Quarterly report - cxense · 1) Q3 12 and Q4 12 revenue figures are partly based on NGAAP and IFRS...

QUARTERLY REPORT

Q2 2013 (SUBJECT TO REVIEW)

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Contents

Q2 2013 in Brief __________________________________________________________________________________________ 3

Selected Highlights _______________________________________________________________________________________ 5

Outlook ____________________________________________________________________________________________________ 5

About Cxense _____________________________________________________________________________________________ 6

Condensed Financial Report _____________________________________________________________________________ 8

Consolidated Income Statement (subject to review) ________________________________________________ 10

Consolidated Statement of Financial Position ________________________________________________________ 11

Consolidated Statement of Cash Flow ________________________________________________________________ 14

Notes to the Consolidated Financial Statements _____________________________________________________ 15

OFFICE LOCATIONS

North America Latin America Japan Europe Asia Pacific

Boston, MA

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

Miami, FL

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

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

Buenos Aires, Argentina

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

Oslo, Norway (Corporate Headquarters)

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

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Q2 2013 in Brief

During Q2 2013, Cxense Software-as-a-Service (SaaS) closed 14 new contracts. Eight of the new contracts

were signed in Europe, five in the Americas and one in Japan. Two of the signed contracts represented

additional purchases from existing customers, while 12 of the contracts were signed with new customers,

predominantly premium publishers.

During the quarter, it became evident that the Cxense Solution Suite strongly supports the major market

trends within online media and publishing. A strong recent trend among premium publishers is the move

toward charging for digital content. According to the World Association of Newspapers and News

Publishers, 86% of publishers say that they will start or have started to implement paid content into their

online business model in 2013. During Q2, Cxense signed two contracts with customers who will utilize the

Cxense Solution Suite to fuel their paid-content solutions. Cxense Content will be used to recommend paid-

content articles based on the users interest, Cxense Advertising to promote the subscription product in the

right context, and Cxense Analytics will be used to analyze the subscriber conversion path to enable optimal

positioning of the paid content toward users who are inclined to subscribe.

Another market trend that became more evident during Q2 was

the development of publisher-controlled content networks.

During the quarter, Cxense signed two contracts with large

multi-publication publishers that now use Cxense Content to

power personalized cross-publication article recommendations.

The publisher objective with cross-publication content

recommendations is to utilize all their publications as sources

for personalized content experiences. This improves the

relevancy of the recommendations, and also helps drawing

traffic from high/traffic-lower-advertising-price publications

(e.g., general news sites) to lower-traffic/high-advertising price

publications (e.g., online magazines).

Finally, there continues to be very strong traffic growth with

mobile and tablet devices. During Q2, Cxense signed one

contract with a pure-play mobile advertising player that chose

Cxense Advertising for its excellent mobile capabilities,

including highly targeted advertising.

The Cxense Extraordinary Insight Engine™(EIE™) powers the core functionality of all the software

applications in the Cxense software suite: Advertising, Analytics, Big Data, Content, and Search. With unique

real-time data capture, processing and output capabilities, the EIE enables the efficient targeting and

personalization methods of the applications. In Q1 2013, Cxense started to market the EIE as a stand -alone

offering through our Big Data solution, where customers may access the application programming

interfaces (APIs) of the EIE to utilize its unique real-time capabilities for customer-specific use cases that

involves Big Data capture, processing and output. In Q2, Cxense signed a new, significant contract in which

Figure 1 Cxense quarterly revenue development 1) (SaaS segment only)

1) Q3 12 and Q4 12 revenue figures are partly based on NGAAP and IFRS accounts and developed before the full year 2012 audit according to IFRS. Thus Q3 12 and Q4 12

numbers might slightly change when revisited according to IFRS during Q3 13 and Q4 13. All other quarters are presented according to IFRS

4

the EIE also will be integrated into the customer’s CRM systems to help improve customer support, and to

facilitate targeted marketing campaigns and various upsell activities toward its customer base.

For Q2 2013 (Q2 2012), Cxense group revenues for continued operations amounted to USD 1.500 million

(USD 0.619 million), of which USD 0.993 million (USD 0.503 million) came from our core business segment,

Cxense SaaS and USD 0.547 million (USD 117 million) came from the PCAN segment. Q2 2013 (Q2 2012)

inter-segment revenues amounted to USD 0.040 million (USD 0.001 million). At the end of Q2 2013, the

Swiss PCAN, PPN, was acquired by Tamedia AG, the leading Swiss media group and the most significant

participant in this ad network. Tamedia purchased the ad network from Cxense to increase its control over

future development of the network. Cxense will continue to deliver its SaaS services to the ad network as

before the transaction. Further details about the transaction and the financials of the discontinued

operations can be found in the notes to the accounts.

For Q2 2013 (Q2 2012) ,the group EBIT for continued operations amounted to USD -1.986 million (USD -

1.551 million), of which USD -1.849 million (USD -1.428 million) came from the SaaS segment and USD -

0.137 (USD -0.124 million) came from the PCAN segment.

During Q2 2013, Cxense experienced the first effects of the focused marketing and PR efforts launched

during Q1. The Cxense management was quoted in Big Data related articles in the Guardian, the second most

popular UK online newspaper; in Aftenposten, the largest Norwegian newspaper by circulation; as well as in

the Norwegian Technology publication Digi.no. During Q2 2013, Cxense attended eight marketing events, of

which three were arranged in the Americas, four in Europe, and one in Japan.

The Cxense development teams continued to launch improvements to Extraordinary Insight Engine (EIE)

and the Cxense Big Data solutions. The EIE got improved real-time query capabilities on longer -time series

than before, and Cxense Big Data expanded APIs for wider and easier integration to external customer

applications (e.g., CRM systems). Furthermore, Cxense Analytics got increased reporting and dashboard

features. For Cxense Advertising, we launched a new, extensive back-end service and resource monitoring

which makes troubleshooting and fault detection more cost effective for our support resources. In addition

Cxense Advertising got improved Supply-Side-Platform (SSP) functionality with additional 3rd-party ad

server and creative support, which expands our utility for customers. The Cxense Content solution was

extended with improved collaborative filtering.

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Selected Highlights

Rodale, the North America based magazine publisher, licensed the full Cxense suite. The publisher is

known for magazines such as Men’s Health, Bicycling, Runner’s World, etc.

Styria, one of the leading media companies in Austria, Croatia and Slovenia, chose Cxense Content

to power its cross-publication content recommendation network to increase readership,

engagement and traffic.

Aller Media, the leading Nordic magazine publisher, chose Cxense Content to power its cross

publication content network.

Yomiuri, known as the world’s largest newspaper by circulation, upgraded their use of Cxense

Analytics and Content. Cxense Analytics now powers crucial real-time decision information for the

front -end editorial team of the online edition. Cxense Content now also powers a (Cxense-branded)

recommendation box on the front page of the online edition.

Infobae.com, one of Argentina’s top three sites, chose Cxense Advertising to replace existing

advertising solutions.

Tamedia, the largest Swiss media group, chose the Cxense Big Data Solution, as well as Analytics, to

power the group’s demand for Big Data analytics through integration with its paid content systems

in addition to their CRM system.

Boost Communications AS, the Norway-based mobile advertising technology company, chose

Cxense Advertising to power their mobile ad network.

Videolog, one of the main online video providers in Brazil, chose Cxense Advertising to monetize its

site with Display and Video advertising.

Outlook

Cxense experiences an 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 area in the near term, with

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

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

companies seek to improve their customer understanding and communication.

Most online companies also experience a significant growth on new devices and formats, mainly tablets and

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

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

opportunity for us.

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

market is estimated at 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, now 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, and has built the cloud-based Extraordinary Insight Engine (EIE) for

real-time analysis of content, user context, and behavior. The EIE is fully integrated by a range of solutions

(Cxense Advertising, Analytics, Big Data, Content, and Search), which are used by Cxense customers to

improve their online businesses by increasing advertising revenue, user engagement, and conversions to

digital subscriptions.

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.

Cxense has also helped

establish a range of publisher-

controlled advertising

networks (PCANs), including

in Spain, where the Company

also has retained an ownership. The PCANs act as publisher-controlled broker between the advertisers and

the publishers, and distribute and share the advertising revenues generated in the network with the

publishers. Due to the majority ownership, the PCAN in Spain 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/

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Cxense group – financial development summary

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

Q2 2013

cont'd. 2) 2 011 FY 2012

IFRS IFRS NGAAP / IFRS NGAAP / IFRS IFRS IFRS IFRS IFRS IFRS

SaaS segment

Revenues total 389 503 655 755 840 993 993 435 2 302

Hosting 55 73 80 171 153 171 171 130 378

Other cost of sales -45 61 -64 -11 -6 32 32 -409 -59

Cost of sales 10 134 16 159 146 203 203 -280 319

Gross profit 379 369 639 596 694 790 790 715 1 983

Gross magin % 97 % 73 % 98 % 79 % 83 % 80 % 80 % 164 % 86 %

Personnel 1 206 1 443 1 276 1 615 1 790 1 832 1 832 4 000 5 540

Other OPEX 218 348 475 235 676 802 802 930 1 276

OPEX 1 423 1 791 1 751 1 850 2 466 2 633 2 633 4 930 6 816

EBITDA -1 044 -1 422 -1 112 -1 254 -1 772 -1 844 -1 844 -4 215 -4 832

PCAN segment

Revenues total - 809 976 1 437 1 375 1 534 547 - 3 222

Gross profit - 43 11 -5 -15 272 60 - 49

Gross magin % 5 % 1 % 0 % -1 % 18 % 11 % 2 %

OPEX - 299 268 332 335 419 196 - 900

EBITDA - -256 -257 -338 -350 -148 -137 - -850

GROUP

EBITDA -1 044 -1 678 -1 369 -1 592 -2 122 -1 991 -1 980 -4 215 -5 683

1) Q3 12 and Q4 12 revenue figures are partly based on NGAAP and IFRS accounts and were

developed before the full year 2012 audit according to IFRS. Thus, Q3 12 and Q4 12 numbers might

slightly change when revisited according to IFRS during Q3 13 and Q4 13. All other quarters are

presented according to IFRS.

2) 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.

3) 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.

8

Condensed Financial Report

Q2 2013 Group revenue for continued operations amounted to USD 1.5 million, an increase of USD 0.9

million over the same period last year (USD 0.6 million). The increase in revenue is due to the steady growth

in the number of external customers (SaaS Segment) and the establishment of the PCAN business from Q2

2012 (PCAN Segment). The PCAN business in continued operations relates to one Published-Controlled Ad

Network company in Spain. The Q2 2013 revenue from the SaaS Segment was USD 0.9 million for external

customers and inter-segment revenue was USD 0.04 million. Revenue from the PCAN segment was USD 0.5

million.

The Q2 2013 cost of sales amounted to USD 0.65 million, compared to USD 0.25 in Q2 2012. The SaaS

Segment cost of sales for Q2 2013 was USD 0.2 million, while the PCAN segment cost of sales was USD 0.49

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 Q2 2013 gross profit

for the SaaS segment amounted to USD 0.79 million and USD 0.06 million for the PCAN segment. The Q2

2013 gross margin in the continuing operations of the PCAN segment was 11% compared to 1% in Q2 2012.

The increase 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 Q2 2013 employee benefit expenses were USD 1.9 million, compared to USD 1.5 million in Q2 2012. The

increase is attributable to the number of employees rising to 62 full-time employees (FTE) from 48 FTE at

Q2 2012.

The depreciation expense in Q2 2013 and the same period last year was USD 0.006. 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 by large reputable hosting suppliers. The

group has limited intangible assets, and the R&D is expensed.

Other operating expenses amounted to USD 0.87 million in Q2 2013 and US 0.4 million Q2 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 Finance income in Q2 2013 was USD 0.105 million largely relating to interest earned on bank deposits

and cash arising from the Share issue proceeds raised in June and December. Finance income in Q2 2012

was USD 0.01. Finance expenses, mostly relating to currency expenses, amounted to USD 0.012 million in

2013 and USD 0.08 in Q1 2012.

Income tax expense for Q2 2013 was USD 0.003 million compared to USD (0.002) positive in 2012. The

income tax expense arises in the Cxense SaasS subsidiaries in USA, Japan and Australia that perform Sales &

9

Marketing and Research & Development activities. In both quarters, the tax expenses are estimates only,

with full reviews being performed at year-end.

The group net loss from continuing operations amounted to USD 1.9 million in Q2 2013, compared to USD

1.6 million in Q2 2012. This represents a loss of USD 15 per share, compared to USD 17 per share in Q2

2012.

The net loss attributable to discontinued operations for Q2 2013 amounted to USD 0.011 million, compared

to USD 0.13 million for Q2 2012. Full details of the sale of the PCAN subsidiary are outlined in Note 4 to the

accounts.

Total assets at the end of Q2 2013 amounted to USD 8.8 million compared to USD 4.3 million at Q2 2012.

The increase is predominantly due to the increase in cash and cash equivalents, which amounted to USD 5.8

million at the end of Q2 2013 and USD 2.9 million at the end of Q2 2012. Trade receivables were USD 1.7

million at the end of Q2 2013, compared to USD 0.6 million at the end of Q2 2012. The increase in Q2 2013

receivables is due to the growth in external customers billings in the SaaS Cxense and the PCAN segment.

The Q2 2013 current assets also include USD 0.8 million of assets held for sale relating to the sale of the

Swissad PCAN subsidiary.

Total current liabilities at the end of Q2 2013 were USD 3.8 million compared to USD 1.6 million at Q2 2012.

The increase is largely due to increased trade payables, accrued expenses, prepayments from customers and

employee-related payables. The Q2 2013 figure also includes USD 0.8 million of liabilities relating to the

sale of the Swissad PCAN subsidiary.

Net cash flow used in operating activities was USD 2.2 million in Q2 2013, compared to a positive amount of

USD 1.8 million in Q2 2012. The positive cash flow in Q2 2012 is due to the share proceeds issue of USD

$3.3 million that occurred in June 2012.

The available liquidity is deemed to be adequate for the remaining 2013 year.

10

Consolidated Income Statement (subject to review)

USD 1,000 Note

Q2 ended

30 June

2013

Q2 ended

30 June

2012

Half Year to

30 June

2013

Half Year to

30 June

2012

Year ended

31 December

2012

Year ended

31 December

2011

Continuing operations:

Revenue 3, 4 1 500 619 2 689 1 009 2 961 435

Operating expense

Cost of sales 3 650 251 1 211 261 1 061 (280)

Employee benefit expense 5 1 955 1 504 3 832 2 709 5 700 4 000

Depreciation expense 6 6 9 11 21 17

Other operating expense 6 875 410 1 604 627 1 446 930

Total operating expense 3 486 2 171 6 656 3 609 8 228 4 667

Net operating income/(loss) (1 986) (1 551) (3 966) (2 600) (5 266) (4 232)

Financial income and expense

Finance income 105 9 182 24 91 76

Finance expense (12) (8) (28) (9) (97) (16)

Net financial income/(expense) 93 1 155 15 (7) 60

Net income/(loss) before taxes (1 893) (1 550) (3 812) (2 585) (5 273) (4 171)

Income tax expense 3 (2) 18 2 33 11

Net income/(loss) for the period from continuing operations (1 897) (1 548) (3 829) (2 587) (5 306) (4 183)

Discontinued operations

Net income/(loss) for the period from

discontinuing operations 4 (11) (132) (167) (132) (442) 0

Total net income/(loss) for the period (1 907) (1 681) (3 996) (2 720) (5 748) (4 183)

Net income/(loss) attributable to:

Owners of the Company (1 846) (1 626) (3 844) (2 665) (5 564) (4 183)

Non-controlling interests (61) (55) (152) (55) (183) 0

Earnings per share:

Basic and diluted 7 (0,15) (0,17) (0,30) (0,29) (0,57) (0,53)

Statement of comprehensive income

USD 1,000

Q2 ended

30 June

2013

Q2 ended

30 June

2012

Half Year to

30 June

2013

Half Year to

30 June

2012

Year ended

31 December

2012

Year ended

31 December

2011

Net income/(loss) for the period (1 907) (1 681) (3 996) (2 720) (5 748) (4 183)

Other comprehensive income:

- Currency translation differences 23 297 97 239 (72) 264

Total comprehensive income/(loss) (1 884) (1 384) (3 899) (2 480) (5 820) (3 919)

Total comprehensive income/(loss) attributable to:

Owners of the Company (1 823) (1 329) (3 747) (2 425) (5 636) (3 919)

Non-controlling interests (61) (55) (152) (55) (183) 0

11

Consolidated Statement of Financial Position

USD 1,000 Note

Half Year to

30 June

2013

Half Year to

30 June 2012

As at 31 December

2012

Assets

Non-current assets

Deferred tax asset 18 - 14

Intangible assets 4 2 2

Office machinery, equipment,etc. 72 73 82

Other financial assets 13 10 12

Total non-current assets 107 86 110

Current assets

Trade receivables 8 1 685 603 1 873

Other short-term assets 9 449 594 764

Cash and cash equivalents 5 754 2 980 10 210

Total current assets 7 888 4 177 12 847

Assets classified as " held for sale" 787

Total assets 8 781 4 263 12 958

12

USD 1,000 Note

Half Year to

30 June

2013

Half Year to

30 June 2012

As at 31 December

2012

Equity and liabilities

Equity

Share capital 10 2 083 1 668 2 269

Other paid in capital 7 891 4 007 13 803

Currency translation differences 298 513 201,4

Retained earnings (4 987) (3 508) (6 453)

Equity attributable to the holders of the Company 5 286 2 680 9 820

Non-controlling interest 13 (277) (54) (125)

Total equity 5 008 2 626 9 695

Liabilities

Non-current liabilities

Deferred tax liabilities - (5) -

Total non-current liabilities - (5) -

Current liabilities

Trade payables 713 354 1 651

Current taxes 72 40 76

Other short-term liabilities 11 2 206 1 249 1 536

Total current liabilities 2 992 1 643 3 263

Liabilities related to assets "held for sale" 781

Total liabilities 3 773 1 638 3 263

Total equity and liabilities 8 781 4 264 12 958

13

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 (2 665) (2 665) (55) (2 720)

Other comprehensive income 239 239 0 239

Total comprehensive income/(loss) for half

year to 30 June 2012 0 239 (2 665) (2 425) (55) (2 480)

Reduction of paid in capital (3 957) 3 957 0 0

Increase in share capital 181 3 084 3 265 0 3 265

Currency effects from translation of equity (18) (58) (138) (214) (214)

Total equity as at 30 June 2012 1 668 4 007 513 (3 508) 2 680 (54) 2 626

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 (3 844) (3 844) (152) (3 996)

Other comprehensive income 97 97 97

Total comprehensive income/(loss) for the

half year to 30 June 2013 0 97 (3 844) (3 747) (152) (3 899)

Reduction of paid in-capital (4 823) 4 823 0 0

Transaction costs 0 0

Share- based payments 41 41 41

Increase in share capital 0 0

Currency effects from translation of equity (186) (1 129) 488 (828) (828)

Total equity as at 30 June 2013 2 083 7 892 298 (4 987) 5 286 (277) 5 009

14

Consolidated Statement of Cash Flow

USD 1,000 Note

Q2 ended

30 June

2013

Q2 ended

30 June

2012

Half Year to

30 June

2013

Half Year to

30 June

2012

Year ended

31 December

2012

Cash flow from operating activities

Profit / (loss) before income tax (1 904) (1 685) (3 979) (2 720) (5 715)

Adjustments:

Income tax payable (3)

Share- based payments 5 4 49 53

Result from investment in associates 52

Depreciation and amortization 6 6 9 11 23

Currency translation effects (353) (40) (741) 26 (113)

Change in trade receivables (453) (287) (477) (467) (1 737)

Change in trade payables (256) 255 (265) 305 1 602

Change in other accrual and non-current items 694 371 1 003 638 750

Net cash flow from / (used in) operating activities (2 261) (1 381) (4 401) (2 207) (5 088)

Cash flow from investing activities

Investment in furniture, fixtures and office machines (3) (5) (3) (13) (34)

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

Investment in associated companies (52)

Net cash flow from / (used in) investing activities (7) (7) (7) (15) (87)

Cash flow from financing activities

Net proceeds from share issues 3 265 3 265 13 390

Proceeds from minority interest 58

Net cash flow from / (used in) financing activities 3 265 3 265 13 448

Net increase/ (decrease) in cash and cash

equivalents (2 268) 1 878 (4 408) 1 043 8 272

Cash and cash equivalents at the beginning of the

period 8 070 1 103 10 210 1 938 1 938

Cash and cash equivalents at the end of the period

(1) 5 802 2 980 5 802 2 980 10 210

(1) Of cash and cash equivalents as at 30 June 2013 USD 49 thousand are presented as part of assets held for sale in the statement

of financial position. Summary of cash flow effects from discontinued operations and which are incorporated above are presented

in note 4.

15

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 companies build unique online

experiences.

The company’s Board of Directors approved the financial statements on August 26, 2013.

These financial statements have been subject to review by independent Cxense auditor BDO.

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

16

Note 3 Segment information

Q2 ended 30 June 2013

USD 1,000 Cxense SaaS PCAN Eliminations Consolidated

Revenue

External customers 953 547 0 1 500

Inter-segment 40 0 (40) 0

Revenues total 993 547 (40) 1 500

Cost of sales 203 487 (40) 650

Gross profit 790 60 (0) 849

Employee benefit expense 1 832 124 0 1 955

Depreciation expenses 5 0 0 5

Other operating expense 802 73 0 875

EBIT (1 849) (137) (0) (1 986)

Net finance income/(expense) 95 (2) 0 93

Income tax income/(expense) (3) 0 0 (3)

Net income/(loss) from continuing operation (1 758) (139) (0) (1 896)

Net income/(loss) for the period from discontinuing operations 0 (11) (11)

Total net income/(loss) for the period (1 758) (149) (0) (1 907)

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.

17

Half Year to 30 June 2013


Revenue


Inter-segment 70 (70) 0

Revenues total 1 833 927 (70) 2 689

Cost of sales 349 931 (70) 1 211

Gross profit 1 484 (5) (0) 1 479



Other operating expense 1 478 126 0 1 604

EBIT (3 624) (342) (0) (3 966)



Net income/(loss) from continuing operation (3 484) (345) (0) (3 829)


Total net income/(loss) for the period (3 484) (512) (0) (3 996)

Balance sheet information 30 June 2013

USD 1,000 Cxense SaaS PCAN

Eliminations

and

unallocated Consolidated

Segment assets:

Non-current assets 0 0 107 107

Current assets

- Trade receivables 1 202 482 1 685

- Other short term assets 575 17 (143) 449

- Cash and cash equivalents 5 586 167 5 754

Assets classified as "held for sale" 787 787

Total segment assets 7 364 1 454 (36) 8 781

Segment liabilities:

Non-current liabilities 0 0 0 0

Current liabilities 2 063 962 (34) 2 992

Liabilities related to assets "held for sale" 781 781

Total segment liabilities 2 063 962 (34) 3 773

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PCAN segment in 2012:

Q2 ended 30 June 2012


Revenue

External customers 502 117 0 619


Revenues total 503 117 (1) 619

Cost of sales 134 119 (1) 251

Gross profit 369 (1) 0 368




EBIT (1 428) (124) 0 (1 551)


Income tax income/(expense) 2 0 0 2

Net income/(loss) from continuing operation (1 425) (124) 1 (1 548)


Total net income/(loss) for the period (1 425) (256) 1 (1 681)

Half Year to 30 June 2012


Revenue



Revenues total 892 117 (1) 1 009

Cost of sales 144 119 (1) 261

Gross profit 749 (1) 0 748




EBIT (2 477) (124) 0 (2 600)



Net income/(loss) from continuing operation (2 464) (124) 1 (2 587)


Total net income/(loss) for the period (2 464) (256) 1 (2 720)

The business incorporated as the PCAN segment was established at the beginning of Q2 2012, and thus segment

information from this segment are equal for Q2 ended 30 June 2012 and for first half year 2012.

19

Balance sheet information 30 June 2012

USD 1,000 Cxense SaaS PCAN

Eliminations

and

unallocated Consolidated

Segment assets:

Non-current assets 0 0 86 86

Current assets

- Trade receivables 322 414 (132) 603

- Other short term assets 349 245 0 594

- Cash and cash equivalents 2 772 208 2 980

Total segment assets 3 442 867 (46) 4 263

Segment liabilities:

Non-current liabilities (6) 162 (162) (6)

Current liabilities 805 868 (30) 1 643

Total segment liabilities 799 1 030 (192) 1 637

Geographic information

Revenues from external customers:

Half Year to

30 June

2013

Half Year to

30 June

2012

Year ended

31 December

2012

EMEA 3 696 1 125 3 933

Americas 387 154 502

Pacific 430 362 826

Total revenue from external customers 4 513 1 640 5 260

Information about major customers

The 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 has solely been booked to the EMEA segment in the

table above.

20

Note 4 Discontinuing operations

Profit from the discontinued operations

USD 1,000

Half Year to

30 June 2013

Half Year to

30 June 2012

Year ended

31 December

2012

Revenue 1 982 691 2 515

Operating expenses 2 139 824 2 954

Net operating income/(loss) (156) (132) (440)

Net finance (11) 0 (2)

Income tax expense 0 0 0

Net income/(loss) for the period from discontinuing operations (167) (132) (442)

Earnings per share:

Basic and diluted (0,013) (0,014) (0,045)

Cash flow from discontinuing operations

USD 1,000

Half Year to

30 June 2013

Half Year to

30 June 2012

Year ended

31 December

2012

Net cash flow from operating activities (88) (138) (469)

Net cash flow from investing activities 0 (3) (7)

Net cash flow from financing activities 0 0 58

Net cash inflow/(outflow) (88) (141) (417)

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 106 thousand. Net assets from PPN AG

included in the consolidated accounts as of June 30, 2013 and presented as "held for sale" is USD 5

thousand. The final transaction values are subject to a separate audit of the PPN AG accounts. The final

gain/loss calculation of the transaction will be presented in the Q3 2013 report when the transaction is

completed.

21

Assets classified as "held for sale"

USD 1,000

As at 30 June

2013

Assets

Intangible assets 2

Office machinery, equipment etc. 5

Trade receivables 666

Other short term assets 66

Cash and cash equivalents 49

Total assets 787

Liabilities

Trade payables 673

Other short term liabilities 108

Total liabilities 781

Net assets included from discontinued operations 5

The following shows assets and liabilities that are included in the consolidated figures as at 30 June 2013 and

which are presented as "held for sale" in the statement of financial position.

Note 5 Employee benefit expense

Specification of employee expense

USD 1,000 Q2 2013 Q2 2012

Half Year to

30 June

2013

Half Year to

30 June

2012

Year ended

31 December

2012

Payroll expense 1 768 1 350 3 477 2 396 5 226

Share-based payments 4 0 49 0 53

Social security tax 188 127 359 217 464

Pensions 47 38 105 90 219

Other personnel expense 115 109 159 126 186

Presented as part of discontinued operations (167) (120) (318) (120) (449)

Total employee benefit expense 1 955 1 504 3 832 2 709 5 700

22

Note 6 Other operating expense

Specification of other operating expense

USD 1,000 Q2 2013 Q2 2012

Half Year

to 30 June

2013

Half Year to

30 June

2012

Year ended

31

December

2012

Audit, legal and other consulting fees 306 121 522 147 431

Office rental and related expenses 120 90 234 157 343

Marketing and representation 148 63 381 99 263

Travel expenses 243 132 390 188 474

Other operating expense 114 61 177 92 56

Presented as part of discontinued operations (56) (57) (100) (57) (121)

Total other operating expense 875 410 1 604 627 1 446

Note 7 Earnings per share

USD 1,000 Q2 2013 Q2 2012

Half Year to

30 June

2013

Half Year to

30 June

2012

Year ended

31 December

2012

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

parent company (1 846) (1 626) (3 844) (2 665) (5 564)

Weighted average number of shares outstanding

for basic earnings per share 12 630 9 308 12 630 9 163 9 763

Earnings per share

- Basic (0,15) (0,17) (0,30) (0,29) (0,57)

- Diluted (1) (0,15) (0,17) (0,30) (0,29) (0,57)

(1) The Company has 366 potential dilutive shares from share options outstanding. Since the Group has a loss for the

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

23

Note 8 Trade receivables

USD 1,000

Half Year to

30 June

2013

Half Year to

30 June

2012

Trade receivables 2 371 618

Allowance for doubtful debts (21) (7)

Presented as assets "held for sale" (666) 0

Total trade receivables 1 685 610

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

As at 30 June 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 June 2013 2 371 1 438 657 225 51

30 June 2012 618 239 183 138 57

Movements in allowance for doubtful debt: June June

USD 1,000 2013 2012

Balance at the beginning of the year 30 0

Impairment losses recognized on receivables 32 7

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 21 7

Past due but not impaired

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Note 9 Other short-term assets

USD 1,000

Half Year to

30 June 2013

Half Year to

30 June 2012

Year ended

31

December

2012

Accrued income 15 267 64

Prepayments 50 12 48

Receivable on authorities and government grants 349 275 509

Other short-term receivables 34 39 143

Other short term assets 449 594 764

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 0 0 0

Balance at 30 June 2013 12 630 12 630 000 2 083

Subscription rights

The Board of Directors has been authorized to issue 1040 shares as part of the share based payment

program. As at June 30, 2013 the Board of Directors had allocated 366 share options as part of the share

based-payment program, of which 0 had been exercised. In addition, as at 30 June 2013 the Board of

Directors has been authorized to issue an additional 1226 ordinary shares.

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

shares with equal rights for all shares.

25

Note 11 Other short-term liabilities

USD 1,000

Half Year to

30 June 2013

Half Year to

30 June 2012 31 Dec 2012

Public duties payables 308 157 202

Prepayments from customers 214 259 480

Accrued expenses 354 253 327

Salary-related provisions 496 296 376

Other current liabilities 388 283 150

Total other short-term liabilities 1 760 1 249 1 535

Note 12 Related party disclosure

USD 1,000

Purchase of services from Description of servicesHalf year ended

30 June 2013

Half year ended

30 June 201231 Dec 2012

Advokatfirma Ræder (1) Legal services - 111 118

Theoline AS (2) Consulting services 31 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 typeHalf year ended

30 June 2013

Half year ended

30 June 201231 Dec 2012

Advokatfirma Ræder Trade payables 94 42 102

Theoline AS Trade payables - - 9

Autoscale Group AG (3) Loan 76 79 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:

26

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 %

PPN Schweiz AG PCAN Switzerland 100% (1)

Principal activity according

to segment

(1) During Q2 2013 Cxense agreed to sell PPN AG to Tamedia AG. See Note 4 for details.

Note 14 Contingent liabilities

Note 15 Events after the reporting period

Sale of Subsidary:

Issue of Shares and allocation of share options:

The BoD has allocated 40 share options to key employees between June 30, 2013 and the approval of

this report. At the approval of this report 406 share options were allocated.

On June 3, 2013 the Board of Directors (BoD) authorized the issue of 32 shares in Cxense AS to four

employees and 5 shares to Polaris Media ASA, a total of 37 shares. The share issue was registered in

the company register in Q3 2013. The BoD used the authorization to issue shares given by the Annual

General Meeting for 2013. After this share issue the BoD is authorized to issue an additional 1226

shares under the same authorization.

The sale of the subsidiary PPN AG as explained in Note 4.

The Group has not been involved in any legal or financial disputes in Q2 2013 or Q2 2012, where an

adverse outcome is considered more likely than remote.

Since June 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:

Quarterly report - cxense · 1) Q3 12 and Q4 12 revenue figures are partly based on NGAAP and IFRS...

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