UMS Quarterly Report Q4_2017

Interim report for the fourth quarter and preliminary report for the year 2017

Unified Messaging Systems ASA

UNIFIED MESSAGING SYSTEMS ASA

Fourth Quarter of 2017 in brief

Revenues of NOK 30.1 million vs. NOK 22.6 million in the fourth quarter of 2016 – an increase of 33%. The increase relates primarily to implementation of PAS licenses, and the fact that the fourth quarter of 2016 included a NOK 3.6 million reversal related to Rigspolitiet. Projects recognized to revenue in the fourth quarter: - West Bengal: Completed delivery to the remaining districts of the state - Singapore: Completed work on M1 and delivered on change requests - SOS Alarm: Delivered hardware for two new operators Recurring revenues of NOK 14.4 million vs. NOK 13.0 million in the fourth quarter of 2016 – an increase of 11%. EBITDA of NOK 6.3 million vs. negative NOK 6.7 million in the fourth quarter of 2016. Driven by increased revenues and reduced costs. Personnel costs reduced by NOK 2.4 million in government grants (“Skattefunn”) vs. NOK 2.0 in the fourth quarter of 2016. UMS and ST Electronics have now successfully completed the integration with all three major telecom operators in Singapore. The system will going forward be used for warning the public in the impacted areas during emergencies. New and expanded contracts in the fourth quarter UMS to partner with Cronos, a leading technology player in Benelux. Geo Square and Cronos Public, both part of the Cronos Group, now participate in the UMS Partner Program and will sell UMS solutions for multi-channel, critical communication to the Government, Public Sector organizations and companies in the Benelux. Yet another large water company in Finland will start using service alerting from UMS. The company sees significant growth opportunities in the country within this sector. Expansion to the existing national contract for new features and services in Sweden is almost complete; the integration with three mobile operators is completed and progress with the one remaining operator is ongoing.

Subsequent to year-end Everbridge will launch a voluntary offer to acquire the entire issued share capital of UMS for NOK 1.37 per share in cash. The Board of Directors of UMS has decided to recommend that its shareholders accept the offer.

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Key figures

FOURTH QUARTER

YEAR TO DATE

2017

2016

% change

2017

2016

% change

Total operating revenues 30 126 514

22 577 097

33 % 103 596 113

93 897 735

10 %

- Of which recurring revenues (core services) 1

14 425 289

12 983 504

11 % 57 495 388

52 874 733

9 %

EBITDA

6 302 819

-6 704 874

-194 % 3 021 894

-5 582 091

N/A

Operating profit/loss (-) (EBIT) Profit/loss (-) before tax

270 323

-12 020 771

N/A -20 260 215

-25 187 526

N/A

-360 869

-13 356 408

N/A -21 222 023

-27 621 384

N/A

Basic and diluted earnings per share Net cash flow from operating activities Net cash flow from investing activities

-0.01

-0.10

N/A

-0.12

-0.22

N/A

-1 875 558

-5 605 580

N/A -13 225 811

671 931

N/A

-1 503 627

-5 036 949

N/A

-8 863 273

-16 780 810

N/A

Equity

24 618 656

-15 234 719

N/A

24 618 656

-15 234 719

N/A

1) Recurring revenues consist of support & maintenance in SaaS and PAS contracts. Additionally, license and deployment revenue related to the largest PAS contract is recognized as recurring revenue on a straight-line basis over the contract term.

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Market development The trend the company has seen related to an uptake in formal tenders for national projects has conti- nued across the world during the fourth quarter as well, and it is expected that this will also continue the coming years. UMS has continued to build strategic partnerships to plan and prepare for responding to these tenders. UMS also sees a positive shift towards more hybrid model tenders that includes both location based (LBAS) and radio based (Cell Broadcast) technologies. This shift in direction is positive since the com- pany is one of very few which has the capability to deliver these hybrid solutions. Similarly, the company continues to see an increase in customer requests and formal tender processes for planning, resource and crisis management solutions in the US and India in this quarter as well. The hurricanes that hit parts of the US in the third quarter have had an impact on the demand for these types of solutions. During the quarter the company has also responded to an increased amount of formal tender processes for location based solutions for municipalities in Norway. The company has set up a strategic partnership in Benelux and is continuing to prepare for other stra- tegic partnerships around the world. UMS considers the area of Big Data and analytics interesting and continues to work within this field as part of the company’s upcoming Safe City program. Technology development and innovation As a consequence of being in the final stage of the development of a new generation software for war- ning and notification, the company adjusted its strategy in 2017 and increased focus and resources to sales activities. The company announced on 13 January 2017 that it would reduce development costs, both with regards to consultants and employees. Other positions would also be affected. The total re- duction in employee- and consultancy costs was estimated to NOK 15 million annually, with full effect from the third quarter of 2017. The cost reduction process has now been completed and personnel costs have been reduced with NOK 10 million annually, of which approximately NOK 2.5 million have impacted the income statement in the fourth quarter (NOK 4.2 million for the year). Consequently, the reduction in employee costs has reached the anticipated level. Consultancy costs have not been reduced to the expected level due to a more challenging task of finalizing the first version of the new generation software solution. However, it is expected that this will be finalized in the first half of 2018. Beginning in the first quarter 2018 the company will increase the speed of transferring existing customers to the new solution. Development expenditures of approximately NOK 1.6 million were capitalized in the fourth quarter of 2017, down from NOK 5 million in the fourth quarter of 2016. The corresponding amounts for the year 2017 was NOK 8.4 million compared to NOK 16.7 million in 2016.

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OPEX excluding D&A 1)

80.1

78.3

69.2

2015

2016

2017

1) Operating expenses, excluding cost of materials, depreciation and amortization

CAPEX (R&D – excluding acquisitions)

Next-generation development finished.

17.8

16.7

8.4

2015

2016

2017

Revenues and EBITDA UMS’s ambition is to primarily deliver standardized software solutions, with less focus on extensive customized solutions. To accomplish this, the company develops solutions that in their basic version, with standard modules, shall fulfill most customer requirements. During the latest years, the market for alert services has become more mature and there has been increased demand for alert services from large corporations and the public sector. The competition in the market has also increased.

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Recurring revenue (MNOK)

60 000 000

57.5

52.9

50 000 000

45.9

40 000 000

29.6

30 000 000

20 000 000

10 000 000

0

2017

2014

2015

2016

55%

15%

9%

Growth:

RECONCILIATION RECURRING REVENUES TO TOTAL REVENUES

FOURTH QUARTER

YEAR TO DATE

2017

2016

2017

2016

Recurring revenues Non-core services SMS/Voice traffic

14 425 289 12 983 504 57 495 388

52 874 733 4 053 207 21 414 322 15 555 474

279 437

799 883

1 349 992

6 073 696 9 348 091

5 591 296 23 302 721 3 202 414 21 448 011

Other revenues Total revenues

30 126 513 22 577 097 103 596 112 93 897 736

Recurring revenues consist of support & maintenance for SaaS and PAS contracts. Additionally, license and deployment revenue related to the largest PAS contract is recognized as recurring revenue on a straight-line basis over the contract term. In the fourth quarter and annual report for 2016, revenue from traffic (SMS/voice) was included in re- curring revenue. However, the Company considers traffic to be a consequence of a number of different factors and not a driver of value by itself. Consequently, it is now reported as a separate line item. The Group has entered into PAS contracts where the licenses/systems have not been delivered and re- venue not recognized as of 31 December 2017. The revenue backlog related to these contracts includes license fees of approximately NOK 6.8 million and annual support and maintenance of approximately NOK 1.5 million. The amounts are affected by currency exchange rates. Other revenues consist primarily of one-time license fees and deployment for PAS contracts, establish- ment fees for new SaaS contracts, and consultancy fees for SaaS and PAS contracts. Media-related services, which are being phased out, are shown separately as non-core services in the table above.

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SMS/Voice traffic (MNOK)

25 000 000

23.3

21.4

20 000 000

18.1

15 000 000

14.2

10 000 000

5 000 000

0

2014

2015

2016

2017

Growth:

28 %

18%

9 %

THE GROUP HAS TWO MAIN PRODUCTS AND SERVICE AREAS:

POPULATION ALERT (PAS), where the company’s software system is licensed to the customer, and installed at premises decided by the customer. With the acquisition of the Location Based Alert Servi- ces business from CellVision in 2015, the Group also started delivering location based services to tele- com operators. With the acquisition of Previstar Inc. in 2016, the Group also offers solutions for crisis management. Revenues from sales of these products and services are included in PAS revenues in the table below. For PAS, revenues are generated by sales of: Set-up and installation of hardware, set-up and installation of software, hardware, software licenses, maintenance, support and consultancy ser- vices. Reference is made to the Group’s financial statements for 2016, note 1 ”accounting principles”, subsections ”revenue recognition” and ”significant judgements in the application of group accounting policies and accounting estimates” for further discussion of the principles used for revenue recognition. GROUP AND SERVICE ALERT (SAAS - SOFTWARE AS A SERVICE), where the services are delivered using a common platform. For SaaS, the customer may pay fees for set-up, training and access to modules (establishment fee), and an annual fee for the ongoing services. The ongoing services include support and benefit of maintenance of the chosen modules. The customer may also purchase consul- tancy services and traffic based on actual use. Unless terminated earlier than three months before year-end, the contract is extended for the subsequent year. Revenues from SaaS is generated by a large customer base, and is normally relatively stable from period to period, affected by new contracts and termination of existing contracts.

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REVENUES BY PRODUCTS AND SERVICES AREA

FOURTH QUARTER

YEAR TO DATE

2017

2016

2017

2016

12 850 594

5 334 242 40 230 954

34 340 610 55 503 918 4 053 207

Population Alert

Software as a Service Non-core services

16 996 482 16 442 972 62 015 166

279 437

799 883

1 349 992

Total revenues

30 126 514 22 577 097 103 596 112 93 897 736

SaaS revenues have increased as most customers have chosen to renew their contracts and new customers have been added. The PAS area is a strategic focus area, in which the Group has been able to win several important con- tracts over the latest years. The largest contract was signed in 2013 for a delivery in Sweden. Revenue recognition on this contract started in the second half of 2014, and the main part of revenue is recognized straight line over the minimum contract period to the first quarter of 2020. This contract contributed reve- nues of NOK 5.4 million in the fourth quarter and NOK 16.8 million for the year 2017, compared to NOK 3.8 million and NOK 15.1 million for the same periods the previous year. Previstar’s revenues have been consolidated from 1 April 2016, and contributed with revenues of NOK 4.6 million in the fourth quarter and NOK 12.6 million for the year 2017, compared to NOK 4.7 million for the fourth quarter and NOK 7.2 million for the year (9 months) 2016. Previstar made deliveries of licenses under new PAS contracts in the third and fourth quarters of 2017, as well as in the fourth quarter of 2016.

FOURTH QUARTER

YEAR TO DATE

2017

2016

2017

2016

5 442 092

3 813 359 16 808 736

15 083 588

Customer 1

At 31 December 2017, the Group had received payment or issued invoices, but not recognized revenues of NOK 31.6 million (deferred revenues), primarily related to PAS contracts. Deferred revenues amounted to NOK 36.3 million at 31 December 2016. The Group’s operating expenses are primarily affected by costs related to its sales resources, internal and external costs related to developing, maintaining and providing support related to its software, deliveries of traffic and hardware to customers as well as corporate and administrative functions. EBITDA was NOK 6.3 million in the fourth quarter and NOK 3 million for the year, compared to negative NOK 6.7 million and negative NOK 5.6 million for the same periods in 2016. The improvement is driven by increased revenues and reduced costs. Personnel costs in the fourth quarter and year was reduced by NOK 2.4 million in government grants (“Skattefunn”) vs. NOK 2.0 in the fourth quarter of 2016.

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Depreciation and amortization Depreciation and amortization increased by 13% to NOK 6 million in the fourth quarter of 2017 compared to the same period the previous year. The increase for year was 19% to NOK 23.3 million. The increase is primarily due to capitalization of development expenditures. The high amounts of amortization in the periods presented in this report is a consequence of capitalization of development of the new generation software starting in 2013, and the acquisitions of technology through acquisi- tions in 2015 and 2016. The company’s current estimate is a useful life of four years for the software and technology assets. For the software, this means that it amortizes capitalized development costs over four years from the start of the individual amortization period, which effectively means that the total amortization period is longer than four years because the company since 2013 has made additional capitalization. Financial items Net financial expenses of NOK 0.6 million in the fourth quarter of 2017 compares to net financial expenses of NOK 1.3 million in the fourth quarter of 2016. The decrease of NOK 0.7 million primarily relates to a decrease in net interest expenses due to the transition from a net debt position in 2016 to a net cash position in 2017, as well as currency effects. For the year 2017, net financial expenses were NOK 1 million, an improvement of NOK 1.5 million com- pared to the previous year, partially due to a NOK 0.9 million gain on settlement of liabilities in Previstar in the first quarter of 2017 (see note 4) and reduced interest-bearing debt and currency effects.

Income tax Income taxes reported for 2017 relates to UMS India, UMS UK and Previstar.

The Group has significant amounts of tax reducing temporary differences, primarily in Norway, for which no deferred tax assets have been recognized

Losses for the period Due to the development explained above, the Group reported losses in the fourth quarter and the year 2017 and 2016. Basic and diluted earnings were consequently negative.

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Cash flow Net cash flow from operating activities has been negatively affected by the losses for the periods presented. Net cash flow from operating activities was negative NOK 1.9 million in the fourth quarter of 2017 and negative NOK 13.2 million for the year, compared to negative NOK 5.6 million and positive NOK 0.7 million for the same periods in 2016. Recognition of revenues related to prepaid (deferred) revenues has contributed negatively to the cash flow in the fourth quarter both years. This relates to annual prepayments for Saas contracts that are primarily received at the beginning of the year, as well as some additional PAS contracts. For the fourth quarter 2017, both deferred revenue and trade deb- tors are also affected by invoicing of a large PAS contract in the third quarter, for which payments were receive in the fourth quarter. For the year, PAS contracts have contributed correspondingly negatively on the cash flow in 2017, while prepayments of PAS contracts contributed positively in 2016. In the fourth quarter and year 2016, the Group had a positive cash effect from postponement of payments of trade creditors, giving a negative cash effect in 2017 when payments were made in the first quarter. Net cash flow from investing activities was negative NOK 1.5 million in the fourth quarter and negative NOK 8.9 million for the year 2017, compared to negative NOK 5 million and negative NOK 16.8 million in the same periods in 2016. Cash outflows from investing activities were primarily related to capitali- zation of development expenditures, related to the new generation software. Net cash flow from financing activities was positive NOK 2 million in the fourth quarter of 2017, primarily because drawing on a short-term overdraft facility exceeded installments on interest-bearing liabi- lities including parts of the convertible loan. In the fourth quarter, the convertible loan was settled, partially by conversion to equity and partially repaid in cash, of which only the latter is included in the cash flow statement. Exercise of employee share options contributed positively with NOK 0.4 million. Net cash flow from financing activities was positive NOK 26 million for the year 2017. The company received net proceeds of NOK 58 million related to the IPO in the first quarter of 2017, of which parts were used to settle shareholders’ loans of NOK 20.4 million and the overdraft facility of NOK 8.6 million. Furthermore, the bank loan has been settled during the year as scheduled, and at the end of the year the company made a drawing on the overdraft facility. In the fourth quarter and year 2016, net cash flow from financing activities was positive NOK 11.8 million and NOK 18 million, primarily due to short- term liquidity borrowings from shareholders. During the fourth quarter, cash and cash equivalents decreased by NOK 1.1 million, but increased by NOK 3.9 million for the year 2017. At 31 December 2017, the Group reported cash and cash equivalents of NOK 13.1 million. Of this, NOK 2.1 million was held by the parent company, to a large extent related to employee tax deductions and consequently restricted. Consequently, the Group has significant amounts of cash in subsidiaries, including in India and the US. This cash is not restricted, but is currently not readily available for use in the Norwegian operations.

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Balance sheet The total balance decreased by NOK 6.2 million to NOK 84.7 million at 31 December 2017 compared to 31 December 2016. Total non-current assets decreased by 14.6 million, because depreciation and amortization exceeded capitalization of development expenditures and costs to obtain PAS contracts in the period. Total re- ceivables and prepayments increased by NOK 4.6 million, primarily due to an increase in government grants, prepaid expenses, prepaid commissions and an increase in trade debtors. Interest-bearing liabilities decreased by NOK 35.3 million due to repayments as explained in the cash flow section above and conversion to equity of part of the convertible loan. Deferred revenue decreased by NOK 4.6 million, primarily due to due amounts recognized to revenue in the period. The reduction of trade debtors by NOK 7.9 million is partially due to payments in the first quarter of 2017 as discussed in the cash flow section above. Equity increased by NOK 39.9 million and was positive NOK 24.6 million at 31 December 2017. The ef- fect of the loss for the year was offset primarily by capital increases. Related parties The Group’s related parties are key management personnel and close members of the family of a person and entities that are controlled or jointly controlled by any of these. Key management personnel are defined as the Board of Directors, as well as the CEO and CFO/VP. The Chairman of the Board is also a related party by being the largest owner. The company also has a minor joint venture company. See note 15 to the consolidated financial statements for 2016 for further information on loans and gu- arantees provided by Board members and shareholders. In January 2017, the company repaid the NOK 20.4 million shareholders’ loans, and underwriting fees related to the IPO were paid. In connection with repayment of part of the convertible loan in cash and in anticipation of a new short-term drawing facility, the Chairman of the Board in November issued a short-term loan to the Company of NOK 3 million, which was repaid in December. In December 2017, the Chairman of the Board issued a guaran- tee for an updated short-term drawing facility and will receive a guarantee commission of 2% p.a. Risks and uncertainties The company has since 2013 incurred significant expenditure on acquisitions and on developing its new generation software platform, which is to be used to deliver services to most of its customers. The company has been dependent on the shareholders providing equity, shareholders loans and guarantees for bank borrowings. The Group has a stable customer base that pays annual support and maintenance fees at the beginning of each year, and the Group has also won new PAS and SaaS contracts during 2016 and 2017. The Group has cash of NOK 13.1 million at 31 December 2017, while UMS ASA has cash of NOK 2.1 million, of which NOK 1.2 million is restricted for employee tax deductions. Consequently, the Group There were no other significant transactions with related parties in 2017.

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has significant amounts of cash in subsidiaries, including in India and the US. This cash is not restricted, but the Company is currently working on making the cash available for use in Norwegian operations. The alert industry is going through rapid changes and this requires UMS to constantly improve functio- nality and features in order to adapt to the market’s needs and avoid technological obsolescence.

For discussion of other risk factors, please see the annual report for 2016.

Outlook A strong growth both in the number of formal tender processes for national contracts, as well as an increase in the request for various SaaS solutions in Europe continues. Most of the new opportunities within national contracts are coming from Asia and Latin America, as well as some in Europe. The company maintains its positive view on this market. The UMS Alert system is being tested in The Bahamas to achieve a precise and increased information flow which will give people the best decision-making basis when time is scarce, before, during and after dangerous events like severe weather. UMS is in the upcoming period aiming for the permanent implementation of the system after the testing period is over. The company is also working with two mobile operators in The Bahamas looking at the possibilities for implementing a commercial location based alerting system with them. The new partnership with Geo Square and Cronos Public, both part of the Cronos Group, will provide UMS with new opportunities in Benelux for selling solutions for multi-channel, critical communication to government, public sector organizations. By getting another large reference service alerting customer in Finland the company sees significant growth opportunities in the country within the water section. Recently, United Utilities, the UK’s largest listed water supply company, signed an agreement for sen- ding messages via UMS’s systems. The company operates the water supply to around 7 million inha- bitants in North West England. UMS expects strong growth in the number of SMS shipments to their customer base in the future. UMS and ST Electronics in Singapore has started to work with the integration with the fourth and last operator in the country as well as working with a Cell Broadcast tender in the country and a SG secure app. The company will complete the implementation for the expansion to the existing national contract for new features and services with the last of the four mobile operators in Sweden in the next quarter. Location Based Alerting is an important area for UMS in Norway and going forward implementing this solution to municipalities, industries, universities and areas alike will be prioritized.

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Alternative performance measures (non-IFRS financial measures)

In this report, the company use some financial measures not defined in IFRS. The company has identified these to be the following:

EBITDA Operating loss (EBIT) Net debt

EBITDA and EBIT are presented as sub-totals in the income statement. The company believes EBIT is relevant for investors as a measure of the operations, excluding effects of financing and income taxes. Similarly, EBITDA excludes depreciation and amortization from EBIT, and the company believes this provides an indication of how the company has performed before the effects of amortization of capitalized development expenditure, as well as amortization of technology related assets from acquisitions.

Net debt is interest-bearing liabilities less cash and cash equivalents:

Net debt 1)

31 December

2017

2016

Total interest-bearing liabilities Less cash and cash equivalents

4 641 779

39 984 567 -9 180 549 30 804 017

-13 089 137 -8 447 358

Net debt

1) Gross and net debt includes the carrying value of the convertible loan in 2016. Negative amount is cash/net cash.

The company believes net debt is a figure that provides an indication of the indebtedness of the Group.

Forward looking statements This report contains statements regarding the future in connection with the Group’s growth initiatives, profit figures, outlook, strategies and objectives. In particular, the section “Outlook” contains forward-looking statements regarding the Group’s expectations. All statements regarding the future are subject to inherent risks and uncertainties, and many factors can lead to actual results and developments deviating substan- tially from what has been expressed or implied in such statements. These factors include the risk factors relating to the Group’s activities described in the annual report for 2016.

Oslo, 27 January 2018 Board of Directors

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15

CONDENSED CONSOLIDATED INCOME STATEMENT

FOURTH QUARTER

YEAR TO DATE

2017

2016

2017

2016

OPERATING REVENUES Sales revenues Total operating revenues

30 126 514 30 126 514

22 577 097

103 596 113

93 897 735 93 897 735

22 577 097 103 596 113

OPERATING EXPENSES Cost of materials etc

7 231 472 9 497 081 7 095 142

5 476 879 10 996 238 12 808 854

22 247 544 48 155 627 30 171 048

19 371 861 46 242 959 33 865 007

Personnel costs

Other operating expenses

Total operating expenses excl. Depreciation/amortization

23 823 695

29 281 971 100 574 219

99 479 827

EBITDA

6 302 819

-6 704 874

3 021 894

-5 582 091

Depreciation/amortization

6 032 496

5 315 897

23 282 109

19 605 435

OPERATING PROFIT/LOSS (-) (EBIT)

270 323 -12 020 771 -20 260 215 -25 187 526

FINANCIAL INCOME AND EXPENSES Net currency gain/loss (-)

-218 156

582 032 24 249

-850 178 933 917 1 045 547 -961 808

399 211 46 501

Other financial income Other financial expenses Total net financial items

7 080

420 116 -631 192

1 941 918 -1 335 637

2 879 571 -2 433 858

PROFIT/LOSS (-) BEFORE TAX

-360 869 -13 356 408 -21 222 023 -27 621 384

Income taxes

619 562

141 964

1 562 519

491 253

PROFIT/LOSS (-) FOR THE PERIOD

-980 432 -13 498 372 -22 784 542 -28 112 637

-0.01

-0.10

-0.12

-0.22

Basic and diluted earnings per share

CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENT

FOURTH QUARTER

YEAR TO DATE

2017

2016

2017

2016

Profit/loss (-) for the year

-980 432 -13 498 372 -22 784 542 -28 112 637

Currency translation differences Total items that may be reclassified subsequently to profit or loss TOTAL COMPREHENSIVE INCOME FOR THE YEAR

316 021

396 606

256 311

-380 828

316 021

396 606

256 311

-380 828

-664 410 -13 101 766 -22 528 231 -28 493 465

16

CONDENSED CONSOLIDATED BALANCE SHEET

31 DECEMBER

Note

2017

2016

NON CURRENT ASSETS Capitalized development costs

3 3 3 3

26 988 266 9 747 015 13 311 184 50 477 478 2 820 833 2 820 833 431 013

32 291 585 18 168 066 13 311 184 64 452 065 3 467 200 3 467 200 681 230

Technology assets

Goodwill

Operating equipment and fixtures Total fixed and intangible assets

Capitalized fulfillment costs and costs to obtain contracts

3

Total other non current assets

TOTAL NON CURRENT ASSETS

53 298 311

67 919 264

CURRENT ASSETS Trade debtors

10 633 372 7 641 883 18 275 255

8 826 002 4 897 735 13 723 737

Other receivables and prepayments Total receivables and prepayments

Bank deposits and cash in hand

13 089 137

9 180 549

TOTAL CURRENT ASSETS

31 364 391

22 904 286

TOTAL ASSETS

84 662 703

90 823 550

EQUITY AND LIABILITIES EQUITY Share capital

1 957 236

1 409 139

Other paid in capital Total paid-in capital

181 886 147

120 865 424

183 843 383 122 274 564 -159 224 727 -137 509 283

Other reserves

TOTAL EQUITY

24 618 656 -15 234 719

LIABILITIES Other non-current interest-bearing liabilities

5

0 0

76 579 76 579

Total non current liabilities

Trade creditors

5 451 881

13 315 633

Income tax liability

459,406

0

Government charges & special taxes

2 882 339 31 632 093 14 976 548 4 641 779

2 386 294 36 256 315 14 115 461 39 907 988

Deferred revenues

Other current liabilities

Current interest-bearing liabilities

5

Total current liabilities

60 044 047 105 981 691

TOTAL LIABILITIES

60 044 047 106 058 270

TOTAL EQUITY AND LIABILITIES

84 662 703

90 823 550

17

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Share capital

Other paid in capital

Translation differences

Retained earnings

Total

Equity as at 31.12.16

1 409 139 120 865 424 500 000 57 461 554

403 719 -137 913 002 -15 234 719

Capital increase

0 0

0 57 961 554

Capital increase conversion loan and share options

48 097

3 559 168

0

3 607 265

0 0 0

0 0 0

256 311

Translation difference Employee share options Result for the period Equity as at 31.12.17

0

256,311 812 787

0

812 787

0 -22 784 542 -22 784 542

1 957 236 181 886 147

660 030 -159 884 757 24 618 656

Equity as at 31.12.15

1 273 186 111 233 875

784 547 -110 832 812 2 458 796

Capital increase exercise share options Capital increase conversion loan

5 600

426 900

0

0

432 500

130 353

9 204 650

0

0 9 335 003

Translation difference Employee share options Result for the period Equity as at 31.12.16

0 0 0

0 0 0

-380 828

0

-380 828

0

1 032 447 1 032 447

0 -28 112 637 -28 112 637

1 409 139 120 865 424

403 719 -137 913 002 -15 234 719

18

CONDENSED CONSOLIDATED CASH FLOW STATEMENT FOURTH QUARTER

YEAR TO DATE

Cash flow from operating activities

2017

2016

2017

2016

Result before tax

-360 869 -619 562 6 032 496 5 210 198

-13 356 408 -141 964 5 315 897 -1 434 113 4 826 741

-21 222 023 -1 562 519 23 282 109 -1 807 370 -7 863 752 1 020,309 -4 624 222

-27 621 384

Paid tax

-491 253

Depreciation/amortization Changes in trade debtors Changes in trade creditors

19 605 435 2 924 535 5 730 124 1 605 679 7 583 070 -8 664 273

680 439 66 550

Non-cash expenses

377 139

Changes in deferred revenues Changes in other accruals items

-13 053 668

-3 557,985 2 365 112

168 859

-448 343

Net cash flow from operating activities

-1 875 558

-5 605 580 -13 225 811

671 931

Cash flow from investing activities Purchase of fixed assets Capitalization of development expenses

-66 578

-83 983

-112 179

-107 045

-1 623 522

-4 952 967

-8 434 404

-16 672 943

Business combinations Fulfillment cost and costs to obtain a contract

0

0 0

0

-822

186 473

-435 510

0

Sale of fixed assets

0

0

118,820

0

Net cash flow from investing activities

-1 503 627

-5 036 949

-8 863 273 -16 780 810

Cash flow from financing activities Change in short term credit facility Installments on interest bearing liabilities Increase interest bearing liabilities

4 641 779 -6 033 923

554,794

-3,984,386 -31 337 408

1,394,217 -4 289 818

-1 599 041

3 000 000

12 400 000

3 000 000 58 340 304 26 018 510

20 400 000

Increase equity

378 750

432 500

432 500

Net cash flow from financing activities

1 986 606

11 788 253

17 936 899

Currency effects on cash and cash equivalents

247 425

-76 133

-20 839

-76 133

Net change in cash and cash equivalents

-1 145 155 14 234 291

1 069 589 8 110 960

3 908 587 9 180 549

1 751 887 7 428 662

Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period

13 089 137

9 180 549

13 089 137

9 180 549

19

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

General information Unified Messaging Systems ASA (UMS ASA or the company) was incorporated on 27 November 1998 and is domiciled in Norway. UMS ASA’s registered office address is Innspurten 15, 0663 Oslo, Norway. The company’s shares were listed on Oslo Axess on 6 January 2017. UMS Group (the Group) consists of UMS ASA and its wholly owned subsidiaries UMS ApS, UMS AB, Unified Messaging Systems & Service Pvt. Ltd. (99.8%), UMS Ltd., UMS OY, UMS France SAS, Previstar Inc. and Previstar Pvt. Ltd. (99.8)%. The Group is a world leader in Population Alert Systems using multiple technologies to leverage existing telecommunication infrastructures to send critical alert messages. The Group is a pioneer in the development of advanced critical messaging systems with around 20 years of professional experi- ence and knowledge from coordinating hand in hand with UNISDR, governments and first responder groups. The Group has more real-life implementations than any other entity in the world and has several patented applications that are unique in the industry for their technological and lifesaving capabilities. These condensed consolidated interim financial statements for the period ending 31 December 2017 were approved by the Board of Directors on 27 January 2017. These condensed consolidated interim financial statements are presented in NOK. As a result of rounding adjustments, the figures in one or more rows or columns included in the financial state- ments and notes may not add up to the total of that row or column. These condensed consolidated interim financial statements (interim financial statements) are prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the EU (IAS 34). The same accounting policies and methods of computation are followed in the interim financial statements as compared with UMS Group’s consolidated financial statements for 2016, prepared in accordance with International Reporting Standards and interpretations, as issued by the International Standards Board and as adopted by the EU (IFRS). A description of the significant accounting policies applied in preparing these condensed interim financial statements, significant judgements and estimates and a description of new standards and interpretations not yet adopted, is included in the mentioned consolidated financial statements for 2016. The Group has evaluated that the implementation of IFRS 9 and IFRS 15 as of 1 January 2018, has no effect on equity at this date, and would not have had a material effect on the comparative figures for 2017. The Group will implement IFRS 15 according to the cumulative retrospective method, to con- tracts that are not completed contracts at 1 January 2018. Comparable figures for 2017 will not be re- stated. However, the Group’s assessment is that it would not have had significant effects on the 2017 comparative figures. For IFRS 9, the effect of classification of financial instruments and the expected credit loss principle are not expected to have any significant impact on the financial statements of the Group and the Group do not expect any effect on equity 1 January 2018. NOTE 1 Statements and accounting policies

20

For both IFRS 9 and IFRS 15, the actual impacts of adopting the standards at 1 January 2018 may change because the new accounting policies are subject to change until the Group presents its first annual financial statements that include the date of initial application. The condensed interim financial statements do not include all the information and disclosures required by IFRS for a complete set of financial statements, and therefore these condensed interim financial statements should be read in conjunction with the mentioned consolidated financial statements for 2016. These condensed consolidated interim financial statements have not been audited or subject to limited review by the auditor. NOTE 2 Segments, revenues The Group has only one segment, consistent with the reporting to the CEO and the Board. The Group has two main products and service areas: POPULATION ALERT (PAS), where the company’s software system is licensed to and installed at the customers’ premises GROUP AND SERVICE ALERT (SAAS - SOFTWARE AS A SERVICE), where the services are delivered using a common platform. With the acquisition of the Location Based Alert Services’ business from CellVision in 2015, the Group also started delivering location-based services to telecom operators. With the acquisition of Previstar Inc. in 2016, the Group also offers solutions for crises management. Revenues from sale of these products and services are included in PAS in the table below. Some non-core media-related services, which are being phased out, are shown separately in the table below.

FOURTH QUARTER

YEAR TO DATE

REVENUES BY PRODUCTS AND SERVICES AREA

2017

2016

2017

2016

12 850 594 16 996 482

5 334 242 16 442 972

40 230 954 62 015 166 1 349 992

34 340 610 55 503 918 4 053 207 93 897 736

Population Alert 1)

Software as a Service 1)

Non-core services

279 437

799 883

Total revenues

30 126 514

22 577 097 103 596 112

1) A reclassification of MNOK 0.9 has been made from PAS to SaaS compared to previously reported figures.

The following customer represented more than 10% of total revenues

FOURTH QUARTER

YEAR TO DATE

2017

2016

2017

2016

Customer 1

5 442 092 5 442 092

3 813 359 16 808 736

15 083 588 15 083 588

Total

3 813 359

16 808 736

21

NOTE 3 Non-current assets FIXED AND INTANGIBLE ASSETS

Tangible fixed assets

Capitalized Development

Technology

Goodwill

Total

Net book value at 01.01.2016 Additions in the period Business combinations Disposals in the period Depreciation/amortization in the period 1)

892 893 25 951 885 20 996 657 13 311 184 61 152 618

107 045 16 672 943

0

0 16 779 988

0 0

0 0

4 895 329

0 0

4 895 329

0

0

277 646 10 333 243

7 927 715

0 18 538 604

Currency effects

-41 061

0

203 795

0

162 733

Net book value as at 31.12.2016

681 230 32 291 585 18 168 066 13 311 184 64 452 065

Net book value at 31.12.2016

681 230 32 291 585 18 168 066 13 311 184 64 452 065

Additions in the period Business combinations Disposals in the period

112 179

8 434 404

0 0 0

0 0 0

8 546 583

0

0 0

0

138 680

138 680

Depreciation/amortization in the period 1)

232 375 13 737 722

8 230 135

0 22 200 232

Currency effects

8 659

0

-190 916

0

-182 257

Net book value as at 31.12.2017

431 013 26 988 266 9 747 016 13 311 184 50 477 479

Capitalized fulfillment costs represent costs incurred in fulfilling contracts with customers that relates to unsatisfied or partially unsatisfied performance obligations. These costs are capitalized and amor- tized over the expected contract periods. In 2017, sales commission costs of NOK 0.4 million related to obtaining PAS contracts have been capitalized as cost to obtain contracts. The total costs of obtaining contracts are allocated to the different performance obligations based on their relative values. The part that relates to a performance obligation expected to be satisfied over more than a year, including expected renewals, is reported as non-current asset (as presented in the table below) and amortized over the expected period. Costs that will be expensed over less than one year is reported as deferred expenses, and is expensed as part of the original nature of expense (e.g. personnel expenses).

22

Capitalized fullfilment cost and costs to obtain contracts 1.1.2016

4 534 031 1 066 831 3 467 200

Amortization 2016 1)

Capitalized fullfilment cost and costs to obtain contracts 31.12.2016

Addition costs to obtain contracts

435 510

Amortization 2017 1)

1 081 877 2 820 833

Capitalized fullfilment cost and costs to obtain contracts 31.12.2017

1) Total depreciation and amortization in the income statement is the sum of depreciation/amortization of fixed and intangible assets and amortization of capitalized fulfillment costs and costs to obtain contracts. The company is continuing the development of its new generation software. Capitalization of develop- ment expenditure has affected the following line items in the income statement:

FOURTH QUARTER

YEAR

2017

2016

2017

2016

Reduction in personnel costs

788 905 2 585 679 4 341 476 5 911 384 834 617 2 367 288 4 092 928 10 761 559 1 623 522 4 952 967 8 434 404 16 672 943

Reduction in other operating expenses

Total capitalization

NOTE 4 Business combinations There have been no business combinations in 2017.

On 18 March 2016, the company acquired all the shares of Previstar Inc. Previstar is headquartered in Virginia, USA, and has a subsidiary in India. Previstar has developed a crisis management system, which is complementary to UMS’ technology. The purchase price was USD 100. For practical purposes, profit and loss from Previstar has been consolidated from 1 April 2016. Amounts from the preliminary purchase price allocation at that time has been included in the balance sheet at 31 March, 30 June and 30 September 2016. Some amounts in the purchase price allocation were adjusted at 31 December 2016, primarily a reduction to technology assets and net current liabilities by approximately NOK 0.4 million, without changes to the reported amounts for the previous quarters in 2016. Previstar contributed with revenues of NOK 7.2 million and a loss of NOK 0.9 million for the period 1 April to 31 December 2016. This includes amortization of the technology rights acquired. Had Previstar been acquired, and consolidated with effect from 1 January 2016, it would have contributed with additional revenues of NOK 1.4 million and an additional loss of NOK 1 million. There were no significant transac- tion costs related to the acquisition. Previstar had entered into agreements with some of its creditors (employees) that they would receive a part of 12 months’ earnings from the acquisition date as full and final settlement of the related liabilities. This was resolved in the first quarter of 2017, with no payments to settle the liabilities. In the consolidated financial statements for UMS, this contributed to a finance income in the first quarter of 2017 of NOK 0.9 million.

See note 8 to the consolidated financial statements for 2016 for further information.

23

NOTE 5 Borrowings

31 December

Interest-bearing liabilities

2017

2016

Convertible loan

0 0

5 016 000 5 783 728 8 626 165 20 400 000

Bank loan

Bank overdrafts

4 641 779

Shareholders' loans

0 0

Other interest-bearing liabilities Total interest-bearing liabilities

158 674

4 641 779

39 984 567

Current interest-bearing liabilities Non-current interest-bearing liabilities Total interest-bearing liabilities

4 641 779

39 907 988

0

76 579

4 641 779

39 984 567

Conversion and repayment in 2017

No. of. shares

Value shares Cash paid

Total value

Name

REIDAR FOUGNER WITH RELATED PARTIES

2 185 915

1 639 436

0 0

1 639 436

KRISTIANRO AS

767 987

575 990

575 990

Others

1 350 785

1 013 089

1 995 006

3 008 095

Total

4 304 687 3 228 515 1 995 006 5 223 521

The bank overdrafts and the shareholders’ loans were repaid in January 2017 using parts of the proceeds from the share issue. In the fourth quarter, the convertible loan of NOK 5,223,521 was settled, of which NOK 3,228,515 was converted and NOK 1,995,006 was repaid in cash. In the fourth quarter the remaining part of the bank loan was settled as scheduled, and the company entered into a new short-term bank overdraft facility, with term to 28 February 2018. This facility was guaranteed by the main shareholder.

NOTE 6 Related parties

The Group’s related parties are key management personnel and close members of the family of a person and entities that are controlled or jointly controlled by any of these. Key management personnel are defined as the Board of Directors, as well as the CEO and the CFO/VP. The Chairman of the Board is also a related party by being the largest owner. The company also has a minor joint venture company. See note 15 to the consolidated financial statements for 2016 for further information on loans and guarantees provided by Board members and shareholders. In January 2017, the NOK 20.4 million shareholders’ loans were repaid by the company, and underwriting fees were paid.

In connection with repayment of part of the convertible loan in cash and in anticipation of a new short-

24

term drawing facility, the Chairman of the Board in November issued a short-term loan to the Company of NOK 3 million, which was repaid in December. In December 2017, the Chairman of the Board issued a guarantee for an updated short-term drawing facility and will receive a guarantee commission of 2% p.a. See note 5 above for details regarding the convertible loan.

There were no other significant transactions with related parties in 2017.

NOTE 7 Other information

The company’s share capital at 31 December 2017 was NOK 1 957 236 divided into 195 723 625 shares, each with a par value of NOK 0.01. At 6 January 2017, 50 million shares were issued at NOK 1.25 per share, and the company was listed on Oslo Axess. The company received gross NOK 62.5 million, and equity was increased by net NOK 58 million after deducting incremental costs related to the share issue. Medio November, the share capital was increased with 505,000 shares due to exercise of employee share options and 4,304,687 shares due to conversion of parts of the convertible loan. All these shares were issued at NOK 0.75 per share, and was registered medio December.

THE 10 LARGEST SHAREHOLDERS AT 31 DECEMBER 2017:

Ownership Interest

Position in UMS ASA

Name

Shares

FOUGNER INVEST AS

48 602 396

24,83 % Chairman of the Board

KRISTIANRO AS

20 356 721

10,40 %

Board member

VERDIPAPIRFONDET ALFRED BERG AKTIV

11 622 266

5,94 %

BERNT HOLDING AS

8 122 480

4,15 %

GEVERAN TRADING CO LTD

7 068 396

3,61 %

SINCO AS

6 449 289

3,30 %

JAG AS

4 763 425

2,43 %

THABO ENERGY AS

4 000 000

2,04 %

TRELLEVIKA INVEST AS

3 633 579

1,86 % Chairman of the Board

CAMACA AS

3 089 177

1,58 %

SKØIEN AS

2 700 000

1,38 %

NISSEN-LIE DØDSBO HARALD MARTINUS JR 2 502 240

1,28 %

PYTHAGOR AS

2 484 150

1,27 %

KIMO INVEST AS

2 347 487

1,20 %

CFO & VP

CAMELBACK HOLDING AS

1 900 000

0,97 %

Subtotal

129 641 606

66,24 %

Others

66 082 019

33,76 %

Total

195 723 625

100,00 %

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