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SeamlessQuarterly  Report  April  1  –  June  30,  2013                  Delårsrapport  1  april  –  30  juni  2013      Delårsrapport  1  april  –  30  juni  2013      Delårsrapport  1  april  –  30  juni  2013      Delårsrapport  1  april  –  30  juni  2013      Delårsrapport  1  april  –  30  juni  2013      Delårsrapport  1  april  –  30  juni  2013      Delårsrapport  1  april  –  30  juni  2013      Delårsrapport  1  april  –  30  juni  2013      Delårsrapport  1  april  –  30  juni  2013      Delårsrapport  1  april  –  30  juni  2013      Delårsrapport  1  april  –  30  juni  2013      Delårsrapport  1  april  –  30  juni  2013      Delårsrapport  1  april  –  30  juni  2013  

 

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Summary,    t  

Apr-­‐Jun  2013  

Apr-­‐Jun  2012  

Jan-­‐Jun  2013  

Jan-­‐Jun  2012  

Full  year  2012  

Net  Sales   26 424 35 658 52 809 65 373 134 336 Operating  profit   -20 906 -2 729 -43 176 -9 367 -29 894 Financial  items,  tax   3 426 562 6 882 2 352 6 149 Profit  for  the  period     -17 480 -2 167 -36 293 -7 015 -23 745 Total  assets   152 473 71 490 152 473 71 490 179 063            Earnings  per  share,  basic  and  diluted*   -­‐0,53 -0,09 -1,11

-0,29 -0,96

Operating  margin  l  

neg neg neg neg neg Equity  ratio   66 % 52 % 66 % 52 % 78 %            Capitalized  development  costs   19 377 7 745 19 377 7 745 12 369 Depreciation   -2 135 -487 -3 888 -1 041 -2 112

* At the end of the period Seamless had an outstanding warrants program of 1 000 000 warrants with an exercise Dec. 15, 2013 - January 16, 2014 that are "in the money". When the result is negative there is no dilutive effect from these warrants. Additional warrants program for a total of 3,500,000 warrants was approved at the Annual General Meeting in April. No award was made during the period of this program.

Net Sales decreased by 26% to 26 424 t (35 658)

Operating profit amounted to -20 906 t (-2 729)

Operating margin remained negative Neg (Neg)

Profit after tax -17 480 t (-2 167)

Earnings per share, basic and diluted -0,53 SEK (-0,09)

   Rörelseresultatet uppgick till -12 226 t (-951)

Rörelsemarginalen är fortsatt negativ Neg (Neg)

Resultat efter skatt uppgick till -10158 t (-1 331)

Resultat per aktie före och efter utspädning -0,30 SEK (-0,05)

   Rörelseresultatet uppgick till -12 226 t (-951)

Rörelsemarginalen är fortsatt negativ Neg (Neg)

Resultat efter skatt uppgick till -10158 t (-1 331)

Resultat per aktie före och efter utspädning -0,30 SEK (-0,05)

   Rörelseresultatet uppgick till -12 226 t (-951)

Rörelsemarginalen är fortsatt negativ Neg (Neg)

Resultat efter skatt uppgick till -10158 t (-1 331)

Resultat per aktie före och efter utspädning -0,30 SEK (-0,05)

   Rörelseresultatet uppgick till -12 226 t (-951)

Rörelsemarginalen är fortsatt negativ Neg (Neg)

Resultat efter skatt uppgick till -10158 t (-1 331)

Resultat per aktie före och efter utspädning -0,30 SEK (-0,05)

   Rörelseresultatet uppgick till -12 226 t (-951)

Second  Quarter    April  1  –  June  30,  2013    Första  kvartalet    1  januari  –  31  mars  2013  

 Sales  Q3  2012  –  Q2  2013  

Second  Quarter  2013  –  Summary  Lower revenues in this quarter from our Transaction Switch and Distribution business, resulted in a 26% decrease in overall revenues. Revenues from the Transaction Switch segments are lumpy and traditionally vary from quarter to quarter. The decrease in sales for Distribution was largely due to a decline in the market generally for the Distribution business area in Latvia. However, income from Distribution will in Q3 increase given that Seamless, as of July 1, is active in the distribution of electronic prepaid cards in the Swedish market. Deals already signed will mean an increase in sales by approximately SEK 100 million annually. Seamless does not have as a policy to give guidelines about quarterly figures, but given the impact of the new deals signed in the Swedish market for Distribution, Seamless estimates that the net sales will increase with around 100% in Q3 compared to Q2, to around SEK 50 million. Sales for our SEQR mobile payments solution increased by 58% compared with the previous quarter. In less than one year, our SEQR mobile payments service has come available to consumers all across Sweden. SEQR has also become technology independent where consumers can now choose to pay either with QR code or NFC. During the quarter, agreements were signed with a number of international companies, and consumers across Europe will have the opportunity to pay with SEQR during the second half of 2013.              

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Q3  2012  Q4  2012  Q1  2013  Q2  2013  

   

   

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CEO’s Comments

Seamless continued to grow strongly in the second quarter. In less than one year since its launch, our mobile payment service, SEQR, has become Europe's most widely accepted solution for mobile payments, based on strong interest from merchants in Sweden. Currently, about 3,500 stores in Sweden have signed an agreement to accept payments from consumers using our SEQR service. As evidence of our compelling offering, SEQR sales rose by 58% over the previous quarter. We have just commenced the roll out of SEQR in Romania, where we have seen a strong start. We continue to demonstrate the scalability of our SEQR offering – with no investment in setup and very low ongoing costs for merchants. Put simply, all it takes is a sticker on a checkout register, after which merchants can accept payments via consumers’ mobiles. It took, for example, only 13 days to install SEQR in all Axfood’s approximately 450 Swedish stores (Hemköp, Willys, Tempo and PrisXtra). With the same speed, this quarter we also started the rollout of our SEQR payments solution for McDonald's, Burger King, Västtrafik, Ur & Penn and Euronics, to name a few. I regularly get asked: "If it's so easy and convenient to make payments with SEQR, and merchants pay only half the fees of other payment cards, and there is virtually no need for investment from the merchant – why are not more of the major chains adopting SEQR?" My answer to this question is: "Look at our rate of expansion, which is, perhaps, the world's fastest. At the same time, we need to keep in mind that large retail companies have decision processes that require time. We are seldom rejected by any chain. Those we have met are evaluating SEQR, but we cannot yet disclose their names. Remember, SEQR was only recently (November 2012 – less than one year ago) rolled out in a production environment.” In the Swedish market, we have achieved a market penetration with stores that make it economically attractive to start communicating directly with consumers. In addition to SEQR being a simple, convenient, fast and safe payment alternative, our focus is to also ensure the solution is financially attractive for the consumer. The SEQR application will continuously provide consumers new offerings, and our goal is for the average consumer to save at least 1,500 crowns per annum using SEQR, without incurring any upfront costs. During the quarter, we started our international expansion in earnest. I believe this is where there is especially large potential. Seamless is already an international company - we have over ten years experience in international business with our solution for refills of prepaid cards for mobile phones. Interest in SEQR among international companies is proving greater than I expected. During the quarter, we established ourselves in Romania, Malaysia, Kuwait, Norway and Finland. Major participants in these markets approached us as they realized the profit potential from using SEQR. Our international expansion is progressing according to our geographic strategy and, at the same time, our scalable products give us the opportunity to add more countries as requests are received. During the quarter, we started to build an international organization to drive our geographic expansion. In contrast to Sweden, banks in other countries are a driving force for our business, as SEQR reduces the very costly handling of cash. In many parts of the world, the proportion of cash used for payments is between 75 and 50 percent (compared with Sweden, where cash is below 25 percent). In these economies, the incentive to move directly to mobile payments – avoiding high card credit payment charges, is even greater than in Sweden.

   

   

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I agree with many observers who believe that the Seamless SEQR is the best technology in the world for mobile payments. In addition, our proven and stable transaction switch - which handles more than 3 billion transactions annually – is the technology at the core of SEQR. It is not difficult to see why the interest in our solution is so great. The strength of our SEQR solution is confirmed by the fact that we have signed agreements with international giants like Microsoft and Celcom, who want to incorporate our technology into their own solutions. During this reporting period, even distribution of prepaid phone time - so called, ‘top-ups’ - grew rapidly. Turnover year on year for this segment of our business roughly doubled. We signed important contracts with customers such as Axfood. Distribution is a strategically important area for Seamless because we can offer merchants an attractive turnkey solution where the same checkout integration can accept SEQR payments and also sell various electronic products such as prepaid phone top-ups. During the remainder of 2013, we will continue to focus on the opportunities we have for rapid expansion. We are building a very good base for future revenue. Seamless, with SEQR, has a unique opportunity that we plan to maximize.    The Group Revenues Seamless sales decreased by 26 percent in the second quarter to SEK 26 424 (35 658) t. Revenues by business area were: Transactions switch with 34 (40) percent, Distribution with 58 (60) percent, and SEQR with 8 (0) percent. Previously the business area SEQR was included in business area Transaction Switch, but as of January 1, 2013 SEQR is recognized as a separate business. Earnings

• Group operating profits amounted to SEK -20 906 (-2 729) t. • Net financial items amounted to SEK 16 (-65) t. • Earnings per share amounted to SEK -0,53 (-0,09) SEK for the quarter.

Employees The number of employees was 120 (45) at the end of the period. In addition, Seamless has approximately 35 consultants primarily in India, Ghana, and Pakistan. The headcount is unchanged from the previous quarter.

Investments During the quarter, investments were made at a value of SEK 11 245 (3 285) t. Product development costs have been capitalized at a value of SEK 6 530 (3 209) t, while depreciation was SEK -2 135 (-487) t. Cash Flow and Financial Position Cash flow from operating activities amounted to SEK -26 633 (-8 528) t for the second quarter. Cash and cash equivalents amounted to SEK 44 092 (10 737) t. Given the nature of Seamless' business and it's expansion plans internationally, the company has been approached by several interesting potential strategic partners consisting of international retailers and large corporations, as well as institutional investors – with both groups interested in investing in Seamless. Something, which would assist in further increasing the market presence of SEQR. These two groups will help in leveraging Seamless' technological advantage – either due to them having a strong market presence in key markets or by possessing large contact networks – and both groups should satisfy such criteria both in respect to their contribution to industrial aspects of SEQR as well as through financial investments in Seamless as a company.

   

   

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The Group has interest-bearing liabilities in the form of equipment leasing amounting to SEK -2 868 (-478) t, divided accordingly into non-current liabilities of SEK -1 582 (-289) t and current liabilities of SEK -1 286 (-189) t. The Company has no interest-bearing liabilities to banks or other financial institutions.

In addition, the company has an outstanding liability to the sellers of Lettel, and amortization of hardware for internal use as well as hardware resold to customers. Otherwise, the Group has no borrowings.

Parent Company The Parent company's net sales for the quarter amounted to SEK -2 (14 255) t and net earnings amounted to SEK -5 399 (-1 915) t. Net financial income for the parent company was SEK 1 (-34) t and cash equivalents at the end of the quarter amounted to SEK 19 417 (9 658) t. The number of employees in the Parent company reached 9 (48) persons as of the end of the quarter.

Effective January 1, 2013, Seamless implemented an internal restructuring where the entire operations was moved from the Parent company, Seamless Distribution AB, to the wholly owned subsidiary Seamless Payments AB. The Parent company carries the costs for the Board, Executive management, and all costs associated with maintenance of the listing on the stock exchange. All other operations and related staff are reported, as of Q1 2013, in a separate company, whereby making comparative figures for the parent company between previous years and this year less relevant. While for the Group as a whole the comparative figures from year-to-year have the same comparative relevance as previously.

The restructuring was purely strategic, enabling a more streamlined group, where it will be much simpler and clearer to monitor and report on the various product segments within the Seamless product portfolio, and to facilitate follow-up and comparisons between different geographical areas. Going forward, it will also be easier to establish subsidiaries, in any country globally.

Shareholders Meeting Seamless Annual General Meeting was held April 26, 2013 in Stockholm. In accordance with the proposed resolutions, the shareholders resolved on the following: Determination of the financial statements and discharge from liability The AGM approved the financial statements and that the unappropriated earnings of SEK 122,123,875 be carried forward. The Board of Directors and the CEO were discharged from liability for the financial year 2012. Board of Directors, Directors' fees and the Auditor The shareholders meeting resolved on the re-election of Peter Fredell and the election of Robin Saunders, Omar M Cordes and Martin Börresen to the board. Furthermore, Michael Sundin was elected as Chairman starting May 1, 2013. For the period ending May 1, 2013 Gunnar Jardelöv was re-elected Chairman of the Board.

• Michael Sundin has previously served as President and CEO of Point International Ltd and has over 30 years experience in the financial sector.

• Omar M Cordes is one of the founders of Ownership Capital and has 35 years experience in the capital markets.

• Robin Saunders is managing partner at Clearbrook Capital LLP and previously worked in investment banking and has extensive experience in senior management positions and directorships in the financial industry.

   

   

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• Martin Börresen is an attorney and partner at Ashurst LLP and Ashurst LLP. Martin Börresen has worked at the firm since 1981, including as a member of Linklaters' international Board of Directors and Head of Linklaters Nordic corporate M & A group.

• The AGM resolved that compensation to the Board should be paid in accordance with the proposal.

• Re-election of Öhrlings PricewaterhouseCoopers AB as auditor with Niklas Renstrom as senior auditor for a term of four years.

Nomination Committee The Annual General Meeting approved the proposed guidelines and bylaws for the Nominating Committee. Guidelines for remuneration to senior executives The Annual General Meeting approved the proposed guidelines for remuneration to senior executives. Authorization to issue shares and / or warrants and / or convertible and the repurchase and transfer of own shares The Annual General Meeting resolved to authorize the issue of new shares not exceeding 8,000,000 shares and / or warrants and / or convertibles. Further the Annual General Meeting resolved on the authorization of repurchase and transfer in respect of own shares. Repurchases may take place on NASDAQ OMX Stockholm under the prevailing registered price interval and by a maximum number of shares where the company, after each purchase, holds a maximum of 10 percent of the total shares in the company. Transfer may take place on NASDAQ OMX Stockholm or in connection with the acquisition of all or parts of companies or operations with a maximum number of shares that the company holds at the time of the Board's decision on the transfer. Transfer on NASDAQ OMX Stockholm or in connection with the acquisition of all or parts of undertakings or a business may only occur at a price within the prevailing price interval on commercial terms but not at a price below the current share price. Incentive program for employees and the Board of Directors The Annual General Meeting resolved on an incentive program for employees based on warrants issued at market value. A maximum of 2,000,000 warrants will be issued. The exercise price of the warrants shall be equal to 275 percent of the volume weighted average trading price of the Company's shares during the period 29 April to 13 May 2013 and the maturity of the warrants is approximately three years. The AGM also resolved on an incentive program for newly elected directors based on warrants issued at market value. A maximum of 1,500,000 warrants will be issued. The exercise price of the warrants shall be equal to 275 percent of the volume weighted average trading price of the Company's shares during the period 29 April to 13 May 2013 and the maturity of the warrants is approximately three years.

   

   

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Business Area

  Net  sales,    April-­‐June  

Growth,  Net  sales  compared  to  same  period  previous  year  

April-­‐June  

Earnings,  April-­‐June   Operating  Margin  April-­‐June  

  2013   2012   2013   2012   2013   2012   2013   2012  Transactions  Switch    

9  044   14  163   Neg  

 

-­‐0,6%   3  198   -­‐2  402   35%  

30%  

Neg  

 Distribution   15  243   21  495   Neg   100%   -­‐1  899   -­‐327   Neg   Neg  SEQR   2  137   -­‐   100%   -­‐   -­‐16  585   -­‐   Neg   -­‐  Non-­‐distributable    

-­‐   -­‐   100%   -­‐   -­‐5  620   -­‐   Neg   -­‐  Seamless  Group   26  424   35  658   Neg   150%   -­‐20  906   -­‐2  729  

 

Neg   Neg  

Transaction  Switch  

Operations: Seamless Payments AB Established: 2001 Products include: E-TopUp, value-add services (VAS) and Managed Operations (MOPS)

Seamless was one of the first companies in the world to develop and market a platform that enabled the electronic replenishment of prepaid cards, a much more efficient and safe alternative to the then established physical vouchers (scratch card). Since the initial installation, over 12 years ago, the development of the Seamless platform ERS 360 has been adapted to new market demands and needs, and is now in its 4th generation. The basic requirement for all mobile operators has been, and is, to offer prepaid customers the most cost effective way possible to replenish their prepaid account for the mobile phone. In some markets, such as in Europe, this is done through distributors such as Pressbyrån or ICA in Sweden, which manage the distribution of the value amount on behalf of the mobile operators. In other markets mobile operators take on the role as the distributor and they manage their own distribution, such as in Africa and the Middle East. Regardless of the deployment model used, both types of participants need to have access to a technology as provided by Seamless ERS 360. This has allowed Seamless, since its inception 12 years ago, to be able to deliver, supply and install the same technology platform for customers from both categories, in other words, both mobile operators such as MTN and distributors such as 7Eleven. Market  development  during  the  second  quarter  During the quarter, Seamless received several orders for both new functionality, orders for upgrades to the latest generation of ERS, as well as orders for increased capacity from existing customers. Despite this, sales were reduced during the quarter compared with the same period last year. Since the orders and projects differs quite markedly it often result in quarterly variation when comparing one quarter to the other. In 2012 Seamless received orders for quite a few license expansions. The revenue from these orders basically require no investment in terms of time or money from Seamless side, while at the same time the revenue can be recognized immediately. The reason for this is that all Seamless systems are designed to handle traffic volumes far above what the customer wants at any given moment, which means that once customers place an order for increased license capacity, the capacity can be increased without much work or costs for Seamless. The orders received and where deliveries have started during Q2 have in general demanded a greater effort, especially the projects for upgrading ERS to the latest version. This means that revenues between quarters can vary quite a lot depending on the type and nature of the project. In addition, an agreement was reached - in stiff competition - with mobile operator Globacom Group Limited (GLO), which is Africa's fastest growing telecommunications company. The first delivery will take place during the year to one of the group's operating countries, Benin. GLO Group also has operations in Nigeria, Ghana and the Ivory Coast, which could mean major future revenue potential

   

   

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for the transaction switch operations. The project will be delivered in 2013. During the second quarter, one of Seamless oldest customers operating in South East Asia, and where they manage the distribution of electronic prepaid to over 8,000 7-Eleven stores in Thailand, ordered an expansion of their system including an upgrade to the latest generation of ERS 360. The order not only has a value from a financial perspective, but the upgrade also brings a strategic opportunity as it opens for the possibility for collaboration in mobile payments through SEQR in the region. Market  Outlook    Over the years, Seamless has established a close cooperation with mobile operator MTN, which is one of the world's ten largest mobile operators with over 100 million subscribers. Currently, Seamless delivers systems to ten of the more than twenty countries where MTN has operations and the aim during this year is to further increase the collaboration. The contract secured with GLO in Benin establishes Seamless as a partner of Globacom, another mobile operator group with several international companies. The goal is to sign agreements with other countries within the Group where GLO is active. The Seamless platform enables rapid deployment of a unified system, which in turn facilitates the maintenance and operation requirements for system operators. This is a big advantage over many competitors who are forced to build new solutions for each new installation. During the second half of 2013, Seamless will launch a module to the platform that extends functionality and allows for existing - as well as new customers - to conduct international monetary transactions (Money Remittance). Remittance can be described as a way for people to send money to relatives and friends in other countries. The market is currently divided into numerous smaller participants where Western Union is one of the more well known. Through the development of the Remittance module, Seamless opens for another large potential customer segment.                  

   

   

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Distribution  Operation: Sia Lettel, Seamless Payments AB Established: 2011 Products include: Physical and electronic distribution of mobile TopUp/re-fill codes, and other electronic products via retail outlets, banks, and on-line channels. eProducts (electronic products) is a growth area, where the product offering provides many advantages for both consumers and retail outlets. The solution includes, for example, mobile airtime, electronic gift cards, and prepaid cash cards. eProducts provides retail outlets an opportunity to increase sales and consumer inflows without the requirement of investments and additional retail shelf space. With the electronic distribution of products, a digital code for the goods is provided; the value of the product is realized at the time of purchase. When re-filling for mobile airtime, a value code is assigned on a receipt from, for example, a checkout payment system. Electronic gift cards and prepaid cash cards can be marketed in stores, without risk, since the value is only activated when purchased. Re-sellers of eProducts have traditionally been retail outlets such as grocery stores, convenience stores, kiosks, and retailers offering mobile phone accessories. As a result of the emergence of new types of eProducts, re-sellers have found that they can create a presence at virtually any retail outlet anywhere.

The Seamless operations in eProducts includes the phases between product / service provider and point of sale outlet. Operations for Distribution and eProducts was previously part of Seamless Lettel subsidiaries, operating in Latvia, but in the second quarter of 2013 a distribution agreement was reached with Axfood Group in the Swedish market. The agreement with Axfood, and related franchises, is for the distribution of electronic and physical prepaid cards to over 450 stores with an expected annual turnover of approximately SEK 100 million. A very successful pilot project together with Axfood was initiated during the month of June, with full deployment starting July 1, 2013. The agreement with Axfood illustrates well the synergies that exist between eProducts and SEQR. Given that customers and integration partners are one and the same, Seamless resources are utilized very efficiently. The product offering to retail is now broader resulting in deepened customer relationships since Seamless provides the customer with both products. The combined offering provides increased opportunities and negotiating advantages toward the retailer and toward checkout register providers with regard to integrations.

Seamless maintains a world-leading technology with extensive experience in electronic distribution - acquired in an international market since its establishment in 2001. This experience has enabled the company to effectively further develop the product with a very successful launch. Having started as a technology provider, Seamless has successfully moved up the value chain by offering an "end to end" platform for eProducts. This means that Seamless, as the owner of the technology, signs agreements directly with the product/service providers and distributes these products/services directly to retailers. Seamless also has a very interesting opportunity in developing sales of eProducts through SEQR. The market for eProducts is moving more and more into digital channels, and by introducing eProducts in SEQR, Seamless can offer the re-fill of prepaid cards and media directly on a mobile phone. Seamless can expect substantially higher margins since we are also owning the sales channel. A significant part of the Swedish prepaid market is sold through digital channels - where the Seamless transaction switch is the technology at the core of prepaid cards in the major Swedish banks today.

   

   

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Market development during the second quarter The market for prepaid cards in Europe has decreased in recent years due to the introduction of smartphones, since they have been difficult to buy without a postpaid subscription, and the market penetration of them have increased dramatically. At the same time, competition among mobile operators led to a steady downward pressure on postpaid subscriptions as well as on pre-paid, a trend that peaked around late 2012, early 2013. The market as a whole for topup in Latvia has seen a decline from April 2012 - April 2013 at 28.7%. Seamless Latvian subsidiary Lettel have generally performed better than the market, but in the last quarter it also got affected by one of the company's largest customers, that were involved in a process of selling the company, which led to reductions in sales through the channel, which also negatively affected sales. The situation for the customer have stabilized and analysts predict that the market in general won’t decline further, rather it will stabilize at these levels, with a possibility of a marginal increase in the future. Market Outlook Negotiations for acquisitions, joint ventures, and own establishments continue in many markets and the first results of this effort is the launch together with Axfood on the Swedish market. Seamless has a good opportunity to attract new customers through the strength of the company's combined offering. Further, the company is working to accelerate sales of Seamless existing distribution channels, such as expanding the product portfolio of eProducts and working with visibility and promotions. When SEQR is launched in new markets, it creates its own sales platform for eProducts, and Seamless expects to effectively launch eProducts in most markets in SEQR.

   

   

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SEQR   Operations: Seamless Payments AB Established: 2012 Products include: Mobile payments

The Seamless mobile payment solution SEQR is the only mobile payment solution that is widely established in stores all over Sweden. With the new contracts signed during the period, SEQR reaches more than 3,500 stores throughout Sweden, and sales have increased by 58% percent over the previous quarter from SEK 1,346 thousand to SEK 2,137 thousand. Interest from foreign operators also continues to be very high as the international launch starts to take off in earnest. It makes SEQR the largest provider of mobile payments in Europe and a global leader. Continued solid establishment in Sweden Interest for SEQR from both small and major participants in the Nordic market remains strong. New agreements were signed during the quarter, such as Ur & Penn that included the recent rollout to 93 stores in Sweden. Even Euronics Sweden, which is part of Euronics International with over 11,000 stores in 31 countries, has started accepting mobile payments via SEQR. The integration of SEQR to existing point-of-sale (POS) systems continues. During the period, agreements were signed with, among others, Visma, allowing merchants who use Visma's checkout system to easily connect to SEQR. Even collaboration with Sweden's largest private car park operator, Q-Park, was initiated. Q-Park has over 1500 sites and will initially offer payment via SEQR at selected car parks in the Stockholm area. The expansion of SEQR through previously agreed projects continued as planned during the period. For example, it is expected that the extensive rollout to McDonald’s 220 restaurants around the country to be completed during the summer. To alert visitors to the possibility of paying by mobile phone Seamless has, for example, produced an instructional video for the restaurants TV screens. Simplified and expanded opportunities for SEQR Invoice accounts The ability to pay with SEQR is carried out in cooperation with the finance company Collector, among others. The service works just like a credit card where all purchases are collected on a single invoice with up to 60 days free of interest and administration fees, including the possibility of partial payments. During the period, SEQR together with Collector also simplified the process for how new users register a billing account. The new approach provides credit application approvals directly on your mobile phone. In addition to the simplified registration of new accounts, credit limits have been increased from 5,000 to 10,000 crowns. SEQR enhanced with NFC technology SEQR has quickly established itself as the leading solution for mobile payments in the Swedish market. In addition to the solution being incredibly fast, inexpensive to implement and extremely secure, it provides an opportunity for merchants to avoid card companies’ high fees. This is largely due to that the only thing the client needs to do to pay with SEQR is to scan the QR code posted at the checkout terminal. During the period Seamless has even made it possible for users to use NFC technology (Near Field Communication) when making a SEQR payment. This is made possible by a small RFID chip that supports NFC, which is integrated in the sticker with the QR code attached at the checkout terminal. International launch of SEQR continues During the period Seamless international expansion of SEQR continued and several important contracts were signed. Among other things, the successful cooperation with Collector was expanded to include both Finland and Norway. Consumers in these countries will be offered the opportunity to use SEQR with Collector’s invoice account - the same service offered in Sweden. Romania is the first market outside Sweden where SEQR will be commercially launched. The launch will take place at the beginning of the third quarter together with Garanti Bank, who will offer

   

   

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customers a link from their bank accounts to SEQR. The Romanian market is attractive for Seamless because card usage is low, and that the use smartphones and demand for electronic payment methods is on the rise. Seamless has entered an important pilot agreement with Celcom, Malaysia's leading mobile operator. Celcom will be the account holder for SEQR and will offer their approximately 13 million customers a so-called Celcom Mobile Wallet Account for payment at merchants in Malaysia. Agreements with Kuwait International Bank and McDonald's have also been signed during the quarter, meaning a launch of SEQR in the Middle East with two very strong players. Interest for mobile payments are very strong internationally, as demonstrated by the results of Seamless international expansion. Expansion continues at a very high rate and the lead that Seamless and SEQR has, compared to other operators with mobile payment solutions, is being utilized. Market Outlook Mobile payments and the various solutions available is something that merchants, consumers and the media discuss often. In addition to SEQR, there are several other operators that are present both physically in stores and online - and more solutions are expected to emerge within the next few years. However, what still distinguishes SEQR from the majority of the other solutions available is that SEQR is the only solution that offers more than the ability to pay physically in store using your mobile. For example, with SEQR you can also pay online and transfer money free of charge to other individuals' bank accounts. Moreover, SEQR is the only solution available that results in lower costs for merchants - given that credit card companies can be bypassed - and eventually even for consumers. It has already become appealing for consumers in Sweden to use SEQR given attractive offers are provided through the application. The goal is that the average consumer will earn about 1500 crowns per year by using SEQR. The foundation of SEQR is the Seamless proprietary transaction switch, which allows you to make payments without the involvement of companies such as Visa and MasterCard. Over the course of twelve years Seamless has been using the transaction switch to replenish prepaid mobiles, making it capable of handling a very large volume of transactions - currently over 3.1 billion annualized. There is a continued increased interest in mobile payments among Swedish merchants. In the recent trade survey carried out by the Swedish Trade Federation in April this year, it was revealed that about eight out of ten merchants are somewhat or very interested in using new technologies for payment in stores, including payments through mobile phones. This is compared to December 2011, when just over six out of ten merchants, when asked the same question, were interested. Approximately every one in three of those surveyed stated that they see reduced cash handling and safety as the main benefit of introducing new payment solutions. And most likely, they will soon go from concept to action – two thirds of merchants surveyed believe that it will be possible to pay by mobile phone in their own store within three years. In order for mobile payments to really strike big requires that consumers embrace the service. The trade survey shows that the majority of Swedish merchants have not yet perceived that there is any demand among customers to pay by mobile phone (apart from supermarkets where one in four merchants reported that they are experiencing a demand). This is a challenge we at Seamless are very well aware of and take very seriously. We continue to work hard to attract more users to SEQR and to encourage them to make payment by mobile an everyday behaviour. An important element is to create a strong added value associated with our product. Just as important is that SEQR works as easily and quickly in both the physical stores and in digital commerce, compared to competing solutions. According to a Swedish study by consulting giant Accenture, over 12 percent of Swedish consumers say that in the future they will buy less in physical stores and over 40 percent of consumers plan to shop even more over the internet.  

   

   

13  

How SEQR Works SEQR is the easiest payment system for mobile phones available. The system lowers costs for the merchant and ultimately probably also for consumers. All the customer needs to do is to pay using their smart phone with the use of an application, SEQR, scan a QR/NFC code and with the use of a PIN-code authorize payment to be deducted from an invoice account. The QR/NFC code is linked, and is unique to the checkout payment solution, and is in turn connected to the Seamless transaction platform. The SEQR technology does not require retailers to invest in any expensive hardware or go through the process of a cumbersome installation in order to offer their customers payment by mobile phone. The system bypasses card companies’ high fees and as such provides the retail outlets the opportunity to substantially reduce costs due to lower transactions fees. SEQR offers much more than just the possibility to pay using mobile phones in stores. It is even possible, with the use of the mobile phone, to pay invoices that have a QR code linked to SEQR. Similarly, payment by mobile phone is easy for both e-commerce transactions and even offers made directly by mail to customers. With SEQR, it is possible to transfer money, free of charge, directly to an individual’s bank account, regardless of bank affiliation. The only requirement to make the transfer is the recipient's mobile number. The recipient of funds only needs to specify in the SEQR application to which account the funds should be transferred. This solution limits the need for either party to provide sensitive information, such as account numbers, to other persons. Retail outlets have the possibility to target offers to customers who choose to pay with SEQR. Seamless also offers smaller merchants SEQR Mobile Checkout, which allows, for example, carpenters, market merchants, or cafes to use their smartphone, tablet, or computer to securely and conveniently accept mobile payments. It is free of charge to implement and transaction fees are significantly lower than for credit card payments. This is an easy option to avoid cash transactions without the investment in an expensive card terminal.

   

   

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Significant events during the period The following significant events occurred during the period:

• Seamless launched the option for users to use NFC (Near Field Communication) when making a SEQR payment by use of their mobile phone. The solution is made possible through a thin RFID circuit that supports NFC that is embedded in the adhesive patch together with a QR code, attached at the checkout terminal. The merchant does not need to invest in expensive new hardware and consumers are able to choose if they want to make use of QR-codes or NFC for payments.

• Seamless signed an agreement with UR & Penn, the leading Nordic distributor of watches. After the agreement was signed in April, SEQR has since been rolled out in all of UR & Penn's 93 stores in Sweden, which means consumers across Sweden can now pay for their watches with use of their mobile phone. The goal during the autumn is that all nine UR & Penn stores in Finland will also provide SEQR payments.

• Q-Park, with over 1,500 parking facilities in Sweden, signed an agreement with Seamless enabling mobile payment for parking at Q-park facilities in the Stockholm area. This will be available as of the autumn 2013. Consumers will no longer need to queue to pay for their parking fees by card, nor will they need to wait for payment authorizations as is normally required with card payments. The user can even extend their parking directly on their mobile without having to return to the parking facility.

• The Annual General Meeting of Seamless was held April 26 where the financial statements were adopted and it was resolved that the unappropriated earnings of SEK 122,123,875 be carried forward.

o Michael Sundin was elected new Chairman and Omar M Cordes, Robin Saunders and Martin Börresen were elected as new Board members. Peter Fredell was re-elected to the Board.

o Directors' fees shall be paid in accordance with the Nominating Committee's proposal.

o Re-election of Öhrlings PricewaterhouseCoopers AB as auditor with Niklas Renstrom as senior auditor for a term of four years.

o The meeting resolved to approve the instructions and guidelines for the Nominating Committee including proposed guidelines for remuneration to senior executives.

o The meeting also resolved on the authorization to issue a maximum of 8,000,000 shares and / or warrants and / or convertibles.

o Resolution was reached regarding an incentive program for employees and the Board of Directors for a total of 3,500,000 options, of which 2,000,000 of these for employees and 1.5 million to newly elected board members.

• An agreement was signed with Axfood Group for the distribution of prepaid mobile, which means Seamless goes from being a technology provider to becoming a distributor for prepaid cards on the Swedish market. The agreement takes effect as of July 1, 2013 and is estimated to increase Seamless annual turnover by approximately SEK 100 million.

• Seamless implements mobile payments in Romania where Garanti Bank introduces SEQR. Garanti Bank will offer all of their customers a connection from their accounts to the service.

• An agreements was signed with mobile operator group GLO in Africa for the delivery of the Seamless system for prepaid refills. Further, an agreement was signed for a pilot installation with mobile operator Celcom in Malaysia, and Kuwait International Bank and McDonald's in Kuwait signed contracts regarding SEQR.

   

   

15  

Events after the reporting period • As of July 1, 2013 the Seamless business area Distribution has been expanded and now also

includes Sweden. Seamless even made the move to enter the domestic market and move from technology provider to distributor of electronic products such as vouchers and prepaid cards. The first major customer Seamless signs an agreement with is Axfood Group. The system has been operational since July 1, 2013, and is expected to generate around SEK 100 million per year in increase sales.

• In July, Seamless registers its fully owned subsidiary, “Seamless Romania”, in Romania. The first three employees starts working at the day of incorporation.

• Seamless fully owned subsidiary, Seamless Remittance, obtains money transfer license from the Swedish Financial Supervisory Authority (FI). The license to conduct money transfer is another quality assurance for SEQR which will result in even more streamlined processes towards account providers as well as connected retailers. The license can also be transferred to the other EU-countries if needed, and it opens up for future business areas like international transfer of money, International remittance.

Transactions with related parties Seamless had no transactions with related parties.

Other Accounting principles This report is prepared in accordance with IAS 34, Interim Financial Reporting, which is consistent with Swedish law through the application of the Financial Reporting Board's recommendation RFR 1, Supplementary Accounting for the group and RFR 2 Accounting for Legal Entities in regard to the parent company. The same accounting principles, definitions of key ratios, and methods of computation have been applied as in the most recent annual report for both the Group and the Parent Company, unless otherwise noted below. In October 2011, Seamless acquired the Latvian distributor of airtime services, Lettel. According to the agreement, Seamless has a contingent consideration to pay an additional SEK 5,000 t in the form of SEK 2, 500 t cash and SEK 2,500 t in shares (the number of shares depends on the price at the time of payment). The additional payment is to be paid two years after the agreement was finalized. The additional purchase price will be paid if Lettel meets or exceeds the agreed established sales targets as well as that the agreement with the retail chain, Plus Punkts, has not been cancelled by the date that the additional purchase price shall be paid.

Significant risks and uncertainties Seamless operations are affected by a number of external factors that can affect its business. These risks may impact the Company's ability to achieve business goals. No significant changes occurred during the quarter regarding significant risks and uncertainties; please refer to the report in the most recent Annual Report, pages 15-17. This report contains forward-looking information based on management's current expectations. Although management believes that these expectations reflected in such forward-looking statements are reasonable, no guarantee can be given that such expectations will prove correct. Accordingly, results could differ materially from those implied in the forward-looking information due to, among other factors, changes in economic, market and competitive conditions, changes in the regulatory environment and other governmental actions, fluctuations in exchange rates, and other factors.    

   

   

16  

 Group  report  over  total  earnings,  t  

Apr-­‐June  2013  

Apr-­‐June  2012  

Jan-­‐June  2013  

Jan-­‐June  2012  

Full  year  2012  

Net  Sales   26  424   35  658   52  809   65  373   134  337  Other  operating  income   918   798   927   355   43  

Material  costs   -­‐15  148  

-­‐22  153  

-­‐29  958  

-­‐42  163  

-­‐83  202  Other  external  costs   -­‐14  

066  -­‐9  401   -­‐30  

352  -­‐17  271  

-­‐45  432  Personnel  costs   -­‐17  

623  -­‐7  144   -­‐33  

593  -­‐14  620  

-­‐33  317  Depreciation   -­‐2  136   -­‐487   -­‐3  888   -­‐1  041   -­‐2  112  

Other  operating  costs   725   -­‐   879   -­‐   -­‐211  Operating  income   -­‐20  

906  -­‐2  729   -­‐43  

176  -­‐9  367   -­‐29  

894  Financial  net   16   -­‐65   -­‐67   -­‐106   -­‐512  Profit  before  tax   -­‐20  

890  -­‐2  794   -­‐43  

242  -­‐9  473   -­‐30  

406  Income  tax   3  410   627   6  949   2  458      6  661  Profit  for  the  period   -­‐17  

480  -­‐2  167   -­‐36  

293  -­‐7  015    -­‐23  

745              Other  comprehensive  income            Currency  translation  differences   209   -­‐87   -­‐165   -­‐293   -­‐1  033  Total  comprehensive  income  attributable  to  parent  company  shareholders   -­‐17  

271  -­‐2  254   -­‐36  

458  -­‐7  308    -­‐24  

778            Consolidated  Balance  Sheet  t  

June  30  2013  

Jun  30  2012  

Dec  31  2012  

ASSETS        Intangible  assets   29  341   18  264   22  137  -­‐  of  which  goodwill   7  731   7  971   7  653  -­‐  of  which  capitalized  development  costs   19  377    7  745   12  369  -­‐  of  which  customer  agreements   2  233   2  548   2  115  Tangible  fixed  assets   13  197   1  015   2  761  Deferred  tax   19  278   8  025   12  225  Inventories  of  finished  goods   4  122   1  427   1  807  Accounts  receivables   27  332   24  132   17  767  Other  receivables   6  932   4  761   102  905  Prepaid  expenses  and  accrued  income   8  179   3  129   5  457  Cash  and  cash  equivalents   44  092   10  737   14  004  Total  assets   152  473   71  490   179  063          QUITY  AND  LIABILITIES        Equity   100  651   37  303   137  110  Provisions   117   -­‐   -­‐  Other  non-­‐current  liabilities   1  582   5  357   7  077  Deferred  tax  liability   334   371   342  Trade  accounts  payable   25  697   14  377   17  185  Current  tax  liability   364   132   115  Other  current  liabilities   10  072   1  942   4  474  Accrued  expenses  and  deferred  income   13  656   12  008   11  760  Total  Equity  and  Liabilities   152  473   71  490   179  063  

     

   

   

17  

 Consolidated  statement  of  changes  in  equity,  t  

Apr-­‐June  2013  

Apr-­‐June  2012  

Jan-­‐June  2013  

Jan-­‐June  2012  

Full  year  2012  

Balance  at  start  of  period   117  923   39  557   137  110   42  359   42  359  Comprehensive  income  for  the  period   -­‐17  271   -­‐2  254   -­‐36  458   -­‐7  308      -­‐24  778  New  share  issue   -­‐   -­‐   -­‐   -­‐   9  606  Transaction  costs   -­‐   -­‐   -­‐   -­‐   -­‐4  809  On-­‐going  new  share  issue   -­‐   -­‐   -­‐   -­‐   112  480  Options  program   -­‐   -­‐   -­‐   -­‐   2  252  As  per  end  of  the  period   100  652   37  303   100  652   21  503      137  110  

       Consolidated  statement  of  cash  flows,  t  

Apr-­‐June  2013  

Apr-­‐June  2012  

Jan-­‐June  2013  

Jan-­‐June  2012  

Full  year  2012  

Cash  flow  from  operations  before  changes  in  working  capital   -­‐18  031   -­‐2  352   -­‐38  475   -­‐7  557   -­‐28  202  Change  in  working  capital   -­‐8  602   -­‐6  176   -­‐2314   -­‐2  226   23  302  Cash  flow  from  operating  activities   -­‐26  633   -­‐8  528   -­‐40  789   -­‐9  783      -­‐4  900  Cash  flow  from  investing  activities   -­‐11  245   -­‐3  285   -­‐21  528   -­‐5  521   -­‐12  168  Cash  flow  from  financing  activities   -­‐504   -­‐441   92  405   17  483   22  514  Cash  flow  during  the  period   -­‐38  382   -­‐12  254   30  089   2  179      5  446  Cash  and  cash  equivalents  at  beginning  of  period   82  474   22  991   14  004   8  558   8  558  Cash  and  cash  equivalents  at  end  of  period   44  092   10  737   44  092   10  737      14  004    

       Key  figures   Apr-­‐June  

2013  Apr-­‐June  

2012  Jan-­‐June  

2013  Jan-­‐June  

2012  Full  year  

2012  Return  on  equity     neg   neg   neg   neg   neg  Earnings  per  share,  basic  and  diluted   -­‐0,53   -­‐0,09   -­‐1  11   -­‐0,29   -­‐0,96  Operating  income,  t   -­‐20  906   -­‐2  729   -­‐43  176   -­‐9  367   -­‐29  894  Growth  Net  sales  (compared  to  the  same  period  last  year)   neg   150%   neg   192%   124%  

Operating  margin   neg   neg   neg   neg   neg  

Average  number  of  shares,  basic  and  diluted   33  048  374   24  261  878   32  635  687   23  878  545   24  636  097  

Liquidity   174%   150%   174%   150%   406%  Equity  ratio   66%   52%   66%   52%   77%  Equity,  t   100  651   37  303   100  651   37  303   137  110  Equity  per  share   3,05   1,54   3,05   1,54   4,15  Number  of  employees  at  end  of  period   120   45   120   45   88  

                 

   

   

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 Parent  company  income  statement  t  

Apr-­‐June  2013  

Apr-­‐June  2012  

Jan-­‐June  2013  

Jan-­‐June  2012  

Full  year  2012  

Net  sales   -­‐2   14  255   -­‐2   24  405   52  035  Other  operating  income   -­‐   799   -­‐   346   19  Operating  expenses   -­‐5  398   -­‐17  571   -­‐10  876   -­‐34  145   -­‐81  965  Operating  income   -­‐5  400   -­‐2  517   -­‐10  878   -­‐9  394   -­‐29  911  Net  financial  items   1   -­‐34   -­‐18   -­‐85   -­‐75  Earnings  before  tax   -­‐5  399   -­‐2  551   -­‐10  895   -­‐9  479   -­‐29  986  Income  tax   -­‐   636   -­‐   2  452      6  652  Income  for  the  period   -­‐5  399   -­‐1  915   -­‐10  895   -­‐7  027      -­‐23  334  

     Parent  company  balance  sheet  t  

June  30  2013  

June  30    2012  

Dec  31  2012  

ASSETS        Fixed  assets   34  840   28  515   40  273  Total  current  assets   30  919   34  208     131  113  Total  Assets   65  759   62  723   171  386  

       EQUITY  AND  LIABILITIES        Equity   40  916   37  678   138  648  Long-­‐term  liabilities   5  000   5  000   5  705  Short-­‐term  liabilities   19  843   20  045   27  033  Total  equity  and  liabilities   65  759   62  723   171  386  

       Pledged  assets   -­‐   6  000   6000  Contingent  liabilities   none   none   none  

             

   

   

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About Seamless Seamless specializes in solutions for payment systems for mobile phones, such as transfer of money between mobile phones (Mobile Money) and cash card re-fills. The Seamless transaction platform ERS 360 processes annually more than 3.1 billion transactions worldwide in over 525,000 retail outlets. Seamless has deployed cash card re-fill solutions and mobile commerce solutions to more than 40 operators in 26 countries on four continents. Seamless SEQR solution for mobile payments in-stores and on-line is patent pending with a total of 41 different patent criteria. Seamless was founded in 2001 and its shares are traded on the NASDAQ OMX Stockholm since June 13, 2012, ticker symbol SEAM. Seamless has offices in: Accra, Bucharest, Calcutta, Lahore, Mumbai, Riga, Lodz and Stockholm.

The Seamless Interim Report for the period April – June 2013 has been approved for publication in accordance with the decision of the Board on 19 August 2013. This interim Report has not been examined by Seamless auditors.

Certification The Board and the CEO for Seamless Distribution AB (publ) declare that the interim report gives a true and fair view of the company's and the Group's financial position and results and describes the principal risks and uncertainties that the Company, and the companies included in the Group, face. Stockholm, August 19, 2013 Seamless Distribution AB (publ) org.nr 556610 – 2660 Michael Sundin Chairman of the Board

Martin Börressen Board Member

Omar Cordes Board Member

Peter Fredell Board Member/ Chief Executive Officer

Robin Saunders Board Member

All information is published on www.seamless.se directly following the public release.

Seamless Share Jan-June 2013

                                                                           

Share  price  performance   5,5%  Short  name                        SEAM  Market  Cap  (June  30)      628  MSEK  Highest  share  price     26.00  Lowest  share  price   17.30  Total  number  of  shares  (June  30)   33,048,374  

November  13,  2013      Third  Quarter  report  February  20,  2014              Fourth  Quarter  report  March  14,  2014                      Annual  Report  2013  

 

  20  

 Contact For more information please contact:

Peter Fredell, CEO peter.fredell@seamless.se +46 8 564 878 00

Daniel Hilmgård, CFO daniel.hilmgard@seamless.se +46 8 564 878 00

Seamless Distribution AB (publ) Box 6234, 102 34 Stockholm Organization number 556610-2660 info@seamless.se www.seamless.se