quarterly report€¦ · with the unique audience insight and targeting capabilities of the cxense...

QUARTERLY REPORT

Q3 2013 (UNAUDITED)

2

Contents

Q3 2013 in Brief __________________________________________________________________________________________ 3

Selected Highlights _______________________________________________________________________________________ 4

Outlook ____________________________________________________________________________________________________ 5

About Cxense _____________________________________________________________________________________________ 5

Condensed Financial Report _____________________________________________________________________________ 8

Consolidated Income Statement ______________________________________________________________________ 10

Consolidated Statement of Financial Position ________________________________________________________ 11

Consolidated Statement of Cash Flow ________________________________________________________________ 13

Notes to the Consolidated Financial Statements _____________________________________________________ 14

OFFICE LOCATIONS

North America Latin America Japan Europe Asia Pacific

Boston, MA

Cxense, Inc. 30 Turnpike Road Southborough, MA 01772 USA

Buenos Aires, Argentina

Victoria Ocampo 360 Piso 3 Puerto Madero Ciudad de Buenos Aires Argentina

Tokyo, Japan

Cxense Co., Ltd. SU Building 204 3-1 Uguisudani-cho, Shibuya-ku Tokyo, 150-0032, Japan

London, UK

Cxense UK 5 Regent St. Charles House, 5th Floor United Kingdom

Melbourne, Australia

Cxense Australia Pty Ltd Level 2, 84 William Street Melbourne, 3000 Australia

San Francisco, CA xxxxx

Cxense, Inc. 1625 El Camino Real, Suite 2 Belmont, CA 94002 USA Miami, FL

Cxense Latin America Suite 232, 4801 South University Drive Davie, FL 33328 USA

Oslo, Norway (Corporate Headquarters)

Cxense AS Henrik Ibsens gate 100 P.O. Box 2920 Solli NO-0230 Oslo, Norway

3

Q3 2013 in Brief

Q3 2013 was another exciting quarter for Cxense as the Company signed 11 new Software-as-a-Service

(SaaS) contracts for our portfolio of recurring software license revenues. The Q3 2013 revenues for the

Cxense SaaS segment amounted to USD 1.1 million, a growth of 64% compared to Q3 2012 revenues of

USD 0.67 million.

Of the eleven new contracts, three were signed in EMEA, four in America and four in Japan confirming

ongoing sales momentums in all our main regions. Three of the new contracts were up-sells of new

solutions to existing customers, which shows that our customers are pleased with existing deployed

solutions and that there is growth potential in already established customer relationships.

New customers were predominantly premium online

news and magazine publishers, but Cxense also signed

Nippon Television, one of the leading broadcasters in

Japan.

During the third quarter, Cxense secured new

customers across all our main solution areas, but with

Cxense Analytics and Content in the majority of the

deals. Analytics is becoming increasingly popular as a

stand-alone product with a rapidly increasing revenue

stream. The Cxense Analytics solution is easy to

deploy, and, with the recently developed features such

as customizable dashboards and wallboards, it has

become a unique tool for publishers who want

understand their audience and use that

understanding to plan advertising, subscription, and

content optimization strategies.

During the third quarter we employed a dedicated Head of Onboarding and Customer Success. This has

already resulted in the introduction of new standardized onboarding project management processes

and follow-up tools, and we see a positive trend with respect to reduced customer go-live time.

After the end of the quarter, on November 15th 2013, Cxense closed and announced the acquisition of

Emediate, the leading Nordic ad server technology, for USD 10 million. The acquisition more than

doubles the Cxense SaaS revenue base and creates the opportunity for sales growth synergies going

forward. The acquisition of Emediate adds around 150 new customers, predominantly Northern

Europe-based publishers, where we can upsell the Cxense Solution Suite. Emediate is known for an

efficient high quality ad serving offering supported by excellent operations. By combining this offering

with the unique audience insight and targeting capabilities of the Cxense Extrordinary Insight Engine

(EIE), we believe we can create a unique and future proof ad serving offering.

The Emediate acquisition was financed through a USD 15 million share issue towards existing and

selected new shareholders.

4

In Q3 2013, the Cxense PCAN segment had revenues of USD 686,000 and EBITDA of USD 18,000,

compared to Q3 2012 revenues of USD 233,000 and EBITDA of USD -93,000. Q3 2013 was the first

quarter with positive results for the PCAN Segment which was established in Q2 2012. The break-even

came as a result of increasing economies of scale through growth in advertisers, better advertising

performance, more participating publishers and increasing gross margin.

PPN AG, the Swiss PCAN, was sold to Tamedia, the largest Swiss publisher, with effect as of 30.06.2013.

The transaction was closed and finalized in Q3 2013. The sale resulted in a gain of USD 0.14 million.

Selected Highlights

Dallas Morning News, the North American online newspaper with more than 5 million unique

visitors each month, launches a new and re-designed premium site and chooses Cxense Content

to power content recommendations to promote increased traffic and enhanced user

engagement

Forecast Communication, the online technology provider controlled by the Nippon Television

Network Corporation of Japan, chose Cxense to replace a number of local search and

recommendation solutions used to power their services

Grupo RBS, one of Brazil’s largest media conglomerates, chose Cxense Content to power

personalized article recommendations on the front page of Zero Hora, Brazil’s sixth largest

online newspaper

Yomiuri of Japan, the largest newspaper in the world by circulation, expands their contract with

Cxense as they see further Cxense Analytics and Content use for their online site

Ringier AG, Switzerlands second largest publisher, expands their contract with Cxense as they

add new Cxense Analytics functionality to gain deeper audience insight

October 17, 2013, after the Q3 reporting period: Dow Jones & Company, the New York based

financial publisher, chooses Cxense Big Data, Advertising and Content to power subscription

optimization on the online edition of the Wall Street Journal, the largest newspaper in the US by

circulation.

5

Outlook

Cxense experiences increasing customer interest for its solutions for real-time analytics, digital

advertising, actionable Big Data processing, content optimization and personalization, and search.

Online publishers and media companies continue to be the main customer focus in the near term, with

interesting market opportunities within the e-commerce sector emerging in the medium term.

The revenue growth outlook for the SaaS segment for the next quarter is good. In Q3 2013 the sales

team sent 44 offer letters vs 23 in Q2.

In the longer term, we also see opportunities in other business verticals for EIE, our Big Data platform,

as companies seek to improve customer understanding, analytics and communication.

Most online companies are experiencing significant growth on new devices and formats, mainly tablets

and mobile smart phones. This requires adaptation of their content and monetization methods. The

Cxense solutions have cross-device support (laptop, mobile tablet) and mobile growth represents a

significant market opportunity for us.

Our commercial product platform addresses large and fast-growing markets. The global online

advertising market is estimated to be more than USD 100 billion this year, and is expected by leading

industry groups to grow to more than USD 200 billion by 2020. The global e-commerce market is

estimated to pass the USD 1,000 billion mark by 2013, and is growing about 20% per year. Industry

analyst group, Gartner expects that Big Data will drive USD 230 billion in IT spending through 2016, up

from USD 96 billion in 2012(1).

About Cxense

Cxense was founded in February 2010. The Company sells Cloud Based Software as a Service (SaaS)

solutions to online content providers and e-commerce companies that want to increase the

functionality, relevance and overall performance on their internet sites. At the same time Cxense

solutions enhance their customer insight and maximize monetization.

Cxense has built the Extraordinary Insight Engine (EIE) for real-time analysis of content, user context,

and behavior. The EIE analyzes the behavior of more than 350 million internet users and deducts their

interest, intent, location, device and much more. The EIE gives our customers a ‘360 degree view’ of

their online consumers.

The EIE is fully integrated with a range of solutions (Cxense Advertising, Analytics, Big Data, Content,

and Search), which are used by Cxense customers to increase advertising revenue, user engagement,

and conversions to digital subscriptions.

6

The solutions based on

the EIE are provided as

SaaS (Software-as-a-

Service) services with

monthly software service

fees and/or royalty

payments dependent on

advertising volume and

transaction levels. The

sale of our SaaS solutions

is reported in the Cxense

SaaS business area and

represents our core

business.

The EIE technology has

several unique aspects: it

is end-to-end real time;

from data capture, through processing to actionable output. It is also mobile optimized through its non-

cookie based data capture methodologies and low bandwidth consumption. With highly flexible APIs

the EIE can power any application and make it context aware.

Cxense has also helped establish a range of publisher-controlled advertising networks (PCANs). The

PCANs act as publisher-controlled broker between the advertisers and the publishers, distributing and

sharing the advertising revenues generated in the network with the publishers. Cxense is advertising

technology provider to the PCANs and charges a fee dependent on the PCAN revenues. In Spain, the

Company has retained a 56% ownership interest and because of majority ownership, this PCAN is

consolidated into the Group Accounts, and is reported in the Cxense PCAN business area.

1) http://techcrunch.com/2012/10/17/big-data-to-drive-232-billion-in-it-spending-through-2016/

http://techcrunch.com/2012/10/17/big-data-to-drive-232-billion-in-it-spending-through-2016/

7

Cxense group – financial development summary

1) Q2 2013 cont’d excludes the discontinued operations of PPN AG (See note 4 for details). All other quarters are

presented including PPN AG. Segment results excluding the discontinued operations can be found in note 3.

2) Other cost of sales includes the elimination difference from elimination of inter group transactions. For 2011 other cost

of sales also includes governmental R&D cost refunds booked as negative costs.

USD Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013

Q2 2013

cont'd. Qtr 3 2013

IFRS IFRS IFRS IFRS IFRS IFRS IFRS IFRS

SaaS segment

Revenues total 389 419 502 960 674 585 735 271 840 122 992 826 992 826 1 090 826

Hosting 54 837 72 625 83 503 166 757 152 750 171 340 171 340 219 453

Cost of advertising - - - - - - - -

Other cost of sales -44 744 61 111 -26 138 -49 184 -6 323 31 656 31 656 -40 217

Intercompany cost of sales - - - - - - - -

Cost of sales 10 093 133 735 57 365 117 573 146 427 202 996 202 996 179 236

- - - -

Gross profit 379 325 369 225 617 220 617 698 693 695 789 830 789 830 911 591

Gross magin % 97% 73% 91% 84% 83% 80% 80% 84%

Personnel 1 205 758 1 443 490 1 312 416 1 578 515 1 789 784 1 831 715 1 831 715 1 833 079

Other OPEX 217 517 347 722 489 291 221 055 676 238 801 693 801 693 643 470

OPEX 1 423 275 1 791 211 1 801 707 1 799 569 2 466 022 2 633 408 2 633 408 2 476 549

- - - -

EBITDA -1 043 949 -1 421 986 -1 184 487 -1 181 872 -1 772 327 -1 843 578 -1 843 578 -1 564 958

PCAN segment

Revenues total 808 854 976 167 1 437 264 1 374 583 1 534 304 546 680 685 932

- - - - - - Hosting - - - - - - -

Cost of advertising 705 287 815 349 1 158 049 1 140 512 1 091 652 395 242 327 616

Other cost of sales - 61 841 166 362 138 690 44 963 44 963 129 689

Intercompany cost of sales 60 157 87 768 118 331 110 441 125 937 46 821 66 100

Cost of Goods Sold 765 444 964 958 1 442 743 1 389 642 1 262 552 487 026 523 405

- - - - - -

Gross profit 43 411 11 209 -5 479 -15 059 271 753 59 654 162 526

Gross magin % 5% 1% 0% -1% 18% 11% 24%

Personnel 180 292 202 420 225 722 237 597 290 651 123 531 109 202

Other OPEX 118 973 65 695 106 501 97 235 128 717 72 824 35 077

OPEX 299 265 268 115 332 223 334 832 419 367 196 355 144 280

- - - - - -

EBITDA -255 854 -256 906 -337 702 -349 891 -147 615 -136 701 18 247

GROUP

EBITDA -1 043 949 -1 677 840 -1 441 393 -1 519 573 -2 122 218 -1 991 192 -1 980 279 -1 546 712

8

Condensed Financial Report

Q3 2013 Group Revenue for continuing operations amounted to USD 1.71 million, an increase of USD 0.8

million over the same period last year (USD 0.9 million). The increase in Revenue is due to the steady

growth in the number of customers for the Cxense SaaS segment as well as increased advertising sales

for the PCAN business segment. After the sale of PPN AG the PCAN segment now consists of PAN Spain,

the PCAN owned 56% by Cxense AS. The Q3 2013 Revenue from the SaaS Segment was USD 1.09

million for external customers and inter-segment Revenue was USD 0.07 million. Revenue from the

PCAN segment was USD 0.69 million.

The Q3 2013 Cost of Sales amounted to USD 0.64 million, compared to USD 0.26 million in Q3 2012. The

SaaS Segment Cost of Sales for Q3 2013 was USD 0.18 million, while the PCAN segment Cost of Sales was

USD 0.52 million. Cost of Sales within the SaaS segment relates to the hosting of the software

applications used by our customers. Cost of Sales within the PCAN segment relates to revenue share

paid to publishers providing their advertising space, as well as agency commission paid to advertising

agencies. The Q3 2013 Gross Profit for the SaaS segment amounted to USD 0.91 million and USD 0.16

million for the PCAN segment. The Q3 2013 Gross Margin in the continuing operations of the PCAN

segment was 23% compared to 3% in Q3 2012. The improvement is due to the gradual expiration of a

publisher revenue share guarantee clause that originates from the start-up of the continuing PCAN

operations.

The Q3 2013 Employee Benefit Expenses were USD 1.9 million, compared to USD 1.4 million in Q3 2012.

The increase is attributable to the number of employees rising to 63 full-time employees (FTE) from 42

FTE at Q3 2012. For the 26 FTEs in the Norwegian legal entity there is not booked Payroll Expense for

the month of July, as the July payment is booked against the holiday accruals.

The Depreciation Expense in Q3 was USD 0.007 million compared to USD 0.003 million . The

Depreciation Expense is consistently low because the Group has limited non-current assets. The large

distributed cloud- based systems operated by Cxense are hosted on platforms leased from large scale,

reputable hosting suppliers. The Group has limited intangible assets, and the R&D cost is expensed (not

capitalized).

Other Operating Expenses amounted to USD 0.68 million in Q3 2013 and USD 0.54 million Q3 2012.

The majority of the expenses related to marketing and external consulting (audit, legal and other). The

increase is in line with the expansion of the existing SaaS business and the inclusion of the PCAN

subsidiary since Q2 2012. The Q3 2013 Other Operating Expense of USD 0.68 million included a R&D

refund originating in Australia which has been booked as negative cost of USD -0.159 million.

The Finance Income in Q3 2013 was USD 0.94 million, largely relating to interest earned on bank

deposits and cash arising from the share issue proceeds new equity issues in June and December 2013.

Finance Income in Q3 2012 was USD 0.01. Finance Expenses, mostly relating to currency expenses,

amounted to USD 0.055 million in 2013 and USD 0.001 in Q3 2012.

Income Tax Expense for Q3 2013 was USD 0.007 million compared to USD 0.0010 in Q3 2012. The

Income Tax Expense arises in the Cxense SaasS subsidiaries in USA, Japan and Australia that perform

Sales & Marketing and Research & Development activities. In both quarters, the Tax Expenses are

estimates only, with full reviews being performed at year-end.

9

The Group Net Loss from continuing operations amounted to USD 1.5 million in Q3 2013, compared to a

Net Loss of USD 1.3 million in Q3 2012. The continuing PCAN operation incurred a Profit for Q3 2013 of

USD 14,000. Overall the Net Result represents a loss of USD 26 per share, compared to USD 30 per share

in Q2 2012.

During Q3 2013 the accounting entries for sale of the PCAN subsidiary were finalized and recorded

resulting in a gain of USD 0.14 million. Full details of the sale of the PCAN subsidiary are outlined in

Note 4 to the accounts.

Total Assets at the end of Q3 2013 amounted to USD 6.3 million compared to USD 4.5 million at Q3

2012. The increase is predominantly due to the increase in cash and cash equivalents, which amounted

to USD 3.8 million at the end of Q3 2013 and USD 2.4 million at the end of Q3 2012. Trade Receivables

were USD 1.5 million at the end of Q3 2013, compared to USD 1.1 million at the end of Q3 2012. The

increase in Q3 2013 Receivables is due to the growth in external customers billings in the SaaS Cxense

and the PCAN segment.

Total Current Liabilities at the end of Q3 2013 were USD 2.3 million compared to USD 3.0 million at

Q3 2012. The Q3 2012 included the share issue allocation not booked until October and taken up as

payables at Sept 2012.

Net Cash Flow used in Operating Activities was USD 1.9 million in Q3 2013, compared to USD 0.6 million

in Q3 2012.

The Available Liquidity as of the 30.09.2013 Balance Sheet is deemed to be adequate for the remaining

2013 year.

10

Consolidated Income Statement (unaudited)

USD 1,000 Note

Q3 ended

30 Sept 2013

Q3 ended

30 Sept

2012

9 mnths to 30

Sept 2013

9 mnths to

30 Sept

2012

Year ended

31 December

2012

Year ended

31 December

2011

Continuing operations:

Revenue 3, 4 1,710 887 4,399 1,896 2,961 435

Operating expense

Cost of goods sold 3 636 264 1,847 525 1,061 (280)

Employee benefit expense 5 1,942 1,365 5,774 4,074 5,700 4,000

Depreciation expense 7 3 16 14 21 17

Other operating expense 6 679 538 2,283 1,165 1,446 930

Total operating expense 3,263 2,169 9,919 5,777 8,228 4,667

Net operating income/(loss) (1,553) (1,282) (5,520) (3,881) (5,266) (4,232)

Financial income and expense

Finance income 4 94 10 276 34 91 76

Finance expense (55) (10) (83) (19) (97) (16)

Net financial income/(expense) 39 0 193 15 (7) 60

Net income/(loss) before taxes (1,514) (1,282) (5,327) (3,866) (5,273) (4,171)

Income tax expense 7 10 25 12 33 11

Net income/(loss) for the period from continuing operations (1,521) (1,292) (5,352) (3,878) (5,306) (4,183)

Discontinued operations

Net income/(loss) for the period from

discontinuing operations 4 143 (165) (24) (297) (442) 0

Total net income/(loss) for the period (1,379) (1,457) (5,377) (4,175) (5,748) (4,183)

Net income/(loss) attributable to:

Owners of the Company (1,385) (1,424) (5,231) (4,079) (5,564) (4,183)

Non-controlling interests 6 (41) (146) (96) (183) 0

Earnings per share:

Basic and diluted 7 (0.26) (0.30) (0.41) (0.43) (0.57) (0.53)

Statement of comprehensive income

USD 1,000

Q3 ended

30 Sept 2013

Q3 ended

30 Sept

2012

9 mnths to 30

Sept 2013

9 mnths to

30 Sept

2012

Year ended

31 December

2012

Year ended

31 December

2011

Net income/(loss) for the period (1,379) (1,456) (5,377) (4,175) (5,748) (4,183)

Other comprehensive income:

- Currency translation differences 5 (234) 102 5 (72) 264

Total comprehensive income/(loss) (1,373) (1,689) (5,274) (4,169) (5,820) (3,919)

Total comprehensive income/(loss) attributable to:

Owners of the Company (1,379) (1,648) (5,128) (4,073) (5,636) (3,919)

Non-controlling interests 6 (41) (146) (96) (183) 0

11

Consolidated Statement of Financial Position

USD 1,000 Note

9 mnths to

30 Sept 2013

9 months to

30 Sept 2012

As at 31 December

2012

Assets

Non-current assets

Deferred tax asset 18 3 14

Intangible assets 6 2 2

Office machinery, equipment,etc. 74 68 82

Other financial assets 18 63 12

Total non-current assets 116 136 110

Current assets

Trade receivables 8 1,479 1,066 1,873

Other short-term assets 9 840 850 764

Cash and cash equivalents 3,841 2,408 10,210

Total current assets 6,159 4,325 12,847

Total assets 6,276 4,460 12,958

USD 1,000 Note

9 mnths to

30 Sept 2013

9 months to

30 Sept 2012

As at 31 December

2012

Equity and liabilities

Equity

Share capital 10 2,113 1,767 2,269

Other paid in capital 8,197 4,243 13,803

Currency translation differences 304 279 201.4

Retained earnings (6,380) (4,750) (6,453)

Equity attributable to the holders of the Company 4,233 1,538 9,820

Non-controlling interest 13 (271) (94) (125)

Total equity 3,962 1,444 9,695

Liabilities

Non-current liabilities

Deferred tax liabilities - - -

Total non-current liabilities - - -

Current liabilities

Trade payables 886 1,153 1,651

Current taxes 66 27 76

Other short-term liabilities 11 1,361 1,836 1,536

Total current liabilities 2,313 3,017 3,263

Total liabilities 2,313 3,017 3,263

Total equity and liabilities 6,276 4,460 12,958

12

Consolidated Statements of Changes in Equity

USD 1,000

Nominal

share

capital

Other paid

in capital

Currency

translation

differences

Retained

earnings

Attributable to

owners of

parent company

Non

Controlling

interest

Total

equity

Total equity as at 1 January 2012 1,505 4,939 273 (4,663) 2,054 0 2,054

0

Profit for the period (4,079) (4,079) (96) (4,175)

Other comprehensive income 5 5 0 5

Total comprehensive income/(loss) for nine months

ending 30 September 2012 0 5 (4,079) (4,073) (96) (4,169)

Reduction of paid in capital (4,190) 4,190 0 0

Increase in share capital 192 3,265 3,457 2 3,459

Currency effects from translation of equity 70 229 (199) 100 100

Total equity as at 30 September 2012 1,767 4,243 279 (4,750) 1,538 (94) 1,444

0

USD 1,000

Nominal

share

capital

Other paid

in capital

Currency

translation

differences

Retained

earnings

Attributable to

owners of

parent company

Non

Controlling

interest

Total

equity

Total equity as at 1 January 2013 2,269 13,803 201 (6,453) 9,820 (125) 9,695

0 0

Profit for the period (5,231) (5,231) (146) (5,377)

Other comprehensive income 102 102 102

Total comprehensive income/(loss) for the nine

months ending 2013 0 102 (5,231) (5,128) (146) (5,274)

Reduction of paid in-capital (4,878) 4,878 0 0

Transaction costs 0 0

Share- based payments 125 125 125

Increase in share capital 6 136 142 142

Currency effects from translation of equity (162) (988) 425 (726) (726)

Total equity as at 30 September 2013 2,113 8,196 304 (6,380) 4,233 (271) 3,962

13

Consolidated Statement of Cash Flow

USD 1,000 Note

Q3 ended 30

Sept 2013

Q3 ended 30

Sept 2012

YTD to 30

Sept 2013

YTD to 30

Sept 2012

Year ended

31 December

2012

Cash flow from operating activities

Profit / (loss) before income tax (1,373) (1,442) (5,352) (4,162) (5,715)

Adjustments:

Income tax payable (3)

Share- based payments 5 98 147 53

Result from investment in associates 52

Depreciation and amortization 7 3 16 14 23

Currency translation effects 118 79 (623) 105 (113)

Change in trade receivables 872 (463) 395 (930) (1,737)

Change in trade payables (500) 799 (765) 1,104 1,602

Change in other accrual and non-current items (1,375) 255 (372) 893 750

Net cash flow from / (used in) operating activities (2,153) (768) (6,554) (2,975) (5,088)

Cash flow from investing activities

Investment in furniture, fixtures and office machines (5) 2 (8) (11) (34)

Investment in intangible assets (0) (0) (4) (2) (2)

Investment in associated companies (52)

Net cash effects from disposal subsidiary (1) 55 55

Net cash flow from / (used in) investing activities 50 2 43 (13) (87)

Cash flow from financing activities

Net proceeds from share issues 142 192 142 3,457 13,390

Proceeds from minority interest 2 2 58

Net cash flow from / (used in) financing activities 142 194 142 3,459 13,448

Net increase/ (decrease) in cash and cash equivalents (1,961) (572) (6,369) 471 8,272

Cash and cash equivalents at the beginning of the period 5,802 2,980 10,210 1,938 1,938

Cash and cash equivalents at the end of the period 3,841 2,409 3,841 2,409 10,210

(1) Cash effects are net of cash received on sale of subsidiary, and cash held by the subsidiary.

14

Notes to the Consolidated Financial Statements

Note 1 General information

Cxense AS, which is the parent Company of the Cxense group (the Group), is a limited liability company

incorporated and domiciled in Norway, with its corporate headquarters in Oslo. The Group is a global

technology company delivering innovative and intuitive products that help clients build unique online

experiences.

The Company’s Board of Directors approved the financial statements on November 18, 2013.

These financial statements are unaudited.

Note 2 Basis of preparation and accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements

are set out below.

The Consolidated Financial Statements have been prepared in accordance with International Financial

Reporting Standards (IFRS) as adopted by the European Union (EU) and in accordance with the

additional requirements following the Norwegian Accounting Act.

The accounting policies applied in this Condensed Consolidated Interim Financial Report are consistent

with those applied and described in the latest Consolidated Annual Financial Statements.

The going concern assumption has been applied when preparing this interim financial report.

15

Note 3 Segment information

Q3 ended 30 Sept 2013

USD 1,000 Cxense SaaS PCAN Eliminations Consolidated

Revenue

External customers 1,024 686 0 1,710

Inter-segment 67 0 (67) 0

Revenues total 1,091 686 (67) 1,710

Cost of goods sold 179 523 (67) 636

Gross profit 912 163 (0) 1,074

Employee benefit expense 1,833 109 0 1,942

Depreciation expenses 6 1 0 7

Other operating expense 643 35 0 679

EBIT (1,571) 17 (0) (1,554)

Net finance income/(expense) 41 (3) 0 38

Income tax income/(expense) (7) 0 0 (7)

Net income/(loss) before continuing operation (1,537) 14 (0) (1,523)

Net income/(loss) for the period from discontinuing operations 0 143 143

Total net income/(loss) for the period (1,537) 157 (0) (1,379)

For management purpose the Group is organized into business units based on its product and services and has two reportable segments:

- Cxense Saas, which sells software-as-a-service applications based on the Extraordinary Insight Engine™ (EIE™) for real-time analysis of

content, user context, and behaviour. The EIE is fully integrated by a range of applications (web analytics, recommendations, search and

targeted advertising), which are used by Cxense customers to improve their online businesses by increasing advertising revenue, page

views, readership and conversion.

- Publisher-Controlled Advertising Networks (PCANs) which sell online advertising on the sites of various publishers, and distribute and

share the advertising revenues generated in the network with publishers.

Segment performance is evaluated by the management based on operating profit or loss and is measured consistently with operating profit

in the financial statements. Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with

third parties.

Discontinued operations:

To be consistent with the presentation in the income statement and statement of financial position, the PCAN segment presented below is

exclusive to the discontinued operations. Furthermore, Cxense SaaS sale to the discontinued operation is presented as a sale to external

customers.

16

9 mnths to 30 Sept 2013


Revenue

External customers 2,787 1,613 4,399

Inter-segment 137 (137) 0

Revenues total 2,924 1,613 (137) 4,399

Cost of goods sold 529 1,455 (137) 1,847

Gross profit 2,395 158 0 2,553



Other operating expense 2,121 161 0 2,283

EBIT (5,195) (325) 0 (5,520)



Net income/(loss) before continuing operation (5,021) (331) 0 (5,352)

Net income/(loss) for the period from discontinuing operations 0 (24) (24)

Total net income/(loss) for the period (5,021) (356) 0 (5,377)

Balance sheet information 30 Sept 2013

USD 1,000 Cxense SaaS PCAN

Eliminations

and

unallocated Consolidated

Segment assets:

Non-current assets 0 0 116 116

Current assets

- Trade receivables 837 641 1,479

- Other short term assets 980 (78) (63) 840

- Cash and cash equivalents 3,644 197 3,841

Total segment assets 5,462 760 54 6,276

Segment liabilities:

Non-current liabilities 0 0 0 0

Current liabilities 1,256 1,090 (33) 2,313

Total segment liabilities 1,256 1,090 (33) 2,313

17

PCAN segment in 2012:

Q3 ended 30 Sept 2012


Revenue

External customers 654 233 0 887

Inter-segment 20 0 (20) 0

Revenues total 674 233 (20) 887


Gross profit 616 7 0 623



Other operating expense 490 48 0 537

EBIT (1,188) (93) 0 (1,281)

Net finance income/(expense) 1 (1) (1) (0)


Net income/(loss) before continuing operation (1,197) (94) (1) (1,291)

Net income/(loss) for the period from discontinuing operations 0 (165) 0 (165)

Total net income/(loss) for the period (1,197) (259) (1) (1,457)

9 mnths to 30 Sept 2012


Revenue

External customers 1,546 351 0 1,896

Inter-segment 21 (21) 0

Revenues total 1,567 351 (21) 1,896


Gross profit 1,366 6 0 1,372



Other operating expense 1,055 110 0 1,165

EBIT (3,664) (217) 0 (3,881)



Net income/(loss) before continuing operation (3,660) (218) 0 (3,878)

Net income/(loss) for the period from discontinuing operations 0 (297) 0 (297)

Total net income/(loss) for the period (3,660) (515) 0 (4,175)

The business incorporated as the PCAN segment was established at the beginning of Q2 2012.

18

Balance sheet information 30 sept 2013

USD 1,000 Cxense SaaS PCAN

Eliminations

and

unallocated Consolidated

Segment assets:

Non-current assets 0 0 136 136

Current assets

- Trade receivables 671 627 (231) 1,066

- Other short term assets 370 477 3 850

- Cash and cash equivalents 2,282 127 2,408

Total segment assets 3,322 1,231 (92) 4,460

Segment liabilities:

Non-current liabilities 0 162 (162) 0

Current liabilities 1,673 1,496 (152) 3,017

Total segment liabilities 1,673 1,658 (314) 3,017

Geographic information

Revenues from external customers:

9 mnths to 30

Sept 2013

9 months to

30 Sept 2012

Year ended

31 December 2012

EMEA 4,957 2,261 3,933

Americas 631 330 502

Pacific 635 611 826

Total revenue from external customers 6,223 3,202 5,260

Information about major customersThe Company does not have single customers that generate 10% or more of the entity's total revenue.

The revenue information above is based on the location of the entity generating the revenue and includes sales generated by discontinued

operations. Revenues from discontinued operations is included and has solely been booked to the EMEA segment in the table above.

19

Note 4 Discontinuing operations

Profit from the discontinued operations

USD 1,000

9 mnths to 30

Sept 2013 (1)

9 mnths to 30

Sept 2012

Year ended

31 December

2012

Revenue 1,982 1,433 2,515

Operating expenses 2,139 1,730 2,954

Net operating income/(loss) (156) (297) (440)

Net finance (11) 0 (2)

Income tax expense 0 0 0

Gain from sale of discontinued operation 143 0 0

Net income/(loss) for the period from discontinuing operations (24) (297) (442)

(1) All of operating income in 2013 comes from the six months ending 30 June, since the subsidiary was sold effective from 1

July 2013.

Earnings per share:

Basic and diluted (0.002) (0.031) (0.045)

Cash flow from discontinuing operations

USD 1,000

9 mnths to 30

Sept 2013 (1)

9 mnths to 30

Sept 2012

Year ended

31 December

2012

Net cash flow from operating activities (88) (273) (469)

Net cash flow from investing activities 0 (9) (7)

Net cash flow from financing activities 0 0 58

Net cash inflow/(outflow) (88) (282) (417)

(1) All of operating income in 2013 comes from the six months ending 30 June, since the subsidiary was sold effective from 1

July 2013. Cash effects from disposal are not included in the cash flow summary above.

At the end of Q2 2013 Cxense negotiated an agreement to sell the PCAN subsidiary PPN AG to Tamedia AG, the Swiss

based media group. The transaction is effective as of July 1, 2013. PPN AG is presented as discontinuing operations through

out this report.

Tamedia AG has been the most significant publisher in the Publisher Controlled Advertising Network alongside a number

of other publishers in the Swiss market. Tamedia states that the rationale for the transaction is to improve the control of PPN

and to use PPN as part of their strategy to develop an exclusive networked advertising offering for their online publications.

Tamedias intention is to continue to cooperate with the other existing publishers in PPN around click-based performance

advertising.

One hundred percent of the shares in PPN AG were sold for USD 103 thousand. The final transaction values have subject

to a separate audit of the PPN AG accounts and now fully finalised. The sale resulted in a gain of USD 143 thousand.

20

Note 5 Employee benefit expense

Specification of employee expense

USD 1,000 Q3 2013 Q3 2012

9 mnths to

30 Sept 2013

9 mnths to

30 Sept 2012

Year ended

31 December

2012

Payroll expense 1,603 1,367 5,080 3,763 5,226

Share-based payments 98 0 147 0 53

Social security tax 147 100 506 317 464

Pensions 74 44 179 134 219

Other personnel expense 19 4 179 130 186

Presented as part of discontinued operations (0) (151) (318) (271) (449)

Total employee benefit expense 1,942 1,365 5,774 4,074 5,700

Note 6 Other operating expense

Specification of other operating expense

USD 1,000 Q3 2013 Q3 2012

9 mnths to

30 Sept

2013

9 mnths to

30 Sept 2012

Year ended

31 December

2012

Audit, legal and other consulting fees 321 177 843 324 431

Office rental and related expenses 120 147 354 304 343

Marketing and representation 148 74 529 173 263

Travel expenses 205 107 595 295 474

Other operating expense (115) 51 62 144 56

Presented as part of discontinued operations 0 (18) (100) (75) (121)

Total other operating expense 679 538 2,283 1,165 1,446

Note 7 Earnings per share

USD 1,000 Q3 2013 Q3 2012

9 mnths to

30 Sept

2013

9 mnths to

30 Sept

2012

Year ended

31 December

2012

Net income/(loss) for the year attributable to the

parent company (3 232) (3 039) (5 231) (4 079) (5 564)

Weighted average number of shares outstanding

for basic earnings per share 12 653 10 118 12 638 9 484 9 763

Earnings per share

- Basic (0,26) (0,30) (0,41) (0,43) (0,57)

- Diluted (1) (0,26) (0,30) (0,41) (0,43) (0,57)

(1) The Company has 534 potential dilutive shares from share options outstanding. Since the Group has a loss for the

period, and since the the potential shares do not have a dilutive effect, they are not included in the calculation.

21

Note 8 Trade receivables

USD 1,000

9 mnths to

30 Sept

2013

9 mnths to

30 Sept

2012

Trade receivables 1 484 1 074

Allowance for doubtful debts (5) (8)

Total trade receivables 1 479 1 066

Trade receivables are non-interest bearing and are generally on 30-day terms.

As at 30 Sept 2013, the ageing analysis of trade receivables is as follows:

USD 1,000

Total

Neither past

due nor

impaired

<30

days 31-90 days >90 days

30 Sept 2013 1 484 910 187 314 72

30 June 2012 1 074 468 217 278 110

Movements in allowance for doubtful debt: Sept Sept

USD 1,000 2013 2012

Balance at the beginning of the year 30 0

Impairment losses recognized on receivables 16 8

Amounts written off during the year as uncollectible (41) 0

Amounts recovered during the year 0 0

Impairment losses reversed 0 0

Balance at the end of the year 5 8

Past due but not impaired

At the time of this report USD 143 thousands of the amount more than 31 days overdue at

30 Sept 2013 had been collected.

22

At 30.09.2013 Cxense AS had 410 outstanding share options, issued according to the Share Option

Program established in September 2012.

Note 9 Other short-term assets

USD 1,000

9 mnths to 30

Sept 2013

9 mnths to 30

Sept 2012

Year ended

31 December

2012

Accrued income 23 486 64

Prepayments 136 44 48

Receivable on authorities and government grants 546 280 509

Other short-term receivables 134 40 143

Other short term assets 840 850 764

Note 10 Share capital and shareholder information

Number of

shares

Share capital

NOK

Share capital

USD

Balance at 1 January 2012 9,018 9,018,000 1,505

Issued during the year 3,612 3,612,000 764

Balance at 31 December 2012 12,630 12,630,000 2,269

Issued during the year 37 37,000 0

Balance at 30 September 2013 12,667 12,667,000 2,113

Nominal value per share at 30 September 2013 is Norwegian Krone (NOK) 1 000. Cxense AS has one class of shares

with equal rights for all shares.

Note 11 Other short-term liabilities

USD 1,000

9 mnths to 30

Sept 2013

9 mnths to 30

Sept 2012 31 Dec 2012

Public duties payables 152 97 202

Prepayments from customers 209 119 480

Accrued expenses 342 218 327

Salary-related provisions 383 150 376

Other current liabilities 275 1,253 150

Total other short-term liabilities 1,361 1,836 1,535

23

Note 12 Related party disclosure

USD 1,000

Purchase of services from Description of services9 months to 30

Sept 2013

9 months to 30

Sept 2012 31 Dec 2012

Advokatfirma Ræder (1) Legal services 27 86 118

Theoline AS (2) Consulting services 47 9

(1) The Chairman of the Board in Cxense AS is a partner in Advokatfirma Ræder.

(2) Stig Eide Sivertsen, Board member, is the owner of Theoline AS

(3) Autoscale Group is controlled by Marco Billeter and Tony Hrnek, Managing Directors of PPN Switzerland AG

USD 1,000

Balances with related parties Balance type9 months to 30

Sept 2013

9 months to 30

Sept 2012 31 Dec 2012

Advokatfirma Ræder Trade payables 0 5 102

Theoline AS Trade payables 10 - 9

Autoscale Group AG (3) Loan 83 82 82

Balances and transactions between the Company and its subsidiaries, which are related parties to the Company, have been eliminated

on consolidation and are not disclosed in this note. The group does not have other transactions with related parties, except for

remuneration to management as disclosed below:

Note 13 Subsidiaries

Name of subsidiary

Place of

incorporation

Portion of ownership and

voting power

Cxense Ltd. Cxense SaaS Australia 100%

Cxense Co., Ltd. Cxense SaaS Japan 100%

Cxense, Inc. Cxense SaaS USA 100%

Cxense Inc. NV Holdings Cxense SaaS USA 100%

Premium Audience Network, s.l.u. PCAN Spain 56%

Principal activity according to

segment

On 1st July 2013, PPN Schweiz AG a wholly owned subidiary was sold to Tamedia AG. See Note 4 for details.

24

Note 14 Contingent liabilities

Note 15 Events after the reporting period

Acquistion of new operations for the Cxense SaaS segment:

Issue of Shares and allocation of share options:

The Group has not been involved in any legal or financial disputes in Q3 2013 or Q3 2012, where an

adverse outcome is considered more likely than remote.

Since Sept 30, 2013 and until the date of these financial statements, the Board of directors is not aware

of any matter or circumstance not otherwise dealt with in this report, that has significantly or may

significantly affect the operations of the Consolidated Entity with the exception of the following:

At 30.09.2013 there were 12667 shares outstanding in Cxense AS. At the date of this report the Cxense

Board of Directors had closed one smaller employee share issue of 35 shares, each at a price of NOK

23000 per share. In additon also a larger share issue of 3691 shares, each at a price of NOK 25000, to

secure the financing of the Emediate acqusition as well as growth capital for Cxense. At the time of the

report both share issues were awaiting registration in the Company Register and in the Norwegian

Central Securities Depository (VPS). For the employee share issue the BoD utilized the authorization to

issue shares given at the 2013 Annual General Meeting. For the share issue of 3691 shares the BoD

used their authorization to issue shares given on the EGM at November 1st 2013.

At 30.09.2013 there were 410 outstanding share options in Cxense. Between 30.09.2013 and the date of

this report 124 share options were allocated and consequently the number of outstanding share

options at the time of this report was 534.

On November 15, 2013, Cxense closed and announced the acqusition of Emediate, the leading Nordic

ad serving technology. Emediate has about 150 customers, predominantly European based media

companies. Emediate has legal entities in Denmark, Sweden and Norway. Cxense acquired Emediate for

EUR 7.43 million including estimated net cash and estimated normalized working capital of EUR 0.53

million (I.e. EUR 6.9 million on a debt/cash free basis). The estimated net cash and normalized working

capital calculation is subject to adjustment as of the balance sheet of the closing date as well as an

audit of that balance sheet. The acquired operations had proforma unaudited 2012 revenues of USD 6.1

million and EBITDA of 0.8 million. The acqusition was financed by the proceeds from a share issue in

Cxense AS.

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