 new shares in connection with the acquisition of Zono AS and Teki Solutions AS. In addition, NOK 7.48 million was injected into the company through a private placement in March 2016, through the issuance of 3,400,000 new shares.

As of 31 December 2016, Techstep ASA had total assets of NOK 508.4 million (NOK 454.6 million). A large portion of this represents the company's goodwill from Nordialog's customer relationships. An impairment test was performed on the Company's goodwill at the end of 2016, see Note 13. Techstep has not identified a need to write down the value of the company's goodwill.

As of 31 December 2016, the book equity was NOK 260.3 million (42.3 million), which corresponds to an equity ratio of 51.2 percent (9.3 percent). Total liabilities were NOK 248.1 million (NOK 412.3 million), NOK 12.6 million of which was long-term interest-bearing liabilities (NOK 56.0 million) The reduction in liabilities is primarily related to a conversion of a shareholder loan to equity in 2016.

Going concern

Based on the aforementioned comments on the accounts of Techstep ASA, the Board of Directors confirms that the annual financial statements for 2016 have been prepared on the basis of a going concern assumption, and that this assumption has been made in accordance

with Section 3-3a of the Norwegian Accounting Act.

Allocation of profit/ loss for the year for the parent company Techstep ASA

The accounts of the parent company for 2016 are marked by a change in the strategic direction for the Company, where portions of the old Birdstep business have continued in the form of a distribution agreement with Smith Micro. A substantial investment has been made in the establishment of a new organization and a foundation for profitable operations going forward.

A loss for the year 2016 of NOK 27.43 million was reported, and it is proposed that the loss be covered by other reserves.

Financial risk and risk management

Techstep is exposed to various types of market, operational and financial risk as a consequence of the company's operational and financial activities. The Company's risk management is coordinated from the head office in accordance with the Board of Directors. The focus is on ongoing, active operations, in the short and intermediate term, which will secure the Company's cash flow by reducing exposure to the financial markets. Long-term financial investments have been made for the purpose of generating long-term financial returns.

The goal of risk management in the Group is to support the creation of value in the Group, and to ensure a continuing solid financial platform through visibility and strategic management of both financial and operational risk factors. Operational risk is primarily linked to large customer projects, which are under continuous evaluation by corporate management. The Group's financial risk is primarily linked to credit risk, liquidity risk, foreign exchange risk and interest rate risk. Reference is otherwise made to Note 2b in the annual financial statements for 2016 and the prospectus that was published in October 2016 for a more detailed description of the risk factors.

Working environment and employees

In 2016, absence due to illness was 2.3% of the total work hours in the Group. There have been

no incidents or work-related accidents that have resulted in serious material damage or personal injuring during the year. In 2017, Techstep will focus on the development of a common organizational culture and the individual employee in the Group. The working environment is regarded as good.

Equality and discrimination

Techstep aims to be an equal opportunity workplace. The Group hopes to avoid discrimination based on gender, ethnic origin or reduced functional ability. Average work hours and remuneration are the same for women and men in the Group.

As of 31 December 2016, Techstep had 122 employees (124), of which 19 (22) were women. There are no women in top management. Three of the company's seven board members are women.

External environment

Techstep emphasizes compliance with all government environmental requirements, and that control routines are established and function in accordance with requirements and prerequisites.

Techstep is part of an international recycling program for electronic products, in which equipment that is returned is recycled and resold to developing countries.

Corporate governance

Techstep ASA's goal is to be in compliance with the Norwegian Code of Practice for Corporate Governance (NUES) of 30 October 2014. According to the Company's own assessment, the Company deviates from four sections of the Code of Practice at the turn of the year 2016/2017: Clarification of the core values and formulation of guidelines for ethics and corporate social responsibility (Section 1), Formulation of the rules of procedure for the Nomination Committee (Section 7), Formulation of company takeover policy (Section 14), and Formulation of guidelines for use of the auditor for services other than auditing (Section 15). A separate statement on Techstep's compliance with these Corporate governance principles has been prepared in the annual report.

Corporate social responsibility

Techstep aims to be a responsible company with a view to working conditions, human rights, the environment and anti-corruption efforts. The Company promotes a healthy, safe and fair work environment in accordance with the applicable laws and regulations, including the UN Global Compact. Techstep has not prepared any formal guidelines, principles, procedures or standards related to corporate social responsibility, since this is considered to be an extensive process that would be costly and resource-intensive in relation to the Company's situation, results and type of business. Techstep is not regulated by any environmental concessions or administrative orders.

Shareholder information

As of 31 December 2016, Techstep had issued 102,475,577 (101,621,627 reverse split 10:1 on 29 January 2016) shares of stock, of which 102,473,633 shares were outstanding and 1,914 (21,055) shares were held by the Company. The nominal value per share was NOK 1.0 (Total of 101,621,627 shares issued, each with a nominal value of NOK 0.10). The Company had 2,526 (2,997) shareholders, and 96.1% of the shares were owned by the 20 largest shareholders (46.18%). The largest shareholder, Middelborg Invest AS, held 24.9% (10.90%) of the shares. At the end of 2016, the share price was NOK 6.19 (NOK 3.41) per share.

For detailed shareholder information, see Note 11 in the consolidated financial statements for 2016.

Outlook

Techstep operates in a structurally attractive enterprise mobility market, where there is strong demand and growth opportunities. Since the first acquisitions were made in the summer and autumn of 2016, Techstep has taken steps to position itself as a provider of the digital workplace and enterprise mobility management in the Nordics. Strategically important acquisitions have been made to complement Techstep's product portfolio and increase its customer base. The decline in hardware sales is expected to continue in the first half of 2017,

but the initiatives that have been implemented and planned are expected to have a compensatory effect in the second half of 2017.

The Company and the organization are currently undergoing a restructuring and transformation to deliver according to the revised strategy.

Techstep will mainly concentrate on the development of five key areas in 2017:

• Establish "Mobile as a Service" (Maas), an integrated service that bundles hardware, a mobile platform, support and service, and business applications tailored to the customer, and sell this as a monthly fee per user
• Change the sales focus from one-off hardware sales to recurring revenue by establishing a "solution hub" that can package solutions for sale
• Expand geographically in the Nordic region by establishing presence in Sweden.
• Streamline distribution by establishing selfservice and package solutions for the products and services that are offered to customers
• Strengthen partnerships through increased sales and closer cooperation with selected partners

Corporate Governance report

Implementation and reporting on corporate governance

Techstep ASA's principles for good corporate governance establish the foundation for longterm value creation to the benefit of the owners, employees, other stakeholders and society as a whole. The principles should contribute to instilling confidence in the Company, more effective decision-making and improving communication between the management, Board of Directors and the Company's shareholders. The principles cannot replace the ongoing work to promote a healthy corporate culture throughout the Company, but they must be seen in the context of this work. Confidence in Techstep is based on respect, responsibility and equality, both internally and externally.

As a Norwegian public limited company listed on Oslo Børs, Techstep is subject to the requirement to prepare an annual statement of its principles and practices for corporate governance pursuant to Section 3-3b of the Norwegian Accounting Act and Section 7 of Oslo Børs' "Continuing Obligations of Stock Exchange Listed Companies" The Norwegian Corporate Governance Board (NUES) has established the Norwegian Code of Practice for Corporate Governance ("the Code of Practice"). Techstep observes the current Code of Practice, most recently revised on October 30, 2014. The Code of Practice is available at www.nues.no.

Compliance with the Code of Practice takes place based on the principle of "comply or explain", which means that the Company must either comply with the individual items in the Code of Practice, or explain why they have chosen an alternative solution.

Techstep provides an annual overall statement of its corporate governance principles in its annual report, which is published on the Company's website www.techstep.no. The statement discusses how Techstep has complied with the Code of Practice throughout the year.

Status at the turn of the year 2016/2017

In 2016, Techstep underwent significant changes with respect to its business operations, ownership, strategy, organization, management

and Board of Directors. For supplementary information, reference is made to the Board of Directors' Report and stock exchange notices for 2016. These changes affect the Company's principles and implementation of corporate governance, including the need to prepare new guidelines and instructions. According to the Company's own assessment, Techstep deviates from four sections of the Code of Practice at the turn of the year 2016/2017:

• Clarification of core values and formulation of guidelines for ethics and corporate social responsibility (Section 1)
• Formulation of the rules of procedure for the Nomination Committee (Section 7)
• Formulation of company takeover policy (Section 14)
• Formulation of guidelines for use of the auditor for services other than auditing (Section 15)

The Board of Directors and management will take 2017 to revise and formulate the necessary rules of procedure, guidelines and routines, including clarification of Techstep's core values and guidelines for ethics and corporate social responsibility.

Business

Techstep's purpose is defined in Article 3 of its Articles of Association:

"The Company's purpose is to engage in business operations within information and communication technology, develop and provide solutions and software within the mobility, digitalization as well as consultancy business and everything that belongs thereto, including owning shares and other securities in other companies."

Techstep has developed clear goals and strategies for the Group and expressed ambitions to become a leading supplier of the digital workplace and mobility for employees in the Nordic region. The Company's goals and main strategies are discussed further in the annual report for 2016.

Equity and dividends

Techstep's equity as of 31 December 2016 was NOK 260.3 million, which corresponds to an equity ratio of 51.2 percent. The Board of Directors considers the equity ratio to be satisfactory and in accordance with the Company's goals, strategy and risk profile.

Techstep has not established any dividend policy beyond a general consensus that the Company's goals and focus are to increase shareholder value and contribute to an attractive market for the Company's shares. As of today, Techstep has not distributed any dividend on the Company's shares, and it does not expect to pay any dividend for the Company in the coming years. Techstep's intention is to retain future earnings, if any, to finance operations and expand the business. Any future decision to pay a dividend will depend on the Company's financial position, operating profit and capital requirements.

As of 31 December 2016, there are three authorizations for the Board of Directors:

• Authorization to acquire treasury shares, limited to a maximum of NOK 10,247,557.
• Authorization to increase the company's share capital #1 by a maximum of NOK 25,600,000 by issuing a maximum of 25.6 million shares in Techstep, with a nominal value of NOK 1 per share. The authorization encompasses the issuance of shares in connection with a merger.
• Authorization to increase the company's share capital #2 by a maximum of NOK 7,500,000 by issuing a maximum of 7.5 million shares in Techstep, with a nominal value of NOK 1 per share, in connection with the acquisition of shares in Teki Solutions AS.

For supplementary information on the authorizations, reference is made to the minutes of the Extraordinary General Meeting held on 4 November 2016, which is available at www.techstep.no and www.newsweb.no. These authorizations are valid until Techstep's Annual General Meeting in 2017, and no later than 30 June 2017. There was a separate vote on each of the three authorizations.

Equal treatment of shareholders and transactions with related parties

Techstep ASA has one class of shares. All shares enjoy equal rights in the Company, and the Company's Articles of Association contain no restrictions on exercising voting rights. Treasury shares will be traded on the stock exchange or in accordance with guidelines from Oslo Børs.

In the event of any capital increase based on the authorization from the General Meeting where the pre-emptive rights of shareholders are set aside, grounds for this will be provided in the stock exchange notice together with the capital increase. In March 2016, a private offering was made to provide the Company with working capital and ensure long-term strategic ownership, with a subsequent repair issue to ensure the equal treatment of shareholders. For details, see the notice for the Extraordinary General Meeting, dated 8 January 2016, and the stock exchange notice of 9 March 2016. In addition, consideration shares were issued in 2016 as settlement for the acquisition of Zono AS and Teki Solutions AS, for which the preemptive rights of the shareholders were set aside. For details, see the minutes of the Extraordinary General Meetings of 23 August and 2 November 2016, respectively.

Techstep has a sensible attitude towards transactions with shareholders, board members, employees and other related parties. To ensure that such situations are handled in the best possible manner, the Board of Directors urges the use of transparency and good judgment in any transaction where both the Company and a board member or a party related to a board member may have interests.

For significant transactions with closely related parties, the Company will use valuations and statements from an independent third party if the transaction is not to be considered by the General Meeting. In 2016, transactions connected to principal shareholders of Techstep ASA were carried out, including Zono AS and Teki Solutions. In both cases, an independent valuation by an expert third party was carried out. For further information, see the stock exchange notices with notices of the Extraordinary General Meetings in 2016, dated 2 August and 13 October as well as Note 22 "Transactions with related parties" attached to the annual financial statements in the annual report for 2016.

Freely negotiable shares

The Company's shares are freely negotiable on Oslo Børs, and the Company's Articles of Association do not place any restrictions on the negotiability of shares. Moreover, there are no restrictions on the purchase or sale of shares of stock by board members and persons in Company management, provided that the rules on insider trading are observed.

General meetings

The General Meeting is the Company's highest decision-making body in which shareholders can exercise their influence. The General Meeting is open to everyone, and Techstep encourages all shareholders to participate and exercise their rights in connection with the Company's General Meetings. In order to vote for their shares, the shareholder must be registered with the Norwegian Central Securities Depository (VPS) at the time of the General Meeting.

Notices of annual or extraordinary general meetings shall be sent no later than 21 days prior to the date of the General Meeting. In accordance with the Company's Articles of Association, documents that are to be considered by the General Meeting are not required to be sent to the shareholders if they have been made available on the Company website. The same applies to documents that by law are to be included in or attached to the notice of the General Meeting. A shareholder may nonetheless request that relevant documents concerning business to be transacted at the General Meeting be sent to him or her. The deadline for registration will be set as close to the meeting as possible, and all the necessary registration information will be described in the notice.

Shareholders who are unable to attend may vote by proxy. Whenever possible, the Company will prepare a proxy form that will allow separate votes for the items that are to be considered at the General Meeting. The Board Chairman is normally the chairperson for the General Meeting. If there is disagreement on individual items, for which the Board Chairman belongs to one of the factions, or is not regarded as being impartial for other reasons, another chairperson will be appointed to ensure impartiality regarding the items to be considered.

The Company will publish the minutes of the General Meeting in accordance with the Stock Exchange Regulations.

In 2016, Techstep held its Annual General Meeting on 28 April, and three Extraordinary General Meetings were held on 31 March 23 August and 4 November, respectively.

Nomination committee

In accordance with Article 6 of the Company's Articles of Association, Techstep shall have a Nomination Committee consisting of two to three members. The Nomination Committee is elected by the General Meeting, and the members are elected for a term of two years. Remuneration of the members of the Nomination Committee is determined by the General Meeting based on a proposal by the Board of Directors.

As of 31 December 2016, the Nomination Committee consists of two persons, Harald Arnet (Chair) and Ketil Skorstad. Both were elected at the Extraordinary General Meeting of 4 November 2016.

The duties of the Nomination Committee include nominating candidates for the Board of Directors and the Nomination Committee, as well as proposing the remuneration of board members. Grounds shall be provided for nominations by the Nomination Committee when they are presented to the General Meeting. The nomination shall be attached to the notice of the General Meeting, no later than 21 days prior to the date of the General Meeting.

Board of Directors, composition and independence

In accordance with Article 5 of the Articles of Association, the Company's Board of Directors shall consist of 3-7 members that are elected by the General Meeting. The Chairman of the Board is elected by the General Meeting, while the Board of Directors elects its own Deputy Chairman. As of 31 December 2016, the Company's Board of Directors consists of seven members, three of whom are women: Einar J. Greve (Chairman), Ingrid Leisner, Svein Ove Brekke, Kristian Lundkvist, Stein Erik Moe, Kristin Hellebust and Camilla Magnus. All the board members were elected at the Extraordinary General Meeting of 4 November

1. The term of office is for a period of two years, and the members may be re-elected.

The composition of the Board of Directors is based on a broad representation of the Company's shareholders, as well as the Company's need for competence, capacity and balanced decisions. A summary of the competence and background of the individual board members is available on the Company's website www.techstep.no.

All board members are regarded as independent in relation to the Company's dayto-day management, and in relation to important business associates. Five of the board members are regarded as independent of the Company's principal shareholders: Einar J. Greve, Stein Erik Moe, Ingrid Leisner, Kristin Hellebust and Camilla Magnus. A summary of the shares of stock held in the Company by the various board members is available in Note 7 to the annual report for 2016.

The work of the Board of Directors

The Board of Directors has the ultimate responsibility for overseeing and supervising the Company's management and operations. The work of the Board is based on the rules of procedure for the Board of Directors, adopted on 24 November 2016, which describe the responsibilities, duties and administrative procedures of the Board of Directors, and regulate the distribution of duties between the Board Chairman and CEO. The rules of procedure also regulate work related to the board committees, including the Audit Committee and the Compensation Committee.

The Board of Directors is responsible for determining the Company's overall goal and strategic direction, principles, risk management and financial reporting. The Board of Directors is also responsible for ensuring that the Company has competent management with a clear internal distribution of responsibilities and work, as well as for making an ongoing evaluation of the performance of the CEO. Rules of procedure for the CEO, which clarify duties, authorities and responsibilities, have also been prepared.

The Board of Directors meets as often as necessary to fulfill its duties, and a minimum of seven times each financial year. The current Board of Directors held two board meetings in 2016 after it was installed on 2 November 2016. The Board of Directors will undertake an annual evaluation of its work and competence, and report this to the Nomination Committee.

Board committees

The Board of Directors has appointed an Audit Committee, and its main duties are to assess the Company's financial reporting and systems for internal control, to follow up and evaluate the auditor, ensure that the auditor is independent, and assist the Nomination Committee with a proposal for the election and remuneration of the auditor. As of 31 December 2016, the Audit Committee consisted of two members from the Board, Ingrid Leisner and Camilla Magnus, both of whom are regarded as independent of the Company.

The Board of Directors has also appointed a Compensation Committee, which is to assist the Board of Directors with tasks related to the evaluation and determination of remuneration for the CEO, as well as the formulation of policy for the remuneration of executive personnel. As of 31 December 2016, the Compensation Committee consisted of two members from the Board, Board Chairman Einar J. Greve and Kristian Lundkvist.

Risk management and internal control

The Board of Directors of Techstep are responsible for ensuring that the Company has good risk management and internal control in accordance with the regulations that apply to its business activities. The Company's systems and procedures connected to risk management and internal control shall ensure efficient operations, timely and correct financial reporting, and compliance with the laws and regulations to which the Company is subject. Specific goals for the Company's internal control are prepared, and they will be revised annually by the corporate management of Techstep. In addition, the Audit Committee has an annual meeting with the auditor, at which the Company's internal control routines are reviewed and evaluated.

Techstep prepares its accounts in accordance with the international accounting standard IFRS, which aims to provide a true and fair overview of the Company's assets, financial obligations, financial position and operating profit. The Board of Directors receives monthly reports from the management on developments and results related to strategy, finance, CPIs,

risk management, projects, challenges and plans for coming periods. In addition, quarterly reports are prepared in accordance with the listing requirements of Oslo Børs, and they are reviewed by the Audit Committee prior to the board meeting and subsequent publication.

For information related to the Company's identified risk and risk management, reference is made to the Board of Directors' Report and Note 2b in the annual report for 2016.

Remuneration of the Board of Directors

Remuneration of board members is stipulated annually by the General Meeting based on a recommendation from the Nomination Committee. Remuneration should reflect the Board of Directors' responsibilities, competence, time involved and the complexity of the business.

The remuneration of the Board of Directors is not performance-based and does not contain option elements. Board members who participate in the Audit Committee receive separate compensation for this. The Company does not provide loans to board members. Detailed information on the remuneration of the Board of Directors can be found in Note 7 to the accounts in the annual report for 2016.

Remuneration of executive personnel

Techstep's executive remuneration policy is based on the primary principle that executive remuneration should be competitive and motivating in order to attract and retain key persons with the necessary competence. The Executive Compensation Statement and guidelines for remuneration of Company management, including criteria for performance-based remuneration, will be presented as separate items at the General Meeting. A clarification will be made of which guidelines are advisory for the Board of Directors, and which guidelines may be binding. In addition, a proposal has been made to allocate options to the management group, subject to the approval of the Annual General Meeting. Detailed information on the remuneration of executive personnel can be found in Note 7 to the accounts in the annual report for 2016.

Information and communications

Techstep places high priority on communication with shareholders, investors and analysts in order to ensure the most correct valuation possible of the Company in the financial market. The Board of Directors will seek to give market actors correct, clear, relevant and up-todate information, while observing the requirement of equal treatment. All information is primarily provided in English, and all stock exchange notices will be made available at www.newsweb.no and the Company's website www.techstep.no.

The CEO is responsible for both day-to-day communication with investors and for shareholder relations, while the Board Chairman is responsible for management of expectations related to strategic direction and risk, as well as topics that require resolution by the General Meeting.

Techstep will continue its quarterly reporting in accordance with the recommendation of Oslo Børs, and the interim results will be published no later than 60 days after the end of the quarter. The complete annual financial statements, including the Board of Directors' Report, will be made available no later than three weeks prior to the General Meeting, and no later than the end of April every year.

Starting in 2017, Techstep will give presentations in connection with the Company's interim reports. The presentations will be open to everyone and provide an overview of the operational and financial developments for the quarter that ended, in addition to an overview of the market outlook and the Company's future prospects. The presentations will be made available on the Company's website www.techstep.no.

Techstep will publish an annual financial calendar, which will contain the dates for the publication of the Company's interim results, as well as the date of the Annual General Meeting. The calendar will be made available on the Company's website www.techstep.no, and it will be distributed as a stock exchange notice and updated on the website of Oslo Børs www.newsweb.no. The calendar will be published prior to December 31 every year.

Takeovers

The Board of Directors of Techstep has not established any guiding principles for how it should act in the event of a takeover bid. If such a situation should arise, the Board of Directors will evaluate the relevant recommendations from the Norwegian Corporate Governance Board (NUES), and it will seek to follow these if the situation so permits.

Auditor

The Company's auditor, BDO AS, has been appointed by the General Meeting, and the auditor is regarded as independent in relation to Techstep ASA. The Board of Directors receives an annual confirmation from the auditor that the requirements regarding independence and objectivity have been satisfied.

The auditor prepares an annual plan for carrying out the auditing work, which is made known to the Audit Committee and the Board of Directors. The Board of Directors will have semi-annual meetings with the auditor; one in the autumn to discuss preparations for the annual financial statements and the Company's audit, and one in the spring in connection with consideration of the annual financial statements and review of the Company's internal control and other findings. These meetings will also be held with an opportunity for a review with the auditor, without the Company's day-to-day management being present. No separate guidelines have been prepared for use of the auditor for services other than auditing.

The Board of Directors will disclose the remuneration of the auditor, distributed between auditing and other services, to the Annual General Meeting, where the remuneration will be determined. The auditor will participate in the Annual General Meeting.

Responsibility statement

Oslo, March 23, 2017

From the Board of Directors and CEO of Techstep ASA

We confirm, to the best of our knowledge, that the financial statements for the period 1 January to 31 December 2016, the comparative figures presented for the period 1 January to 31 December 2015 and the opening balance 1 January 2015 have been prepared in accordance with current applicable accounting standards, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the entity and the group taken as a whole. We also confirm that the Board of Directors' Report includes a true and fair review of the development and performance of the business and the position of the entity and the group, together with a description of the principal risks and uncertainties facing the entity and the group.

Einar J. Greve Chairman

Ingrid Leisner Board member

Camilla Magnus Board member

Stein Erik Moe Board member

Kristian Lundkvist Board member

Kristin Hellebust Board member

Svein Ove Brekke Board member

Gaute Engbakk CEO

Consolidated Income Statement

Reported figures

(amounts in NOK 1 000)	Note	2016	2015
Revenue		570 526	622 508
Other revenue		2 972	7 818
Total revenue	6	573 498	630 325
Cost of materials		405 210	447 472
Salaries and personnel costs	7, 18	104 041	99 787
Depreciation	14	903	1 349
Amortisation intangible assets	4,12	18 984	22 655
Other operation costs	8	51 169	58 624
Other cost	7, 8	17 511	0
Total operating expenses		597 818	629 887
Operating profit		(24 319)	438
Technical loss, sharebased payment	4	(21 217)	0
Financial income	9	852	871
Financial expense	9	(5 967)	(11 088)
Profit before taxes		(50 654)	(9 778)
Income taxes	10	5 954	1 697
Net income		(44 700)	(8 081)
Net income attributable to
Non-controlling interests		(4 245)
Shareholders of Techstep ASA		(40 455)	(8 081)
Earnings per share in NOK:
Net income after tax	11	(0.65)	(0.80)
Other comprehensive income		(44 700)	(8 081)

Statement of financial position

(amounts in NOK 1 000)	Note	2016	2015	01.01.2015
Assets
Intangible assets
Deferred tax asset	10	857	0	0
Goodwill	12, 13	253 378	253 378	251 700
Customer relations	12	18 116	37 247	59 902
Total intangible assets		272 350	290 624	311 602
Tangibles	14	3 159	3 652	4 244
Total tangible and intangible assets		275 509	294 276	315 846
Financial assets
Associated companies	15	13 349	14 195	0
Shares and investments	17	27 973	4 973	7 973
Other non-current assets	17	506	930	801
Total financial assets		41 829	20 098	8 774
Total non-current assets		317 338	314 374	324 620
Inventories		9 526	12 137	13 906
Accounts receivable	16	83 250	68 385	62 942
Other receivable Total inventories and receivables	16 16	16 603 109 379	40 700 121 221	38 393 115 241
Cash and cash equivalents		81 692	18 982	17 138
Total current assets	25	191 071	140 203	132 379
Total assets		508 409	454 578	456 999
	Note	2016	2015	01.01.2015
Equity
Share capital Other equity	11 11	102 476 132 631	244 42 081	32 (147 057)
Total equity attributable to the owners of Techstep
ASA		235 107	42 326	(147 025)
Non-controlling interests	11	25 187	0	0
Total equity		260 294	42 326	(147 025)
Liabilities
Deferred tax	10	0	9 901	16 616
Non-current interest bearing debt	20	12 656	31 250	60 000
Non-current interest bearing debt to shareholders	20	0	24 848	157 850
Other non-current debt	18	0	308	10 166
Total non-current debt Current interest bearing liabilities		12 656	66 307	244 632
	20	113 721	218 038	259 244
Accounts payable	19	62 050	56 045	50 250
Tax payable	10	9 338	4 299	552
Public taxes, provisions	19	14 007	9 597	12 131
Other current liabilities	19	36 342	57 967	37 215
Total current debt		235 458	345 945	359 392
Total liabilities		248 114	412 252	604 024
Total equity and liabilities		508 409	454 578	456 999

Oslo, 23 March 2017, from the Board of Directors and the CEO of Techstep ASA, signatures on the following page:

Einar J. Greve

Chairman

Ingrid Leisner Board member

Camilla Magnus Board member

Stein Erik Moe Board member

Kristian Lundkvist Board member

Kristin Hellebust Board member

Svein Ove Brekke Board member

Gaute Engbakk CEO

(amounts NOK 1 000)	Share capital	Treasury shares	Other paid-in capital	Other equity capital	Sum	Minority interest	Total equity capital
Equity as of January 1, 2015	32	0	2 102	(149 158)	(147 025)	0	(147 025)
Ordinary result 2015	0	0	0	(8 081)	(8 081)	0	(8 081)
Comprehensive result 2015	0	0	0	0	0	0	0
New issued share capital	212	0	195 505	1 714	197 432	0	197 432
Other	0	0	0	0	0	0	0
Equity as of December 31, 2015	244	0	197 607	(155 526)	42 326	0	42 326
Ordinary result 2016	0	0	0	(40 455)	(40 455)	(4 245)	(44 700)
Comprehensive result 2016	0	0	0	0	0	0	0
New issued share capital	102 231	(1 914)	86 095	58 115	244 527	29 433	273 959
Other, merger diff. 1)	0	0	0	(2 027)	(2 027)	0	(2 027)
Other, errors prev. years 2)	0	0	0	(9 264)	(9 264)	0	(9 264)
Equity as of December 31, 2016	102 476	(1 914)	283 702	(149 156)	235 107	25 187	260 294

Spesification of changes in equity

1) The former subsidiaries Nordialog Skøyen AS, Nordialog Ski AS, Nordialog Gardermoen AS, Nordialog VG-Passasjen AS, Telecom Fornebu AS, Nordialog Vestfold AS og Scancom AS were merged with Nordialog Oslo AS as of January 1, 2016. At the same time, the subsidiary Selectit AS was transferred and merged with the sister company SmartWorks AS. The merger difference is charged to equity capital.

2) Tax expense for the subsidiary NetConnect regarding 2013 is charged against equity in accordance with IAS 8, correction of errors in previous years, due to the incorrect application and understanding of rules regulating the use of tax loss carry forward for the company.

Cash flow

	(amounts in NOK 1 000)	Note	2016	2015
	Profit before tax		(50 654)	(9 778)
	Profit from associated company	15	(157)	444
	Amortisation intangible assets		18 984	22 655
	Depreciation tangible assets		903	1 349
	Technical loss reversed takeover	4	21 217	0
	Taxes paid	10	(4 224)	(552)
	Changes in net operation working capital		(16 940)	20 885
A	Net cash flow from operation activities		(30 871)	35 003
	Investment in subsidiaries		0	(16 889)
	Investment in financial assets		424	(129)
	Investment in machinery, inventories	14	(410)	(757)
B	Net cash used on investment activities		14	(17 775)
	Repayment of shareholder loans		(24 848)
	Repayment of other long term debt		(18 902)	(9 858)
	Change in interest bearing debt		72 011	(5 526)
	Cash from acquisition of Techstep ASA		10 306	0
	Cash from acquisition of Zono AS		55 000	0
C	Net cash flow from financing activity		93 567	(15 383)
	Net change in cash and cash equivalents (A+B+C)		62 710	1 844
	Cash and cash equivalents as of January 1		18 982	17 138

Notes to the Group accounts

• 1. General information, compliance and changes in International Financial Reporting Standards
• 1. Summary of significant accounting policies
• 2b Financial risk
• 1. Critical accounting judgements and key sources of estimation uncertainty
• 1. Business combinations and discontinued operations
• 1. Segments
• 1. Revenues
• 1. Salaries and personnel cost
• 1. Other operation expenses
• 1. Financial income and expenses
• 1. Income taxes
• 1. Earnings per share, additional equity information, number of shares, authorizations, shareholders
• 1. Goodwill and intangible assets
• 1. Impairment testing
• 1. Machinery and equipment
• 1. Associated company
• 1. Accounts receivable and other short term receivables
• 1. Other non-current assets and financial assets
• 1. Pension
• 1. Accounts payable, other short term liabilities and non-interest bearing liabilities
• 1. Interest bearing liabilities
• 1. Pledges and guarantees
• 1. Related parties
• 1. Legal disputes and contingencies
• 1. Events after the reporting period
• 1. Restricted funds, credit facilities
• 1. Transition note NGAAP IFRS including separate notes

1. General information, compliance and changes in International Financial Reporting Standards

The accompanying consolidated financial statements are prepared under International Financial Reporting Standards (IFRS), and cover the fiscal year from January 1 to December 31.

Income per share is calculated by dividing net income available to common shareholders for the period by the number of common shares outstanding at the end of the period. As of December 31, 2016, the Company has 102,475,577 shares issued and 102,473,663 shares outstanding, the difference of 1,914 representing treasury shares.

Rounding differences may occur in summations and between the Notes and the financial statements.

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.

The Group business going forward will mainly be based on the subsidiaries of Teki Solutions AS. Thus, Teki Solutions AS is, for accounting purposes, considered as the acquiring entity and the accounts for the combined entity are a continuation of the accounts for Teki Solutions Group. The accounts at year-end present the consolidated accounts of Teki Solutions Group for the full year 2016, including Zono and Techstep from the date of the business combination, November 7, 2016.

The consolidated accounts have been prepared under IFRS from 2012 and onwards. See note 26 for further details.

For an overview of the subsidiaries included in the Group's financial stetements i.e registered office, shareholding and voting rights, see Note 6 to the financial statements of the parent company Techstep ASA.

1.2 New standards and interpretations not yet adopted

The Group has elected not to early adopt any standards or interpretations that have an adoption date after the balance sheet date. Below is an

overview of the most central new standards issued by the IASB:

• IFRS 9 Financial instruments: Classifications and measurement. Effective for annual periods beginning on or after January 1, 2018
• IFRS 15 Revenue recognition. Mandatory effect on January 1, 2018
• IFRS 16 Leases. Mandatory effect from January 1, 2019

Based on the expected development of the Group, we expect that IFRS 15 and 16 will have an effect for the Group.

IFRS 16 Leases (effective January 1, 2019, but not approved by the EU). Up to now one has had a distinction between operating and finance leasing according to IFRS 17. The new IFRS 16 eliminates this and introduces a single lessee accounting model. When applying the new model, a lessee is required to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value, and recognize depreciation of lease assets separately from interest on lease liabilities in the income statement. For the Group this implies that current operating leases satisfying the criteria will be recognized with assets and liabilities. Among others this may include rent of premises, cars and computer systems. The change will have a significant positive impact on EBITDA in the Group's consolidated income statement.

IFRS 15 Revenue from Contracts with Customers (effective January 1, 2018, but not approved by the EU). IFRS 15 establishes a new five-step model that will apply to revenue arising from contracts with customers. The main implications of IFRS 15 for the Group will be the following: Allocation based on stand-alone selling prices.

Disclosures: IFRS 15 adds several disclosure requirements to the annual and interim reports, e.g. to disaggregate revenues into categories that depict how the nature, amount, timing and uncertainty of revenues and cash flows are affected by economic factors.

Transition methods: IFRS 15 allows for either a full retrospective approach where all periods presented are adjusted or a modified approach where only the current period is adjusted. The latter method requires disclosures that reconcile all financial line items in the year of adoption to the current standards.

The company is working to identify the effects of the new standard.

2. Summary of significant accounting policies

2.1 Functional and presentation currency

The Group presents its accounts in Norwegian kroner (NOK), which is also Techstep ASA's functional currency.

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

2.2 Consolidation principles and subsidiaries

The consolidated financial statements incorporate the financial statements of Techstep ASA (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 to obtain benefits from its activities.

Its subsidiaries are recognized using the historical cost to the parent company.

Income and expenses of its 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 21.83% non-controlling interests in Teki Solutions as of December 31, 2016.

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

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

2.3 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.

The Group has not consolidated its subsidiaries with a functional currency other than Norwegian kroner. As of December 31, 2016, the newly founded subsidiary SmartWorks Nordic Group AB in Sweden is considered insignificant.

2.4 Revenue recognition and related costs

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for hardware, licenses or services supplied, stated net of discounts and valueadded taxes. The Group recognizes revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity.

Sales of services

Support & Maintenance, which runs for more than one period, is recognized as income in line with the delivery, and the payment for future periods is recorded on the balance sheet as a liability (Deferred Revenue / Advance Payment), 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 recognized when the shareholder's right to receive payment has been established (provided it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably). The parent companies recognize dividends from subsidiaries and associates when it is reasonably certain that it will be received.

Interest income from a financial asset is recognized 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 timely 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 for by the time of decision.

2.5 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. Acquisition-related 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, except that:

• Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognized and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively
• Liabilities or equity instruments related to sharebased payment arrangements of the acquiree or share-based payment arrangements of the Group entered into that replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 Share-based Payment at the acquisition date. 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 noncontrolling 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 acquisitiondate 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 and the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognized immediately in profit or loss as a bargain 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 recognized amounts of the acquiree's identifiable net assets.

The choice of measurement basis is made on a transaction by transaction basis. Other types of noncontrolling 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 is 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 recognized 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 recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized 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 recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.

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 are 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 recognized directly in profit or loss. An impairment loss recognized 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.

2.6 Software development costs

No internally generated intangible asset arising from development (or from the development phase of an internal project) has been recognized as intangible assets. Such recognition would take place 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
• the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognized 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 recognized, development expenditure is recognized in profit or loss in the period in which it is incurred.

After initial recognition, internally generated intangible assets are reported at cost less accumulated amortization 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 recognized as an expense incurred. Development costs previously recognized as an expense are not recognized as an asset in subsequent periods.

2.7 Fixed assets

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

Depreciation is recognized 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 methods 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. As of December 31, 2016, the Group held no assets under financial leases.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss that arises 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 recognized in profit or loss.

2.8 Intangible assets

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method is 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 as of the date of acquisition.

Software Expenses related to the purchase of new computer programs are recorded as an intangible asset if these expenses are not part of the hardware acquisition costs. Software is normally amortized using the straight-line method over three 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.

2.9 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 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 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 cashgenerating 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 recognized immediately in profit or loss. A reversal of an impairment loss is recognized 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 recognized for the asset (or cash-generating unit) in prior years.

2.10 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.

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 recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

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

2.11 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.

2.12 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 recognized 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 recognized for all taxable temporary differences. Deferred tax assets are generally recognized 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 utilized. Such deferred tax assets and liabilities are not recognized 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 recognized for taxable temporary differences associated with investments in its subsidiaries and associates, and interests in joint ventures, except where the Group is unable 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 recognized to the extent that it is probable there will be sufficient taxable profits against which to utilize 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 realized, 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 taxes for the year

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred taxes are also recognized 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.

2.13 Inventories

Inventories are valued at the lower of cost or net realisable value for products that will be sold as a separate item. Inventories that will be sold as part of a transaction with several items, which is expected to

earn net income, are not considered as an indicator of write down, even though the allocated sales price in the transaction is lower than the cost. Cost is determined using the FIFO or weighted average method, depending on the nature of the inventories.

2.14 Cash and cash equivalents

Cash and cash equivalents comprise cash, bank deposits, and revolving credit facilities. The revolving credit facilities are presented in the balance sheet under short-term debt.

2.15 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 recognized as other paid-in equity. Realized losses related to sale of own shares are recognized 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.

2.16 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.

2.17 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 employee 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 reduce future contributions.

2.18 Cash flow statement

The cash flow statement is presented using the indirect method. The Group's activities are divided into 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.

2.19 Segment information

Segment information presented is prepared in accordance with the accounting principles and guidelines that the Group uses for the preparation of consolidated financial statements. The classification is the same one that the Group's management uses to monitor operations and allocate resources to segments.

2.20 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 recognized 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 to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Group's general policy on borrowing costs. Contingent rentals are recognized as expenses in the periods in which they are incurred.

Operating lease payments are recognized as an expense on a straight-line 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 recognized as an expense in the period in which they are incurred.

2.21 Provisions

Provisions are recognized 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 recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, and considers 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 recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

2.22 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 changing. 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.

2b Financial risk

The Group's financial risk is primarily related to credit risk, liquidity risk, currency risk and interest rate risk.

Risk management in the Group aims to support value creation in the Group and secure a solid financial platform through visibility and strategic management of both financial and operational risk factors. Operational risk relates mainly to major customer projects, which are continuously reviewed by corporate management.

a) Credit risk

Credit risk is the risk that customers cannot settle their obligations as they mature. Credit risk is considered part of the business risk and as part of ongoing operations. As of December 31, 2016, the majority of the Group's operations are in Nordialog Oslo. The company has established procedures for credit rating for major customers or suppliers. The risk that customers do not have the financial ability to meet its obligations is considered low. Historically, only minor losses have been realized due to customers experiencing financial difficulties. The company's customers are largely well-established companies. Techstep has not established a central credit policy, and does not retrieve external credit information on customers receiving credit from the company. The company has a few large customers leading to a concentration of risk to some extent.

The largest proportion of the Group's customers are Norwegian, which thus can be said to create a geographic concentration of risk. The company has a large number of customers, but relatively few large customers.

Of the Group's total customer base as of December 31, 2016, the five largest individual customers account for about 27.5 % of total operating revenues in 2016 and 12.7 % of accounts receivable. The ten largest customers represent approximately 34% of revenue and 26% of accounts receivable.

Approximately 10% of total operating revenues and accounts receivable originated from the public sector (government, municipal, state and municipal companies, etc.) in Norway.

In addition to the public sector, two Groups may be highlighted:

	Bank / insurance	14.0%

Telecommunication 9.3%

The maximum credit exposure consists of carrying value of receivables and cash and cash equivalents. All receivables are due within one year. Normal payment is 14 days after invoicing.

Long-term receivables consist of smaller holdings with no fixed maturity.

The company considers that the risk of accounts receivable and accrued income not realized is mainly linked to disputes over the delivered business solutions and functionality.

Provisions for losses on trade receivables is based on individual assessments of accounts receivable over a certain size, with a particular focus on those more than 90 days overdue. For insignificant accounts receivable, a more flat-rate, experience-based provision is made.

Earned but not invoiced income

Usually customers are invoiced continuously per hours worked on a project. Any unbilled time balance at the end of the reporting period is recognized as incurred, but not invoiced income to the extent the company considers that a final payment obligation for the client is incurred. In some incidents, earned income has been disputed in a later period. In these cases, the income will be reversed in the period the dispute is settled.

Actual losses in the table below are related to customer bankruptcies, etc.

(amounts in NOK 1 000)	Carrying amount	Not matured	0 - 30 days	30 - 60 days	60 - 90 days	> 90 days	Impaired
Accounts receivable	83 988	75 080	6 019	740	(26)	2 175	(738)
Other short term receivable 1)	13 709	13 709					(304)
Provision for bad debt		(304)				(738)
Total accounts receivable and other short term receivable	97 697	88 485	6 019	740	(26)	1 437

Accounts receivable and other receivables shown at maturity per December 31, 2016

1) Other short term debt does not include pre-payment of NOK 2,894.5 which is not considered a financial asset.

Changes in the provision for bad debt during the year

	1/1 - 31/12
Opening balance provision for bad debt at 01/01/16	1 206
Changes in the provision during 2016	(164)
Closing balance provision for bad debt at 31/12/16	1 042
Actual losses on accounts receivable due to bankruptcy, debt settlement, etc.	617

b) Liquidity risk

Liquidity risk is the risk of not being able to pay the Group's financial obligations at maturity. Liquidity risk arises from a mismatch between cash flow from operations and financial commitments. The management of liquidity risk takes place by developing liquidity management strategies operationalized through liquidity budgets and continuously monitored.

Historically, the Group has had a satisfactory liquidity. Consolidated cash flow from operations in 2016 is negative. The Group has added significant new capital through the restructuring process that took place throughout much of 2016.

Operations in Techstep are subject to normal fluctuations that affect cash flows during the year. The majority of payments are related to employees and suppliers.

At December 31, 2016, the Group had cash and cash equivalents of NOK 81.6 million. The company also had an unutilized credit reserve of 9.4 million at DnB ASA. The overdraft facility is renewed annually.

Total guarantees the Group has adequate access to liquidity. There are no significant restrictions on its ability to access or use the assets or to settle the Group's debt.

Interest bearing liabilities at maturity as of December 31, 2016

(amounts in NOK 1 000)	Face value	1 year 1)	2 years	3 years	> 3 years	Total payments
Interest bearing liabilities	126 377	113 721	8 438	4 219	0	126 377
Interest on interest bearing liabilities 2)		3 476	463	232		4 170
Total interest bearing liabilities		117 197	8 901	4 450	0	130 548

1) Hereof renewable credit facilities NOK 70 685

2) Calculated with the current interest rate at December 31, 2016

Accounts payable 62 050 essentially falls due within 30 days (< 1 year)

c) Currency risk

The Group's operations are primarily run in and from Norway. The Group is thus not materially affected by operational currency fluctuations. The essential part of the Group's goods and services are billed in NOK. Some of the Group-purchased licenses and services are invoiced in euros or dollars.

The Group has no contracts or other form of hedging of receivables or deliveries nominated in other currencies than Norwegian kroner. The Group has, to a limited extent, bank accounts, accounts receivable and accounts payable in foreign currencies. Changes in exchange rates between Norwegian kroner and foreign currency, therefore, affect the Group's profit and equity insignificantly.

The Group has insignificant investments in subsidiaries outside Norway. Operations in the new SmartWorks Nordic Group AB may lead to an increased currency risk in the coming years.

d) Interest rate risk

Consolidated operating income and cash flow from operating activities is only marginally affected directly by interest rate changes. The Group's interest rate risk related to floating interest rates on bank accounts and deposits in addition to floating rate debt in credit institutions. The Group has no fixed rate deposits and debt and, therefore, is not exposed to fair value interest rate risk.

The Group will assess its capital structure on an ongoing basis in the future.

As of December 31, 2016, a change in interest rates of one percentage point would lead to an annual increase in interest expense of 1.2 million, calculated from net interest-bearing cash reserves. No policy for managing interest rate risk has been developed.

e) Categories of financial instruments

The Group has the following categories of financial instruments

(amounts in NOK 1 000)	Available for sale	Receivables and cash	Total	At fair value	Level in rating
ASSETS					hierarchy
Equities and equity instruments		27 974	27 974	27 974	3
Other long term receivables		506	506	506	N/A
Accounts receivable and other receivables (excluding prepayments)		96 958	96 958	96 958	N/A
Cash and cash equivalents		81 692	81 692	81 692	N/A
Total assets		207 130	207 130	207 130
At fair value		207 130	207 130	207 130

(amounts in NOK 1 000)	Other financial liabilities at amortized cost	Total	At fair value	Level in rating hierarchy
LIABILITIES
Interest bearing liabilities	126 378	126 378	126 378	2
Trade and other payables 1)	112 399	112 399	112 399	N/A
Total liabilities	238 777	238 777	238 777
At fair value	238 777	238 777	238 777

1) Accrued income and taxes payable are not included in current liabilities as this analysis is intended to show financial instruments

Fair value estimates and fair value hierarchy

The Group measures the fair value based on the following hierarchy that reflects the inputs used to measure fair value:

Level 1: Quoted prices (unadjusted) in active markets for identical financial instruments. Level 2: Other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices).

Level 3: Inputs for assets or liabilities that are not based on observable market data (unobservable inputs).

Net carrying value of accounts receivable, other receivables, cash and cash equivalents and trade payables are considered to approximate the fair value.

The fair value of interest-bearing liabilities is estimated by discounting future cash flows with an estimated market interest rates for similar financial instruments. Due to the limited amounts of these commitments, it is assumed that the carrying value approximates fair value.

Shares and equity interests that are not listed, have a low value, and it is assumed that the carrying value approximates fair value.

f) Capital management

The group has until now followed up its capital structure by ensuring sufficient free liquidity in the form of cash, bank deposits and bank overdrafts, to be able to continually service its obligations without debt financing, have sufficient capital, and having available liquidity to be able, among other things, to make strategic acquisitions

3. Critical accounting judgements and key sources of estimation uncertainty

Critical judgements in applying the Group's accounting policies

The preparation of consolidated financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosures of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected within the next financial year.

The following represents a summary of the critical accounting judgements the management has made in the process of applying the Group's accounting policies:

Key sources of estimation uncertainty – critical accounting estimates

A critical accounting estimate is one which is both important to the presentation of the Group's financial position and results and requires management's most difficult, subjective or complex judgements, often resulting from the need to make important estimates based on assumptions about the outcome of matters that are inherently

uncertain. Management evaluates such estimates on an ongoing basis, based upon historical results and experience, consultations with experts, trends and other methods which management considers reasonable under the circumstances, as well as forecasts as to how these might change in the future.

Revenue recognition

Consolidated operating revenues consist primarily of sales of goods such as mobile phones, tablets and accessories as well as other services such as service and support services, licenses and invoice control services. A delivery may often be composed of items where the income is recognized at delivery and services, where income is earned over time. Specific commissions and vendor / reseller discounts (bonuses) are earned related to the deliveries. The value of accrued but not invoiced commissions and bonuses at the end of the accounting period is assessed by management.

Depreciation and amortization

Depreciation and amortization expenses are based on management's estimates of residual value, depreciation and amortization method and the useful life of property, plant and equipment and intangible assets. Estimates may change due to technological developments, competition, changes in market conditions, and other factors, and may result in changes in the estimated useful life and in amortization or depreciation charges. The useful lives of property, plant and equipment and intangible assets are reviewed at least annually taking into consideration the factors mentioned above and all other important relevant factors. A change in estimated useful life is a change in accounting estimate, and depreciation and amortization plans are adjusted prospectively.

Impairment

The Group has made significant investments in property, plant and equipment, intangible assets, goodwill, associates and other investments.

Goodwill, intangible assets with indefinite useful life, and intangible assets not yet in use are tested for impairment annually or more often if indicators of impairment exist, whereas other assets, including customer relations, are tested for impairment when circumstances indicate there may be a potential impairment. Factors that indicate impairment that trigger impairment testing include the following: significant fall in market values; significant underperformance relative to historical or projected future operating results; significant changes in the use of the assets or the strategy for the overall business, including assets that are decided to be phased out or replaced and assets that are damaged or taken out of use; significant negative industry or economic trends; significant loss of market share; and significant unfavourable regulatory decisions.

In accordance with IAS 36 Impairment of assets, the recoverable amount of assets and companies is the higher of value in use and fair value less cost of disposal. Value in use, particularly when discounted cash flow methods are used, must be based in part on management's evaluations, including determining appropriate cashgenerating units, determining the discount rate, estimates of future performance, revenue generating capacity of the assets, margins, license and spectrum prices on future renewals, required maintenance capex and assumptions of the future market conditions. Recessionary effects and increased macroeconomic risks may impact the estimates of future performance and discount rates used in estimating recoverable amounts of assets.

The use of fair value less cost of disposal requires estimating the fair value of assets and liabilities using the assumptions that market participants would use. This entails considering market participants' views on the particular cash-generating unit, as well as the actual performance of the cash-generating unit.

Deferred tax assets

Deferred tax assets are recognized to the extent that it is probable that the tax assets will be realized. Significant judgement is required to determine the amount that can be recognized and depends foremost on the expected timing, level of taxable profits as well as tax planning strategies and the existence of taxable temporary differences.

The Group has conditional tax positions (loss carry forward) that are not included in the basis for deferred tax assets as a possible utilization. Uncertainties related to new transactions and events and interpretation of new tax rules may also affect the value of deferred tax.

Associated companies

Nordialog Asker AS is an associated company as of December 31, 2016 (50% owned). Group acquired the remaining 50% in February 2017. See note for subsequent events.

The book value of the associated company is based on the valuation of goodwill and the intangible asset customer relations on an equal footing assessment as the Group's goodwill and customer relations arising from acquisition of subsidiaries - see above.

Uncertainty about taxes and public duties

At year-end 2016, the Group is involved in two cases relating to taxes and public duties:

• One case concerning the utilization of tax losses by acquired businesses NetConnect
• One case concerning tax deductibility and value added tax relating to treatment of transaction costs connected to the restructuring of the Group and acquisitions of subsidiaries

In both cases, management made an assessment and provisions based on judicious assessment of current tax and public duties regulations. To the extent that it was found necessary, external experts were consulted. The rules in this area are complex, thus, there is a risk that the authorities' assessment of the same rules applied to Techstep's conditions may give a different outcome than management, and consequently a risk of negative outcome for earnings in later periods.

4. Business combinations and discontinued operations

Techstep ASA's Group accounts represent Teki Solutions Group after the reverse takeover 07/11/2016 of Birdstep ASA (now Techstep—renamed June 3, 2016).

On April 7, 2016, Birdstep ASA sold its subsidiary Birdstep Technology AB (BTAB) with Birdstep "HetNet" technology and a majority of BTAB employees to Smith Micro Software Inc. for USD 2 million. In return, Birdstep received a letter of intent for a sole distribution agreement for the sale and exploitation of Smith Micro products in Norden. As these transactions took place before the aforementioned reverse takeover, no accounting consequences of this reorganization are reflected in the consolidated financial statements. We refer to the quarterly reports for Birdstep Q1 - Q3 and accounts for the parent company for 2016.

On July 1, 2016, the Company entered into an agreement with Zono Holding AS to acquire 100% stake in Zono in exchange for shares in Techstep ASA. The transaction was completed in September 2016 with the issuance of a total of 58,181,818 consideration shares. On July 1, 2016, the same day as the Zono transaction, the Company entered into an agreement in principle with Teki Gruppen AS to acquire 54% stake in Teki Solutions AS.

The Zono transaction was completed in September 2016 and the combined entity was presented in the Q3 report in accordance with the acquisition method.

The Teki Solutions transaction was completed in November 2016 and a total of 30,053,488 shares were issued, divided into four equal parts for Skarestrand Invest AS, Dovran Invest AS, Jyst Invest AS and Tinde Industrier AS, following the demerger of Teki Gruppen AS

The activities of the Group will mainly be based on the business in Teki Solutions AS. For accounting purposes, Teki Solutions is considered the acquirer and accounts for the combined entity are a continuation of the financial statements for Teki Solutions Group. The financial statements will thus consist of the consolidated accounts for Teki Solutions Group for 2016, including Zono and Techstep from the date of the business combination November 7, 2016. The business combination is accounted for as a reversed takeover.

The Teki Solutions transaction

The transaction is considered a reverse takeover as Teki Solutions AS for accounting purposes is considered as the acquirer.

Equity capital in Techstep ASA per Q3 (amounts in NOK 1 000)
Shares in Zono AS – see below	128 000
Short term receivables	1 204
Cash in bank	28 557
Short term liabilities	(5 741)
Equity capital in Techstep ASA per Q3 2016	152 020

Consideration shares in Zono AS	(128 000)
Result of operations Techstep ASA 9/30 – 11/7	991
Equity capital in Techstep ASA 11/7 pre Zono	25 011
Minority share of the share issue (not paid in)	21 217
Net value	46 228
Increased equity capital from reversed takeover	46 228
Surplus value	0

Assets from Techstep (acquisition of Zono AS)

(amounts in NOK 1 000)
Shares in Kjedehuset AS	23 000
Shares in Teki Solutions AS	10 140
Receivable from Teki Solutions AS	12 309
Receivable from Nordialog Oslo AS	27 697
Cash, bank	55 000
Net assets	128 146
Consideration shares: 58 181 818 at NOK 2.2 per share	128 000
Bargain purchase gain	146

Technical Losses sharebased payment

"The loss" is calculated as: (amounts in NOK 1 000)	Total	Majority	Minority
Shares in Techstep ASA Value of the company per market price 11/7/16	102 475 577	92 743 347	9 732 230
(NOK 4.75 per share)	486 759	440 531	46 228
Equity at the transaction date			25 011
Technical losses sharebased payment			21 217

The loss has no effect on the liquidity.

5. Segments

Techstep's business has shifted from an early stage in mobile solutions for businesses delivering terminals primarily for communication (voice, SMS, email) and simple business solutions, towards creating new realities where this is regarded as fundamental, and customers are looking for mobile business solutions that can support their business in a much wider range.

Sales of terminals have traditionally enjoyed good margins. The business has, during this period, been followed per location. Margin of terminals is currently marginalized in line with the product's place in the value chain and customer willingness to pay for these in isolation. The Group's business forward is, therefore, based primarily on value-added services installed on mobile devices and supported by active management and support.

In line with this, the Group's operations as of December 31, 2016 is divided into two segments: Hardware, which includes all sales of terminals and accessories, and is still the basis for the delivery, and Service, which is sale of business solutions and services that represent the value added layers.

For reporting purposes, the hardware business segment is represented by the Nordialog Group, i.e Nordialog Oslo with subsidiaries Buskerud Mobil and associate Nordialog Asker, and the service segment by SmartWorks AS. 30% - 50% of sales from SmartWorks is routed through Nordialog Oslo as complex deliveries. Internal sales are eliminated on consolidation.

Costs of administrative services delivered by Teki Solutions AS (accounting services) and Techstep ASA (corporate management, value chain optimization, etc.) are charged to the operative business areas through a Group fee reported as "other income" in the aforementioned companies. The subsidiaries, Nordialog and SmartWorks, included this in other operating expenses.

The classification is the same one the Group's management uses to monitor operations and allocate resources to segments. The accounting policies of the reportable segments are the same for the Group.

Segment information

		Elim	Not	Total
554 467	52 800	(36 741)	2 972	573 498
(418 606)	(23 165)	36 741	(179)	(405 209)
(108 334)	(34 632)		(29 755)	(172 721)
27 527	(4 997)		(26 962)	(4 432)
(15 675)	(55)		(4 157)	(19 887)
11 852	(5 052)		(31 119)	(24 319)
154				154
79	33		10	122
326 765	28 404	(7 818)		347 351
153 958	7 100			161 058
489 267	35 504	(7 818)		508 409
	Hardware	Service	ination	allocated

2015 (amounts in NOK 1 000)	Hardware	Service	Elim	Not allocated	Total
Revenue	602 422	31 362	(24 592)	21 133	630 325
Cost of materials	(442 407)	(12 621)	24 592	(17 035)	(447 471)
Other operating cost	(111 637)	(18 558)		(28 216)	(158 411)
EBITDA	48 378	184		(24 118)	24 442
Depreciation & amortization	(24 006)				(24 006)
EBIT	24 372	184		(24 118)	436
Income from affiliated company	(444)				(444)
Number of employees	89	25		10	124
Assets	290 362	38 216	(34 193)		294 385
Allocated Goodwill / customer relations	153 093	7 100			160 193
Total assets	447 237	45 316	(34 193)		454 578

Total revenue per geographical area
(amounts in NOK 1 000)	2016	2015
Norway	573 498	613 589
Sweden		16 736
Total	573 498	630 325

6. Revenue

(amounts in NOK 1 000)	2016	2015
Hardware revenue	428 545	496 224
Service revenue	69 590	47 568
Commissions and bonuses	72 391	78 715
Other	2 972	7 818
Total revenue	573 498	630 325

7. Salaries and personnel cost

		Whereof «other
(amounts in NOK 1 000)		costs» *	2016	2015
Salary and holiday pay	88 202	4 022	84 180	81 461
Social security tax	12 482		12 482	12 509
Pension costs including social security tax	2 554		2 554	2 365
Other personnel costs	4 825		4 825	3 452
	108 063	4 022	104 041	99 787

* Salary and personnel costs allocated as restructuring costs in connection to closing of locations

Remuneration to the Board

Total remuneration to the board expensed in 2016 and 2015.

(amounts in NOK 1 000)

		In office		Remun eration	No. of shares	Remun eration	No. of shares
Board of Directors	Position	from date	To date	2016	31.12.16	2015	31.12.15
Einar J. Greve	Chair	04.11.2016	-	83
Ingrid Leisner	Member	29.01.2016	-	117
Camilla Magnus	Member	04.11.2016	-	42
Kristian Lundkvist	Member	04.11.2016	-	42
Kristin Hellebust	Member	04.11.2016	-	42
Stein Erik Moe	Member	04.11.2016	-	42
Svein Ove Brekke	Member	04.11.2016	-	42
Tore Traaseth	Member	29.01.2016	04.11.2016	80
Ian Jenks	Chair	29.01.2015	04.11.2016	146		149
Tom Nyman	Member		01.10.2015			-
Arne Aarnes	Member		27.04.2015			45
Anna Bergsten	Member		27.04.2015			45
Kirsten English	Member		01.10.2015			113
Urban Gillström	Member	27.04.2015	Jan. 16			90
Regina Nilsson	Member	27.04.2015	Jan. 16			90
Total				634		532

In addition, the chairman of the board has billed Chairman's fees of NOK 250 000 through his company Cipriano AS for the period June - November. See note 23.

Total remuneration to the Management

2016 (amounts in NOK 1 000)		Salary	Pension	Other remuneration	Number of shares
Current Management
Gaute Engbakk 1)	CEO Techstep	417	-	-	-
Marius Drefvelin2)	CFO Techstep	-	-	-	-
Stian Bakke	Sales director/ constituted CEO Nordialog	1 276	102	705	-
Tom Edman	CEO SmartWorks	731	-	-	-
Rune Midthaug	CEO Teki Solutions	1 289	103	650	-
Per Øyvind Rode	Finance director, Teki Solutions	942	83	100	-
Mads Vårdal	CInO Techstep	1 211	99	950	-
Expensed, former Management
Lonnie Shilling	CEO Birdstep	-	-	-	-
Fredrik Johansson	Acting CEO Birdstep	555	53	98	-
Total remuneration		6 421	440	2 503	-

1) Employed from 05.11.2016

2) Employed from 01.01.2017

2015 (amounts in NOK 1 000)		Salary	Pension	Other remuneration	Number of shares
Current Management
Gaute Engbakk	CEO Techstep	-	-	-	-
Marius Drefvelin	CFO Techstep	-	-	-	-
Stian Bakke	Sales director/ constituted CEO Nordialog	1 259	90	766	-
Tom Edman	CEO SmartWorks	-	-	-	-
Rune Midthaug	CEO Teki Solutions	1 291	90	125	-
Per Øyvind Rode	Finance director, Teki Solutions	821	68	-	-
Mads Vårdal	CInO Techstep	1 191	66	-	-
Expensed to former Management
Lonnie Shilling	CEO Birdstep	2 565	395	-	-
Fredrik Johansson	CFO Birdstep	949	105	-	-
Total remuneration		8 076	440	2 503	-

Remuneration to the CEO Gaute Engbakk amounts to NOK 416 666, for the time from employment November 5, 2016 and to year-end. CEO is included in the Group's ordinary contribution scheme. In addition to ordinary remuneration, the CEO billed NOK 1.259 million, through his company Engbakk MCI for services rendered in the period before commencement. See note 23.

Through a separate agreement with the former shareholders of Teki Solutions AS, CEO Gaute Engbakk is guaranteed a bonus of NOK 700 000 in addition to ordinary salary in 2017. The agreement relates only to the fiscal year 2017.

Compensation to the former CEO, Lonnie Schilling, for the period from November 7 until year-end (the ownership period) is NOK 0. For the period from 1/1 to 11/7, NOK 3,413,446, is expensed as salary, NOK 2,852,760 as bonus, and NOK 315,190 as pension.

Compensation for the acting CEO Fredrik Johanson for the period 11/7 until year end: Salary NOK 554,819 — Bonus NOK 98,342 — pension NOK 53,170. For the period from 1/1 to 11/7: Salary NOK 687,799 — bonus NOK 1,205,257 — pension NOK 72,768.

Auditor remuneration

(amounts in NOK 1 000)	2016	2015
Statutory audit (incl. Technical assistance to financial statements)	1 146	1 189
Other assurance services	210	26
Tax advice (incl. Technical assistance with tax papers) Other technical assistance in connection with the annual report, pro forma figures and	51	39
prospect	576	325
Other assistance from other auditing firms	46	35
Total auditor remuneration	2 030	1 579

8. Other operation costs

		Whereof
(amounts in NOK 1 000)		«other costs» *	2016	2015
Operating leases of buildings, other housing expenses	11 215	3 959	7 256	9 138
Operating lease of computer equipment and other assets 1)	5 938		5 938	7 525
Consultancy fees, attorney's fees, etc.	20 092	6 865	13 227	15 220
Factoring	1 809		1 809	388
Office costs	6 090		6 090	6 244
Telephone, data, line rental	3 376		3 376	2 769
Car expenses, travel costs	2 156		2 156	2 465
Selling expenses, advertising, customer events	7 507		7 507	6 477
Other costs	6 475	2 666	3 809	8 398
Total operating costs	64 658	13 489	51 169	58 624

* Consists of costs for abandoned locations (restructuring costs) and transaction costs in connection to the restructuring of the Group.

1) Lease commitment for the Group
Rental of computer systems related to the franchise agreement with Kjedehuset AS (see also note 17)
Yearly rent			4 039
The Franchise agreement expires in June 2019
Operational lease of 11 cars
Remaining rental period varies from 5 to 35 months
Total monthly rent			57
Total rental obligation running contracts	2017	2018	2019
Total yearly rent	486	107	37

9. Financial income and expenses

(amounts in NOK 1 000)	2016	2015
Interest income	762	388
Other financial income	90	483
Interest expense	(5 911)	(10 419)
Other financial expense	(58)	(669)
Total financial expense	(5 117)	(10 216)

10. Income taxes

(amounts in NOK 1 000)	2016	2015
Earnings before tax	(50 654)	(9 778)
Not deductible items	5 921	115
Share of net income associated company	(154)	444
Technical loss - reverse takeover	21 217
Net taxable income	(23 670)	(9 219)
Tax rate	25 %	27 %
Calculated income taxes	(5 918)	(2 489)
Effect of change in tax rate	(36)	792
Income taxes ordinary income	(5 954)	(1 697)
Effective tax rate	0%	0%

Payable taxes in financial statement: (amounts in NOK 1 000)	2016	2015
Payable tax this year	0	4 299
Provided re: Netconnect previous years	9 264
Excess provision previous years	75
	9 339	4 299

Deferred tax in financial statement

(amounts in NOK 1 000)	Balance 31.12.16	Change 2016	Techstep 1/1 - 11/7	Balance 31.12.15	Change 2015	Opening balance 01.01.15
Machinery fixtures and fittings	(394)	(134)	0	(260)	(260)	0
Goodwill and customer relations	28 838	(17 022)	0	45 860	(19 584)	65 444
Inventories	(561)	(12)	0	(550)	235	(785)
Receivables	(870)	285	0	(1 156)	(1 156)	0
Other Tax losses carried forward,	0	(19)	0	19	(5)	24
deferred interest deductibility	(30 583)	(7 056)	(19 217)	(4 311)	(1 154)	(3 157)
Total temporary differences	(3 571)	(23 957)	(19 217)	39 603	(21 923)	61 526
Tax rate	25 %	25 %	25 %	27 %	27 %	27 %
	(893)			10 693
Effect of change in tax rate	36			(792)
Deferred tax (-asset)	(857)	(5 989)	(4 804)	9 901	(5 919)	16 612
		(25% - 24%)			(27% - 25%)

Temporary differences not included in the basis for deferred tax asset:

(amounts in NOK 1 000)	31.12.2016	31.12.2015
Receivables	(191 727)	(191 727)
Tax losses carried forward	(439 990)	(439 990)
Total	(633 603)	(633 603)

11. Earnings per share

Earnings per share is calculated by dividing net income for the period available to shareholders by the number of ordinary shares issued at year-end. At December 31, 2016, the Company had 102,475,577 shares issued and 102,473,633 shares outstanding, whereby the difference (1914 shares) are treasury shares held by the company.

	Date	# shares
Number of shares 12/31-15	January 1	10 162 163
Private placement Middelborg Invest	March 8	3 400 000
Private placement minority shareholders	July 7	678 108
Zono consideration shares	September 16	58 181 818
Teki consideration shares	November 7	30 053 488
Number of shares 12/31/16	December 31	102 475 577

Average number of shares used when calculating income per share is based on the exchange ratio in the share purchase agreement from November 7, 2016 (IFRS 3.B27):

Weighted average, 2016	62 632 094
Weigthed average, 2015	10 131 725

Share capital

The company's share capital at December 31, 2016 is NOK 102,475,577 divided into 102,475,577 shares with a nominal value of NOK 1.00. With the exception of the specifications referred to below, the shares are issued and fully paid.

Techstep has only one class of shares and all shareholders have equal rights under Norwegian law.

The consideration shares that were distributed in November in four equal parts for Skarestrand Invest AS, Dovran Invest AS, Jyst Invest AS and Tinde Industrier AS, after the demerger of Teki Gruppen AS, will not be admitted to listing on the Oslo Stock Exchange before the company has published and FSA has approval of a listing prospectus pursuant to § 7-3 of the securities trading Act. Each of these stocks still gives the right to one vote at the general meeting. All other shares are freely transferable and each share entitles its holder to one vote at the general meeting. Per balance sheet date, the Company holds 1,914 own shares.

Techstep's 10 largest shareholders as of December 31, 2016

Shareholder	%	# shares
ZONO HOLDING AS*	61.19 %	62 706 966
JYST INVEST AS	7.33 %	7 513 372
DOVRAN INVEST AS	7.33 %	7 513 372
TINDE INDUSTRIER AS	7.33 %	7 513 372
SKARESTRAND INVEST A	7.33 %	7 513 372
INTELCO CONCEPT AS	1.46 %	1 500 000
VINTERSTUA AS	1.07 %	1 094 559
MP PENSJON PK	0.49 %	502 983
PETROLEUM INVEST	0.47 %	485 704
STRØMLAND SIVERT NØTSUND	0.39 %	400 356
OTHER SHAREHOLDERS	5.59 %	5 731 521
TOTAL	100 %	102 475 577

* Zono Holding AS has in a shareholders meeting on January 30, 2017 resolved to distribute 59,706,969 shares in Techstep to its 16 shareholders through a capital reduction. The distribution is inter alia pending a 6-week mandatory creditor notification period and bank approval. Following completion of the capital reduction, the shares will be distributed and owned inter alia as follows:

Middelborg Invest AS:	25,525,228 shares
Datum AS:	15,720,370 shares
Cipriano AS:	2,774,182 shares
Antares Group AS	554,838 shares
Duo Jag AS	554,834 shares

Following the completion of the capital reduction, Zono Holding AS will own 3,000,000 shares in Techstep.

Duo Jag AS - partly owned by member of the Board of Directors, Ingrid Leisner Antares Group AS - owned by CEO Gaute Engbakk Cipriano AS - owned by chairman of the Board of Directors Einar J. Greve Middelborg Invest AS - owned by Kristian Lundkvist member of the Board of Directors

Board authorizations per 31/12/2016:

The Board held the Extraordinary General Meeting on November 4, 2016 and granted the following authorizations to issue new shares:

1. Authorization to purchase own shares

"Board is authorized on behalf of the Company to purchase the Company's own shares and to own shares within the limitations set by the Norwegian Public Limited Companies act. The maximum number of shares to be acquired shall not exceed a total nominal value of NOK 10,247,557 (equivalent to approximately 10% of the share capital)

2. Authorization to issue new shares

2.1 Authorization to issue shares in connection with merger

"Authorization to increase the share capital by up to NOK 25,600,000 by issuing up to 25,600,000 shares in Techstep ASA at a nominal value of NOK 1. The shareholders' preferential rights pursuant to Public Limited Companies Act § 10-4 may be waived."

2.2 Authorization to issue shares in connection with merger

"Authorization to increase share capital by up to NOK 7,500,000 by issuing up to 7,500,000 shares in Techstep ASA at a nominal value of NOK 1. The shareholders' preferential rights pursuant to Public Limited Companies Act § 10-4 may be waived."

2.3 Authorization to issue shares in connection with the company's incentive system

"The Board is authorized, according to the Norwegian Public Limited Companies 10-4, to increase the share capital by up to NOK 7,500,000 by issuing up to 7,500,000 shares in Techstep ASA at a nominal value of NOK 1 in connection with the Company's incentive system for employees and directors. The shareholders' preferential rights pursuant to Public Limited Companies Act § 10-4 may be waived."

Proxies that apply for all three authorizations:

• The authorization is valid until the Annual General Meeting in 2017, or until June 30, 2017 at the latest.
• Subscription terms shall be decided by the Company's Board of Directors

12. Goodwill and other intangible assets

(amounts in NOK 1 000)	Goodwill				Customer relations
Accumulated cost	Nordialog	SmartWorks	Sum	Nordialog	SmartWorks	Sum
As of January 1, 2015 Arising on acquisition of	263 515	12 177	275 692	222 137		222 137
subsidiaries	1 092	586	1 678			0
As of December 31, 2015	264 607	12 763	277 370	222 137	0	222 137
Arising on acquisition of subsidiaries			0			0
As of December 31, 2016	264 607	12 763	277 370	222 137	0	222 137
Accumulated impairment losses			0			0
As of January 1, 2015	18 329	5 663	23 992	162 235		162 235
Impairment losses			0			0
Amortization			0	22 655		22 655
As of December 31, 2015	18 329	5 663	23 992	184 890	0	184 890
Impairment losses
Amortization				19 131		19 131
As of December 31, 2016	18 329	5 663	23 992	204 021	0	204 021
Book value as of December 31, 2015	246 278	7 100	253 378	37 247	0	37 247
Book value as of December 31, 2016	246 278	7 100	253 378	18 116	0	18 116

Customer relations are amortized by a linear method over five years.

13. Impairment testing

Goodwill acquired through business combinations is allocated to individual cash-generating units as presented in note 12.

The recoverable amount of assets and companies is the higher of value in use and fair value less selling costs.

For cash-generating units with goodwill, the discounted cash flow model is used to determine the value in use based on latest management-approved financial projections. The explicit forecast period is covering 2017 to 2018 as a terminal year. Beyond the explicit forecast period, the cash flows are extrapolated with perpetual, constant, nominal growth rates using Gordon's formula.

Key assumptions used in the discounted cash flow models:

Key assumptions used to calculate value in use are growth rates, EBITDA margins (operating investments) and discount rates.

Growth rates - The expected growth rate for a CGU converges from its current level, based on results from the last few years up to the long-term growth level in which the marketplace business operates. The growth rates used to extrapolate cash flows beyond the explicit forecast period are based on experiences and assumptions of market shares and market developments in which the business operates. The growth rates used to extrapolate cash flows for the terminal value is not higher than expected for long-term growth in markets where the business operates.

EBITDA margin - EBITDA margin represents the operating margin before depreciation and amortization and is estimated based on the current level and expected future market development. The rationalization that took place in the Group on restructuring in 2016 is implicit in these margins and the expected future EBITDA margins.

Operating Investments (Capex) - Group's activities so far, i.e., the business that underlies the estimated cash flows in the current cash-generating units, has required minimal operating investments. This is also assumed in the forecast period.

Discount rates - The discount rate is based on a weighted average cost of capital (WACC), derived using the capital asset pricing model (CAPM). A company's cost of equity and cost of debt, weighted to reflect a capital structure respectively 77:23, giving the company's weighted average cost of capital. WACC-interest, which is used to discount future cash flows is set out from a long-term expected real interest rate of 1.5 to 2.0% and a corresponding inflation. A market risk premium of 5% and a small enterprise premium of 4% is attributed. The discount rate accounts for a 2% debt premium, debt ratio, the company's tax rate and asset beta of 0.78 based on a peer Group of comparable companies.

Assumptions applied to calculations:

WACC after tax	10.5 %
Terminal growth	1.5 %

Impairment

The Group has not had any impairment losses during 2015 and 2016.

Nordialog

Sensitivity analysis of goodwill associated with the cash generating unit Nordialog

The book value of the CGU amounts to	NOK 335 million
Of this, goodwill in its own balance sheet arising from acquisitions	NOK 92 million
Group Goodwill attributable to the CGU	NOK 154 million

The estimated recoverable amount exceeds the carrying value of the respective unit. A reduction in the terminal growth by > 25 points, or an increase in the required return by > 50 points would trigger the need for further tests to be carried out to substantiate the value of the goodwill.

Sensitivity, value of total equity at changes in WACC and terminal growth:

Growth	WACC
	11.50 %	11.00 %	10.50 %	10.00 %	9.50 %
1.00 %	223.6	246.1	271	298.9	330.2
1.25 %	233	256.6	282.8	312.2	345.2
1.5 %	242.9	267.6	295.2	326.2	361.1
1.75 %	253.3	279.3	308.4	341	378.1
2.00 %	264.3	291.6	322.3	356.9	396.2

SmartWorks

Sensitivity analysis of goodwill associated with the cash generating unit SmartWorks

The book value of the CGU amounts to	NOK 23.3 million
Of this, goodwill in its own balance sheet arising from acquisitions	NOK 0.6 million
Group Goodwill attributable to the CGU	NOK 6.5 million

The estimated recoverable amount that exceeds the carrying value of the respective unit a 1% reduction of terminal growth or a 1% increase in the required return will not result in the value of the unit's goodwill being put at risk.

Sensitivity, value of total equity at changes in WACC and terminal growth:

Growth		WACC
	11.50 %	11.00 %	10.50 %	10.00 %	9.50 %
1.00 %	21	22.8	24.7	26.9	29.2
1.25 %	21.8	23.6	25.6	27.9	30.4
1.5 %	22.5	24.5	26.6	29	31.6
1.75 %	23.4	25.4	27.6	30.1	33
2.00 %	24.2	26.3	28.7	31.3	34.4

14. Machinery, fixtures and fittings

(amounts in NOK 1 000)	Machinery fixtures	Fittings rented premises	Sum
Accumulated cost as of January 1, 2016	5 863	4 175	10 038
Additions	410		410
Additions arising from acquisition of subsidiaries			0
Disposals			0
Accumulated cost as of December 31, 2016	6 273	4 175	10 448
Accumulated cost as of January 1, 2015	5 455	3 999	9 453
Additions	343		343
Additions arising from acquisition of subsidiaries	65	176	241
Disposals			0
Accumulated cost as of December 31, 2015	5 863	4 175	10 038
Accumulated depreciation as of January 1, 2016	4 483	1 903	6 386
Depreciation this year	623	280	903
Impairment			0
Additions arising from acquisition of subsidiaries			0
Disposals			0
Accumulated depreciation as of December 31, 2016	5 106	2 183	7 289
Accumulated depreciation as of January 1, 2015	3 433	1 604	5 037
Depreciation this year	1 045	254	1 299
Impairment			0
Additions arising from acquisition of subsidiaries	5	45	51
Disposals			0
Accumulated depreciation as of December 31, 2015	4 483	1 903	6 386
Book value as of December 31, 2015	1 380	2 272	3 652
Book value as of December 31, 2016	1 167	1 992	3 159
Estimated economic lifetime in years	5	14
Depreciation percentage	20 %	7 %

15. Associated company

The Group holds a 50% ownership, but has no controlling interest in Nordialog Asker AS. The company is presented as an associated company in the Group accounts.

(amounts in NOK 1 000)	2016	2015
Book value as of January 1	14 195	0
Acquisition (09.18.2015)		14 639
Disposal
Share of net result (after tax)	1 134	275
Amortization of excess value customer relations	(980)	(719)
Equity adjustment and dividend	(1 000)	0
Book value as of December 31	13 349	14 195

In February 2017, the Group acquired the remaining 50% stake. See note 24 subsequent events.

Nordialog Asker (100% value)	2016	2015
Revenue	38 852	36 646
Ordinary result / OCI	3 117	1 877
Current assets	8 351	5 610
Non-current assets	2 290	2 287
	10 641	7 897
Equity	4 285	3 168
Liabilities	6 356	4 729
	10 641	7 897

16. Accounts receivable and other short term receivables

2016 (amounts in NOK 1 000)	Not due	0 - 30 days	30 - 60 days	60 - 90 days	> 90 days	Provision for bad debt	Total
Age distribution accounts receivable	75 080	6 019	740	(26)	2 175	(738)	83 250
Hence submitted to factoring	37 269						37 269
Net accounts receivable	37 812	6 019	740	(26)	2 175	(738)	45 981

There is no single customer or Group of customers who may be perceived as a unit that accounts for > 10% of the outstanding balance

2015 (amounts in NOK 1 000)	Not due	0 - 30 days	30 - 60 days	60 - 90 days	> 90 days	Provision forbad debt	Total
Age distribution accounts receivable Hence submitted to factoring	53 934 38 336	5 582	2 695	1 767	4 686	(279)	68 385 38 336
Net accounts receivable	15 598	5 582	2 695	1 767	4 686	(279)	30 049

There is no single customer or Group of customers who may be perceived as a unit that accounts for > 10% of the outstanding balance.

Other short term receivables consist of:
(amounts in NOK 1 000)	2016	2015
Retailer bonus	7 619	9 395
Commissions Telenor	1 819	1 043
Other prepaid costs	2 894	2 219
Receivable Nordialog Ensjø AS	1 625	1 625
Receivable Nomo Holding AS	1 625	1 625
Other receivables*	1 021	24 793
	16 603	40 700

* Accrued income regarding SAS case amounting to 16.7 million is included in "Other receivables" 2015

Other receivables are measured at fair value equal to par. There is no provision for bad debts on other receivables.

17. Shares and investments, other non-current assets

Investment in shares and investments

(amounts in NOK 1 000)	# shares	2016	# shares	2015
Shares in Kjedehuset AS	159 672	27 937	43 127	4 936
Other shares and investments		37		37
Total		27 974		4 973

Shares in Kjedehuset constitute 7.01% of the share capital of the company.

The increase from 2015 is explained by the acquisition of Zono AS which had a 5.12% share in Kjedehuset. The shares are valued at historical cost, equal to fair value.

Other long term receivables
(amounts in NOK 1 000)	2016	2015
Long term receivables employees	22	4
Deposit facilities	384	826
Loan to Telehuset Fredrikstad	100	100
Total other long term receivables	506	930

18. Pension

The Group companies in Norway are obliged to follow the OTP act (Act on Mandatory company pensions). The company has an insured defined contribution plan for its employees.

				2016	2015
Number of employees covered by the plan as of December 31, 2016	122	121
Premiums paid including social security tax	2 554	2 365
Plan premium in % of pensionable income	Basic amount (G)*	2016	2015
	0 - 1 G	2 %	2 %	Nordialog
	0 - 7 G	4.30 %	4.30 %	SmartWorks
	7.1 - 12 G	6.30 %	6.30 %	SmartWorks
	0 - 7 G	6.50 %	6.50 %	Teki Solutions and Techstep (from 01.11.16)
	7 .1 - 12 G	12 %	12 %	Teki Solutions and Techstep (from 01.11.16 )
* The plan premium of the contribution plan is calculated in % of the National Insurance basic amount amounting to in 2016 and 2015 respectively		kr 92 576	kr 90 068

The Group has no statutory or other obligation to pay further contributions should the insurance company that administers the agreement not have sufficient assets to pay all employees the benefits relating to the contribution plan in present or future periods.

19. Accounts payable, other short term liabilities and non-interest bearing liabilities

Accounts payable (amounts in NOK 1 000)	2016	2015
Accounts payable	62 050	56 045

Accounts payable consist of obligations not overdue to the Groups suppliers. The essential part of trade payables is in Norwegian kroner.

Public taxes (amounts in NOK 1 000)	2016	2015
Public taxes	14 007	9 597

Public taxes consist of unpaid 6th period employee tax, payroll tax and VAT.

Other short term liabilities (amounts in NOK 1 000)	2016	2015
Employee bonus provision	8 167	7 192
Holiday allowance	8 940	7 248
Accrued expense / pre-paid income	14 045	16 974
Interest		11 970
Other	5 190	14 583
	36 342	57 967

Other payables are non-interest bearing and are expected to be settled within one year from the balance sheet date.

20. Interest bearing liabilities

The Group's interest-bearing liabilities consist of:

(amounts in NOK 1 000)

2016	Balance NOK	Credit line	Due within < 1 yr **	Due within 1 - 5 yr	Due within > 5 yr	Interest *	Interest rate adjustment	Pledges
Belvedere Holding	2 388		2 388			0.50 %	Yearly	No
KJGI AS	2 388		2 388			0.50 %	Yearly	No
EMP AS	2 388		2 388			0.50 %	Yearly	No
Duratro AS Nomo Holding	1 433		1 433			0.50 %	Yearly	No
AS	7 659		7 659			0.50 %	Yearly	No
Nordialog Ensjø Other debt	7 659 527		7 659 527			0.50 %	Yearly	No
Total shareholders'
loan	24 443		24 443
Overdraft facility	33 416	33 416					1 mth NIBOR + 2.25%	Note 21
Draw non factoring facility	37 269	37 269					1 mth NIBOR + 2.25%	Note 21
Margin loan Nordialog Oslo	16 875		4219	12 656			6 mth NIBOR + 4.2%	Note 21
Margin loan Teki Solutions	14 375		14 375	0			6 mth NIBOR + 4.2%	Note 21
Total	126 377	70 685	43 036	12 656	0

* Interest = governmental basic shareholder interest rate of return for the fiscal year

** Short term part of the shareholders' loan is converted to share capital Q1 2017

2015	Balance NOK	Credit line	Due within < 1 yr **	Due within 1 - 5 yr	Due within > 5 yr	Interest *	Interest rate adjustment	Pledges
Teki Gruppen AS	106 041		106 041			0.50 %	Yearly	No
Klekkerud AS	26 960		26 960			0.50 %	Yearly	No
Zono AS	3 192			3 192		0.50 %	Yearly	No
Belvedere Holding	2 163			2 163		0.50 %	Yearly	No
KJGI AS	2 163			2 163		0.50 %	Yearly	No
EMP AS	2 163			2 163		0.50 %	Yearly	No
Duratro AS	1 298			1 298		0.50 %	Yearly	No
Nomo Holding AS	6 935			6 935		0.50 %	Yearly	No
Nordialog Ensjø	6 935			6 935		0.50 %	Yearly	No
Total shareholders' loan	157 849		133 001	24 848	-
Overdraft facility Drawn on factoring	17 951	17 951					1 mth NIBOR + 2.25%	Note 21
facility Margin loan	38 336	38 336					3 mth NIBOR + 2.25%	Note 21
Nordialog Oslo Margin loan Teki	16 875			16 875			6 mth NIBOR + 4.2%	Note 21
Solutions	43 125		28 750	14 375			6 mth NIBOR + 4.2%	Note 21
Total	274 136	56 287	161 751	56 098	-

* Interest = governmental basic shareholder interest rate of return for the fiscal year

** Short term part of the shareholders' loan in 2016 is converted to share capital

21. Pledges and guarantees

Liabilities secured by mortgages

(amounts in NOK 1 000)	2016	2015
Margin loans	31 250	60 000
Overdraft facility	33 416	17 951
Factoring facility	37 269	38 336
Total liabilities secured by mortgages	101 935	116 287

The company has a combined overdraft / factoring facility of NOK 80 million, the factoring facility is maximized to NOK 40 million and the overdraft facility to NOK 40 million. Interest on drawn credit is 1 month NIBOR + 2.75%. + 0.,4% commission of the maximum amount per year.

Overdraft facility for 2015: Bank overdraft facility NOK 30 million + 20 million additional credit, factoring facility 70 million.

Collateral for financial debt is set as 1st priority pledge totalling a nominal value of NOK 115 million for Nordialog Oslo AS with intersecting side security for the sister company SmartWorks totalling a nominal value of NOK 30 million in:

Book value of assets pledged as collateral

(amounts in NOK 1 000)	2016	2015
Accounts receivable	99 853	109 084
Inventories	9 526	12 137
Machinery, fixtures and fittings	3 159	3 652
Shares in subsidiaries in Nordialog Oslo AS		173 226
Total book value of assets pledged as collateral:	112 538	298 099

* Shares in subsidiary – to be eliminated in the group accounts, as it is included in the financial accounts for the parent company Techstep ASA per 1 January 2016

Garantees issued in favor 3. parties (not subsidiaries)

The Group has issued the following bank guarantees in favor of 3rd parties in connection with leases:

(amounts in NOK 1 000)	Amount	Duration
Teki Solutions AS	665	18.10.2021
Nordialog Ski AS	155	01.05.2018
Nordialog Gardermoen	150	30.06.2017
Nordialog Skøyen 1)	1 231	30.06.2017
Nordialog VG-passasjen	280	31.01.2019
Asker (associated company per 12.31.16)	94	15.05.2020

1) Closed down and co-located with Nordialog Oslo

Parent company guarantees in connection with subsidiaries purchase of materials:

Teki Solutions guarantees as surety for Nordialog Oslo's debt against Tech Data Norway AS. Teki Solutions guarantees on behalf of SmartWorks AS for the purchase of goods and services from ALSO AS.

22. Related parties

The following persons are considered as a related party in relation to Techstep ASA: Members of the board and Group management and their close family

As related companies are considered:

Nordialog Asker AS (see note 15)

and the companies listed below, owned or controlled by one or more persons considered as related parties.

Company	Controlled by	Role
Advokatfirmaet Greve	Einar J. Greve	Chairman of the Board
Cipriano AS	Einar J. Greve	Chairman of the Board
Middelborg Invest AS	Kristian Lundkvist	Member of the Board
Middelborg AS	Kristian Lundkvist	Member of the Board
Duo Jag AS	Ingrid Leisner	Member of the Board
BREWA AS	Svein Ove Brekke	Member of the Board
Skarestrand Invest AS	Svein Ove Brekke	Member of the Board
Engbakk Mci	Gaute Engbakk	CEO
Antares Group AS	Gaute Engbakk	CEO

(amounts in NOK 1 000)

	Revenue from		Expenses to
Profit and loss account	2016	2015	2016	2015
Transactions with related parties	153	8	4 317	1 146

For associated company - see note 15

Balance as of	Loan to /receivables			Debt to/ payables	Guarantees to
December 31	2016	2015	2016	2015	2016	2015
Related parties	0	0	0	0	0	0

For associated company - see note 15

23. Legal disputes and contingencies

NetConnect ASA was acquired 15/08/2013. At the time of the takeover, the company had a loss carry forward of approximately 71 million. Part of the loss carried forward was offset against taxable income in other Group companies ( Group contribution) in 2014. The IRS has questioned the right to offset this loss after the takeover. As a result of the misinterpretation of rules relating to loss carry forward after change of control, and an error when filling the NetConnect tax return for 2013, the tax for 2014 allegedly corrected by the IRS and up to 30% additional tax of the not yet utilized part of the deficit was imposed. In total, this represents 9.2 million, and the amount is recognized directly in equity in accordance with IAS 8. The company argued against the IRS to reduce the additional tax as, in their view, the basis for this is not met. The case has not yet been decided.

The company has no other disputes or contingent liabilities that are not stated in the accounts and should have been disclosed at the time of the closing of the financial statements.

24. Events after the reporting period

Acquisitions

In February 2017, Techstep ASA signed a binding agreement for the acquisition of software company Mytos AS for a total purchase price of 120 million, consisting of 11,666,667 consideration shares and 50 million in cash. Simultaneously, Techstep ASA entered into an agreement in principle to buy telecom mobility hardware company Apro Telecom and Data AS ("Apro") for an aggregate purchase price of 15.5 million consisting of 1,333,333 consideration shares, 7 millon in cash and a seller note of 0.5 million. On March 21, 2017, Techstep entered into a binding share purchase agreement to acquire Apro. In addition, Techstep ASA agreed to acquire the remaining 21.84% in Teki Solutions AS and the remaining 50% of Nordialog Asker, thereby ensuring Techstep full ownership of both companies. No purchase price allocation has been performed, and thus the effect on the financial accounts can not be accounted for at this moment.

During February, a letter of intent was signed establishing Techstep Finance as a joint venture between Techstep and Bridge Capital, an experienced financial and operating partner. Techstep Finance will be a central part of Techstep's future supply of Maas (Mobility as a Service).

On 12 March 2017, Techstep ASA entered into a binding agreement with SysTown International AB to acquire InfraAdvice Sweden AB for an aggregated purchase price of SEK 18.5 million. The purchase price will be settled with SEK 14.0 million in cash and SEK 4.5 million in Techstep shares based on volume weighted share price 15 days prior to closing.

Capital increases (according to the board mandates of 4/11/2016, see note 12)

In connection with the acquisitions of Mytos and Apro, and to finance further acquisitions and growth, Techstep completed a successful private placement of 17,543,860 shares at a price of 5.70 per share, which brought in proceeds of NOK 100 million in new equity. An extraordinary General Meeting was held on February 28, 2017 to approve the private placement and the increase of the share capital from NOK 102,475,577 to NOK 120,019,437

Share capital increase following the Mytos acquition 11.7 million shares increasing the share capital from NOK 120,019,437 to NOK 131,686,104.

February 8, the Company entered a binding agreement to acquire the remaining 21.84% minority interest in Teki Solutions AS and the remaining 50% of the shares in Nordialog Asker AS. The purchases will be carried out by issuing 6,580,710 and 934,615 consideration shares, respectively, in addition to settlement of shareholder loans and vendor financing.AS a result of the transactions the share capital will increase from NOK 131,686,104 to NOK 139,201,429.

The new shares will be placed on a separate ISIN pending a listing prospectus, and will not be admitted to listing on the Oslo Stock Exchange before the company has published and FSA has approval of a listing prospectus pursuant to § 7-3 of the securities trading Act.

Authorization to increase share capital

At the Extraordinary General Meeting on February 28, the Board was authorized to increase the share capital by up to 35 million shares at NOK 1. The authorization includes both cash and contributions other than in cash such as in connection with a merger, and is valid until the company's AGM in 2018, or at the latest until June 30, 2018.

25. Restricted funds, credit facilities

(amounts in NOK 1 000)	2016	2015
Bank deposits	81 692	18 982
Hereof restricted funds - provision for employee tax	4 961	3 827
Restricted as a result of guarantees in favor of 3rd parties	0	0
The Group has the following credit facilities:
Overdraft facility	40 000	30 000
Factoring facility	40 000	50 000
Drawn as of December 31
Overdraft facility	33 416	17 951
Factoring facility	37 269	38 336

The Group is in violation of the following covenant in connection with the credit facilities as of 12.31.2016:

* NIBD / EBITDA max 1.5. Annual measurement to consolidated financial statements.

In connection with this, the company has obtained a waiver from the bank, DnB, who accept the violation given that covenant is met by 31.12.2017.

26. Transition of Teki Solutions accounts 01.01.2015

Transition

In preparation of the accounts under NGAAP, no formal Group accounts have been prepared presenting the Teki Solution Group accounts, as the ultimate holding company was Teki Gruppen AS and the Group accounts were prepared for the Teki Gruppen Group only. Consequently, first time adoption of IFRS as described in IFRS 1 does not apply, and the Teki Solutions Group accounts had to be prepared from the Group formation in November 2012 and going forward.

A renewed fair value measurement of acquired assets and liabilities and allocation of excess value has been performed for each business combination.

The transition note, therefore, primarily presents the steps involved in preparing the Group accounts for Teki Solutions based IFRS 3 / IFRS 10 and based on the Teki Solution AS parent company accounts. Wherever the change in accounting principles from NGAAP to IFRS has resulted in new and altered balances, this is commented upon in notes to the transition – see below.

		Teki					Teki
		Solutions AS	Subsid iaries	Elim shares in	Rev amort GW / elim		Solutions Group
(amounts in NOK 1 000)	Note	NGAAP	NGAAP	subsidiaries	intercomp	Taxes	IFRS
ASSETS
Intangible assets
Deferred tax asset	d	546	731	0	0	1 220	2 497
Goodwill	a	0	7 539	233 274	10 887	0	251 700
Customer relations	b	0	0	59 902	0	0	59 902
Total intangible assets		546	8 270	293 176	10 887	1 220	314 099
Property, plant and equipment		126	4 118	0	0	0	4 244
Total tangible and
intangible assets		672	12 388	293 176	10 887	1 220	318 343
Financial assets
Shares in subsidiaries		361 781	189 285	(551 066)	0	0	0
Other shares		1 670	6 304	0	0	0	7 973
Other long term receivables		0	801	0	0	0	801
Total financial assets		363 451	196 389	(551 066)	0	0	8 774
Total non-current assets		364 123	208 778	(257 891)	10 887	1 220	327 117
Current assets
Inventories, licenses for resale		0	1 180	0	0	0	1 180
Inventories, finished goods		0	12 726	0	0	0	12 726
Accounts receivable	c	3 984	58 958	0	0	0	62 942
Receivable intercompany		66 216	153 145	0	(219 361)	0	0
Other short term
receivables	c	3 445	29 318	0	5 630	0	38 393
Total inventories and receivables		73 644	255 328	0	(213 731)	0	115 241
Cash and cash equivalents		438	16 699	0	0	0	17 138
Total current assets		74 083	272 027	0	(213 731)	0	132 379
Total assets		438 206	480 805	(257 891)	(202 844)	1 220	459 496
EQUITY AND LIABILITIES
Equity
Share capital		32	14 940	(14 941)	0	0	32
Other paid in capital		2 201	16 274	(7 040)	0	0	11 435
Total paid in capital		2 233	31 214	(21 981)	0	0	11 467
Other equity		44 534	39 891	(255 023)	10 887	1 220	(158 491)
Total equity		46 767	71 105	(277 004)	10 887	1 220	(147 024)
Long term debt
Deferred tax liability Long term interest bearing	d	0	0	19 113	0	0	19 113
debt		30 340	29 660	0	0	0	60 000
Debt to shareholders,
interest bearing		73 991	118 009	0	(34 151)	0	157 850
Other long term debt	e	6 974	3 192	0	0	0	10 166
Total long term debt		111 305	150 861	19 113	(34 151)	0	247 129
Short term interest bearing debt		224 415	34 828	0	0	0	259 244
Accounts payable		1 881	48 369	0	0	0	50 250
Current tax payables		552	0	0	0	0	552
Duties payable		595	11 536	0	0	0	12 131
Intercompany debt		41 668	137 913	0	(179 581)	0	0
Other short term debt		11 022	26 193	0	0	0	37 215
Total short term debt		280 134	258 839	0	(179 581)	0	359 392
Total debt		391 439	409 700	19 113	(213 731)	0	606 521
Total debt and liabilities		438 206	480 805	(257 891)	(202 844)	1 220	459 496

The following significant changes were made in the financial statements resulting from the transition between NGAAP and IFRS.

Note a) - Goodwill

Fair value of Goodwill is based on renewed measurement and purchase price allocation according to IFRS. According to NGAAP, goodwill is subject to straight line amortization over five years. Under IFRS, goodwill is not amortized, but is subject to impairment testing according to IAS 36 (goodwill – intangible assets with undefined, infinite economical lifetime). Amortization of goodwill under NGAAP therefore is reversed, while impairment losses resulting from loss of value is maintained.

The reversed amortization of goodwill has been tax deductible under NGAAP, and deferred tax liabilities have been calculated on the reversed amounts.

Note b) – Customer relations

Customer relations is classified as an intangible asset with a defined economical lifetime, and is amortized over five years. In addition, customer relations is tested for impairment (minimum yearly) based on the estimated cash flow from the customers in question. If necessary, the value is impaired.

Amortization of customer relations is not deductible for tax purposes, and a deferred tax liability on the balance is calculated using the current tax percentage.

Note c) – Accounts receivable, other short term receivables

Per NGAAP, a provision for loss on accounts receivable is calculated based on a flat-rate percentage. According to IFRS, provisions must be made based on a customer by customer evaluation. The provision for loss on receivables is not significant, and the altered view has not resulted in a different provision.

Note d) – Deferred tax

According to NGAAP for small businesses, deferred tax asset for the daughter companies has not been entered to the accounts. In the Group account, this must be entered per IFRS, and tax resulting from the change in temporary differences is presented as part of taxes in the profit and loss accounts.

Note e) – Pension liability

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 employee benefits associated with earnings in present and previous periods. Consequently, per NGAAP and IFRS, no pension liability shall be entered to the account.

Techstep ASA – Income statement

(amounts in NOK 1 000)	Note	2016	2015
Revenue		0	0
Other revenue		300	0
Total revenue		300	0
Salaries and personnel costs	2	11 021	3 409
Depreciation		0	0
Other operation costs	3	15 681	3 928
Other cost	2, 3	6 782
Total operating expenses		33 484	7 337
Operating profit		(33 184)	(7 337)
Financial income	4	521	3 375
Financial expense	4	(690)	(18 070)
Profit before taxes		(33 353)	(21 982)
Income taxes	5	5 850	0
Net income from continued operations		(27 504)	(21 982)
Loss from discontinued operations		68	0
Net income		(27 436)	(21 982)
Other comprehensive income		(27 436)	(21 982)

Techstep ASA – Statement of financial position

(amounts in NOK 1 000)	Note	2016	2015
Assets
Deferred tax asset	5	5 850	0
Total tangible and intangible assets		5 850	0
Financial assets
Investment in subsidiaries	6	257 230	0
Total financial assets		257 230	0
Total non-current assets		263 080	0
Current assets
Group receivables		0	37 491
Other receivables		834	0
Total inventories and receivables		834	37 491
Cash and cash equivalents		16 954	436
Total current assets		17 787	37 927
Total assets		280 867	37 927
	Note	2016	2015
Liabilities and equity
Equity
Share capital		102 475	10 162
Other equity		173 071	26 617
Total equity attributable to the owners of Techstep ASA	7	275 546	36 779
Liabilities
Accounts payable		1 977	84
Tax payable	5	0	0
Public taxes, provisions		29	0
Other current liabilities		3 315	1 064
Total current debt		5 321	1 148
Total equity and liabilities		280 867	37 927

Oslo, 23 March 2017, from the Board of Directors and the CEO of Techstep ASA, signatures on the following page:

Einar J. Greve

Chairman

Ingrid Leisner Board member

Camilla Magnus Board member

Stein Erik Moe Board member

Kristian Lundkvist Board member

Kristin Hellebust Board member

Svein Ove Brekke Board member

Gaute Engbakk CEO

Techstep ASA: Specification of changes in equity

(amounts in NOK 1 000)	Share capital	Surplus fund	Other paid-in capital	Other equity capital	Total equity capital
Equity as of January 1, 2015	10 162	38 272	90 751	(80 423)	58 762
Ordinary result 2015	0	0	0	(21 982)	(21 982)
Equity as of December 31, 2015	10 162	38 272	90 751	(102 405)	36 780
Ordinary result 2016	0	0	0	(27 436)	(27 436)
New issued share capital	92 313	173 888	0	0	266 202
Equity as of December 31, 2016	102 476	212 160	90 751	(129 841)	275 546

Techstep ASA – Cash flow

(amounts in NOK 1 000)	2016	2015
Profit before tax	(33 353)	(21 982)
Other income, sale of assets		(188 676)
Loss on discontinued operations	68	206 936
Changes in net operation working capital	3 338	(17 205)
Net cash flow from operation activities	(29 947)	(20 927)
Disposal of subsidiary		14 462
Change in shareholder loans	37 491	(1 430)
Net cash used on investment activities	37 491	13 032
New issued equity capital	8 972	0
Net cash flow from financing activity	8 972	0
Net change in cash and cash equivalents	16 516	(7 895)
Cash and cash equivalents as of January 1	438	8333
Cash and cash equivalents as of December 31	16 954	438

Techstep ASA – Notes to the annual accounts

• General information, basis for preparation
• Salaries and personell cost
• Other operational costs
• Financial income and expenses
• Income taxes
• Shares in subsidiaries
• Equity capital

Notes to the annual accounts for Techstep ASA

1. General information, basis for preparation

Birdstep ASA was renamed Techstep Group June 3, 2016.

On April 7, Birdstep ASA sold its subsidiary Birdstep Technology AB (BTAB) with Birdstep "HetNet" technology and most BTAB employees to Smith Micro Software Inc. for 2 MUSD. In return, Birdstep received a letter of intent to get sole distribution rights for Smith Micro's products in the Nordic region.

On July 1, 2016 the Company entered an agreement with Zono Holding AS to acquire 100% of the shares in Zono, in exchange for consideration shares in Techstep ASA. The Zono transaction was completed in September 2016, and a total of 58,181,818 consideration shares were issued. On the same day, the company signed an agreement in principle with Teki Gruppen AS to acquire a 54% stake in Teki Solutions AS. The transaction was completed in November 2016 by issuing 30,053,488 consideration shares, divided into four equal parts for Skarestrand Invest AS, Dovran Invest AS, Jyst Invest AS and Tinde Industrier AS, resulting from the demerger of Teki Gruppen AS.

The financial statements for the parent company Techstep ASA have been prepared and presented in accordance with simplified IFRS pursuant to § 3-9 in Norwegian Accounting Act.

The financial statements are prepared in accordance with the Group's accounting policies, and reference is made to the Group Note 1 and 2 for further details.

2. Salaries and personnel cost

(amounts in NOK 1 000)		Whereof «other costs»*	2016	2015
Salary and holiday pay	11 454	2 065	9 389	2 747
Social security tax	981		981	180
Pension costs including social security tax			647	396
Other personnel costs	4		4	86
Total salaries and personnel cost		2 065	11 021	3 409

* Salary and personnel costs allocated as restructuring costs in connection to closing of locations.

Remuneration to auditor

(amounts in NOK 1 000)	2016	2015
Statutory audit (incl. Technical assistance to financial statements)	206	159
Other assurance services	190	26
Tax advice (incl. Technical assistance with tax papers)	31	39
Other technical assistance in connection with the annual report, pro forma figures and prospect	302	267
Other assistance from other auditing firms	0	0
Total auditor remuneration	729	491

3. Other operation costs

		Whereof «other
(amounts in NOK 1 000)		costs»*	2016	2015
Operating leases of buildings, other housing expenses	23		23	15
Operating leases of computer equipment and other assets	23		23
Consultancy fees, attorney's fees etc.	15 869	4 717	11 152	338
Office costs	31		31	395
Telephone, data, line rental	109		109
Car expenses, travel costs	515		515	1 328
Selling expenses, advertising, customer events	367		367
Other costs	3 461		3 461	1 852
Total operating costs	20 398	4 717	15 681	3 928

* Consists of costs for abandoned locations (restructuring costs) and transaction costs in connection to the restructuring of the Group.

4. Financial income and expense

(amounts in NOK 1 000)	2016	2015
Interest income	219	303
Loss from sale of assets Birdstep ASA –
Birdstep Technology AB		1 028
Other financial income	302
Interest expense	(690)
Agio		2 044
Other financial expense *		(18 020)
Net financial expense	(169)	(14 645)

* Financial loss resulting from the asset transfer agreement with Birdstep Technology AB

5. Income taxes

(amounts in NOK 1 000)	2016	2015
Earnings before tax	(33 353)	(21 982)
Not deductible items	13	3
Gain (-) / loss sale of shares	-	(1 028)
Transaction costs	9 942
Net taxable income	(23 399)	(23 007)
Tax rate	25 %	27 %
Calculated income taxes	(5 850)	0
Effect of change in tax rate	0	0
Income taxes ordinary income	(5 850)	0

Payable taxes in financial statement
(amounts in NOK 1 000)	2016	2015
Payable tax this year	0	0

Deferred tax in financial statement (amounts in NOK 1 000)	2016	Change	2015
Machinery fixtures and fittings	(1 886)		(1 886)
Receivables	(191 727)		(191 727)
Tax losses carried forward	(463 389)	(23 399)	(439 990)
	(657 002)		(633 603)
Temporary differences not included in the basis for deferred tax asset	(633 603)		(633 603)
Basis deferred tax asset	(23 399)		0
25% hereof	(5 850)		0

6. Shares in subsidiaries

Shares in subsidiaries 2016	Location	#shares	Nom. Value	Ownership	Book value
Zono AS	Tønsberg	3 718	1 030	100 %	128 000
Teki Solutions AS	Oslo	191 053	1.5 USD	78.16 %	129 230
Birdstep Technology San Francisco Inc.	San Fran.	40 000 000	0,003522	100 %	0
Total					257 230

Subsidiaries of subsidiaries 2016	Location	#shares	Nom. value	Ownership	Book value
Teki Solutions AS
Nordialog Oslo AS	Oslo	1 000	1000	100 %	327 737
Buskerud Mobil AS	Drammen	978 500	1	100 %	12 801
SmartWorks AS	Oslo	100 000	87.5	100 %	17 661
SmartWorks Nordic Group AS 1)	Stockholm			100 %	100
Netconnect	Oslo	3 341888	1	100 %	16 384

1) Newly founded ultimo 2016. Not included in the group accounts as of December 31, 2016 - immaterial.

Shares in subsidiaries 2015	Location	# shares	Nom. Value	Ownership	Book value
Birdstep Technology AB	Stockholm	50 143 429	SEK 0.01	100 %	0
			USD
Birdstep Technology San Francisco Inc.	San Fran.	40 000 000	0.003522	100 %	0
Total					0

8 March 2016 Birdstep Technology ASA signed an agreement to sell its wholly owned subsidiary Birdstep Technology AB to Smith Micro Software, Inc. for gross compensation of 2 million dollars on a "cash-free, debt net" basis. The transaction was approved by shareholders of Birdstep Technology ASA at an Extraordinary General Meeting 31 March 2016.

7. Equity

The Company has 102,475,577 shares at par value of NOK 1.0. All shares have equal voting rights. Four share capital issues have taken place during the year:

Issue (amounts in NOK 1 000)	#shares	Issue price	Proceeds
Private placement Middelborg AS	3 400 000	2.2	7 480 000
Private placement minority shares	678 108	2.2	1 491 838
Compensation shares ZONO	58 181 818	2.2	128 000 000
Compensation shares Teki	30 053 488	4.3	129 229 998
Total			266 201 836

For additional information on the number of shares, equity etc., please see Group Note 11.

BDO AS Munkedamsveien 45 Postboks 1704 Vika 0121 Oslo

Independent Auditor's Report

To the General Meeting of Techstep ASA

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Techstep ASA. The financial statements comprise:

• · The financial statements of the parent company, which comprise the balance sheet as at 31 December 2016, and income statement, statement of changes in equity, cash flow for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and
• · The financial statements of the group, which comprise the balance sheet as at 31 December 2016 and 2015, income statement, statement of changes in equity, cash flow for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion:

• The financial statements are prepared in accordance with the law and regulations.
• The accompanying financial statements give a true and fair view of the financial position of the parent company as at 31 December 2016, and its financial performance and its cash flows for the year then ended in accordance with simplified application of international accounting standards according to § 3-9 of the Norwegian Accounting Act.
• The accompanying financial statements give a true and fair view of the financial position of the group as at 31 December 2016 and 2015, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards as adopted by the EU.

Basis for Opinion

We conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company as required by laws and regulations, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Description of key audit matter	How the key audit matter was addressed
Reverse takeover and implementation of IFRS
During 2016 several linked transactions took place resulting in a change of control in Techstep ASA. As a result of these transactions, the shareholders controlling 78,16 % of Teki Solutions AS gained control of Techstep ASA. Prior to these transactions, Techstep ASA had sold of the pre-existing business activities. The linked transactions were considered not to be a business combination, thus, it was accounted for as an assets acquisition by Teki Solutions AS.	We have performed a detailed review of the agreements and the calculation of income statement effect of the linked transactions. The documentation of the IFRS implementation, including the new acquisition analysis, management's assumptions and the methodology underlying the analysis was reviewed and verified.
Teki Solutions AS financial statements for 2015 was prepared based on accounting principles generally accepted in Norway. Since Teki Solutions AS was identified as the acquirer in the linked transactions, IFRS has been implemented from 01.01.2015 for the Teki Solution group. The transition to IFRS is described in note 26.	We have involved internal specialists in valuation and acquisition analysis in this work. Furthermore, our audit procedures involved a detailed review of the presentation of the transition to IFRS in note 26 and acquisition analysis presented in note 4.
Assets and liabilities acquired by Teki Solutions AS were measurement at fair value at the transaction date. The difference between the fair value of consideration shares and the fair value of the net assets received (from Teki Solutions perspective) was recognised in the consolidated income statement. See note 4.
The linked transactions and implementation of IFRS accounting is complex and has therefore been an important priority in our audit.

Our audit procedures relating to the sale of handsets and mobile solutions have included a detailed review of the company IT systems that automatically process sales transactions. We have also performed a detailed review and assessment of accrued income at year-end. Furthermore, the procedures relating to the sale of services and implementation of digital workflows have been reviewed in detail as has accrued income. We have additionally performed a detailed review of contracts and accrued hours to ensure that revenue is accrued correctly. We have assessed the adequacy of the description of the Group's principles for revenue recognition detailed in the notes.
Our audit procedures have included a detailed review of management's impairment testing for each business unit to which goodwill is allocated. We have also assessed management's assumptions underlying the valuation and taken into account management's historical accuracy in determining the estimates. We have used internal specialists in this process. We have also considered the assumptions described in note 13. We have reviewed the adequacy of the information provided in the notes against the requirements of IAS 36.

Valuation of investments in subsidiaries
The company has significant investments in subsidiaries that are valued at cost. Investments amount to MNOK 257,23. In connection with the assessment of the underlying value of the subsidiaries there will be carried out an estimate of the recoverable amount in accordance with IAS 36, to determine if there are indications that the assets are impaired. Losses and low equity in subsidiaries are indications that there may be impairment losses	Our audit procedures have included a detailed review and assessment of management's impairment testing, including the calculation of recoverable amounts. We have also assessed management's assumptions underlying the valuation and taken into consideration the historical accuracy in determining the estimates.
relating to investments.	We have used internal valuation specialists in this process.
The size of investments and complexity of the valuation of the assets means that we deem the valuation of investments in subsidiaries as a key audit area.

Other information

Management is responsible for the other information. The other information comprises the Board of Directors' report, statements on Corporate Governance and Corporate Social Responsibility and other information in the annual report, but does not include the financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement in this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors and the Managing Director for the Financial Statements

The Board of Directors and the Managing Director (management) are responsible for the preparation and fair presentation of the financial statements of the parent company in accordance with simplified application of international accounting standards according to the Norwegian Accounting Act section 3-9, and for the preparation and fair presentation of the financial statements of the group in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's and the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing (ISAs), we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error. We design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.
• obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit

We also provide the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Board of Directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

Opinion on the Board of Directors' report

Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Board of Directors' report and in the statements on Corporate Governance and Corporate Social Responsibility concerning the financial statements, the going concern assumption, and the proposal for the coverage of the loss is consistent with the financial statements and complies with the law and regulations.

Opinion on Registration and Documentation

Based on our audit of the financial statements as described above, and control procedures we have considered necessary in accordance with the International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information, it is our opinion that management has fulfilled its duty to produce a proper and clearly set out registration and documentation of the company's accounting information in accordance with the law and bookkeeping standards and practices generally accepted in Norway.

Oslo, 23 March 2017 BDO AS

Erik H. Lie State Authorised Public Accountant

Independent Auditor's Report 2016 Techstep ASA - Page 7 of 7

TECHSTEP ASA

Brynsveien 3 0667 Oslo, Norway +47 915 233 37

www.techstep.no