Techstep ASA — Interim / Quarterly Report 2014

Feb 11, 2015

Contents

Q4 Quick summary	2
Birdstep Technology ASA Interim Report	3
CEO Update	4
Business Focus	7
Highlights / Milestones	9
Market Outlook	10
Result of Operations	12
Cash Flow	13
Financial Statements	14
Notes	19
Discontinued Operations	21
Risks	23
Financial Calendar 2015	24

BIRDSTEP TECHNOLOGY ASA SELLS BIRDSTEP TECHNOLOGY OY (Secure Mobility) in order to focus fully on its core growth areas.

Birdstep´s newest product, Always Smartest Connected, was delivered for test and evaluation into ongoing trials in Asia.

The company fi nalized an Asset Transfer Agreement where all assets were transferred to Birdstep Technology AB

Birdstep signs two technology and channel partner agreements to target the fast growing Asian mobile market.

Birdstep Technology ASA Interim Report

OCTOBER - DECEMBER 2014

• Revenue was NOK 12.1 (12.9) million, representing a decrease of 6.4% over the same period last year.

• EBITDA ended at NOK -6.2 (-0.7) million, representing an increased loss of NOK 5.4 million over the same period last year.

• Continuing operating earnings per share amounted to NOK -0.07 (-0.04).

• Total net cash fl ow amounted to NOK -0.2 (20.6) million.

• Cash balance was NOK 16.5 (19.7) million.

JANUARY – DECEMBER 2014

• Revenue was NOK 51.5 (51.8) million, representing a decrease of 0.6% over the same period last year.

• EBITDA ended at NOK -11 (-2.1) million, representing an increased loss of NOK 13.1 million over the same period last year.

• Continuing operating earnings per share amounted to NOK -0.15 (-0.11).

• Total net cash fl ow amounted to NOK -5.6 (5.4) million.

SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD

• The company sold Birdstep Technology OY (Secure Mobility) in order to concentrate on Smart Mobile Data Solutions and realised Euro 2m cash for the transaction in January 2015.

• The company fi nalized an Asset Transfer Agreement where all assets were transferred to Birdstep Technology AB. This will simplify the corporate structure signifi cantly.

CEO Update

There were two transactions to note. Firstly, the sale of Birdstep OY (divestment of the Secure Mobility business) which strategically means we can now focus on Smart Mobile Data Solutions whilst realising 2.0m Euro of cash to re-invest back into the business. Secondly we transferred the corporate assets to Birdstep Technology AB. This provides an effective and streamlined company as we enter into 2015.

I am confi dent that those transactions will strengthen our company, allowing us to accelerate our product development and the related business strategy, while allowing for increased fi nancial fl exibility. I will spend most of my update on explaining the background and reasoning behind those transactions.

THE SALE OF BIRDSTEP TECHNOLOGY OY

Over the past years Birdstep has been evaluating and implementing ways to better leverage the synergies between Secure Mobility and Smart Mobile Data solutions. The fi rst step was to alter the product and development strategies to better leverage the same or similar products across the enterprise and service provider markets. Next step was to build a stronger sales team by consolidating its expertise into one team with the goal to leverage synergies, bring more effi ciency to the daily work and also to be able to look at the accounts with a wider perspective.

But despite the efforts to fi nd synergies for Secure Mobility and Smart Mobile Data the market direction for the different business areas further diverged. Smart Mobile Data has established itself as the major area of growth for the company and with the sale of Birdstep Technology OY we have a much stronger foundation from which to focus and execute on the opportunities we see for ourselves.

Birdstep signed a share purchase agreement on January 2, 2015 with Elektrobit Wireless Technology. The debt free, net of cash and cash equivalents purchase price for the transaction, which was validated by external bankers, was EUR 2.0 million in cash before transaction costs

The transaction will have no impact on the company´s revenue generated from its existing Smart Mobile Data customer as Birdstep Technology OY ´s Secure Mobility offering is positioned towards enterprise, government and defence organisations, while Smart Mobile Data customers are Mobile Network Operators (MNO), Multiple System Operators, Cable Operators (MSO), Mobile Virtual Network Operators (MVNO) and Original Equipment Manufacturers (OEM). Birdstep will, after this transaction, be able to focus entirely on Smart Mobile Data services, offering advanced solutions for its customers. The new capital will be used to further focus on growth, continue geo-

graphic expansion, further develop the product portfolio and strengthen the company´s position in high growth markets such as the US and Asia.

THE ASSET TRANSFER AGREEMENT

On January 5, 2015 Birdstep and Birdstep Technology AB, the wholly owned Swedish subsidiary, announced that they had signed an asset transfer agreement where all assets, including all customer contracts and Intellectual Property Rights (IPR), were transferred to Birdstep Technology AB on January 1, 2015.

During the last decade the structure of Birdstep has varied as entities were acquired and sold. Also, the core business of Birdstep has changed during these years. However, the reality of the business structure has not refl ected the organizational structure.

Before the transaction the contractual- and busi-

ness activities were separated from each other insofar as the contractual and ownership of resources and assets resided within the company while day-to-day activity such as product development, sales etc. were managed out of Birdstep Technology AB. Moreover, important management and administrative functions within the Group were carried out at the Stockholm offi ce of Birdstep Technology AB. The company came to the conclusion that unifying these would strongly increase effi ciency, simplifi cation and clarity. This is benefi cial to all involved, including shareholders, customers, management and employees. Among other things, the company will now also have simplifi ed accounting processes. Birdstep Technology AB has become the entrepreneur of the Smart Mobile Data business by owning IPRs, customer contracts, product development and pricing.

As to results in the last quarter, and after reclassifying assets and liabilities related to Birdstep Tech-

nology OY as held for sale, and the profi t as profi t from discontinued operations, Q4 closed with a revenue of NOK 12.1 million compared to NOK 12.9 million for the previous year. Q4 EBITDA ended at NOK -6.2 million compared to NOK -0.7 million for the previous year and the full year FY14 revenue was NOK 51.5 million compared to NOK 51.8 million for the previous year.

You will fi nd more detailed information about our numbers under Result of Operations.

We are dissatisfi ed with our rate of growth slowing both in the quarter and for the full year. We have however identifi ed the main reasons behind the results. Firstly, as I informed in our Q3 report, some new deals has taken longer than expected to close and unfortunately have shifted into 2015. Secondly, we have, despite focused efforts, not succeeded in the European market. The European telecoms market continues to show no growth as the market consolidates. Thirdly, outside of Europe we anticipated that mobile operators, after investing in their WiFi infrastructure, would have been more aggressive in their attempts to manage the customers WiFi experience. However, our discussions with operators and other players in the markets worldwide is supporting the fact that Wi-Fi is now really becoming an enabling technology that must be adopted to form a strategic Het-Net (Heterogeneous Network) offering. We believe that during 2015 more and more operators, including MVNO's and cable operators, will become more aggressive in their use of WiFi to solidify their HetNet strategies and strengthen their customer experience proposition.

Turning to our business opportunities we are continuously concentrating all the resources necessary to bring opportunities to closure as quickly as possible. I am pleased to inform you that our newest product, Always Smartest Connected, has now been delivered for test and evaluation into ongoing trials in Asia. We have a strategy and roadmap for 2015 which puts Birdstep in a strong position to capitalize on the trends in the market and enable our customers to provide an exceptional user experience to their customers. And last but not least, as a result of our recent M&A´s (Merger & Aquisition) activities, we have strengthened our balance sheet and demonstrated a longer-term capability and commitment to investing in the future development of our products.

I look forward to updating you again next quarter.

Lonnie Schilling Chief Executive Offi cer

Business Focus

The HetNet trend

This quarter the company continued to deliver it's core product, EasySmart, to existing customers globally. In the USA, the big challenge, which also presents a major growth opportunity for the sector and for Birdstep, is consumers insatiable appetite for more data. This is only set to grow as we move beyond 2015. Mobile operators face the monumental headache of drastically improving coverage and capacity on their networks. They will continue to pursue technological advancements to handle demand. This still includes offloading some mobile bandwidth needs to Wi-Fi, but it appears that HetNets (Heterogeneous Network) now have started to gain even more relevance and importance. As offl oading is evolving into "traffi c steering", as parallel cellular and Wi-Fi networks continue to converge and devices become capable of selecting intelligently between them. This is a crucial development for the HetNet since it brings Wi-Fi and cellular networks together as coherent partners with complementary strengths and capabilities.

A renewed and more serious interest in HetNet strategies was observed also in the Asia Pacifi c region during the quarter. Various MNOs (Mobile Network Operator) have initiated evaluations and defi nition of strategies to leverage carrier Wi-Fi deployments as part of their near and long term strategies. There is also a defi nite need for analyt-

ics solutions, particularly in conjunction with Het-Net deployments. This augurs well for Birdstep as it is a natural foundation for data monetization, which is becoming the most critical aspect for carrier investments in Wi-Fi technologies. Another interesting observation is that Telstra Australia is rolling out 80,000 hotspots and is currently offering free Wi-Fi for a limited term to its subscribers. This reiterates the shift towards carrier Wi-Fi by the MNOs and it further consolidates Birdstep´s value proposition both in the region and globally. With Birdstep´s newest product, Always Smartest Connected, now delivered for test and evaluation into ongoing customer trials, Asia remains one of the company´s most promising markets.

The European market is still weak in terms of revenue growth, which has remained negative for the vast majority of mobile players. While the speed of decline has eased, there is no evidence that the region will return to growth in 2015. But the years of sharp decline seems to be over. The company attended a number of events in the region during the quarter, which resulted in moderate activity and new contacts. The discussions with operators, potential partners and analysts also supported the fact that Wi-Fi is now really becoming an enabling technology that needs to be adopted by European wireless operators to form a strategic HetNet offering, particularly with discussions around VoLTE/VoWIFI (Voice over LTE / Voice over Wi-Fi) and the completion from Wi-Fi for voice services.

There is an increasing amount of competition emerging in all of the company´s target market. Birdstep believes new competition validates the HetNet value proposition and particularly the market sector in which the company operates. The key will be to assist operators in developing Het-Net strategies in their overall high level plans and differentiate the offerings from other organizations.

Highlights / Milestones

• The company focused on fi nalizing the sale of Birdstep Technology OY. The agreement was signed on January 2 2015, realising cash of Euro 2 million.

• The company focused on fi nalizing an Asset Transfer Agreement where all assets were transferred to Birdstep Technology AB. This will simplify the corporate structure signifi cantly. The agreement was approved at the EGM in Oslo on December 16 2014.

• Birdstep´s newest product, Always Smartest Connected, was delivered for test and evaluation into ongoing customer trials in Asia.

• Birdstep is targeting the fast growing mobile market in Taiwan by signing a technology and channel partner agreement with Acom Networks. Both companies see promising

potential within the wireless service provider market in Taiwan and aim to establish Birdstep as the leading Intelligent Network Selection solution provider to the MNOs and MSOs in that country.

• Birdstep brings Smart Mobile Data solutions to the Philippines and South East Asia by signing a new partnership contract with Ardent Networks, one of the largest distributors of IT products in theregion. Birdstep's entire product suite, enabling experience continuity for consumers is now available to carriers and MNOs throughout the region.

• The company received recognition after attending and hosting several events in the quarter.

Market Outlook

HetNets have been brewing for a few years now but 2015 will be the year they become mainstream as several core components reach maturity. The starting point came with MNOs offl oading data to Wi-Fi in order to avoid a capacity crunch on their backbone networks, while exploiting the superior economics of broadband infrastructures and almost as a by-product giving their customers in many cases a better quality of experience. Now offl oading is evolving into "traffi c steering", as parallel cellular and Wi-Fi networks continue to converge and devices become capable of selecting intelligently between them. This is a crucial development for the HetNet since it brings Wi-Fi and cellular networks together as coherent partners with complementary strengths and capabilities.

The advent of traffi c steering highlights a vital element that has been missing from many early HetNets, which is client software capable of cooperating closely with the respective networks to maximise QoS while optimizing costs for the operator. This has required simultaneous progress on the client, network and operational fronts from specialists in the fi eld like Birdstep and some operators have already taken advantage. Now the fi nal pieces of the puzzle are falling into place, which means that more MNOs can contemplate deployment of robust HetNets that really do work as a single seamless infrastructure giving users a continuously best connected experience wherever they are.

As a result operators can now hand down rules on policy from their BSS (Business Support Systems) through the network for enforcement on the client device. Such a rule might specify that live video will always be routed over the best possible connection, while less urgent traffi c such as emails or text messages should take the cheapest route.

Real life scenarios could be more sophisticated, taking account of varying traffi c conditions and the status of the user's device, so that Wi-Fi could be turned off when the battery is low and the user is away from home. Analytics will be employed increasingly on the client to give operators a clear view of the experience the user is currently getting as well as the status of the device. This will augment the existing analytics from the network so that operators can achieve a true end to end view at the service level as a basis for intelligent decisions over traffi c steering.

People still do like talking on the phone, especially when travelling, and so a HetNet is only truly worthy of the name if it enables telephony over Wi-Fi as well as cellular.

There is one other important aspect of a HetNet that is sometimes forgotten in this age of asynchronous communications and that is telephony. People still do like talking on the phone, especially when travelling, and so a HetNet is only truly worthy of the name if it enables telephony over Wi-Fi as well as cellular. That defi ciency will also be remedied during 2015 as more MNOs deploy consistent packet based telephony services that work equally well over Wi-Fi in public places such as airports, with transparent handoff to and from cellular as the user roams. For telephony too, the HetNet can select the best available network, which is a signifi cant benefi t given the problems with poor coverage in and around buildings suffered by many users of cellular services.

Therefore, during 2015, then the ability of HetNets to deliver Experience Continuity – that is consistent, always available service, spanning both voice and data - will be a telling competitive advantage for operators.

Result of Operations

Fourth quarter

Fourth quarter revenue was NOK 12.1 (12.9) million, which represents a decrease in revenue of 6.4% over the same quarter last year.

Salaries and wages were NOK 8.2 (9) million. The decrease in salaries and wages compared to the same quarter last year is due to an increase of capitalized development cost. The number of employees as of 31.12.2014 was 46 (44).

Other operating expenses for the quarter were NOK 9.3 (4.3) million.

EBITDA ended at NOK -6.2 (-0.7) million which represents an increased loss of NOK 5.4 million compared to the same period last year.

As a result of the above, Income (Loss) from continuing operations before taxes of NOK -6.8 (-3) million was recorded in the quarter.

Twelve months

The twelve month's revenue was NOK 51.5 (51.8) million, which represents a decrease of 0.6% over the same period last year.

Salaries and wages were NOK 37.3 (34.9) million.

Other operating expenses for the twelve months were NOK 22.3 (18) million.

EBITDA ended at NOK -11 (-2.1) million which represents an increased loss of NOK 8.9 million compared with the same period last year.

As a result of the above, Income (Loss) from continuing operations before taxes of NOK -15.2 (-10.1) million was recorded during the twelve months period.

The fi nancial fi gures presented above are excluding Birdstep Technology OY due to discontinued operation. Assets and liabilities related to that entity were reclassifi ed as held for sale, and its profi t as profi t from discontinued operations.

Cash fl ow

Fourth quarter

Cash fl ow for the quarter was almost neutral resulting in our net cash balance decreased by NOK 0.2 million to NOK 16.7 million, and NOK 16.5 million after cash and cash equivalents classifi ed as held for sale. The fourth quarter last year, and including the new issue of NOK 19.7 million showed a cash balance increase of NOK 20.6 million.

Net cash fl ow from operating activities for the quarter was NOK 0.8 million. Fourth quarter last year, net cash fl ow from operating activities was NOK 4.1 million.

Twelve months

Cash fl ow for the twelve months was negative and our net cash balance decreased by NOK 5.6 million to NOK 16.5 million and after the reclassifi cation of NOK 0.2 million as held for sale. For the same period last year, the cash balance increased by NOK 5.4 million.

Net cash fl ow from operating activities for the twelve months was NOK -0.4 million. For the twelve months previous year, net cash fl ow from operating activities was NOK -6.8 million.

Cash and cash equivalents as of 2 Jan 2015 and after considering the purchase price form the sales of Birdstep Technology OY is expected to be improved by NOK 16.8 million to NOK 33.3 million.

Financial statements

Condensed Consolidated Statements of Operations

(In thousands of NOK , except share and per share data)

	For the three months ended		For the full year
	31.12.2014	31.12.2013	2014	2013
OPERATING REVENUES Cost of Sales	12.055 (636)	12.873 (295)	51.482 (2.766)	51.812 (994)
OPERATING EXPENSES
Salaries and wages	(8.242)	(8.951)	(37.346)	(34.896)
Other operating expenses	(9.330)	(4.339)	(22.376)	(17.999)
TOTAL OPERATING EXPENSES	(17.572)	(13.290)	(59.722)	(52.896)
Operating income loss before
	(6.154)	(712)	(11.006)	(2.078)
			-
Depreciation and amortization	(1.686)	(2.362)	(7.700)	(8.402)
Operating income loss after
	(7.839)	(3.074)	(18.706)	(10.480)
OTHER INCOME (EXPENSE)
Interest income, net	127	73	352	213
Other financial items, net	871	(39)	3.108	160
OTHER INCOME, NET	998	34	3.460	373
INCOME(LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES	(6.842)	(3.041)	(15.246)	(10.107)
Income taxes	(186)	(701)	(186)	(701)
INCOME(LOSS) FROM CONTINUING OPERATIONS	(7.028)	(3.741)	(15.432)	(10.807)
Profit for the year from discontinued operations	3.022	1.845	5.596	1.972
NET INCOME(LOSS)	(4.006)	(1.897)	(9.836)	(8.836)
Earnings and diluted earnings per share		- -
Continuing operations	(0,07)	(0,04)	(0,15)	(0,11)
Discontinued operations	0,03	0,02	0,06	0,02
Total	(0,04)	(0,02)	(0,09)	(0,09)

Condensed Consolidation Statements of Comprehensive Income

(In thousands of NOK, except share and per share data)

	For the three months ended		For the full year	For the full year
	31.12.2014	31.12.2013	2014	2013
Net income (loss) for the period	(4.006)	(1.897)	(9.836)	(8.836)
OTHER COMPREHENSIVE INCOME
Currency translation effect	3.620	1.222	2.626	1.344
TOTAL COMPREHENSIVE INCOME	(386)	(675)	(7.210)	(7.492)
Attributable to:
Equity holder of the parent company	(733)	(675)	(7.210)	(7.492)
TOTAL COMPREHENSIVE INCOME	(733)	(675)	(7.210)	(7.492)

Condensed Consolidation Balance Sheets

(In thousands of NOK, except share and per share data)

	As	of
	31.12.2014	31.12.2013
NONͲCURRENT ASSETS:
Intangible assets	48 246	48 431
Tangible assets	1 235	195
TOTAL NONͲCURRENT ASSETS	49 481	48 626
CURRENT ASSETS:
Accounts receivable	7 876	10 897
Other current assets	959	2 009
Assets held for sale	6 937	8 224
Cash & cash equivalents	16 539	19 707
TOTAL CURRENT ASSETS	32 311	40 837
TOTAL ASSETS	81 792	89 463
SHAREHOLDERS' EQUITY:
Share capital	10 162	10 012
Share premium fund	38 272	36 037
Retained earnings, including translation reserves	17 557	24 767
TOTAL SHAREHOLDERS' EQUITY	65 991	70 816
NONͲCURRENT LIABILITIES
Deferred tax liabilities	178	175
TOTAL NONͲCURRENT LIABILITIES	178	175
CURRENT LIABILITIES
Accounts payable	3 110	2 239
Deferred revenue	488	1 207
Liabilities held for sale	5 338	6 605
Accrued expenses and other liabilities *	6 687	8 420
TOTAL CURRENT LIABILITIES	15 623	18 472
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	81 792	89 463

* Accrued pension cost in 2013 was displayed as a separate line in non-current liabilities.

In 2014 this item has been reallocated and is now included in Accrued expenses and other liabilities.

Condensed Consolidated Statements of Cash Flows

(In thousands of NOK)

	For the three months ended		For the full year
	31.12.2014	31.12.2013	2014	2013
OPERATING ACTIVITIES
Income (loss) from continuing operations before taxes		(6 842) (3 041)	(15 246) (10 107)
Income (loss) from discontinuing operations	3 022	1 845	5 596	1 972
Depreciation and amortization	1 940	2 415	8 386	8 576
Write down and impairment of assets	Ͳ	Ͳ	Ͳ	Ͳ
Change in receivables and payables	2 640	2 865	865	(7 213)
NET CASH FROM OPERATING ACTIVITIES	761	4 084	(398) (6 772)
INVESTING ACTIVITIES
Capitalized development		(1 969) (1 964)	(6 548) (6 521)
Furniture, Machinery and Equipment and leashold improvments	Ͳ	Ͳ		(1 086) Ͳ
Payment of loan	(722)	Ͳ		(722) Ͳ
Change in loan balance with affiliated company	Ͳ	Ͳ	Ͳ	Ͳ
NET CASH FROM INVESTING ACTIVITIES		(2 691) (1 964)	(8 356) (6 521)
FINANCIAL ACITIVITIES
New Issue	Ͳ	19 692	2 385	19 692
NET CASH FROM FINANCIAL ACTIVITIES	Ͳ	19 692	2 385	19 692
	Ͳ	Ͳ
Effect of foreign exchange rate changes	1 759	(1 247)	746	(990)
Net increase(decrease) in cash & cash equivalents	(172)	20 564	(5 623)	5 410
Cash & cash equivalents, beginning of period	16 879	1 767	22 331	16 921
Cash & cash equivalents classified as held for sale	(168)	(2 623)	(168) (2 623)
Cash & cash equivalents, end of period	16 539	19 707	16 539	19 707

The statement of cash flow is presented as if no discontinued operation has occurred

Condensed Consolidated Statements of Changes in Shareholders' Equity

(In thousands of NOK, except share and per share data)

	Share capital	Share premium	Other paid equity	Other equity	Translation reserves	Total equity
Equity as at 31 December 2013	10.012	36.037	61.232	(49.140)	12.675	70.816
Net income (loss)	-	-	-	(9.836)	-	(9.836)
Other comprehensive income for the period Displacements between restricted and
unrestricted reservs						-
Foreign currency exchange	-	-	-		2.626	2.626
Total comprehensive income	-	-	-	(9.836)	2.626	(7.210)
Transactions with shareholders:
Net issue of ordinary shares*	150	2.235	-	-	-	2.385
Total transactions with shareholders	150	2.235	-	-	-	2.385
Equity as at 31 December 2014	10.162	38.272	61.232	(58.976)	15.301	65.991

* A completion of a private placement of 1.500.000 shares was made May 20, 2014. The share issue was made pursuant to an agreement entered into in 2011 with the former CEO, which agreement since has been assigned by such former CEO to a third party. The subscription price per share was set in the 2011 agreement.

	Share capital	Share premium	Other paid equity	Other equity	Translation reserves	Total equity
Equity as at 31 December 2012	9.199	17.165	61.232	(40.304)	11.330	58.622
Net income (loss)	-	-	-	(8.836)	-	(8.836)
Other comprehensive income for the period Displacements between restricted and
unrestricted reservs						-
Foreign currency exchange	-	-	-	-	1.344	1.344
Total comprehensive income	-	-	-	(8.836)	1.344	(7.492)
Transactions with shareholders:
Net issue of ordinary shares	813	18.873	-	-	-	19.686
Reduction in share capital and transfer of share
premium	-	-	-	-	-	-
Total transactions with shareholders	813	18.873	-	-	-	19.686
Equity as at 31 Dec 2013	10.012	36.037	61.232	(49.140)	12.675	70.816

Notes

Accounting Policies

The accompanying consolidated fi nancial statements are prepared under International Financial Reporting Standards (IFRS). Our fi scal year runs from January 1 to December 31.

The accompanying condensed consolidated statements of operations and cash fl ows cover the full year 2014, and the related information on Birdstep included in these notes to the fi nancial statements is unaudited. In the opinion of management, such interim statements include all adjustments, which consist only of the normally recurring adjustments necessary for a fair presentation of the consolidated results of operations, fi nancial position and cash fl ows for each period presented. The interim consolidated results are not necessarily indicative of results for the full year.

The same accounting policies and methods of computation are followed in the interim fi nancial statements as those of the most recent annual fi nancial statements.

These interim fi nancial statements are presented in Norwegian crowns (NOK). The functional currency of Birdstep's foreign operations is the currency of the country in which the operations are conducted.

The accounts of Birdstep are translated into the reporting currency, NOK, using exchange rates in effect at period-end for assets and liabilities, and at average exchange rates during the period for the results of operations.

EBITDA is equivalent to operating income (loss) excluding both discontinued operations and noncash charges, such as depreciation and amortization.

Income per share is calculated by dividing net income available to common shareholders for the period by the weighted average number of common shares outstanding during the period.

As of December 31, 2014, the Company has 101.621.627 shares issued and 101.600.572 shares outstanding, the difference of 21.055 representing treasury shares.

Segment Reporting

The Company is divided into two separate operating segments (Smart Mobile Data and Secure Mobility)

	*(!()!)'(+	(!()!)'(	)'(+	)'(*
	()',,	()/.*	,(+/)	,(/()
	"./*0#	"* '.+#	"(/ .'-#	"('+/'#
\$
	-*0.	-).,	)*0))	(0*.)
	*'.	(-*/	**+/	)'-+

* Secure Mobility segment is related to Birdstep Technology OY which was sold on 2 Jan 2015. The Secure Mobility segment is presented as Discontinued Operatation on page 22.

Discontinued Operations

On January 2nd, 2015, the Company and EB entered into a Share Purchase Agreement on whereby EB acquired 100% of the shares in BTOY from the Company as of the same date.

The debt free, net of cash and cash equivalents purchase price for the transaction was EUR 2.0 million in cash on the closing date and before accounting for transaction costs.

The assets and liabilities related to Birdstep Technology OY have been presented as held for sale following the sale of 100 % of the shares in the company on January 2nd, 2015.

	2014	2013
NON-CURRENT ASSETS:
Intangible assets	2.484	1.680
Tangible assets	65	61
TOTAL NON-CURRENT ASSETS	2.548	1.741
CURRENT ASSETS:
Accounts receivable	3.825	3.591
Other current assets	395	269
Cash & cash equivalents	168	2.623
TOTAL CURRENT ASSETS	4.389	6.483
Assets held for sale	6.937	8.224
NON-CURRENT LIABILITIES
Other liabilities	935	3.285
TOTAL NON-CURRENT LIABILITIES	935	3.285
CURRENT LIABILITIES
Accounts payable	861	886
Deferred revenue	367	198
Accrued expenses and other liabilities	3.175	2.236
TOTAL CURRENT LIABILITIES	4.403	3.320
Liabilities held for sale	5.338	6.605

Analysis of the result of discontinued operations is as follows

	For the three months		For the full year
	2014	2013	2014	2013
OPERATING REVENUES	6.397	6.275	23.922	19.372
Cost of Sales	-883	-861	-2.765	-3.053
OPERATING EXPENSES
Salaries and wages	-3.681	-2.640	-12.589	-9.932
Other operating expenses	-1.272	-1.083	-4.534	-4.149
TOTAL OPERATING EXPENSES	-4.953	-3.723	-17.123	-14.081
Operating income loss before
depreciation and amortization (EBITDA)	561	1.691	4.034	2.238
Depreciation and amortization	-254	-53	-686	-174
Write down and impairment of intangible assets	0	0	0	0
Operating income loss after
depreciation and amortization (EBIT)	307	1.638	3.348	2.064
OTHER INCOME (EXPENSE)
Interest income, net	25	0	25	0
Other financial items, net	2.690	206	2.223	-92
OTHER INCOME, NET	2.715	206	2.248	-92
PROFIT FROM DISCONTINUED OPERATIONS BEFORE TAXES
Income taxes	0	0	0	0
PROFIT FROM DISCONTINUED OPERATIONS	3.022	1.845	5.596	1.972

Cash fl ow

	For the three months		For the full year
	2014	2013	2014	2013
Operating Cash flow	-3.782	2.443	-929	4.378
Investing cash flow	-550	-628	-1.526	-1.923
Financing cash flow	0	0	0	0
Total cash Flows	-4.333	1.815	-2.455	2.454

Risks

This report contains statements regarding the future in connection with the company's growth expectations, general and specifi c market outlook and objectives. All statements about the future are subject to inherent risks and uncertainties, and many factors can lead to actual profi ts and developments deviating substantially from that which has been expressed or implied in such statements.

Birdstep Technology is exposed to various forms of market, operational and fi nancial risk.

Financial instruments that potentially subject Birdstep to concentrations of credit risk consist primarily of cash and accounts receivable. Birdstep performs ongoing evaluations of custom-

ers' fi nancial condition to determine if any provision for potential uncollectible amounts is needed. As of December 31, 2014, no provisions for potential uncollectible amounts had been made.

The company's various risks have been described in the Annual Report/ Prospectus in further detail and no other risks has been identifi ed.

Financial Calendar 2015

	2015
January	Febuary	March	April
M Tu W Th F Sa Su	M Tu W Th F Sa Su	M Tu W Th F Sa Su	M Tu W Th F Sa Su
1 2 3 4	$\overline{1}$	$\overline{1}$	$1\ 2\ 3\ 4\ 5$
5 6 7 8 9 10 11	2 3 4 5 6 7 8	2 3 4 5 6 7 8	6 7 8 9 10 11 12
12 13 14 15 16 17 18	9 10 11 12 13 14 15	9 10 11 12 13 14 15	13 14 15 16 17 18 19
19 20 21 22 23 24 25	16 17 18 19 20 21 22	16 17 18 19 20 21 22	20 21 22 23 24 25 26
26 27 28 29 30 31	23 24 25 26 27 28	23 24 25 26 27 28 29 30 31	27 28 29 30
May	June	July	August
M Tu W Th F Sa Su	M Tu W Th F Sa Su	M Tu W Th F Sa Su	M Tu W Th F Sa Su
$1 \quad 2 \quad 3$	$1 \t2 \t3 \t4 \t5 \t6 \t7$	1 2 3 4 5	12
5 6 7 8 9 10	8 9 10 11 12 13 14	6 7 8 9 10 11 12	3 4 5 6 7 8 9
11 12 13 14 15 16 17	15 16 17 18 19 20 21	13 14 15 16 17 18 19	10 11 12 13 14 15 16
18 19 20 21 22 23 24	22 23 24 25 26 27 28	20 21 22 23 24 25 26	17 18 19 20 21 22 23
25 26 27 28 29 30 31	29 30	27 28 29 30 31	24 25 26 27 28 29 30 31
September	October	November	December
M Tu W Th F Sa Su	M Tu W Th F Sa Su	M Tu W Th F Sa Su	M Tu W Th F Sa Su
1 2 3 4 5 6	1 2 3 4		$1 \t2 \t3 \t4 \t5 \t6$
	5 6 7 8 9 10 11	2 3 4 5 6 7 8	7 8 9 10 11 12 13
8 9 10 11 12 13
14 15 16 17 18 19 20	12 13 14 15 16 17 18	9 10 11 12 13 14 15	14 15 16 17 18 19 20
21 22 23 24 25 26 27	19 20 21 22 23 24 25	16 17 18 19 20 21 22	21 22 23 24 25 26 27
28 29 30	26 27 28 29 30 31	23 24 25 26 27 28 29	28 29 30 31

Preliminary fi nancial calendar, with reservations for changes:

Quarterly Reports

• Q4 2014 11th February 2015
• Q1 2015 27th April 2015
• Q2 2015 31st July 2015
• Q3 2015 4th November 2015

Annual General Meeting

27th April 2015

Birdstep Technology ASA invites shareholders, investors, media and other stakeholders to a phone conference following the announcement of the quarterly earnings reports.

Time and call-in details or place of the events above will be communicated at a later stage via OSE, Oslo Stock Exchange and www.birdstep.com.