REPORT JANUARY – DECEMBER 2016 Net sales in

• Net sales in the period amounted to MSEK 236 (193) and Net sales for the quarter were MSEK 68 (55).  
• The Result after tax for the period was MSEK -242 (-108) and the Result after tax for the quarter was MSEK -34 (-40). Several non-recurring items with a net total impact of -4.1 MSEK have affected the quarter.  
• Gross Margin in the period has decreased to 34% (44%) due mainly to the addition of Livescribe and Pen Generations to the Group. However, Livescribe adds a stable revenue base whilst Pen Generations provides much needed growth.  
• Overhead costs in the quarter amounted to 66 MSEK. Considerably lower than previous quarters due to the cost saving activities.  
• Earnings per share after dilution for the period were SEK -0.13 (-0.13) and for the quarter SEK -0.01 (-0.04).  
• ABLE Investment Advisors Inc., a Korean company, has entered into an agreement to invest 6 MUSD in Anoto, thereby replacing previous agreement with SMark Inc. 1.6 MUSD of the total amount has been received and an additional 1.9 MUSD are expected to be received in March 2017.  
• Restructuring and cost reduction efforts are beginning to show positive signs in the financial results but Anoto still faces certain financial challenges in the near term. For further information, see “Risks and Uncertainties”. 

CEO Comments: After a painstaking period of restructuring, Anoto is starting to show signs that the difficult transformation effort is paying off. These signs include fourth quarter 2016 revenue that was up 70% over the prior quarter with a gross margin of 34.1% that was approximately 3% better than the prior quarter. While posting rising top-line performance the new Anoto organization drove Q4 overhead costs down a further 11% relative to Q3.

This significantly reduced overhead is a result of rationalizing both our human resources and our facilities. Since the current transformation began in the second quarter of 2016, we have consolidated multiple offices and eliminated approximately 90 positions (employees and consultants) to trim our global team. This has contributed to an operating expense reduction of an estimated 15 MSEK per quarter relative to the Q1­–Q3 2016 average.

In addition to further reducing costs in Q4, we also continued to clean our books through enhanced scrutiny of our inventory positions and our receivables. This conservative rigor resulted in Anoto reserving for, or writing off, over 10 MSEK. Including all non-recurring items that amounted to -4.1, the operating losses for Q4 2016 at 34 MSEK were 72 MSEK lower than for Q3 2016.

Asia continues to be a strong market for Anoto with significant revenue growth in Japan and Korea. Sales in the Enterprise Forms business remained lackluster in Q4 but the pipeline in emerging markets is beginning to look encouraging. Revenues in the USA have remained stable in spite of the significant cost savings achieved there through staff reductions and office closures.

It is important to note that Anoto achieved the above results while contending with a legal dispute with Leapfrog that delayed the delivery of an important pen component and deferred revenue. The dispute is now being managed in a mutually beneficial way through an attitude of cooperation rather than through costly and destructive litigation.

Productization of Anoto DNA (ADNA) moved forward energetically in Q4 and an enhanced release is expected in Q1 of 2017. Business and technical cooperation with SMark continued in Q4 although the payment of funds to Anoto from ABLE has been delayed due to some working capital issues they were managing.

OUTLOOK

2016 has been a challenging year notable for the tough decisions taken to transform from a hardware-focused organization to one building for a profitable future based on software, proprietary patterns, and robust image processing. Challenges will certainly remain in 2017 but we expect that the newly efficient pen business will make strong contributions to the financial health of the organization while the emerging ADNA business provides the potential for considerable growth. With costs lowered by 106 MSEK and this exciting portfolio to support growth, Anoto anticipates substantial improvements in its financial performance during 2017.

Joonhee Won CEO, Anoto Group AB (publ)

Anoto Group AB discloses the information provided herein pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication at 08.45 on February 24, 2017.

Calendar 2016                         

Annual Report April 28 2017

Annual General meeting May 17 2017

For more information  

Please contact:

Joonhee Won, CEO

Email: ir@anoto.com

Anoto Group AB (publ.), Corp. Id. No. 556532-3929 Mobilvägen 10 SE-223 62 Lund, Sweden Phone: +46 46 540 12 00 www.anoto.com ·