Techstep ASA — Interim / Quarterly Report 2016

Feb 28, 2017

TECHSTEP

INTERIM REPORT Q4 2016.

WE MAKE YOUR WORKLIFE MOBILE

CONTENT

ABOUT TECHSTEP ASA	З
HIGHLIGHTS	4
CEO COMMENT	5
KEY FIGURES	7
OPERATIONAL REVIEW	8
FINANCIAL REVIEW	q
FINANCIAL STATEMENTS	10
NOTES	15
FINACIAL CALENDAR 2017	29

ABOUT TECHSTEP ASA.

Techstep has established itself as a leading B2B provider of mobility and communications services in Norway.

Digitization of society and business is changing the mentality of the telecom industry as well as the organizations and people it serves. Focus is moving from infrastructure and devices to value adding services. This creates new market opportunities, and Techstep, along with its subsidiaries, is building and expanding its market offerings to become the preferred digital workplace vendor.

The strategy for building the solutions platform is through organic innovation, acquisitions, and partnerships with an aim to become a fully integrated digital solutions provider. In pursuit of the growth strategy, Techstep is backed by strong investors known for creating value through transformation.

Techstep has two main business segments: Hardware, represented by Nordialog, and Service, represented by SmartWorks. Both companies are subsidiaries of Teki Solutions, which is controlled by Techstep. Nordialog is the mobile operator Telenor's key distribution channel of devices and mobile subscriptions to the Norwegian business segment.

INTERIM REPORT Q4 2016.

HIGHLIGHTS Q4 2016

• Techstep took new steps in positioning itself as a leading digital workplace provider in the Nordics delivering integrated enterprise mobility solutions

• The company made strategic acquisitions, including the B2B providers of mobility and communication services, Nordialog and SmartWorks

• A new organization with a new management team was established with Gaute Engbakk joining as CEO in $\geq$ November 2016. In addition, new members of the Board of Directors were elected at an Extraordinary General Meeting in November 2016
• Q4 2016 revenues amounted to NOK 162.3 million $\geq$
• Adjusted EBITDA ended at NOK 2.4 million, reflecting a quarter with focus on restructuring and M&A

• Q4 2016 EBITDA as reported ended negative at NOK 1.3 million, driven by Nordialog's operations and deduction of group one-off costs related to the transformation process Techstep is experiencing

HIGHLIGHTS YTD 2017

• Marius Drefvelin joined as CFO in January 2017

• Techstep agreed to acquire the software service company Mytos AS and entered an agreement in principle to acquire the telecom mobility hardware company Apro Tele og Data AS

• Agreement in place to establish Techstep Finance, a joint venture with an experienced financing operating partner, a vital part in Techstep's future delivery of MaaS (Mobility-as-a-Service)

• Techstep successfully completed a fully underwritten private placement of NOK 100 million to finance acquisitions and further growth

CEO COMMENT.

"DURING THE FOURTH OUARTER LAST YEAR AND MOVING INTO 2017 WE HAVE TAKEN SIGNIFICANT STEPS FORWARD IN POSITIONING TECHSTEP AS THE LEADING PROVIDER IN THE NORDICS OF THE DIGITAL WORKPLACE, DELIVERING INTEGRATED ENTERPRISE MOBILITY SOLUTIONS.

We see great opportunities as the digital transformation of enterprises and the mobile B2B industry takes place, and will continue to build a solid, profitable and innovative company within this market.

In Q4 2016, supported by active owners and a stronger balance sheet, we acquired Teki Solutions AS, a leading B2B provider of mobility and communication services represented by the subsidiaries Nordialog and Smart-Works. Then, in Q1 2017, we acquired Mytos AS, a software as a service company (SaaS), and entered an agreement in principle to acquire Apro Tele og Data AS, a telecom mobility hardware company. Furthermore, we have established a new management team and started to restructure the business and the organization to deliver on our strategy of increasing solutions sales and deliverables to grow with increasing margins.

From the business platform acquired through Teki Solutions AS, we have a solid base of 3,600 customers

with over 220,000 end-users. A majority of the revenues are from customers that are among the largest and most prominent corporations in Norway and the Nordics - many of which are just beginning to implement digitization and mobility. The user penetration, i.e. the number of employees using our services compared to the total number of employees in these companies, is only around 22%. These factors indicate significant growth potential by securing a broader offering and higher user penetration in the existing customer portfolio.

A key motivational factor for the acquisition is that smartphones and tablets are used at an increasing extent in business life as well as leisure time. Thus, a more effective use of hardware and business solutions available for mobile is increasingly important for our customers' businesses. The end user market is undergoing disruptive shifts where work is progressively more mobile and the power balance is shifting from selling infrastructure to providing value added services.

Consider the fact that most professions $(\sim80\%)$ are mobile in nature, so employees would greatly improve efficiency if they could go about their business without having to stop their work to type on a PC.

The majority ( $\sim$ 90%) of our revenues in 2016 came from sale of hardware and related services, but an increasing portion (~10%) was solutions revenue. Margins for hardware have decreased the past several years while margin from solutions is growing. That is why we strengthened the focus on delivering an enterprise mobile solutions platform. We aim to become a fully integrated digital solutions provider to our customers, and through that to increase the revenue from hardware, solutions and service.

The acquisition of Mytos gives us access to their unique telecom expense management software solution, while we obtain a significant customer base. Additionally, Apro brings a team particularly skilled in the public sector and a large customer base to whom we can provide our solutions offerings.

Going forward, we will focus on what we believe are the key value drivers within our business:

• 1. Grow the number of end users with existing customers and gain new market shares by growing geographically and in existing markets.
• 1. Sell more solutions to existing and new customers and increase revenues per user through solutions sales. Solutions are both in-house organic, from Telenor and through 3rd party partners.
• 1. Grow the recurring revenue in the company by selling more solutions as a service.

I look forward to increasing solutions sales and deliverables that will grow with increasing margins and, especially, working closer with all the new people on board.

Gaute Engbakk, CEO

KEY FIGURES Q4 2016.

KEY FIGURES (ADJUSTED)

(Figures in NOK 1000)

	Q4 2016	Q4 2015	2016	2015
Revenue	162 335	188 085	573 498	630 325
Adjusted EBITDA 1) Adjusted EBITA 1) Adjusted EBIT 1)	2418 2142 (1434)	809 5 (5659)	13078 12175 (6808)	24 4 4 3 23 0 93 437
Employees	122	124	122	124

1) Includes adjustments for transaction costs and one-offs of NOK 3.7 million in Q4 2016 and NOK 17.5 million in 2016.

KEY FIGURES (ACTUAL REPORTED)

(Figures in NOK 1000)

	Q4 2016	Q4 2015	2016	2015
Revenue	162 335	188 085	573 498	630 325
EBITDA	(1316)	809	(4433)	24 4 4 3
EBITA	(1592)	5	(5336)	23 0 93
Operating profit / loss (EBIT)	(5168)	(5659)	(24319)	438
Total assets	508 409	454 578	508 409	454 578
Cash	81 6 9 2	18 9 8 2	81 6 9 2	18 9 8 2
Equity	260 294	42 3 26	260 294	42 3 26

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. For accounting purposes, Teki Solutions AS is presented as the acquiring company (reverse takeover). Please see note 6 for information about the transition and the basis for the opening balance of Techstep ASA group accounts for 2016.

OPERATIONAL REVIEW.

MAIN DEVELOPMENTS IN THE QUARTER

During the fourth quarter of 2016, Techstep established a new management team and started to restructure its business and organization to capitalize on the new strategy outlined for Techstep. At the same time, investigations were made of potential acquisitions of companies that can bring synergies to the Group.

In November, the Teki Gruppen transaction, where Techstep acquired 53.94% of the shares in Teki Solution AS from Teki Gruppen AS, was completed. This transaction, settled by issuance of new shares, increased the total ownership for Techstep in Teki Solutions to 78.16% and was approved by the Extraordinary General Meeting in November 2016.

Gaute Engbakk assumed the position as CEO in November, and Marius Drefvelin was appointed CFO. Drefvelin assumed the position in January 2017.

Six new members of the Board of Directors were elected and one member re-elected at the Extraordinary General Meeting in November 2016.

SUBSEQUENT EVENTS

On February 1, 2017, Techstep agreed to acquire the software service company Mytos AS for NOK 120 million, and signed a separate agreement in principle to acquire the telecom mobility hardware company Apro Tele og Data AS ("Apro") for NOK 15.5 million. In addition, an agreement was made to acquire the remaining 21.84% in Teki Solutions AS and the remaining 50% of Nordialog Asker, securing Techstep full ownership of the companies. The acquisitions will be paid by a combination of cash, issuance of new shares, and by settlement of shareholder and vendor loans. See note 5 for further details.

Techstep Finance was established as a joint venture with an experienced financing operating partner, and it will be a vital part in Techstep's future delivery of MaaS (Mobility-as-a-Service).

In connection with these transactions, and to finance further acquisitions and growth, Techstep successfully raised NOK 100 million in new equity through a private placement towards high quality investors. The placement was significantly oversubscribed An Extraordinary General Meeting will be held on February 28, 2017 to approve the private placement. See note 5 for further details.

FINANCIAL REVIEW.

The group business going forward will mainly be based on the subsidiaries of Teki Solutions AS, Nordialog and SmartWorks. Thus, Teki Solutions AS is, for accounting purposes, considered 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. All figures have been restated in accordance with IFRS, from inception of the business in 2012 to 2016. For further details, please see note 6. Figures in parentheses represent the corresponding period in 2015. All figures are unaudited unless otherwise stated.

FINANCIAL RESULTS

Techstep had total revenue of NOK 162.3 million in the fourth quarter of 2016 (NOK 188.1 million), and EBITDA came to negative NOK 1.3 million (NOK 0.8 million). Total revenue for 2016 was NOK 573.5 million (NOK 630.3 million), and EBITDA ended negative at NOK 4.4 million (NOK 24.4 million). The decrease in revenues both the fourth quarter and full year primarily reflects a reduction in hardware sales in Nordialog. Adjusted EBITDA for the fourth quarter was NOK 2.4 million and 13.1 million for 2016.

Total operating expense increased during the year when compared with the same period of 2015, and cost-cutting initiatives have been made to improve operations going forward. Operating expense includes transaction costs and one-offs of NOK 3.7 million in the fourth quarter, totalling NOK 17.5 million in 2016.

Depreciation and amortization came to NOK 3.9 million for the fourth quarter (NOK 6.5 million) and NOK 19.9 million for the full year 2016 (NOK 24.0 million).

Net loss for the fourth quarter ended at NOK 27.2 million (loss of NOK 6.2 million), and with a loss of NOK 44.7 million for the year (loss of NOK 8.1 million). The figures include a technical loss from the reverse takeover of NOK 21.2 million.

CASH FLOW

Net cash flow from operating activities was negative NOK 42.8 million for the fourth quarter of 2016 and negative NOK 30.9 million for the year (NOK 33.2 million).

Net cash flow used for investing activities was NOK 108.5 million for the quarter and NOK 108.9 million for the year (NOK 17.8 million). The investing activities in 2016 is related to the acquisitions of Zono AS in the third quarter and Teki Solutions in the fourth quarter.

Net cash flow from financing activities was NOK 161.5 million for the fourth quarter 2016 and NOK 137.2 million for the year (negative NOK 15.4 million). The activity represents the issuance of new share capital in relation to the acquisitions of Zono and Teki Solutions in the fourth quarter.

Net increase in cash flow for the fourth quarter was NOK 10.2 million, while net change in cash and cash equivalents was negative NOK 2.6 million for the full year 2016 (NOK 72 thousands).

The cash position on December 31, 2016 was NOK 81.7 million, where NOK 55 million came from the acquired company Zono AS.

FINANCIAL POSITION

Techstep had total assets on December 31, 2016 amounting to NOK 508.4 million (NOK 454.6 million), and a significant part is representing the company's goodwill from Nordialog's customer relations.

Impairment testing of goodwill has been carried out as of December 31,2016 according to note 1, section 1.11. No imminent impairment loss has been identified as a result of the test.

On December 31, 2016, total liabilities were NOK 248.1 million (NOK 412.3 million), of which NOK 12.6 million is long-term, interest-bearing debt (NOK 56 million). The reduction in liabilities is primarily related to a conversion of shareholder loan to equity in 2016. Total equity was NOK 260.3 million (NOK 42.3 million), corresponding to an equity ratio of 51.4% (9.3%).

RELATED PARTY TRANSACTIONS

The Zono Transaction, where Techstep acquired 100% of the shares in Zono AS from Zono Holding AS, was completed in September and 58,181,818 consideration shares were issued to Zono Holding AS. Zono Holding AS is the majority shareholder in Techstep and is controlled by Middelborg AS. In connection with the completed purchase of 53.92% in Teki Solutions AS from Teki Gruppen AS, Middelborg AS was compensated in the fourth quarter of 2016 with NOK 1.2 million for consultancy work.

RISK AND UNCERTAINTY FACTORS

Techstep is exposed to various forms of market, operational and financial risk. Techstep's business depends on successful integration of the acquired companies Zono, Teki Solutions, Mytos and Apro, and the partnerships with Smith Micro. Any delay or negative development regarding the partnerships or the acquired businesses may have negative impact on the business of Techstep.

The company's various risks are described in detail in the Prospectus dated October 12, 2016, and no other risks have been identified. The Prospectus is available from the company's website www.techstep.no.

OUTLOOK

Techstep operates in a structurally attractive enterprise mobility market with strong demand and growth opportunities. Since the first acquisitions were made in 2016, Techstep is positioning itself as a digital workplace provider delivering integrated enterprise mobility solutions. Strategic important acquisitions have been made to complement Techstep's offering potential. The decline in hardware sales is expected to continue, but MaaS and other initiatives should start to have positive effect in the second half of 2017. The business and organisation is currently undergoing a restructuring and transformation to deliver on the revised strategy.

Going forward, Techstep will focus on growing the number of end users, increasing sales per user, growing recurring revenues through sales of solutions and services as a service (SaaS), and improving cost control per user to increase profit that can be reinvested in the business.

INTERIM FINANCIAL STATEMENTS.

(PREPARED ACCORDING TO IFRS)

CONDENCED CONSOLIDATED STATEMENT OF INCOME

(Figures in NOK 1000)

Note		Q4 2016	Q4 2015	2016	$2015 *$
Revenue		162 335	188 085	573 498	630 325
Operating expenses		(163650)	(187 276)	(577931)	(605883)
Operating profit/loss before depreciation and
amortization (EBITDA)		(1316)	809	(4433)	24 4 4 3
Depreciation		(277)	(804)	(903)	(1349)
Operating profit/loss before amortization (EBITA)		(1592)	5	(5336)	23 0 93
Amortization		(3575)	(5664)	(18984)	(22655)
Operating profit/loss (EBIT)		(5168)	(5659)	(24319)	438
Profit/loss from associates		155	(111)	154	(444)
Technical loss on reverse takeover	$\overline{4}$	(21217)		(21 217)
Other financial items net		(1023)	(1653)	(5271)	(9772)
Profit/loss before tax (EBT)		(27253)	(7423)	(50653)	(9778)
Taxes		103	1 2 6 9	5954	1697
Net profit/loss		(27150)	(6154)	(44700)	(8081)
Profit/loss attributable to shareholders		(27150)	(6154)	(44700)	(8081)
Comprehensive profit/loss		(27150)	(6154)	(44700)	(8081)
Earnings per share		(0.30)	(0.61)	(1.29)	(0.80)

* Restated 2015 actual figures may differ from 2015 pro-forma figures presented in the Q3 2016 report.

STATEMENT OF FINANCIAL POSITION

(Figures in NOK 1000)

	Note	2016	$2015 *$	01.01.2015
ASSETS
Customer relations, Goodwill	6	271 493	290 624	311 602
Deffered tax asset		857
Intangible non-current assets		272 350	290 624	311 602
Tangible assets		3 1 5 9	3652	4 2 4 4
Non-current assets, investments		41829	20 098	8774
Total non-current assets		317 338	314 374	324 620
Total inventories		9526	12 137	13 906
Total receivables		99853	109 084	101 335
Cash		81 6 9 2	18 9 8 2	17138
Total current assets		191 071	140 203	132 379
Total assets		508 409	454 578	456 999
EQUITY AND LIABILITIES
Share capital		102.476	2.44	32.
Other capital		157819	42 081	(147057)
Total equity	3,4,6	260 294	42 3 26	(147025)
Long term interest bearing debt		12 6 5 6	56 098	228 016
Deffered tax			9 9 0 1	16 616
Total non-current liabilities		12 656	65 999	244 632
Short term interest bearing debt		113721	218 038	259 244
Accounts payable		62.050	56 045	50 250
Other current liabilitity		59 687	72 170	49898
Total current liabilities		235 458	346 253	359 392
Total equity and liabilities		508 409	454 578	456 999

* Restated 2015 actual figures may differ from 2015 pro-forma figures presented in the Q3 2016 report.

STATEMENT OF CHANGES IN EQUITY

(Figures in NOK 1000)

	Share	Treasury	Share	Retained	Minority	Total
	capital	shares	premium	earnings	shares	equity
Equity at January 1, 2015	32		11 4 35	(158 491)		(147024)
Ordinary result 2015				(8081)		(8081)
Comprehensive income 2015
Share capital increase	212		197 220			197 432
Other			1144	(1144)		0
Equity at December 31, 2015	244		209 798	(167717)		42 3 26
Ordinary result 2016				(40455)	(4245)	(44700)
Comprehensive income 2016
Share capital increase 1)	102 231	(1914)	73 903	70 30 6	29 433	273 959
Errors in previous years IAS 8				(9264)		(9264)
Other				(2027)		(2027)
Equity at December 31, 2016	102 476	(1914)	283702	(149156)	25 187	260 294

$^{\rm 1)}$ Share capital increase

Share capital increase	273 949
Shareholders loan converted to share capital	149 900
Technical loss, minority shareholders	21 20 7
Equity capital Techstep November 7	25 011
Techstep placement, reverse takeover
Zono - treasury shares in Teki Solutions (at cost)	(10141)
Shareholder loan to Zono	(40028)

CONSOLIDATED CASH FLOWS STATEMENT

(Figures in NOK 1000)

	Q4 2016	2016	2015
Profit/loss before tax	(27253)	(50654)	(9778)
Income from affiliated companies	(155)	(157)	444
Amortization intangible assets	3575	18 9 8 4	22 655
Amortizazion tangible assets	2.77	903	1349
Technical loss	21 217	21 217
Taxes paid	(4224)	(4224)	(552)
Changes in current assets / non-int. bearing short term debt	(36207)	(16940)	19 113
A Net cash flow from operating activities	(42770)	(30 871)	33 231
Investment in affiliated company			(14639)
Other financial assets	454	424	(129)
Investment in tangible assets	(89)	(410)	(757)
Invested in subsidiary Zono AS (excl. cash)	(73000)	(73000)	(2 250)
Reverse take over Techstep (excl. cash)	(35912)	(35912)
B Cash flow from investing activities	(108547)	(108898)	(17775)
Changes in shareholders loan	(24443)	(24848)	(133002)
Changes in other long term debt	(25781)	(18902)	(9858)
Changes in interest bearing debt	(62184)	(104317)	(69956)
Issued new share capital	284 090	284 090	197 432
Treasury shares	(10141)	(10141)
Non-monetary changes in equity		11 2 9 1
Cash flow from financing activities	161 541	137 173	(15383)
Net change in cash (A+B+C)	10 2 24	(2596)	72
C Cash at beginning of period	6 1 6 2	18 9 82	17138
Techstep ASA opening balance	10 30 6	10 30 6
Zono AS opening balance	55 000	55 000
Cash end of period	81 692	81 692	17 210

Cash flow analysis for Q4 2015 has not been prepared as opening balance sheet at 30/9 in 2015 has not been established - see section 1.1 BASIS FOR PREPARATION

NOTES.

Selected notes to the quarterly financial statements

Techstep ASA reports according to new accounting principles from fourth quarter 2016, thus the complete standards, amendments and interpretations are included in this report. Onwards, the accounting principles will be found in the annual report and a condensed version of the principles will be included in the quarterly reports.

NOTE 1: ACCOUNTING POLICIES

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

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.

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 restated under IFRS from 2012 and onwards. See note 6 for further details.

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.

1.2 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.

1.3 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 so as 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 into line with those used by other members of the Group.

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

1.4 TRANSACTIONS IN FOREIGN CURRENCY

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

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

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

1.5 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 value added 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 that 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 by the time of decision

1.6 BUSINESS COMBINATIONS AND GOODWILL

Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. 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, 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 share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 Share-based Payment at the acquisition date; and assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured at fair value less cost to sell.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred and the amount of any noncontrolling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is 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 non-controlling interests are measured at fair value or, when applicable, on the basis specified in another IFRS.

When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and 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 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.

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

1.7 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

• 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.

Subsequent to initial recognition, internally generated intangible assets would be 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 period.

1.8 FIXED ASSETS

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

Depreciation is recognized so as to write off the cost or valuation of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation 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. The Group held no assets under financial leases as of December 31, 2016.

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.

1.9 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.

1.10 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 cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is 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 cashgenerating unit) in prior years.

1.11 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.

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

1.12 TRADE RECEIVABLES

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

1.13 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 tax for the year

Current and deferred tax 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 tax 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.

1.14 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.

1.15 EOUITY

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.

1.16 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.

1.17 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.

1.18 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.

1.19 SEGMENT INFORMATION

The Financial information presented is excluding of Smart-Works Nordic Group AB. Segment information presented, is prepared in accordance with the accounting principles and guidelines that the Group uses for the preparation of consolidated financial statements.

1.20 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 so as 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.

1.21 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, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

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

122 USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

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

NOTE 2: BUSINESS SEGMENTS (FOR ACCOUNTING PURPOSES)

For financial reporting purposes, Techstep has currently two main business segments represented by its legal entities: Nordialog and SmartWorks AS. Both companies are subsidiaries of Teki Solutions, which is controlled by Techstep ASA. Operationally, the figures will differ mainly because some revenues from Nordialog are related to the sale of services. About 30% - 50% of SmartWorks turnover is routed through Nordialog, while internal sales are eliminated in the Group accounts. The figures for Nordialog and SmartWorks does hence not represent either the Techstep Groups turnover or earnings for Hardware and Solutions respectively. Figures in parentheses represent the corresponding period in 2015. All figures are unaudited unless otherwise stated.

NORDIALOG (Nordialog legal entities)

Nordialog is the mobile operator Telenor's key distribution channel of devices and subscriptions to the Norwegian business segment. Teki Solutions operates eight of Nordialog's business centers located in Eastern Norway (including Asker), and accounts for ~60% of the total Nordialog distribution volume in Norway. Nordialog revenue streams include both Hardware and Solutions sales.

(Figures in NOK 1000)

	Q4 2016	Q4 2015	2016	2015
Revenue	153 182	167819	554 467	602 422
EBITDA	9809	7855	27 527	48 378
EBITA	9609	7092	26742	47 027
Employees	79	89	79	89
Total assets	489 268	447 237	489 268	447 237

Nordialog had revenues of NOK 153.2 million in the fourth quarter 2016 (NOK 167.8 million) and NOK 554.5 million for the year (NOK 602.4 million). The company's reduction in hardware sales in 2016 is mainly due to expensive hardware and increased longevity on the products. In addition, the largest producers, Apple and Samsung, only launch new products every second year with marginal changes to the models, creating less demand for new products.

EBITDA amounted to NOK 9.8 million for the quarter (NOK 7.9 million) and NOK 27.5 million for 2016 (NOK 48.4 million). The

decrease in EBITDA for 2016 is mainly influenced by a weak first quarter 2016, with slight improvements over the year due to increased sales and cost-cutting effects made throughout the year. In May, 10 full-time employees were transferred to SmartWorks, and consultants were removed. By December 31, 2016, Nordialog had 79 full-time employees (97).

Nordialog expects a small improvement in hardware sales in 2017, mainly driven by leasing agreements and MaaS concepts, which is expected to increase the customer turnover ratio.

(Figures in NOK 1,000)

SmartWorks, located in Oslo, delivers services and solutions within the "Enterprise Mobility Management," and offers mobility digitalization solutions through third party software such as Cisco, Citrix and Microsoft. SmartWorks generate revenue both directly from external customers and as supplier for Nordialog.

Q4 2016	Q4 2015	2016	2015
17719	9065	52 800	31 26 2
(154) (209)	(593) (593)	(4997) (5052)	184 184
33 35 504	25 45 316	33 35 504	25 45 316

Revenue in the fourth quarter 2016 amounted to NOK 17.7 million (NOK 9.1 million), while revenue for the full year was NOK 52.8 million (31.3 million). The strong improvement is primarily driven by increased sales of mobility projects, including renegotiations of licencing fees to existing customers and increasing revenues from support services.

EBITDA for the fourth quarter 2016 ended negative at NOK 0.2 million (negative NOK 0.6 million), and EBITDA for the full year was negative NOK 5 million (NOK 0.2 million). The majority of SmartWorks sales comes from Nordialog customers, in which respective gross profit remains in Nordialog. SmartWorks has also completed organisational changes to better support Techstep's current growth ambitions and planned operational structure.

By the end of the year, the total number of full-time employees was 33 (17).

NOTE 3: SHARE CAPITAL AND SHAREHOLDERS

The company's share capital as of December 31, 2016 was NOK 102,475,577 divided on 102,475,577 ordinary shares with a par value of NOK 1.00. Subject to the below, the shares are issued and fully paid. Techstep has only one class of shares and all shareholders have equal rights according to Norwegian law.

In November 2016, a total of 30,053,488 consideration shares were equally distributed to Skarestrand Invest AS, Dovran Invest AS, Jyst Invest AS and Tinde Industrier AS, following the demerger of Teki Gruppen AS. The consideration shares will not be admitted to trading on Oslo Børs until the Financial Supervisory Authority (Finanstilsynet) has approved the transaction and Techstep has published a listing prospectus according to Section 7-3 of the Securities Trading Act, but each consideration share gives the right to one vote at the company's general meeting. All other shares are freely transferable with voting rights at the company's general meeting.

As of the date of this report, Techstep holds 1,914 treasury shares. Techstep's 10 largest shareholders as of December 31, 2016, are as follows:

Shareholder name	Ownership%	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%	1094559
MP PENSJON PK	0.49%	502.983
PETROLEUM INVEST	0.47%	485704
STRØMLAND SIVERT NØTSUND 0.39 %		400356
Total 10 largest shareholders	94.40%	96 744 056
Other shareholders	5.60%	5 731 521
Total number of shares	100%	102 475 577

NOTE 4: CHANGES IN GROUP STRUCTURE

Restructuring of the Group

The Techstep ASA's Group accounts represent the continued operations of the Teki Solutions Group after the reverse takeover November 7, 2016, of Birdstep ASA (change of name June 3, 2016).

April 7, 2016, Birdstep ASA sold its wholly owned subsidiary Birdstep Technology AB with the Birdstep "HetNet" technology platform and a majority of Birdstep Technology AB's employees to Smith Micro Software Inc. for USD 2 million. In return, Birdstep received a Letter of Intent to be granted the sole distribution rights and utilization of Smith Micro's products in the Nordic region.

As these transactions took place prior to the reverse takeover, no accounting consequences resulting from the reorganization is reflected in the Group accounts. For further information, reference is made to Birdstep's quarterly reports for first to third quarter 2016 (available at www.techstep.no) and the year-end accounts for the parent company.

The Zono and Teki Transactions

On July 1, 2016, Techstep ASA entered into a share exchange agreement with Zono Holding AS for the acquisition of 100% of the shares in Zono AS (the "Zono Transaction"). The assets of Zono comprised 24.22% of the shares in Teki Solutions AS,

The Zono Transaction*:

Assets:

Shares in Kjedjehuset AS	23.000
Shares in Teki Solutions AS	10140
Sellers credit Teki Solutions AS	12.309
Sellers credit Nordialog Oslo AS	27697
Cash	55 000
Accounts payable	(146)
Net value	128 000
Consideration shares (58 181 818 shares of
NOK 2.2 per share)	128 000
Excess value

5.12% of the shares in Kjedehuset AS and approximately NOK 55 million in net cash balance. The Zono Transaction was completed in September 2016, and 58,181,818 consideration shares were issued to Zono Holding AS. The combined entity was presented in the Q32016 accounts using the acquisition method.

On July 1, 2016, Techstep ASA also entered into an agreement in principle with Teki Gruppen AS to acquire an additional 53.94% of the shares in Teki Solutions AS. The Teki Group Transaction was completed in November 2016, and a total of 30.053.488 consideration shares were issued and distributed into four equal parts to Skarestrand Invest AS, Dovran Invest AS, Jyst Invest AS and Tinde Industrier AS (following the demerger of Teki Gruppen AS).

After completion of the Teki Gruppen Transaction, Techstep ASA holds 78.16% of the shares in Teki Solutions AS. The group business will mainly be based on the business activity of the Teki Solutions Group. 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 for the business combination, November 7, 2016.

The Teki Solutions Transaction*:

Considered to be the aquiring company.

Total shareholder's equity Techstep ASA
per Q3 2016	152.020
Result of operations 30/9 - 7/11	991
Consideration shares Zono	128 000
Calculated equity Techstep ASA 7/11
pre Zono	25 011
Technical loss minority shareholders**	21 207
Equity capital increase reverse takeover	46 218

* Figures in NOK 1000

** Technical loss has no cash effect

NOTE 5: SUBSEQUENT EVENTS

Acquisition of Mytos

On February 1, 2017, Techstep ASA agreed to acquire the entire software service company Mytos AS for NOK 120 million. The "Mytos" acquisition will be settled with NOK 50 million in cash, financed by the company's current cash position, and NOK 70 million in Techstep shares, corresponding to 11,666,667 consideration shares at NOK 6.0 per share.

Agreement in principle to acquire Apro

On February 1, 2017, Techstep signed a separate agreement in principle to acquire the telecom mobility hardware company Apro Tele og Data AS ("Apro") for NOK 15.5 million. The "Apro" acquisition will be settled with NOK 7 million in cash and NOK 8 million in shares, corresponding to NOK 1,333,333 consideration shares at NOK 6.0 per share. The transaction is subject to due diligence and further assumes cash and debt-free basis with a normalized level of net working capital.

Acquisition of the minority shares in Teki Solutions and Nordialog Asker

Techstep has agreed to acquire the remaining 21.84% in Teki Solutions AS and the remaining 50% of Nordialog Asker, securing Techstep full ownership in the companies. The "Teki Solutions" shares will be settled by issuing 6,580,710 consideration shares and thereby include the settlement of the remaining shareholder loans of NOK 23.9 million. The Nordialog Asker shares will be settled by a vendor's note of NOK 2.025 million and 934,615 consideration shares.

Private placement

In connection with the acquisitions, and to finance further acquisitions and growth, Techstep successfully raised NOK 100 million in new equity through a private placement at NOK 5.70 per share. The placement was significantly oversubscribed and attracted strong interest from both existing shareholders and new high-quality institutional and private investors.

The Board of Directors allocated a total of 17,543,860 shares in two tranches. Tranche 1 with 12,280,702 new shares was directed at existing shareholders and new investors, subject to, and in compliance with, applicable exemptions from relevant prospectus or registration requirements. Tranche 2 with 5,263,158 shares, was allocated to Middelborg AS, Cipriano AS and Datum AS.

An Extraordinary General Meeting will be held on February 28, 2017 to approve the private placement and the increase of share capital from NOK 114,756,279 to NOK 120,019,437.

Share option grant

On February 1, 2017, the Board of Directors resolved to grant 3 million share options to CEO Gaute Engbakk and 1.5 million share options to each of CFO Marius Drefvelin and CIO Mads Vårdal. The option grant is subject to the approval of the annual general meeting of Techstep. Neither Gaute Engbakk, Marius Drefvelin nor Mads Vårdal currently own shares or rights to shares in Techstep prior to the option grant. Once the options have been duly issued, the Company will have issued in total 6 million share options.

NOTE 6: TRANSITION OF TEKI SOLUTION ACCOUNTS 01.01.2015

(Figures in NOK 1000)

Notes	Teki Solutions AS NGAAP	Subsidiaries NGAAP	Eliminated shares in subsidiaries	Reveresed amortized GW/eliminated intercomp	Taxes	Teki Solutions Group IFRS
ASSETS
Intangible assets
Deferred tax asset e	546	731	$\,0\,$	$\mathbb O$	1220	2 4 9 7
$b$ Goodwill	$\overline{0}$	7539	233 274	10 887	$\overline{0}$	251700
Customer relations $\rm{C}$	$\sqrt{a}$	$\mathbf 0$	59 902	$\mathbf 0$	$\mathbb O$	59 902
Total intangible assets	546	8 2 7 0	293 176	10887	1220	314 099
Property, plant and equipment	126	4 1 18	$\mathbf 0$	$\,0\,$	$\mathbb O$	4 2 4 4
Total tangible and intangible assets	672	12 3 8 8	293 176	10887	1220	318 343
Financial assets
Shares in subsidiaries	361781	189 285	(551066)	$\mathbf 0$	$\mathbb O$	0
Other shares	1670	6 3 0 4	$\circ$	$\circ$	$\circ$	7973
Other long term receivables	$\mathbf 0$	801	$\circ$	$\circ$	$\overline{0}$	801
Total financial assets	363 451	196 389	(551066)	$\bf{0}$	0	8774
Total non-current assets	364 123	208 778	(257891)	10887	1220	327 117
Current assets
Inventories, licenses for resale	$\mathbb O$	1180	$\mathbb O$	$\mathbf 0$	0	1180
Inventories, finished goods	$\mathbb O$	12726	$\overline{0}$	$\overline{0}$	$\mathbf{0}$	12726
d Accounts receivable	3984	58 958	$\theta$	0	0	62 942
Receivable intercompany	66 216	153 145	$\mathbf 0$	(219361)	0	0
Other short term receivables d	3 4 4 5	29 318	$\mathbb O$	5 6 3 0	0	38 393
Total inventories and receivables	73 644	255 328	$\pmb{0}$	(213 731)	0	115 241
Cash and cash equivalents	438	16 699	$\,0\,$	$\,0\,$	$\circ$	17138
Total current assets	74 083	272 027	$\pmb{0}$	(213 731)	0	132 379
Total assets	438 206	480 805	(257891)	(202844)	1220	459 496
EQUITY AND LIABILITIES
Equity
Share capital	32	14 940	(14941)	$\,0\,$	$\circ$	32
Other paid in capital	2 2 0 1	16 274	(7040)	$\circ$	$\circ$	11 4 35
Total paid in capital	2 2 3 3	31 214	(21981)	$\pmb{0}$	0	11 4 6 7
Other equity	44 534	39 891	(255023)	10887	1220	(158491)
Total equity	46767	71 105	(277004)	10887	1220	(147024)
Long-term debt
Deferred tax liability	$\mathbb O$	0	19 113	0	0	19 113
Long-term interest bearing debt	30 340	29 660	0	$\,0\,$	0	60 000
Debt to shareholders, interest bearing	73 991	118 009	$\circ$	(34151)	$\overline{0}$	157 850
Other long-term debt	6974	3 1 9 2	$\overline{0}$	$\overline{0}$	$\overline{0}$	10 16 6
Total long-term debt	111 305	150 861	19 11 3	(34151)	0	247 129
Short-term interest bearing debt	224 415	34 828	$\,0$	$\mathbb O$	0	259 244
Accounts payable	1881	48 369	0	$\,0\,$	0	50 250
Current tax payables	552	$\,0\,$	0	$\,0\,$	0	552
Duties payable	595	11536	$\mathbf 0$	$\mathbb O$	0	12 13 1
Intercompany debt	41 668	137 913	$\overline{0}$	(179581)	$\circ$	$\circ$
Other short-term debt	11 0 22	26 193	$\overline{0}$	$\mathbf{0}$	$\overline{0}$	37 215
Total short-term debt	280 134	258 839	0	(179581)	0	359 392
Total debt	391 439	409 700	19 11 3	(213 731)	0	606 521
Total debt and liabilities	438 206	480 805	(257891)	(202844)	1220	459 496

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

Note a - 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 only. Consequently, first time adoption of IFRS as described in IFRS 1 does not apply, and the Teki Solutions group accounts must be restarted 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 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.

Note b - 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 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 c - 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 are 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 d - Accounts receivable, other short-term receivables

According to NGAAP, a provision for loss on accounts receivable is calculated based on a flat-rate percentage. IFRS provisions were 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 e - Deferred tax

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

Note f - 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, no pension liability is entered to the account per NGAAP and IFRS.

(Figures in NOK 1000)

	Share	Treasury	Other paid in	Other	Total	Minority	Total
	capital	shares	capital	capital		shares	equity
(Figures in NOK 1000)
Parent company total equity 01.01.2014	30			30 006	30 036		30 036
Eliminated / earned other equity			2102	(124 390)	(122 289)	7865	(114 424)
Total equity 01.01.2014	30		2 1 0 2	(94384)	(92 253)	7865	(84388)
Ordinary result 2014				(65045)			(65045)
Other comprehensive income 2014
New paid in capital	2				2		2
Other merger diff.				10 271	10 271	(7865)	2406
Total equity 31.12.2014	32		2102	(149158)	(147025)		(147025)
Ordinary result 2015				(8081)	(8081)		(8081)
Other comprehensive income 2015
New paid in capital	212		195 505	1714	197 432		197 432
Other merger diff.
Total equity 31 12 2015	244		197 607	(155526)	42 3 26		42 3 26
Ordinary result 2016				(40455)	(40455)	(4245)	(44700)
Other comprehensive income 2016
New paid in capital	102 231	(1914)	86 0 95	58 115	244 527	29 433	273 959
Other, merger diff.				(2027)	(2027)		(2027)
Other, errors prev. years acc to IAS 8				(9264)	(9264)		(9264)
Total equity 31.12.2016	102 476	(1914)	283702	(149156)	253 107	25 187	260 294

• 1) As of January 1, 2016, the former subsidiaries Nordialog Skøyen AS, Nordialog Ski AS, Nordialog Gardemoen AS, Nordialog VG-passasjen AS, Teleom Fornebu AS, Nordialog Vestfold AS and Scancom AS were merged with Nordialog Oslo AS. At the same time, the former Nordialog Oslo subsidiary Selectit AS was merged with sister company SmartWorks AS. The resulting merger difference has not been charged to equity.
• 2) Tax expense for previous years has been corrected against equity in accordance with IAS 8 due to incorrect application of tax rules and reporting in the tax returns for 2013 regarding Netconnect (subsidiary).

FINANCIAL CALENDAR 2017.

Preliminary financial calendar, with reservations for changes:

27.4.2017 11.5.2017 18.8.2017 26.10.2017 ANNUAL GENERAL MEETING QUARTERLY REPORT - Q1 2017 HALF YEARLY REPORT 2017 QUARTERLY REPORT - Q3 2017

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