otrum annual report 2017...accounting services. we have strengthened our sales teams, and have been...

OtrumAnnual report 2017

2 Otrum - Annual report 2017

Table of contents

Letter from the CEO .......................................................................................................................................................................................... 3

Otrum Enterprise .............................................................................................................................................................................................. 4

Otrum Digital Signage ...................................................................................................................................................................................... 5

Management Overview .................................................................................................................................................................................... 6

Profit and Loss Account .................................................................................................................................................................................... 7

Balance Sheet as at 31.12 .................................................................................................................................................................................. 8

Equity and Liabilities .......................................................................................................................................................................................... 9

Cash flow Statement ....................................................................................................................................................................................... 10

Notes ................................................................................................................................................................................................................... 11

3Annual report 2017 - Otrum

Letter from the CEOFor over 30 years, Otrum has created innovative guest centric software for the hospitality industry. Branching out into new verticals, we now offer powerful signage and TV solutions for all industries where hosted applications utilising onsite smart displays have become reality. In addition to hospitality, Otrum is actively present in the healthcare, leisure, retail and commercial sectors.

Otrum’s software solutions are used by many hotel chains, as well as signature independent hotels. Our installed base is over 160,000 hotel rooms across Europe, the Middle East and Africa. Our customers also take advantage of Chromecast and Apple TV streaming solutions from Otrum, in addition to leveraging our content licensing agreements to be able to provide users with premium content such as movies, TV channels and real-time information feeds (e.g. flight status and live weather).

Looking back at 2017 I am very pleased to see that we have accomplished and overachieved on our goals at a time when our industry is undergoing a fundamental shift to adapt to a digital world. Our mission is well defined and we have seen great progress in transforming Otrum into a world class customer centric software company. Our strategy going forward is to accelerate, innovate and build on our solid value propositions.

Otrum has executed a major financial turnaround delivering a fantastic growth of 22,000 new in-room software licences and an all-time high growth in Otrum signage licences, all of this with an 8-year record high EBITDA. Operational excellence in 2017 has been first rate, due to an efficient financial team and a move to fully cloud based services for all sales tools and accounting services.

We have strengthened our sales teams, and have been consistent in our execution of the company strategy. Otrum operates with a network of strategic partners throughout Europe, the Middle East, Africa and Asia. Our key partners have been instrumental in securing new business with major customers in 2017, and we are continuously building the Otrum Partner Program by securing new strategic partners in regions where we identify potential growth.

We are proud to report that we have secured fantastic new properties including Hyatt Martinez (France), Ole-Sereni (Kenya), Grand Hotel Oslo (Norway), Raffles Hotel Istanbul (Turkey), Mövenpick Resort (Jordan), Hotel Sanders (Denmark), Forest Holidays (UK) and have ramped activities with chains such as Marriott Hotels, Nordic Choice Hotels, Radisson Hotel Group and Adina Apartment Hotels.

Otrum’s professional Research and Development organisation, as well as our technical support services, are a cornerstone of Otrum’s highly regarded reputation. In a high-pressure environment, our R&D team have proven their strong ability to adapt to change by developing high quality and stable software solutions.

Otrum has consistently been at the forefront of in-room guest centric technology, with passionate employees as the driving force behind our success. As a team we have a strong vision of building a company that will become the world’s most innovative and trusted provider of signage solutions and hospitality TV – these core values will be our driving force for the future.

Stein Surlien CEOOtrum AS


Otrum EnterpriseTHE MARKET LEADING HOSTED SOLUTION. SCALABLE AND ROBUST, TO MEET ALL GUEST NEEDS 24/7/365.

SMART TV INTEGRATION = AFFORDABILITY

Otrum Enterprise is the segment leader in functionality, stability and ease of use. With Smart TV implementations investment costs can be significantly reduced using existing infrastructure such as coax, Ethernet and Wi-Fi. This flexibility also includes hybrid solutions with mixed infrastructure.

WEB BASED MANAGEMENT

Otrum Enterprise empowers hotels and hotel staff to take full control of the deployed interactive solution. Using web based editors and content management systems, your in-house monitoring, management and analysis has never been easier.

SCREEN MIRRORING

Screen mirroring is easily added to Otrum Enterprise for both Android and Apple iOS. Otrum bases the solution on industry standards, offering guests the best possible user experience.

HTML5 DESIGN MEANS WE ARE FLEXIBLE

Built on a HTML5 foundation, Otrum Enterprise software works across multiple platforms and delivers a seamless user experience across TVs, tablets and smart phones. Powerful tools are provided for branding and customisation, including graphical languages such as Arabic and Russian.

LIFETIME UPDATES

By subscribing to Otrum’s suite of software services, continuous updates are guaranteed throughout the lifetime of the solution. Feature enhancements will be deployed to your site, as and when they evolve.

NETWORK OPERATIONS CENTRE (NOC)

Our skilled team of software engineers monitor and control all Otrum Enterprise guest rooms. Should a service need arise, we can address this before you or your guests have even noticed. In addition, all systems are backed up to the cloud daily.

Over 1.5 million Otrum Enterprise users per month.


Otrum Digital SignageSTREAMLINED DIGITAL COMMUNICATION.GENERATE REVENUE VIA SALES PROMOTIONS AND ADVERTISING.

EASE OF USE

Otrum Digital Signage provides you with powerful communication tools to reach a widely distributed audience, with minimal effort.

The focus of Otrum’s web based software is simplicity and ease of use, at the same time as maintaining market leading feature rich applications.

BRAND RECONITION

Enhance your brand recognition with customised templates, or make use of Otrum’s library of predesigned layouts that present information in an eye-catching format.

Put your digital marketing and branding in full focus. Keep your marketing messages up to date with time-relevant campaigns and product promotions, managing all your screens and content through a simple web browser.

PRE-SCHEDULE CONTENT

Pre-schedule content to offer the right messaging throughout the day, ensuring your audience has the right information exactly when they need it – this will significantly reduce requests at your information desk.

Ease of useQuick and simple set-up.Powerful content editor.Live news, weather and flight info.

Cloud-basedHosted applications.User rights management.Scalable as needs change.

Accelerated ROILow cost marketing solution.High-impact results.Reduce print and admin costs.

3,500 screens powered by Otrum.


STEIN SURLIENCEOStein joined Otrum in September 2015. He has previously been CEO Norman Shark, CEO of Norman ASA, Senior Vice President Oracle Europe, Middle East & Africa, Managing Director Oracle Norway, Vice President Santech Micro Groupe and Managing Director Hewlett Packard Sweden AB.

Educational background: Harvard executive education, London Business school GBC, University of Utah EE and Norwegian Airforce Academy.

JANNE EDMAN MARTINSENCFO & COOJanne joined Otrum in September 2015. She has previously been Financial Director at Crayon, CFO at CAMO ASA, Head of Finance and Accounting Nordic for Royal Caribbean International, as well as having held the position of Group Controller in Otrum (2005-2006).

Janne holds a MSc. in International Finance from CERAM in France.

NIGEL BATESONExecutive Vice PresidentNigel entered the hospitality software business in February 1999, first with Guestlink International and later moving to Otrum’s HQ in Norway following an industrial buyout. In this position, Nigel fronts the Otrum product portfolio towards the market, and shapes the product line-up to fit the changing needs of the global client base.

Nigel has a BSc in Technology Marketing.

ANDREAS TØNNESENCTOAndreas joined Otrum in 2007. He has experience from the telecommunications industry working on videoconferencing solutions with partners such as Cisco and Microsoft.

He holds a Master degree in Computer Science from the University of Oslo. Andreas has been working on Otrum’s client-technology from the set-top-box era to today’s web-based solutions.

LEIF-TORE HESTAASVice President After SalesLeif-Tore joined Otrum in 2000, starting in the R&D department as a hardware engineer. He has managed several R&D projects and has had various positions within R&D, prior to his appointment as Vice President After Sales.

Before joining Otrum, Leif-Tore worked for Ericsson within hardware production and industrialisation. He was educated at the University of Agder.

Management Overview


Parent company Group

2016 2017 Note 2017 2016

OPERATING INCOME0 0 Revenue 81 994 235 79 337 641 0 0 Other operating income 817 256 1 243 676 0 0 OPERATING INCOME 2 82 811 491 80 581 318

OPERATING EXPENSES0 0 Raw materials and consumables used 39 591 915 44 872 122 0 0 Payroll expenses 3,4 18 951 344 21 293 921 0 0 Depreciation tangible fixed assets 7 403 154 899 736 0 0 Depreciation intangible fixed assets 8 1 955 926 2 914 383

301 139 288 Other operating expenses 3 17 925 929 23 761 487 301 139 288 OPERATING EXPENSES 78 828 266 93 741 648

(301) (139 288) OPERATING PROFIT / (LOSS) 3 983 224 (13 160 331)

FINANCIAL INCOME AND EXPENSES0 0 Foreign exchange gain 7 081 100 8 050 628

81 0 Other interest income 614 183 88 834 0 71 Other financial income 50 396 50 389 0 0 Foreign exchange losses (7 421 013) (5 432 153)0 0 Other interest expenses (1 112 777) (1 047 698)0 (70) Other financial expenses (140 823) (168 754)

81 1 NET FINANCIAL INCOME AND EXPENSES (928 933) 1 541 246

(220) (139 287) OPERATING RESULT BEFORE TAX 3 054 291 (11 619 085)

0 0 Tax on ordinary result 6 8 065 350 80 658

(220) (139 287) ANNUAL NET PROFIT / (LOSS) 11 119 641 (11 538 427)

BROUGHT FORWARD(220) (139 287) From share premium reserve 13(220) (139 287) NET BROUGHT FORWARD

EXTENDED INCOME STATEMENT(220) (139 287) Annual net profit / (loss) 11 119 641 (11 538 427)

Extended net profit / (loss)0 0 Translation differences 1 279 993 (1 227 278)

(220) (139 287) EXTENDED ANNUAL NET PROFIT / (LOSS) 12 399 634 (12 765 705)

Profit and Loss Account



2016 2017 Note 2017 2016

ASSETS

FIXED ASSETS

Intangible fixed assets0 0 Deferred tax asset 6 6 746 574 0 0 0 Research and development 7 6 510 344 3 837 027 0 0 Total intangible assets 13 256 918 3 837 027

Tangible fixed assets0 0 Equipment and other movables 8 293 132 667 964 0 0 Total tangible fixed assets 293 132 667 964

Financial fixed assets1 250 000 1 250 000 Investments in subsidiaries 9 0 0

0 0 Other receivables 157 152 190 560 1 250 000 1 250 000 Total financial fixed assets 157 152 190 560

1 250 000 1 250 000 TOTAL FIXED ASSETS 13 707 202 4 695 551

CURRENT ASSETS

0 0 Inventories 10 946 924 956 868

Debtors0 0 Accounts receivables 8 554 394 14 296 725 0 0 Accounts receivables group companies 0 0 0 0 Other receivables 5 3 579 408 5 663 050 0 0 Total debtors 12 133 802 19 959 775

Investments0 0 Bonds and other receivables 5 855 5 407 0 0 Total investments 5 855 5 407

132 280 4 743 Cash and bank deposits 11 4 458 550 6 255 452

132 280 4 743 TOTAL CURRENT ASSETS 17 545 131 27 177 501

1 382 280 1 254 743 TOTAL ASSETS 31 252 333 31 873 052

Balance Sheet as at 31.12



2016 2017 Note 2017 2016

EQUITY & LIABILITIES

EQUITY

Restricted equity and other paid in equity60 000 60 000 Share capital 12 60 000 60 000

1 314 780 1 175 493 Share premium reserve 0 0

1 374 780 1 235 493 Total restricted equity and other paid in equity 60 000 60 000

Retained earnings0 0 Other equity 7 009 295 0 0 0 Loss brought forward 0 (5 390 340)0 0 Total retained earnings 7 009 295 (5 390 340)

1 374 780 1 235 493 TOTAL EQUITY 13 7 069 295 (5 330 340)

LIABILITIES

Other long-term liabilities0 0 Other long-term liabilities 0 29 864 0 0 Total other long-term liabilities 0 29 864

Current liabilities0 11 750 Trade creditors 13 214 598 22 048 481 0 0 Public duties payable 1 905 145 1 837 956

7 500 7 500 Other short-term liabilities 14 9 063 295 13 287 092 7 500 19 250 Total current liabilities 24 183 038 37 173 529

7 500 19 250 TOTAL SHORT-TERM LIABILITIES 24 183 038 37 203 393

1 382 280 1 254 743 TOTAL EQUITY AND LIABILITIES 31 252 333 31 873 052

Equity and Liabilities

Oslo, 18th of April 2018

Chairman of the Board / CEOStein Surlien

Member of the Board / CFO & COOJanne Edman Martinsen



2016 2017 2017 2016

CASH FLOW FROM OPERATIONS(220) (139 287) Profit before income taxes 3 054 291 (11 619 085)

0 0 Depreciation 2 359 079 3 814 119 0 0 Change in inventory 9 944 1 501 297 0 0 Change in trade debtors 5 742 331 (6 795 864)0 11 750 Change in trade creditors (8 833 883) 12 221 662 0 0 Effect of exchange fluctuations 1 279 546 317

7 500 0 Change in other provisions (778 969) 4 537 609 7 280 (127 537) NET CASH FLOW FROM OPERATIONS 2 832 339 3 660 055

CASH FLOW FROM INVESTMENTS

0 0 Purchase of fixed and intangible assets (4 629 243) (3 865 984)

(1 275 000) 0 Purchase of shares and investm. in other companies

0 0

(1 275 000) 0 Net cash flow from investments (4 629 243) (3 865 984)

CASH FLOW FROM FINANCING

1 400 000 0 New equity received 0 1 400 000 1 400 000 0 Net cash flow from financing 0 1 400 000

0 0 Exchange gains / (losses) on cash and cash equivalents

0 0

132 280 (127 537) Net change in cash and cash equivalents (1 796 903) 1 194 071 0 132 280 Cash and cash equiv. at the beginning of the period 6 255 452 5 061 379

132 280 4 743 Cash and cash equivalents at the end of the period

4 458 550 6 255 452

Cash flow Statement


Notes

The financial statements have been prepared in accordance with simplified application of international accounting standards according to § 3-9 of the Norwegian Accounting Act.

The financial statements are presented in Norwegian kroner (NOK). The functional currency of the company is NOK.

The financial statements have been prepared on a historical cost basis.

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

Consolidation principles

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries at 31 December 2017.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intercompany balances, transactions, unrealised gains and losses resulting from intercompany transactions and dividends are eliminated in full.

On consolidation, the assets and liabilities of operations with a functional currency other than the NOK are translated into NOK at the rate of exchange prevailing on the reporting date and their income statements are translated at the average exchange rates for the year.

Translation differences arising from the translation of a net investment in foreign operations are specified as translation differences in the statement of equity.

Revenue recognition

Revenue is recognised on a straight line basis over the period in which the contract relates.

Hardware and sale of software

Revenues from the sale of goods and sale of software are recognised in the income statement once installation has taken place and most of the risk and return has been transferred.

Licences/royalties

Customer agreements typically involve multiple sources of revenue, including licence/royalty income, development fees, and maintenance and support. For customer contracts where development and customisation have already been completed, or, if no development or customisation is required, Otrum typically recognises licence/royalty revenue in the same period as the system is installed.

Development fees

Development fees are recognised in the month the service is provided.

Subscription

Revenues from the rendering of services are recognised in the income statement when the services are rendered.

Rental income

Rental income is recognised in income on a straight line basis over the lease term.

NOTE 1ACCOUNTING PRINCIPLES


Deferred revenue

The portion of the revenue recorded as received in advance is carried on the balance sheet as deferred revenue.

Financial income

Interest income is recognised as it accrues.

Foreign currencies

Transactions in foreign currencies are translated at the rate applicable on the transaction date. Monetary items in a foreign currency are translated into NOK using the closing rate on the balance sheet date.

Taxes

The tax expense (income) in the income statement consist of tax payable for the period and changes to deferred tax. Deferred tax and deferred tax assets are measured at the tax rate by the end of the reporting period. Deferred tax/tax assets are calculated based on the temporary differences which exist between accounting and tax values, and any carryforward unused tax losses at the year-end. Temporary differences, which are reversed or may be reversed in the same period, have been offset. A deferred tax asset is recognised for the carryforward of unused tax losses and unused tax credits to the extent that it is more likely than not that the tax asset can be utilised.

Taxes payable and deferred tax are recognised directly in equity to the extent that they relate to equity transactions.

Deferred tax and deferred tax assets are carried at nominal value.

Classification and valuation of balance sheet items

Non-current assets are assets intended for long-term ownership or use. All other assets are current assets. Receivables that fall due for payment within one year shall not be classified as non-current assets. Similar criteria applies to liabilities.

Current assets are valued at the lower of acquisition cost and fair value.

Non-current assets are written down to fair value upon any impairment that is expected not to be temporary. Long-term debt is recognised at nominal value at transaction date.

Receivables

Accounts receivables and other current receivables are recorded in the balance sheet at nominal value less provisions for doubtful debts. Provisions for doubtful debts are calculated on the basis of an individual assessment. For the remaining receivables, a general provision is estimated based on the expected loss.

Inventories

Inventories are carried in the financial statement at the lower of cost and net realisable value. The net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The cost of inventories is determined by using the FIFO method, and includes all cost of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. For manufactured goods a proportionate share of the direct and indirect variable and fixed production costs is included.


Subsidiaries/associated companies

Investments in subsidiaries and associated companies are valued at cost in the company accounts. The investments are valued at cost less any impairment losses. An impairment loss is recognised if the impairment is not considered temporary. Impairment losses are reversed if the reason for the impairment loss disappears in a later period.

Dividends/group contributions are recognised in the income statement in the same year as the group company makes a provision for the amount. If the dividends / group contributions exceed withheld profits after acquisition, the excess represents repayment of invested capital, and the dividend is deducted from the recorded value of the subsidiary.

Fixed assets

Tangible fixed assets are recognised in the balance sheet at cost and are depreciated over the asset’s expected useful life on a straight-line basis. Assets that consist of significant parts with different useful lives are depreciated separately. Repair and maintenance are expensed as incurred. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. The reduction is recognised as an impairment loss.

Research and development

An intangible asset arising from development is recognised if the asset will generate future economic benefits and the expenses can be reliably measured. Otherwise, the costs are expensed as incurred. The asset is depreciated on a linearly basis over its useful life. Research costs are expensed as incurred. Expected grants from the Research Council of Norway (SkatteFUNN) are recorded in the balance sheet as a reduction of activated R&D or other cost, depending on initial recognition of underlying cost.

Pensions

The company pays contributions to an insurance company for a defined contribution pension plan. After the contribution has been made the company has no further commitments. The contribution is recognised as payroll expenses. Any prepaid contributions are recognised as an asset (pension fund) to the degree the contribution can be refunded or will reduce future contributions.

Use of estimates

The management has used estimates and assumptions that have affected assets, liabilities, income, expenses and information about potential liabilities in accordance with simplified application of international accounting standards according to § 3-9 of the Norwegian Accounting Act.

Cash flow statement

The statement of cash flow is presented using the indirect method. Cash and cash equivalents include cash, bank deposits, and other short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.


NOTE 2OPERATING INCOME


Income specified by business area 2017 2016 2017 2016

Sale of systems hardware 0 0 27 007 537 26 025 540 Sale of systems software 0 0 10 123 436 7 177 410 Recurring software revenue 0 0 7 374 722 5 825 416 Recurring content revenue 0 0 25 059 254 30 368 379 Other income 0 0 13 246 541 11 184 573 Total 0 0 82 811 491 80 581 318

Income specified by geographical marketNordic 0 0 49 540 753 44 088 275 Europe excl. the Nordic countries 0 0 30 944 680 31 290 622 Other countries 0 0 2 326 057 5 202 421 Total 0 0 82 811 491 80 581 318


NOTE 3 PAYROLL EXPENSES, NUMBER OF EMPLOYEES, REMUNERATIONS, LOANS TO EMPLOYEES, ETC.


Payroll expenses 2017 2016 2017 2016

Salaries 0 0 19 729 137 20 023 776 Payroll tax 0 0 2 911 328 2 554 868 Pension costs 0 0 924 843 1 250 806 Other benefits 0 0 860 556 1 234 712 SkatteFUNN 0 0 0 (510 871)Capitalised R&D 0 0 (5 474 520) (3 259 368)Total payroll expenses 0 0 18 951 344 21 293 921

Number of full time equivalents in the accounting year 35 29

Management remuneration CEO Board members

Salaries/fee/board fee 1 947 000 0Pension costs 0 0Other benefits 0 0

The CEO is the majority owner of Otrum Holding AS (60 %). There is no severance package agreed.

The shareholders have a total bonus agreement of 1,2 MNOK split in 4 equal parts if the budgeted result after taxes is reached.

No loans or guarantees have been given to the CEO, members of the board or their related parties. There are no loans / guarantees that represent more than 5% of the company’s equity.

Remuneration to auditors Parent company Group

Statutory audit 28 750 373 767 Assurance services 0 25 000 Tax advisory fee 5 423 9 423 Other non-auditing services 94 782 421 509 Total audit fee 128 955 829 699


NOTE 4PENSION

The company is required to provide an occupational pension scheme pursuant to the Act relating to Mandatory Occupational Pensions. The company’s pension scheme complies with the requirements under that law.

For the company’s defined contribution plan TNOK 746 is recognised in the income statement in 2017.

NOTE 5GOVERNMENT SUBSIDY (SKATTEFUNN)


2017 2016 2017 2016

Carried SkatteFUNN 0 0 889 000 836 000

NOTE 6INCOME TAXES


2017 2016 2017 2016

Components of the income tax expensePayable tax on this year's result 0 0 0 0 Changes in deferred tax 0 0 (6 746 574) (78 160)Translation differences 0 0 0 (2 498)Correction previous years 0 0 (1 318 776) 0 Total income tax expense 0 0 (8 065 350) (80 658)

Basis for income tax expense Result before taxes (139 287) (220)Permanent differences 0 (25 000)Tax base (139 287) (25 220)



2017 2016 2017 2016

Temporary differences Fixed assets 0 0 (3 152 057) (1 507 414)Receivables 0 0 (325 364) (941 260)Inventories 0 0 (163 116) 0 Pensions 0 0 157 152 140 823 Profit and loss account 0 0 1 146 112 1 432 640 Total 0 0 (2 337 273) (875 211)

Loss carry-forward (164 507) (25 220) (26 995 656) (28 017 704)Basis for deferred tax / (deferred tax asset) (164 507) (25 220) (26 995 656) (28 892 915)

Deferred tax / (deferred tax asset) (39 482) (6 053) (6 746 574) (6 934 300)Carried deferred tax / (deferred tax asset) 0 0 (6 746 574) 0

NOTE 7 INTANGIBLE ASSETS

Intangible assets

Group

R&D Total

intangible assets

Acquisition cost at 01.01 66 391 534 66 391 534 Additions 4 629 243 4 629 243 Acquisition cost at 31.12 71 020 777 71 020 777

Accumulated depreciation 31.12 (64 510 433) (64 510 433)

Net carrying value 31.12 6 510 344 6 510 344

Depreciation for the year (1 955 926) (1 955 926)

The company uses linear depreciation for all intangible assets. The economic life of the assets are expected to be:

* R&D 3-5 years


NOTE 8FIXED ASSETS

Fixed assets

Group

Pay-TV systems

Machines and movables

Total fixed assets

Acquisition cost at 01.01 15 844 701 25 749 923 41 594 623

Disposal 0 (5 281 547) (5 281 547)

Acquisition cost at 31.12 15 844 701 20 468 376 36 313 076

Accumulated depreciation 31.12 (15 836 938) (20 183 008) (36 019 945)Net carrying value 31.12 7 763 285 368 293 132

Depreciation for the year (60 935) (342 217) (403 154)

The company uses linear depreciation for all fixed assets. The economic life of the assets are expected to be:

* Pay-TV systems 5 years * Machines and movables 5 years

The lease agreements expire by 2020. Guarantee liabilities for the rental of office space is TNOK 950.


NOTE 9SUBSIDIARIES, ASSOCIATED COMPANIES AND JOINT VENTURE

Subsidiaries of Otrum Holding AS Acquired Location Share

ownership Voting

rights

Otrum AS 01.09.2016 Oslo 100 % 100 %

Subsidiaries of Otrum AS Acquired Location Share

ownership Voting

rights

Otrum Svenska AB 12.03.1995 Stockholm 100 % 100 %Otrum Finland OY 12.03.1995 Helsinki 100 % 100 %

Investments in subsidiaries, associated companies and joint ventures are recognised at cost.

Investments recognised at cost:

Subsidiaries of Otrum Holding AS Share capital

Number of shares

Carrying value

Otrum AS 1 000 000 1 000 000 1 250 000

Equity Result

Otrum AS 7 036 323 10 160 248

NOTE 10INVENTORIES


2017 2016 2017 2016

Finished goods 0 0 946 924 956 868 Total 0 0 946 924 956 868


NOTE 11RESTRICTED BANK DEPOSITS

Withheld employee taxes amounts to TNOK 848 at 31.12.

NOTE 12SHARE CAPITAL AND SHAREHOLDER INFORMATION

Share capital

Number of shares

Nominal value

Surlien Management AS 36 000 18 000 2 JMG Management AS 15 000 7 500 2 Nigel Bateson 4 500 2 250 2 Andreas Tønnesen 4 500 2 250 2 Total 60 000 30 000

Surlien Management AS is owned by the Chairman of the Board / CEO Stein Surlien (100 %) andJMG Management AS is owned by Member of the Board / CFO & COO Janne Edman Martinsen (100 %).

NOTE 13EQUITY

Parent companyShare

capitalShare premium

reserveOther equity Total

Equity at 01.01 60 000 1 314 780 0 1 374 780 Profit / (loss) for the year 0 (139 287) 0 (139 287)Equity at 31.12 60 000 1 175 493 0 1 235 493

GroupShare

capitalShare premium

reserve

Other equity / Loss brought

forward Total

Equity at 01.01 60 000 0 (5 390 340) (5 330 339)Profit / (loss) for the year 0 0 11 119 641 11 119 641 Translation difference 0 0 1 279 994 1 279 994 Equity at 31.12 60 000 0 7 009 295 7 069 295


NOTE 14OTHER SHORT-TERM LIABILITIES

Other short-term liabilities Parent company Group

2017 2016 2017 2016

Accrued salaries/holiday pay 0 0 (2 169 454) (2 270 676) Deferred income 0 0 (3 118 161) (3 250 704) Accrued costs 0 0 (1 433 761) (930 310) Other short-term liabilities (7 500) (7 500) (2 341 919) (6 835 402) Total (7 500) (7 500) (9 063 295) (13 287 092)

NOTE 15FINANCIAL MARKET RISK

The company does not use derivatives to manage financial risk.

Interest rate risk

As a result of fluctuations in the floating market interest rates on company debts, the company will be exposed to interest rate risk in the short and medium-term. A maximum limit has been set regarding debts with floating market interest rate. The lending portfolio has a combination of floating and fixed rate of interest.

Currency risk

Currency fluctuations represent both a direct and an indirect financial risk for the company. The company does not have any agreements that reduces this risk as of 31.12.

Commodity price risk

Risk of fluctuations in commodity prices is secured through long-term purchase agreements, as well as strategic agreements with suppliers and other market participants.


NOTE 16GOING CONCERN AND SUBSEQUENT EVENTS

Otrum’s equity is positive, one year ahead of the plan connected to the MBO made in 2016. The corporate management has taken several steps to improve the group’s earnings and to cut costs. The management’s main focus this last year, and going forward, is the income generating part of the business. Both in regards to renegotiating and renewing existing contracts and gaining new customers. Several new clients/contracts were signed in 2017 and there are plans to sign several frame agreements in 2018. The group has been focused on the strategy plan made in 2017.

On the basis of this, the going concern assumption has been applied in preparing the annual accounts.

ENTERPRISE

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OTRUM ENTERPRISEONE SOLUTION, MULTIPLE CLIENTS

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