annual report 2017 - bublarbublar group ab (publ), annual report 2017 3 2017 has been an intense and...

Annual Report 2017

BUBLAR GROUP AB (PUBL), ANNUAL REPORT 20172

Comments from the CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Description of activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Glowing Gloves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Project Mercury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Collaborations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Market description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Augmented reality – AR you ready? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

The games market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Shares, share capital and ownership information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Board of Directors, senior executives and auditor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Annual financial statements for Bublar Group AB (publ) . . . . . . . . . . . . . . . . . . . . . . . . . .16

Administration report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Income statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Balance sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

Cash flow statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Notes to the accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

Notes on individual items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

Auditor's report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

Contents

BUBLAR GROUP AB (PUBL), ANNUAL REPORT 2017 3

2017 has been an intense and exciting year for Bublar. Du-ring the year, we reached three important milestones in theCompany’s short history:

we built a complete gaming studio with focus on develop-ment and launch of mobile games and mobile applica-tions at the leading edge of technology,

we live-tested our software platform through the betalaunch of the location-based social AR app Placie,

we listed the Company on the NGM Nordic MTF list.

For the gaming studio, our aim is to develop games and appsat the leading edge of technology. We have therefore built upan organisation within Bublar where creative game develo-pers collaborate with highly skilled engineers within real-timesimulation, GIS (mapping system) and Augmented Reality (AR)to create what we call the next generation of mobile games.Today, there are almost four billion smartphones and tabletcomputers around the world, and this figure is expected toincrease to six billion already by 2020 according to the tele-coms company Ericsson. Every year, devices are becomingmore and more advanced, and their performance is impro-ving, with larger screens, faster processors, better sensors,3D cameras and support for AR. This opens up opportunitiesfor us to develop new types of games and applications,where technology is combined with creativity.

With the app Placie, we have tested our platform. So far,around 27 000 people have downloaded Placie via AppStoreand Google Play, and shared thousands of images with eachother, linked to physical locations in real life. This is visualisedin the app via our mapping system, and in AR via the camerasetting. With this app, we can show that we have created afast and operationally secure real-time system for handlingthe mobile user’s content, published as a sort of virtual layeraround the globe. Our platform also forms the basis for up-coming “real-world games”, which are GPS-based mobilegames, where AR is linked to reality. Already now, we are reu-sing several components for our next mobile games, whichwill be launched continuously through 2018.

The first game, Glowing Gloves (see page 7), is being beta-tested during the second quarter of this year, and is basedon our platform in combination with Apple’s ARKit, the lastest

software within AR. Apple’s and Google’s investments withinmobile AR are very important for pushing the development.Over the next few years, we are envisaging strong growth inthe number of smartphones that can handle AR in a newway, which means that Bublar is well positioned as a gameand application developer.

Besides developing our own gaming products, it is our ambi-tion to establish collaborations with well-known brands andcharacters that are already established in the consumer mar-ket. This applies both for the development of mobile gamesand development of other AR applications. We have ongoingdialogues with potential partners and hope to be able to pre-sent collaborations during 2018, now that the Company isentering into a more commercial phase. The development ofAR is still only in its infancy, and we will make sure that Bublarcaptures its share of the market, which is expected to growglobally to around USD 90 billion over the next few years(Digi-Capital).

Magnus GranqvistCEO

Comments from the CEO

Description of Activities

Bublar is a technology and game development company, with the business concept of creating innovative mobilegames/apps with AR and location based services. In order to realise the idea, the Company has created a software plat-form for AR and location based services that is scalable, robust and able to handle a broad range of end users. AR is atechnology that is used to fill a function or to create an experience by adding a layer of computer-generated graphics toreality. The technology can be experienced via a camera view in a mobile or other platforms, such as glasses, and maybecome the next wave of technology after the PC, internet and mobile. Bublar’s first app, Placie, shows the software plat-form’s characteristics and opportunities.

Business conceptBublar’s business concept is to develop and publish mobilegames and applications that combine the latest technology inthe experience. With the help of an inhouse-developed soft-ware platform, the Company can create new mobile experi-ences, where large volumes of users can create, discover andinteract in real time with both other users and with contentlinked to GPS all over the world.

Operational goalsBublar’s goals are to:

Start collaborating with at least one global brand duringthe first half of 2018.

Further develop our own game portfolio with ongoinglaunches during 2018 of the sport game Glowing Gloveswith advanced AR functionality, and Mercury, a MMORPGgame1.

Further develop the software platform with functionalitiesthat enable the Company to launch products faster andwith new technological functions.

Develop B2B business within AR visualisation linked to location based services or other technical solutionswhere Bublar’s software platform is used.

Financial goalsTo generate income as from the first half of 2018.

To achieve positive cashflow by the end of the first half of2019.


Virtual Reality (VR) is a computer technology that replicates an environment, real or imagined, that simulates the user’s physical presence. VR can so far only be experienced via VR headsets.

Location-basedservices

Mobile games/apps

AugmentedReality (AR)

Bublar

Augmented Reality (AR), or enhanced reality, is when the user looks at a physical environment where elements are enhanced with the help of texts, figures or animations. AR can be experienced via a mobile telephone or via AR headsets (such as Microsoft’s HoloLens).

1 Massively multiplayer online role-playing game


Movement recognition or

control

New technologies that Bublar is

integrating into future products.

Face control

Voice control Eye control

Strategy

Bublar shall be at the leading edge in the use of new technol-ogy for its application development of mobile games. To getthere, the Company will seek collaborations with actors thatdevelop software for gesture control, motion tracking, facetracking, etc. for interaction with AR, but also with globallyknown brands, primarily within the entertainment industry. Itis Bublar’s intention to build up a broad portfolio of apps andgames that combine technology for AR with location services.

Focus on the latest technology – the Company sees AR asthe foundation for the next great technology shift. Bublarcombines the AR technology with location based services,which both enables a large number of application areas, and also constitutes a sophisticated technology, with entrybarriers to future competitors as a result.

Development of our own platform – Bublar has built a soft-ware platform for games and apps that can handle large vo-lumes of data and users in real time. Having our ownplatform makes it easier to create new products quickly andefficiently. Focus on the ability to handle large amounts ofdata characterises Bublar’s platform, and is an important fea-ture that is expected to make Bublar an attractive partner forother companies and brands.

Collaborations – the Company is seeking collaborations withglobal brands. The aim is to collaborate to develop entertai-ning and interactive mobile experiences, where the Compa-ny’s technology and software platform is used in combinationwith the brands’ established knowledge, user base and mar-ket channels. The first product demonstrates the softwareplatform’s scalability and ability to handle large quantities ofusers and data in real time, in combination with AR and loca-tion services. The Company is holding discussions on collabo-ration with major consumer brands.

Income modelBublar applies two main income models for mobile gamesand apps.

Pay-to-Play: The app is downloaded at a specified price fromApp Store and Google Play.

Free-to-Play/Freemium: The app is downloaded free ofcharge from App Store and Google Play. Income is generatedby advertising or purchases within the app. Examples of pur-chases within the app may be purchase of additional levels ina game, upgrades or purchases to avoid advertising in amusic or video app. On average, 2–5% of active app usersmake purchases within an app in any given month, andspend SEK 77–200 per month.

Customer-based income: Bublar’s know-how within AR andlocation-based services is in demand from actors who wantto be early adopters of new technology. Collaboration or di-rect assignment discussions can therefore create income op-portunities for Bublar in projects where our skills and/orplatform for mobile experiences is part of the delivery.

These income models can be used on their own or in combi-nation, depending on how an app is designed. The valuechain is illustrated in the image above, where Bublar fits inunder game developer and publicist.

Game developer

Publicist Distributor Player


Description of activities, cont.

Software platformBublar has constructed a solid, cloud-based software plat-form that enables the Company to create games and otherapplications that can handle large volumes of data traffic inreal time. The platform can facilitate communication, bothbetween the users and with digital objects linked to physicallocations in reality.

The platform is constructed from microservices (“microser-vices architecture”), which is a software program that carriesout an individual specific function as part of a larger applica-tion. The advantage of using collaborating small sections isthat tasks can be spread out across a larger number of ser-vices as required. This gives the Company the opportunity tocreate services that adapt automatically to increasing uservolumes.

Bublar considers that the platform constitutes a competitiveadvantage when the Company develops mobile applicationswith AR and location based services, both inhouse and toget-her with major consumer brands. The Company can create,manage and launch services that enable large user volumesthat require quick handling of real-time data. The Company’sprimary focus is on mobile games and mobile social experi-ences, but the platform could also be used to develop otherapplications, tangential to the concept of Internet-of-Things.Communication between laptop computers, smart devicesand robots, or communication between autonomous carscould be possible applications.

The app Placie was beta-launched at the end of November.The app’s users can interact with each other via Bublar’s ownmap system, and create their own content with the mobilephone camera in a playful form of AR.

We have received positive publicity about the beta-launch, inparticular in US and Chinese industry media. The Virtual Rea-lity forum VU Dreams described Placie as “The New Global ARSocial Network”. As we write, the app has a high user gradingof 4.7 stars in Google Play, compared to an average gradingof 4.1 according to Appbrain.

For Bublar, the beta-test has been very valuable for evalua-ting the platform in real operation. We have established thatthe server platform has very good operational security, and aglobal reach with very short delays on publication of contentfrom the users’ mobiles, in both the map and the camera set-ting. We have received good feedback relating to user beha-viour, and see that the map system works quickly andefficiently. The integration with AppStore, Google Play and Fa-cebook is fully functional, and our method for filtering user-created images works.

Bublar can therefore show a unique platform that visualisesthe functionality of what we have developed in a concretemanner. This means a lot in our meetings with potential part-ners when we discuss various projects and when we developnew games.

Bublar cloud platformUser data

UGC (User GeneraredContent)

Map Services

Score Board Management

IoT (Internet-of-Things)

DeviceManagement

Chat

Geo services


Bublar has developed a unique AR game for mobiles usingApple’s ARKit, so that the users can control the game throughbody movements, and compete against a person in a diffe-rent geographic location. Bublar assesses that we are thefirst in the world to launch a game with this technical functio-nality.

The game is called Glowing Gloves, and is a rea-listic boxing game in an AR environment. Thestory of the game is based on the traditionalsuccess story within boxing – the route from thestreet to world champion! The game experiencestarts at Franky’s authentic gym, where begin-ners get an introduction. Glowing combinationscan be practised, and historic wins are well-do-cumented in the trophy cupboards. The experi-ence in the game spurs moving on to the nextfight on the route to becoming the indisputablemaster.

The income model for the game is based onusers downloading and using the app free ofcharge, but when users want additionalfunctions in the game, they must pay a smallamount. “Freemium”, as the model is called, hasgrown to be the most popular and most profi-table income model among game developers.The key to commercial success for games usingthe freemium model is to offer users attractive

virtual products bought within the game.

Over time, there are also options to generate income viamarketing. Brands can be shown in the game, for example onequipment and in the surroundings. The user may have toview a short film, or click away an advertisement before theapp can continue to be used.

Glowing Gloves – a New Sports Game with Advanced Augmented Reality


Description of activities, cont.

Project Mercury:

An Epic Adventure of DiscoveryBublar is introducing location-based AR experi-ences to the role play genre in the mobile worldusing the latest technology in a MMORPG2

game structure in our next inhouse-developedgame.

Players from the fantasy genre will feel at home,even if the game structure is unique, to ensureit is simple to get into the game, followed by ri-sing challenges and variation (maximum rep-layability, expandability and versatility).

Bublar is looking forward to welcoming playersto a new world in the third quarter of 2018.

Bublar believes there will be increased interestin the genre, as Niantic has flagged the releaseof the game Harry Potter: Wizards Unite, andNext Games will be releasing a game based onWalking Dead. The commercial power of boththese brands will ensure global media notice ofthe genre, which may benefit Bublar’s gametoo.



It is Bublar’s ambition to establish collaborations with majorwell-known brands, where the Company’s technology andknowledge within Augmented Reality is utilised in the bestway, and generate income. Besides creating our own ground-breaking games, we are working actively on creating dealsprimarily within two main areas – game development licencesand customer-based assignments.

Game development licences

Well-known characters have always created attraction. Theattraction of entering into licence agreements is, of course, tobe able to build games based on already established charac-ters in the consumer markets all around the world, whichnormally have an existing user base from film, tv, games andtoys. Often there are also established market channels, bothdigital and physical, which can be used for collaboration withthe IP owner. For a supplier to be awarded major brand li-cences, long negotiations are often needed concerning gameconcepts and due diligence before it is trusted to create thegame products. As a newly-established game studio, we needto display both competence and financial strength.

The game developer Niantic, which worked with the Nin-tendo/Pokémon Company to create Pokémon GO, is develo-ping the upcoming Harry Potter: Wizards Unite together withWarner Bros. This is an example of this type of agreement,

and the first-rate one within our genre of AR games. Nor-mally, the game developer manages both development andpublication, and pays a royalty for the right to use the charac-ters in the game. As a rule, a royalty of 30–40% of the incomefrom App Store and Google Play is payable after costs havebeen covered. The setup means that the game developer isresponsible for both the development and the launch, but re-tains the larger part of the income, around 2/3 of the incomeafter launch on the market.

Customer-based assignments

Bublar’s platform can also be used for other mobile applica-tions, where we develop services on assignment from custo-mers. It is our perception that AR technology will see strongdemand, for example for 3D visualisation of consumer pro-ducts. Bublar is experiencing demand from customers, for ARsolutions for products that can be tried on or studied in de-tail in a realistic way as a 3D model via a mobile. Using con-cepts such as face tracking, Bublar is now creatingapplications where consumer can try on virtual pairs of sun-glasses, or turn over and study products in detail in the formof 3D models, in order to increase the willingness to buy.

One variant may also be small games developed on assign-ment primarily for marketing purposes, “branded games”.

Global Brands – How Could Collaborations Take Shape


Augmented Reality – AR you ready!Investments from the technology giants Apple (ARKit), Google(ARCore), Facebook (Camera Effects) and Snap (Snap LensStudio) are driving the development of Augmented Reality.This is causing analyst companies to trump each other intheir forecasts. The analysts at Digi-Capital are predicting aninstalled base of 900 million AR devices (mobile telephonesand smart glasses with AR functionality) already by the end of2018, growing to 3.5 billion users by 2022. According to Digi-Capital, these will generate around USD 85–90 billion in tur-nover within the next few years. Another company, ARTilleryIntelligence, is even more optimistic. They estimate that al-ready in 2017, there were around 500 million smartphonesglobally able to use AR apps based on Apple’s and Google’stechnologies, and expect an explosion to 1.8 billion devicesby the end of 2018. The large existing installed base consistsprimarily of Apple’s most modern models (around 433 millionunits), but growth is expected to be driven by Android mo-dels. See the diagram below.

Irrespective of platform, we are seeing a development wherehundreds of millions of smartphones, compatible with ARKitand ARCore, will amount to billions of devices within a fewyears, which creates good incentives for developers to buildAR-based games and applications.

The comparison with Virtual Reality (VR) is interesting. Digi-Capital expects that VR (mobile, standalone, console, PC) willreach an installed base of around 50–60 million devices overthe next few years, and will generate a turnover of USD 10–15 billion. There is, however, a relatively significant differencein the ubiquetous accessibility of AR via smart phones with-out users having to buy any new hardware.

The services and applications within the part of the AR mar-ket based on mobiles is expected to grow strongly in the co-ming years. According to Digi-Capital, growth will speed up in2019, and then amount to almost USD 30 billion, and movetowards doubling that figure a few years later, reachingaround USD 60 billion in 2021.

Installed base of ARKit and ARCore, million devices

ARCore-compatible mobiles

ARKit-compatible mobiles

0

1,000

2,000

3,000

4,000

5,000

0 71218

218

505434

1,245

5861,831

2,594

654

3,248

3,584

672

4,256

2016 2017 2018 2019 2020

Sorce: https://www.huffingtonpost.com/entry/arcore-arkit-google-and-apples-next-battleground_us_59e28bf3e4b09e31db97599e

60

50

40

30

20

10

0

Forecast income, mobile AR, USD billion

2016 2017F 2018F 2019F 2020F 2021F

Mobile AR Revenue Underperform (total)

Outperform (total)

70

Source: https://www.digi-capital.com/news/2017/06/mobile-ar-to-top-a-billion-users-and-60-billion-by-2021/#more-1684

Market Description

3 https://www.bcg.com/en-nor/publications/2018/augmented-reality-is-camera-next-big-thing-advertising.aspx

AR: Is the Camera the Next Big Advertising Medium?In its report “Augmented Reality: Is the Camera the Next BigThing in Advertising?”3, BGC (Boston Consulting Group) descri-bes a development where AR can create the next major trendwithin digital marketing. According to BCG, the camera functionis in the process of becoming a new marketing window, as thespread of smartphones with cameras is creating new beha-viour patterns among users. Mobile users are increasingly en-gaging with the physical world through the digital lens. It isestimated that 1.3 billion photographs were taken all aroundthe world in 2017, or four times more than in 2010, and mostof these via mobiles. Snapchat’s CEO, Evan Spiegel, has said:“The camera is developing from being a barrier that separatesusers from the world to becoming the lens through which youexplore the world.”

In this behaviour, the marketing sector is seeing a potential forcreating a new medium for advertising experiences. BCG ar-gues that “camera marketing” may be the next wave in the de-velopment of digital marketing, just like internet advertising inthe middle of the 1990s, or mobile advertising in the early2010s. In combination with physical and digital environments,AR is offering unique ways for marketeers to interact with con-sumers.

It is predicted that a dynamic ecosystem surrounding AR willemerge, thanks to consumer interest in the technology, and asnew generations of mobiles are launched. BCG enumerates va-rious ways for the market to develop. Bublar sees opportuni-ties to become both a technology partner to major brands whowant to have direct relations with consumers, for example, butalso to facilitate third party AR marketing on an AR platform,owned or managed by social media, messages, games, digitalpublishers or others.


The Games MarketAccording to the research company Newzoo, in 2017 the glo-bal game market amounted to around USD 116 billion, whichis a growth of 10.7% compared to the year before. Thegrowth is particularly strong in mobile games, and geographi-cally China and Japan are growing the fastest. Newzoo fore-casts that the annual average growth (CAGR) for the globalgame market 2016–2020 will be +8.2%, with an income ofUSD 143.5 billion by 2020. Half of this income is expected tobe generated by mobile games.

In 2017, Apple launched its AR platform ARKit, and with thismajor investment indicating they are betting on a strong fu-ture for AR. Google followed with ARCore. It is now easierthan ever for developers to develop games using AugmentedReality, AR. Since Pokémon GO was launched in 2016, wehave not yet seen any major breakthrough for AR games orAR apps during 2017.

Companies within entertainment and media are today moreaware than ever that consumers spend a lot of time on their

mobiles, which provides plenty ofopportunities for marketing and in-come from characters and brands.During 2017, mobile apps were in-troduced for Stranger Things, Rick &Morty, Star Wars and many others,and we expect more formats andcharacters from TV and film to moveto the mobile game world. Withsmartphones becoming ever moreadvanced, often to a level of laptopsin terms in performance and speed,we expect more games for PCs andconsoles to be developed into mo-bile games, in particular MMORPG4-based games. Companies such asApple, Google and Huawei have in-vested heavily in machine learningto improve the performance, batterylife, camera functionality and user-friendliness of mobiles, which opensthe way for the next generation ofmobile games and apps.

The Global Games Market 2017, per device and segment with annual growth

PC gameUSD 32.3 billion+1.4 %

MobileUSD 50.4 billion+23.3 %

Total 2017USD 116 billion

+10.7% growth

Console gameUSD 33.3 billion+3.7 %

Browser-based PC gameUSD 5.2 billion+9.4 %

Downloaded PC gameUSD 27.1 billion+3.8 %

TabletUSD 11.4 billion+13.4 %

SmartphoneUSD 39.1 billion+26.6 %

28 %

23 %

4 %

29 %

29 %

43 %

34 %

10 %

Källa: ©Newzoo, Q4 2017 Update, Global Games Market Report, newzoo.com/globalgamesreport

The Global Games Market 2016–2020, forecast per segment, USD billion

Källa: ©Newzoo, Q4 2017 Update, Global Games Market Report, newzoo.com/globalgamesreport

2016 2017 2018 2019 2020

0

30

60

90

120

150

25 %

Smartphone

Tablet

Console game

Browser based PC game

Downloaded PC game

104.8

125.4134.5

23 % 22 % 22 % 21 %

5 % 4 % 4 % 3 % 3 %

31 % 29 % 27 % 26 % 26 %

10 % 10 % 10 % 10 % 10 %29 % 34 %

36 %39 %

41 %

143.5

116.0


Bublar Group AB (publ) is a Company registered with a cen-tral securities depository (CSD), and its shares are registeredelectronically by Euroclear, which also maintains the Compa-ny’s shareholder register. All transactions involving the Com-pany’s shares are done electronically through registration inthe CSD system through authorised banks and other securi-ties manages. The Company’s shares are currently traded onNGM Nordic MTF. The shares have the ISIN codeSE0010270793. Subscription warrants of series 2017/18 havethe ISIN code SE0010298075. The LEI code for the Companyis 5493007JJTJFKGX2N830.

There is only one class of shares. All shares have the samenumber of votes, which is one vote each, and the same rightto the Company's assets on liquidation. On 31 December2017, the share capital was SEK 721 741, allocated across 25,265,445 shares, each with a quota value of SEK 0.0286. All shares are fully paid up.

Subscription warrantsIn conjunction with the new share issues in 2017, a total of11,645,231 subscription warrants of series 2017/18 were is-sued. Three (3) subscription warrants of series 2017/18 areneeded to subscribe to one (1) new share at the issue priceof SEK 6.40. Provided all subscription warrants are exercised,3,881,744 new shares will be issued, which would contributeMSEK 24.8 to the Company. Given full exercise of the sub-scription options, the shares offered in the subscription war-rant programme correspond to 13.3 per cent of the sharecapital and votes in the Company.

Shareholder listThe Company currently has around 1,200 shareholders. Thelargest shareholders in Bublar as at 31 December 2017 arelisted in the table below:

Name Number Share of the of shares Company, %

Kenneth Häggmark via Kvantskum AB 2,516,310 9,96 %

Magnus Granqvist via MAGRAQ Invest AB 2,516,310 9,96 %

Need Invest AB 2,213,633 8,76 %

Försäkringsbolaget Avanza Pension 902,145 3,57 %

Per Granå 765,600 3,03 %

Axel Ljung 765,600 3,03 %

Nordnet Pensionsförsäkrings AB 708,442 2,80 %

Goodbye Kansas Entertainment Group AB 696,340 2,76 %

H Cap AB 688,617 2,73 %

Jacob Gray Invest AB 654,370 2,59 %

Other ca 1 200 owners 12,838,078 50,91 %

Total 25,265,445 100,00 %

DividendPolicy

For Swedish companies, the dividend is proposed by theBoard of Directors and decided by the General Meeting, inaccordance with the Companies Act and the Articles of Asso-ciation. Currently there is no formal dividend policy.

When considering any future dividend, the Board of Directorswill weigh in several factors, such as the development of thebusiness, operating profit and financial position, the currentand expected liquidity requirement, any expansion plans,contract-related limitations and other significant factors.

Current situation

Bublar is developing and expanding rapidly, and no dividendhas therefore ever been paid. The Board of Directors is cur-rently intending to continue to let the Company carry forwardany profit in order to fund growth and operation of the busi-ness.

General

All shares have an equal right to a share of the Company’s as-sets and profit, and the new issue shares in the upcomingOffer entail a right to share in the profit for the first time onthe record day for dividend that falls next after the new shareissue has been registered with the Swedish Companies Re-gistration Office.

The right to dividend accrues to the person registered as anowner in the shareholder register kept by Euroclear on therecord day set by the General Meeting. Dividend is normallypaid as a cash amount per share administered by Euroclear,but it may also consist of other than cash payment. There areno restrictions on or special procedures for dividend to sha-reholders domiciled outside Sweden. In the event of liquida-tion of the Company, shareholders have the right to a shareof the surplus in proportion to the number of shares held.

Shares, Share Capital and Ownership Information



Share capital developmentSince the Company was formed, the share capital has develo-ped as follows:

Price each Change to Accumulated Change to Accumulated QuotaYear Event SEK share capital share capital number of shares number of shares value

2015 Formation 1.00 50,000 50,000 500 500 100

2015 Split 2000:1 0 50,000 999,500 1,000,000 0.05

2016 New share issue 2.505 10,000 60,000 200,000 1,200,000 0.05

2016 Split 10:1 0 60,000 10,800,000 12,000,000 0.005

2016 New share issue 4.17 8,101 68,101 1,620,214 13,620,214 0.005

2017 New share issue 19,414 87,515 3,882,833 17,503,047 0.005

2017 Bonus issue 3.67 412,485 500,000 0 17,503,047 0.0286

2017 New share issue IPO 3.67 221,741 721,741 7,762,398 25,265,445 0.0286

5 Price corrected due to split 10:1 implemented

According to the Articles of Association, Bublar’s Board of Di-rectors shall consist of a minimum of three and a maximumof eight ordinary members, with a maximum of four depu-ties.

Bublar’s Board of Directors currently consists of six membersincluding the chair. The current Board Directors were electedat the Annual General Meeting on 19 June 2017. The Boardof Directors’ assignment is valid until the end of the next An-nual General Meeting planned for 24 May 2018. Board Direc-tors may be contacted via the Company’s head office atSkeppargatan 8, 114 52 Stockholm, or alternatively via emailat [email protected].

The work of the Board of Directors is governed by the Swe-dish Companies Act, the Articles of Association and the for-mal work plan adopted by Bublar’s Board of Directors. Theformal work plan stipulates the division of responsibility bet-ween the Board of Directors and the CEO. The Board of Di-rectors always makes the decision on the appointment ofand remuneration to the CEO.

The same Board of Directors has been elected for the subsi-diary Virtual Brains AB.

The Board of Directors

Staffan Eklöw, Chairman of the Board since 2017.Born 1957.

LLB and Swedish equivalent to MBA from Stockholm University. Staffan has almost 30 years’ of experience as acommercial lawyer with law firms and companies. During theperiod 1994–2000, he was the CLO at TV4 AB. Staffan has ex-perience of board work, and for many years was the Mana-ging Partner of the law firm Lindahl. Other boardappointments include Onside TV-Production AB, Medlings-Centrum Sverige AB and Lennart Nilsson Photography AB.

Holding in Bublar: 100,000 shares via Plätten Invest AB.

Peter Engdahl, ordinary member since 2017.Born 1947.

Peter is the CEO of Need Invest, which is Bublar’s third lar-gest owner. Peter has more than 30 years experience fromthe Swedish capital market in various positions including Se-nior Vice President of Svenska Handelsbankens Equity de-partment, CEO of Handelsbanken Fonder and executivemember of Oktogonen. Among his other board and invest-ment assignments, Peter is the Chairman of Gustaf & TyraSvenssons Minnesfond (Karolinska Institutet) and InvestmentManager of Sven & Lilly Lawskis Stiftelse (Swedish SupremeCourt).

Holding in Bublar: 0 shares, but represents 2,213,633 sharesowned by Need Invest AB.

Maria A. Grimaldi, ordinary member since 2017.Born 1968.

Diploma in Market Economics, and trained as Brand Strate-gist at Berghs School of Communication. Maria was formerlyCEO of ANGI – the Association of the Nordic Game Industry.She is currently the Senior Investment Manager at GoodbyeKansas Game Invest, a subsidiary within the Goodbye KansasGroup (shareholder in Bublar). Maria has board experiencefrom the digital distribution platform Ztorm AB, ISFE – Inter-active Software Federation Europe, Fishbrain and is the chairof the game studio Fall Damage and board member of the e-sport platform Esportal AB.

Holding in Bublar: 0 shares.

Per Granå, ordinary member since 2016.Chief Technical Officer (CTO), founder.Born 1973.

Per has broad competence within software development andexperience of research and development within internet in-frastructure, 3D visualisation, graphics engines and GIS (geo-graphic information systems). Per has previously workedwithin IIS-SE (The Internet Infrastructure Foundation), as CTOfor Sightline Vision AB, Cycore and Mental Images.

Holding in Bublar: 765,600 shares.

Axel Ljung, ordinary member since 2016.Head of Front End Development, founder.Born 1980.

BSc and graduate engineer in Data Technology, specialising ingame development from Kalmar University. Axel has broadexperience within game development, GIS systems and 3D.Axel was previously CTO for the visualisation companySightline Vision AB.


Magnus Granqvist, ordinary member since 2015. CEO of Bublar Group and Virtual Brains since 2015, founder.Born 1968.

Swedish equivalent to MBA from Stockholm University. Mag-nus has 20 years’ experience of sales and business develop-ment from the media, internet and content industries.Magnus was formerly Sales Director of Sandrew/WarnerBrothers cinema launches in Sweden and CEO of the filmcompany Noble Entertainment. Magnus has a backgroundwithin MTG with live games in TV, and from Cell Network,where he was the CEO and founder of the subsidiaries CellInteractive TV and the first Nordic interactive TV channel, eTV.

Holding in Bublar: 2,516,310 shares via MAGRAQ Invest AB.


Board of Directors, Senior Executives and Auditor


Senior Executives

Magnus Granqvist, Chief Executive Officer (CEO). Employed by the Company since 2015.

See description on the preceding page.

Anders Lindell, Chief Financial Officer (CFO).Born 1962.

Swedish equivalent to MBA from the Stockholm School ofEconomics. Employed by the Company since 2017. Works forStrenuus Capital and has extensive experience from the fi-nancial markets through previous positions in UBS (Frankfurtand London) and Handelsbanken.

Holding in Bublar: 60,000 shares via Strenuus International AB.

Kenneth Häggmark, Chief Innovation Officer (CINO). Employed by the Company since 2015. Born 1978.

MSc from Institute of Technology at Linköping University. One of the Company’s founders. Has previously developedreal time simulators for the Swedish defence industry, and in-teractive software for the ABBA Museum, among others.

Holding in Bublar: 2,516,310 shares via Kvantskum AB.

Per Granå, Chief Technical Officer (CTO). Employed by the Company since 2016.


Axel Ljung, Head of Front End development. Employed by the Company since 2016.


Wictor Hattenbach, Game Studio Director. Employed by the Company since 2017.Born 1984.

Specialist in designing leading innovative interactive experien-ces. Has developed games and apps over the last nine years,with experience from various business models and platformswithin game development. Has previously worked with gamedesign, app design and UX design for companies such asUbisoft, Bigpoint and Magix.

Holding in Bublar: 0 shares.

Per Storløkken, Senior Producer. Employed by the Company since 2016.Born 1975.

MSc from Gjøvik University College. Per has more than 15years’ experience of the game industry and has contributedto launches with titles such as Battlefield 1 and Mirror’s Edge.Per formerly worked as Senior Game Producer at DICE(Electronic Arts) and at Funcom.


Other information about the senior executivesNo Board Director or senior executive has any family ties withanother Board Director or senior executive in Bublar. As isevident from the above, some Board Directors and senior ex-ecutives have private interests in the Company through theirshareholdings. Board Directors and senior executives in theCompany may be directors or hold positions in other compa-nies, as well as have shareholdings in other companies, andin instances of such a company entering into business withthe Company, Board Directors or senior executives in theCompany may find themselves in a conflict of interest, whichis handled by not having the person in question involved inmanaging the matter on behalf of the Company. Over andabove what has been stated, no Board Director or senior ex-ecutive has any private interests that may be in conflict withthose of the Company.

Over and above what has been expressly stated, none of theabove Board Directors or senior executives have been invol-ved in any bankruptcy, receivership or liquidation during theirmandate period as board director, deputy board director orsenior executive in any company during the past five years.None of the above Board Directors or senior executives have,over the past five years, been found guilty in any fraud-rela-ted case or been the subject of sanctions by authorities (inc-luding approved professional organisations) authorised bylaw or regulation, or been prohibited by a court of law frombeing a member of an issuer’s administrative, managementor supervisory body, or from having a senior or comprehen-sive function at an issuer’s for at least the past five years.


Annual Financial Statements for Bublar Group AB (publ)

The Board of Directors and Chief Executive Officer herebypresent the annual financial statements for the financial year01 January 2017 to 31 December 2017.

Administration reportThe annual financial statements have been prepared in Swe-dish kronor, SEK.

In the consolidated accounts, the operations of the ParentCompany and the Subsidiary are consolidated up to and inc-luding 31 December 2017. Subsidiaries are all companies inwhich the Group has the right to draw up the company’s fi-nancial and operational strategies for the purpose of recei-ving financial benefits. The Group achieves and exercises adeciding influence by holding more than half of the votes.Companies set up for particular purposes are also consolida-ted if the Parent Company has a deciding influence, irrespec-tive of whether there is an ownership share or not. Thebalance sheet date of the subsidiary is 31 December and itapplies the Parent Company’s valuation principles.

The consolidated accounts are presented in SEK, which isalso the Parent Company’s reporting currency. Profit/loss forsubsidiaries purchased or sold during the year are reportedas from the date the purchase or sale came into force, accor-ding to what is applicable.

Amounts reported in the financial reports for the subsidiaryhave been adjusted where required in order to safeguardcorrespondence with the Group’s accounting principles.Transactions are eliminated upon consolidation according toChapter 7, Section 13 of the Annual Accounts Act. InternalGroup transactions and balance sheet items are eliminatedin their entirety on consolidation, including unrealised gainsand losses on transactions between Group companies. In theevent unrealised losses on inter-Group assets are reversedon consolidation, any write-down requirement for the under-lying asset is also tried from a Group perspective.

The business

Bublar Group AB (“Bublar”) is active in the computer gamesindustry as a game development company. The Company fo-cuses on developing location-based games and services withAugmented Reality (“AR”). AR is a technology for enhancingthe real world in real time, with layers of digital objects andinformation. Currently, screens in mobile Telephones can beused to present Augmented Reality in games and other ser-vices.

During the financial year, the Company has constructed asoftware platform which positions Bublar within the rapidtechnological development for mobile games and applica-tions, where position data and real-time graphics are put to-gether into new commercial applications.

The Company’s registered office is in Stockholm.

Significant events during the financial yearExtraordinary General Meeting in April 2017 makes a decision on a new share issue

An Extraordinary General Meeting of Bublar Group AB washeld on 25 April. The Meeting decided to authorise a newissue of shares and subscription warrants with no priorityright for existing shareholders.

The new share issue contributes around MSEK 14.2 to Bublar

Bublar implemented a targeted new share issue of 3,882,833units, which contributed around MSEK 14.2 before issue ex-penses during April 2017. A unit consisted of one (1) shareand one (1) subscription warrant of series 2017/18. Three (3)share warrants gives the right to subscribe to one (1) newshare at SEK 6.40 during the subscription period 1 to 30 De-cember 2018. The subscription price of the offer was SEK3.67 per unit.

The Annual General Meeting in June 2017 makes a number of decisions

On 19 June, the Annual General Meeting of Bublar Group ABwas held, at which a number of decisions were made overand above what is incumbent on the Annual General Meetingunder the Companies Act (2005:551) or the Articles of Asso-ciation. Some of the decisions made by the Annual GeneralMeeting related to changes to company category, the Articlesof Association, a bonus share issue and authorisation of anew share issue.

New share issue contributes around MSEK 28.5 to Bublar

On 5 September, the Board of Directors decided, supportedby the authorisation from the Extraordinary General Meetingon 19 June 2017, to implement a new share issue via an offerto the general public and institutional investors in Sweden tosubscribe to shares in the Company for around MSEK 23.5.As the new share issue was oversubscribed, the option to in-crease the offer via a targeted new share issue for MSEK 5.0was exercised, which in total contributes MSEK 28.5 to theCompany before issue expenses.

The total number of shares in Bublar increased by 7,762,398shares to 25,265,445 shares and added around 1,200 newshareholders to the Company. A unit consisted of one (1)share and one (1) subscription warrant of series 2017/18.Three (3) share warrants gives the right to subscribe to one(1) new share at SEK 6.40 during the subscription period 1 to30 December 2018. The subscription price of the offer wasSEK 3.67 per unit.

Corporate registration number 559019-7462


Bublar’s shares and subscription warrants are listed on NGM Nordic MTF

Bublar Group AB (publ) was listed on NGM Nordic MTF, withthe first trading day being 6 November 2017. The shares aretraded under the abbreviation BUBL MTF, and the subscrip-tion options under the abbreviation BUBL TO1. Ahead of thelisting, Bublar implemented a share offer to the general pu-blic and institutional investors. As the new share issue wasoversubscribed, the option to increase the offer was exerci-sed. A total of MSEK 28.5 was contributed to the Companybefore issue expenses. The subscription price of the offerwas SEK 3.67 per unit.

Bublar’s first product Placie is launched as a public beta-version

On 22 November, Bublar Group AB (publ) (“Bublar”) launchedthe mobile app Placie, which in a playful way combines Aug-mented Reality (“AR”) with location-based technology. UsingPlacie, users can create virtual objects from their photog-raphs and place these anywhere in the world.

Placie is a social app that combines AR and location-basedtechnology so that anyone can create and place virtual ob-jects and images in real places. Users can interact with eachother via the app’s own map system, and create their owncontent with the mobile phone camera in a playful form ofAR. The app is available in a public beta-version and can beinstalled via App Store or Google Play.

Capital needsIn the memorandum published in conjunction with the invita-tion to subscribe to units in Bublar Group in September2017, two financial goals were expressed: 1) to start genera-ting income as from H1 2018, and 2) to achieve positive cashflows by the end of H1 2019. The Board of Directors makesthe assessment that the existing working capital is insuffici-ent without the Company being able to generate income du-ring the next 12 months. If the income does not developsufficiently quickly in the short term, the Company thereforeneeds to consider measures, including raising more capital,which the Board of Directors assesses is possible under nor-mal market conditions.

RisksBublar Group is currently in a development phase for its pro-ducts and is developing a number of projects based on itsown technical platform. There is a risk that the projects Bub-lar has invested in will be received with little interest by endcustomers, and that the expected income flows will not begenerated, with a consequent negative effect on profit and

cash flows. Capitalised development costs may also need tobe impaired. If a commercial launch of a project results inlower income than expected, this may have a significant neg-ative effect on the Company’s business, profit and financialposition.

Delays in planned and ongoing game projects may have anegative effect on cash flows, income and operating margins.If one or more of the Company’s developed games is de-layed, this may have a significant negative effect on the Com-pany’s business, profit and financial position.

The mobile game market is characterised by rapid technolo-gical and

innovative development and strong competition. Several ofBublar’s current and future competitors may have competi-tive advantages in the form of longer history, a more establis-hed brand and greater financial, technical and marketingresources.

The Group consists of a small organisation, and must there-fore be considered as very dependant on a few key persons.Furthermore, the partners the Company has chosen to colla-borate with may be forced to make other prioritisations thanthose of the Company, with consequent risks of delays toand completion of projects.

Important events after the end of the periodLaunch of a new AR game – Glowing Gloves – during second quarter of 2018

In conjunction with the publication of the press release ofunaudited annual earnings figures for 2017 on 16 February2018, Bublar announced the development of a game withplanned release of the beta-version during the second quar-ter of 2018, based on the latest AR technology offered byApple’s ARKit. The game combines AR with motion tracking,which will enable new game functions to be presented in aunique way, based on the latest smartphone technology.Bublar has been inviting test users since the end of March.


Annual financial statements for Bublar Group AB (publ), corporate registration number 559019-7462, cont.

Changes in equity

Reserve for Other Other equity Unregistered development contributed incl. profit/loss Total

Group, KSEK Share capital share capital expenses capital for the year equity

Opening balance at 01 Jan 2017 60 8 – 13,512 -6,197 7,383

New share issue 250 -8 – 35,688 – 35,930

Bonus issue 412 – – -412 – 0

Capitalised development expenses for the year – – 6,388 – -6,388 0

Profit/loss for the year – – – – -10,933 -10,933

Closing balance 722 0 6,388 48,788 -23,518 32,380

Reserve for Share Profit/loss brought Unregistered development premium forward, incl. profit/loss Total

Parent Company, KSEK Share capital share capital expenses reserve for the year equity

Opening balance at 01 Jan 2017 60 8 – 13,512 -2,999 10,581

New share issue 250 -8 – 35,688 – 35,930

Bonus issue 412 – – -412 – 0

Capitalised development expenses for the year – – 12,412 – -12,412 0

Profit/loss for the year – – – – -6,045 -6,045

Rounding off difference – – – – -1 -1

Closing balance 722 0 12,412 48,788 -21,457 40,465

Multi-year comparison Group Parent Company2017-12-31 2016-12-31 2017-12-31 2016-12-31

Net sales, KSEK 0 0 0 0

Profit/loss after financial items, KSEK -13,907 -7,919 -8,731 -4,058

Balance sheet total, KSEK 39,577 13,449 47,221 16,115

Number of employees 16 10 – –

Equity ratio, % 82 % 55 % 86 % 66 %

Appropriation of earnings

Proposed appropriation of the Company's profit, SEK

Share premium reserve 48,787,806

Accumulated loss from previous years -2,999,153

Capitalised development expenses for the year -12,412,000

Loss for the year -6,045,200

27,331,454

The Board of Directors proposes as follows:

carried forward to next year 27,331,454

27,331,454

As regards the Company's loss and position in general, refe-rence is made to the following income statements and ba-lance sheets and supplementary information.


INCOME STATEMENTS

Group Parent company1 Jan 2017 3 Jul 2015 1 Jan 2017 3 Jul 2015

KSEK Note 31 Dec 2017 31 dec 2016 31 Dec 2017 31 dec 2016

Operating income, etc.

Net sales – – – –

Work performed by the company for its own use and capitalised 6,388 6,161 12,813 10,262

Other operating income 20 – 20 –

6,408 6,161 12,833 10,262

Operating expenses

Raw materials and consumables 1 – – -17,083 -12,583

Other external expenses 2 -5,099 -3,667 -3,138 -1,605

Personnel expenses 3 -14,678 -10,273 -646 -8

Earnings before interest, taxes, depreciation and amortisation (EBITDA) -13,369 -7,779 -8,034 -3,934

Depreciation and impairment of tangible and intangible fixed assets -375 -50 -543 -33

Earnings before income and tax (EBIT) -13,744 -7,829 -8,576 -3,967

Profit from financial items

Interest income and similar income statement items – – – –

Interest expenses and similar income statement items 4 -163 -90 -155 -91

Profit/loss after financial items -13,907 -7,919 -8,731 -4,058

Appropriations

Group contributions received – – 1,012 226

Tax -36 – – –

Deferred tax 5 3,010 1,723 1,674 833

Net profit/loss for the year -10,933 -6,197 -6,045 -2,999


BALANCE SHEETS

Group Parent companyKSEK Note 31 Dec 2017 31 Dec 2016 31 Dec 2017 31 Dec 2016

ASSETS

Fixed assets

Intangible fixed assets 6

Capitalised expenses for research, etc. 12,340 6,161 22,674 10,262

Tangible fixed assets 7

Equipment, tools, fixtures and fittings 612 365 471 271

Financial fixed assets 5, 8

Participations in Group companies 0 0 50 50

Deferred tax receivables 4,744 1,723 2,506 833

Total fixed assets 17,697 8,249 25,701 11,416

Current assets

Current receivables

Other receivables 985 648 901 385

Prepaid expenses 9 299 74 69 32

Cash and bank balances

Cash and bank balances 20,596 4,478 20,550 4,282

Total current assets 21,880 5,200 21,520 4,699

TOTAL ASSETS 39,577 13,449 47,221 16,115



Group Parent companyKSEK Note 31 Dec 2017 31 Dec 2016 31 Dec 2017 31 Dec 2016

EQUITY AND LIABILITIES

Equity 10

Restricted equity

Share capital 722 60 722 60

Unregistered share capital – 8 – 8

Reserve for development expenditure 6,388 – 12,412 –

Total restricted equity 7,110 68 13,134 68

Non-restricted equity

Other capital contributed/Share premium reserve 48,788 13,512 48,788 13,512

Other equity including profit/loss for the year -23,518 -6,197 – –

Profit/loss carried forward – – -15,412 –

Profit/loss for the year – – -6,045 -2,999

Total unrestricted equity 25,270 7,315 27,331 10,513

Total equity 32,380 7,383 40,465 10,581

Non-current liabilities

Liabilities to credit institutions 11 1,000 2,500 1,000 2,500

Total non-current liabilities 1,000 2,500 1,000 2,500

Current liabilities

Trade accounts payable 1,181 1,260 703 362

Liabilities to Group companies 12 – – 2,832 2,122

Other liabilities 1,190 1,201 – –

Current liabilities to credit institutions 11 1,500 500 1,500 500

Accrued expenses and prepaid income 13 2,326 605 721 50

Total current liabilities 6,197 3,566 5,756 3,034

TOTAL EQUITY AND LIABILITIES 39,577 13,449 47,221 16,115



CASH FLOW STATEMENTS

Group Parent company1 Jan 2017 3 Jul 2015 1 Jan 2017 3 Jul 2015

KSEK 31 Dec 2017 31 dec 2016 31 Dec 2017 31 dec 2016

Operating activities

Operating income -13,744 -7,829 -8,576 -3,967

Adjustment for items not included in cash flow 375 50 543 33

Interest received, etc. 0 0 0 0

Interest paid -163 -90 -155 -91

Income tax paid -36 0 0 0

Cash flow from operating activities before changes to working capital -13,568 -7,869 -8,188 -4,025

Cash flow from changes to working capital

Reduction (+)/increase (-) in trade accounts receivable -573 -723 459 -190

Reduction (-)/increase (+) in trade accounts payable -79 1,260 341 362

Reduction (-)/increase (+) in current liabilities 1,710 1,806 1,381 2,172

Cash flow from operating activities -12,510 -5,526 -6,007 -1,681

Investing activities

Acquisition of equipment, tools, fixtures and fittings -413 -415 -342 -304

Acquisition of Group companies 0 0 0 -50

Capitalised expenditure on product development -6,388 -6,161 -12,813 -10,262

Cash flow from investing activities -6,801 -6,576 -13,155 -10,616

Financing activities

Company formation 0 50 0 50

Shareholder contributions received 0 1,779 0 1,779

New share issue* 35,929 11,751 35,929 11,751

Borrowings 3,000 3,000

Repayment of borrowings -500 0 -500 0

Cash flow from financing activities 35,429 16,580 35,429 16,580

Cash flow for the period 16,118 4,478 16,267 4,283

Cash and cash equivalents at start of period 4,478 0 4,283 0

Cash and cash equivalents at end of period 20,596 4,478 20,550 4,283

* In 2017 three new share issues were carried out. The liquidity received was a total of approx. SEK 42.8 million. The amount stated is after issue costs totaling approx. 6.8 MSEK


NOTES TO THE ACCOUNTS

Accounting and valuation principles

Accounting principles

The financial reports of the Group and the Parent companyhave been prepared in accordance with the Annual AccountsAct and BRNAR 2012:1 (K3). The principles applied are un-changed compared to last year. The most important accoun-ting and valuation principles used in the preparation of thefinancial reports are summarised below.

Consolidated accounts

In the consolidated accounts, the operations of the ParentCompany and all the Subsidiaries are consolidated up to andincluding the year end of the Parent Company. Subsidiariesare all companies in which the Group has the right to drawup the company’s financial and operational strategies for thepurpose of receiving financial benefits. The Group achievesand exercises a deciding influence by holding more than halfof the votes. Companies set up for particular purposes arealso consolidated if the Parent Company has a deciding influ-ence, irrespective of whether there is an ownership share ornot. All subsidiaries have the same balance sheet date andapply the Parent Company’s valuation principles. The consoli-dated accounts are presented in SEK, which is also the ParentCompany’s reporting currency. Profit/loss for subsidiariespurchased or sold during the year are reported as from thedate the purchase or sale came into force, according to whatis applicable. Internal Group transactions and balance sheetitems are eliminated in their entirety on consolidation.

Income taxes

The reporting of income tax includes current tax and defer-red tax. For items stated in the income statement, related taxeffects are also stated in the income statement. The tax ef-fects of items recognised directly in equity are also recogni-sed in equity. Deferred tax is calculated on all temporarydifferences. A temporary difference exists when the reportedvalue of an asset or liability differs from the tax value. Defer-red tax receivables regarding loss carry forwards or other fu-ture tax deductions are recognised to the extent it is likelythat the deduction can be offset against future tax surpluses.

Cash flow statements

Cash flow statements have been prepared in accordancewith Chapter 7 of BRNAR 2012:1 (K3) using the indirect met-hod.

Interest income

Interest income is reported as it is earned. The calculation ofinterest income is done on the basis of the return on the un-derlying asset according to the effective interest method.

Liquid assets

Liquid assets consist of cash and cash equivalents and un-appropriated holdings with banks and other credit institu-tions.

Payments to employees

Short-term payments

Short-term payments to employees, such as salaries, holidaypay and bonus, are payments to employees that become duewithin 12 months from the balance sheet date during theyear the employee has earned the pay. Short-term paymentsare valued at the undiscounted amount the Company is ex-pected to pay as a result of the unutilised right.

Payments after termination of employment

The Company provides payments after termination of emp-loyment in the form of pensions through various definedcontribution schemes.

Defined-contribution pension schemes

The Company pays fixed fees to other legal entities relatingto several government schemes and insurance schemes forindividual employees. The Company has no legal or informalobligations to pay further fees over and above payment ofthe fixed fee, which is reported as a cost during the period inwhich the service in question is performed.

Parent Company valuation principles – alternative rules inlegal entities

Participations in subsidiaries

Participations in subsidiaries are valued at acquisition value,possibly less impairment. Dividends from subsidiaries are re-cognised as revenue.

Group contributions

All Group contributions paid or received are recognised asappropriations.


Estimates and assessments

When financial reports are drawn up, the Board of Directorsand the CEO must make certain estimates, assessments andassumptions, according to the accounting and valuation prin-ciples applied, which impact on the reporting and valuationof assets, provisions, liabilities, income and expenses. Theareas where such estimates and assessments may be ofgreat importance to the Group, and which can thus affect theincome statements and balance sheets in the future, aredescribed below.

An assessment is carried out at each balance sheet date ofwhether there is any indication of a need for impairment ofany of the financial fixed assets. Impairment takes place of ifthe decrease in value is considered to be permanent, and istried individually.

Important assessments

The following are important assessments that have beenmade during implementation of the Group’s accounting prin-ciples, and which have the most significant effect on the fi-nancial reports.

Reporting on contract assignments in progress

Determining when the income from contract assignments inprogress shall be reported requires understanding of, for ex-ample, how the work is progressing and historical experienceof similar work. Reporting of income from contract assign-ments also requires significant assessments when determi-ning milestones, actual work produced and estimated costsfor completing the work.

Reporting of deferred tax receivables

The assessment of the extent to which deferred tax recei-vables may be reported is based on an assessment of theprobability of the Group’s future taxable income againstwhich deferred tax receivables can be utilised. Significantconsideration is also required in the assessment of the effectof certain legal and financial limitations or uncertainties in dif-ferent jurisdictions.

Assessment of doubtful receivables

Trade accounts receivable are valued at the cash flow that isexpected to be received by the Company. A detailed and ob-jective review of all outstanding amounts on the balancesheet date is therefore carried out.

Valuation principles

Receivables

Receivables have been recognised at the amount expectedto be received.

Other assets, provisions and liabilities

Other assets, provisions and liabilities have been entered atacquisition cost, unless otherwise stated below.

Income recognition

Income is recognised at that fair value of what has been ob-tained, or is expected to be obtained. This means that theCompany reports income at the nominal value (value on theinvoice) if the Company receives the payment in liquid fundsdirectly on delivery. Deductions are made for any discountsgiven.

Tangible fixed assets

Tangible fixed assets are recognised at their acquisition costnet of accumulated depreciation and any impairment. Theassets are subject to linear depreciation over the assets' use-ful life, except land, which is not impaired. The useful life is re-viewed at each balance sheet date. The following useful livesare applied:

Number of years

Equipment, tools, fixtures and fittings 5

Capitalised expenditure on development and similar work

Capitalised expenditure on development and similar work isrecognised at its acquisition value less accumulated depre-ciation according to plan and any impairment.

Expenses that are directly attributable to the developmentphase of a project are reported as an intangible fixed asset,provided they fulfil the following requirements:

It is technically possible to complete the asset so that itcan be used or sold.

The Company intends to complete the asset and use orsell it.

The Company has the prerequisites to use or sell theasset.

It is probable that the asset will generate future financialbenefits.

There are sufficient resources to complete the asset andto use or sell it.

The development expense can be measured in a reliableway.



Development expenses that do not fulfil these criteria for ca-pitalisation are written off as they arise. The acquisition valueof expenses brought forward include the expenses for theproduction of the asset. Directly attributable expenses inc-lude personnel expenses arising from the work on develop-ment, together with a suitable proportion of indirect costs.Depreciation of project development in progress starts at thetime of completion.

The following useful lives are applied:

Number of years

Capitalised expenditure for development work and similar projects 5

Income taxes

Current tax is the income tax for the current financial year re-lating to the taxable profit for the year, as well as the part ofthe income tax for previous financial years that has not yetbeen reported.

Current tax is valued at the probable amount according tothe tax rates and tax rules that apply on the balance sheetdate.

Consolidated accounts

Subsidiaries

Subsidiaries are companies in which the parent company di-rectly or indirectly holds more than 50% of the number ofvotes or otherwise has a controlling interest. A controlling in-terest entails the right to formulate another company’s finan-cial and operational strategies with the purpose of obtainingfinancial advantages. The reporting of company acquisitionsis based on the unit principle. This means that the acquisitionanalysis is drawn up at the moment when the acquirer obta-ins a controlling interest. As from that time, the acquirer andthe acquired unit are regarded as an accounting unit. The ap-plication of the unit view also means that all assets (includinggoodwill) and liabilities and income and expenses are inclu-ded in full, even for partly-owned subsidiaries. The acquisi-tion value of subsidiaries is calculated as the sum of the fairvalue at the date of acquisition for assets acquired, with anaddition of liabilities arising and taken over, as well as equityinstruments issued, expenses directly attributable to thecompany acquisition and any additional purchase price. Thefair value is established in the acquisition analysis, with someexceptions, at the date of acquisition of the acquired identifi-able assets and liabilities taken over as well as minority sha-reholdings. Minority shareholdings are valued at fair value atthe date of acquisition. The acquired company's income and

expenses, identifiable assets and liabilities and any goodwillor negative goodwill arising are included in the consolidatedfinancial statements as from the time of acquisition.


NOTES ON INDIVIDUAL ITEMS

Note 1 Purchases and sales within the Group

Parent company2017 2015/2016

Percentage of sales relating to Group companies 0% 0%Percentage of purchases relating to Group companies 84% 88%

Note 2 Payments to auditors

Group Parent companyKSEK 2017 2015/2016 2017 2015/2016

Expensed payments amount to:

Grant Thornton- audit assignment 84 50 84 50- audit work over and above audit assignment 10 10- tax advice 4 4- other services 36 36

Total 124 60 124 60

Note 3 Personnel

The Parent Company has had no employees. No salaries have been paid. Board Director fees have been expensed for the pe-riod between the General Meeting and the end of the period.

Group Parent company2017 2015/2016 2017 2015/2016

Average number of employees

The average number of employees is based on the number of working hours paid for by the Company relating to normal working hours.

The average number of employees was 16 10 – –- of which female 4 2 – –- of which men 12 8 – –

Salaries, payment, etc., KSEK

Salaries and payments 10,174 6,431 450 0Pension expenses 1,232 1,195 0 0Social security expenses 2,788 2,045 126 0Other personnel expenses 484 603 70 8

Total 14,678 10,273 646 8



Note 3 Personnel, cont.

Costs reported as payments to employees are divided up as follows: Group Parent company

KSEK 2017 2015/2016 2017 2015/2016

Salaries – Board of Directors and CEO 1,074 908 450 0Salaries – other employees 9,100 5,523 0 0

Total salaries and payments 10,174 6,431 450 0

Pensions – Board of Directors and CEO 169 202 0 0Pensions – other employees 1,063 992 0 0Other social security contributions 2,788 2,045 126 0Other personnel expenses 484 603 70 8

Total social security contributions 4,504 3,842 196 8

Total personnel expenses 14,678 10,273 646 8

The Group has entered an agreement with the CEO, entailing that the CEO on termination by the Company will receive seve-rance pay corresponding to six monthly salary payments. The CEO is entitled to all the employment benefits during the noticeperiod, including agreed pension contributions.

Note 4 Interest expenses and similar profit/loss items


Exchange rate losses on receivables and liabilities 2 – 2 –Security and mortgage fees – 30 – 30Other interest expenses 161 61 153 61

Total 163 91 155 91

Note 5 Deferred tax


Deferred tax 4,744 1,723 2,506 833

Reconciliation of effective taxEarnings before tax -13,907 -7,919 -7,719 -3,832Tax expense, 22.00% -3,060 -1,742 -1,698 -843

Tax effect of:Non-deductible expenses -223 -84 -111 -10Non-taxable income 0 0 0 0Loss carry forward arising this year -3,010 -1,734 -1,673 -833Change in deferred tax 3,010 1,734 1,673 833

Total 4,744 1,734 2,506 833


Note 6 Development work and similar work brought forward


Opening accumulated acquisition values 6,161 0 10,262 0Purchases 6,388 6,161 12,813 10,262

Closing accumulated acquisition values 12,549 6,161 23,075 10,262

Depreciation for the year -209 0 -401 0

Closing accumulated depreciation -209 0 -401 0

Reported value 12,340 6,161 22,674 10,262

Note 7 Equipment, tools, fixtures and fittings


Opening acquisition values 415 0 304 0Purchases 413 415 342 304Sales/disposals 0 0 0 0

Closing accumulated acquisition values 828 415 646 304

Opening depreciation -50 0 -33 0Depreciation for the year -166 -50 -142 -33

Closing accumulated depreciation -216 -50 -175 -33

Closing reported value 612 365 471 271

Note 8 Participations in Group companies

31 Dec 2017 31 Dec 2016Equity Reported Reported

Company Corporate ID number Registered office Number share % value value

Virtual Brains AB 559019-7298 Stockholm 500 100,00% 50 50

50 50

Virtual Brains AB

Opening accumulated acquisition values 50Purchases 0

Closing accumulated acquisition values 50

Closing reported value 50


Note 9 Prepaid expenses and accrued income


Accrued income/prepaid expenses 259 25 50 –Prepaid insurance 19 17 19 12Other items 20 32 – 20

Reported value 299 74 69 32

Note 10 Information on share capital

Number of Quota valueshares per share

Amount/value at the start of the year 12,000,000New share issue 13,265,445

Amount/value at the end of the year 25,265,445 0,029

Note 11 Liabilities to credit institutions


Almi loan, amortisation within 2 to 5 years 1,000 2,500 1,000 2,500

Almi loan, amortisation within 1 year 1,500 500 1,500 500

Note 12 Liabilities to Group companies


Opening balance – – 2,122 0Changes during the period – – 710 2,122

Closing balance – – 2,832 2,122

Note 13 Accrued expenses and prepaid income


Personnel-related expenses 1,408 511 526 0Interest – – – –Other items 918 94 195 50

Reported value 2,326 605 721 50


Note 14 Definitions of key ratios

Equity/assets ratio Adjusted equity as a percentage of the balance sheet total

Return on equity Profit/loss after financial items as a percentage of average adjusted equity

Return on total capital Operating profit/loss plus financial income as a percentage of average balance sheet total

Quick ratio Current assets excluding inventory as a percentage of current liabilities

Note 15 Pledged assets and contingent liabilities

Pledges and comparable securities given for own liabilities and for obligations reported as provisions.


Blocked funds 150 150 150 150Floating charges 3,000 3,000 3,000 3,000

Note 16 Contingent liabilities

In the view of the Board of Directors, the Group and the Parent Company have no contingent liabilities.




Stockholm, 02 May 2018

Staffan Eklöw Peter Engdahl Maria A. GrimaldiChairman

Per Granå Axel Ljung Magnus GranqvistChief Executive Officer

My auditor's report was presented on 03 May 2018

Carl NiringAuthorised Public Accountant

Report on the annual accounts and consolidated accounts

Opinions

I have audited the annual accounts and consolidated ac-counts of Bublar Group AB (Publ) for the year 2017. The an-nual accounts and consolidated accounts of the companyare included on pages 16-31 in this document.

In my opinion, the annual accounts and consolidated ac-counts have been prepared in accordance with the AnnualAccounts Act and present fairly, in all material respects, the fi-nancial position of parent company and the group as of 31December 2017 and their financial performance for the yearthen ended in accordance with the Annual Accounts Act. Thestatutory administration report is consistent with the otherparts of the annual accounts and consolidated accounts.

I therefore recommend that the general meeting of sharehol-ders adopts the income statement and balance sheet for theparent company and the group.

Basis for opinions

I conducted my audit in accordance with International Stan-dards on Auditing (ISA) and generally accepted auditing stan-dards in Sweden. My responsibilities under those standardsare further described in the "Auditor’s Responsibilities" sec-tion. I am independent of the parent company and the groupin accordance with professional ethics for accountants inSweden and have otherwise fulfilled my ethical responsibili-ties in accordance with these requirements.

I believe that the audit evidence I have obtained is sufficientand appropriate to provide a basis for my opinions.

Significant uncertainty factor relating to the assumption of continued operation

Without impacting on my opinions, I would like to draw theattention to the boards wording in the administration reportunder the heading "Capital Needs", which states that theCompany is dependent on further capital contribution during2018 to safeguard the continuation as a going concern

Responsibilities of the Board of Directors and the Managing Director

The Board of Directors and the Managing Director are re-sponsible for the preparation of the annual accounts andconsolidated accounts and that they give a fair presentationin accordance with the Annual Accounts Act. The board of Di-rectors and the Managing Director are also responsible forsuch internal control as they determine is necessary toenable the preparation of annual accounts and consolidatedaccounts that are free from material misstatement, whetherdue to fraud or error.

In preparing the annual accounts and consolidated accounts,the Board of Directors and the Managing Director are re-sponsible for the assessment of the company’s and thegroup’s ability to continue as a going concern. They disclose,as applicable, matters related to going concern and using the

going concern basis of accounting. The going concern basisof accounting is however not applied if the Board of Directorsand the Managing Director intends to liquidate the company,to cease operations, or has no realistic alternative but to doso.

Auditor's responsibility

My objectives are to obtain reasonable assurance aboutwhether the annual accounts and consolidated accounts as awhole are free from material misstatement, whether due tofraud or error, and to issue an auditor’s report that includesmy opinions. Reasonable assurance is a high level of assu-rance, but is not a guarantee that an audit conducted in ac-cordance with ISAs and generally accepted auditingstandards in Sweden will always detect a material misstate-ment when it exists. Misstatements can arise from fraud orerror and are considered material if, individually or in the ag-gregate, they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these an-nual accounts and consolidated accounts.

As part of an audit in accordance with ISAs, I exercise profes-sional judgment and maintain professional scepticismthroughout the audit. I also:

Identify and assess the risks of material misstatement ofthe annual accounts and consolidated accounts, whetherdue to fraud or error, design and perform audit procedu-res responsive to those risks, and obtain audit evidencethat is sufficient and appropriate to provide a basis formy opinions. The risk of not detecting a material missta-tement resulting from fraud is higher than for one resul-ting from error, as fraud may involve collusion, forgery,intentional omissions, misrepresentations, or the over-ride of internal control.Obtain an understanding of the company’s internal con-trol relevant to my audit in order to design audit procedu-res that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effective-ness of the company’s internal control. Evaluate the appropriateness of accounting policies usedand the reasonableness of accounting estimates and re-lated disclosures made by the Board of Directors and theManaging Director.Conclude on the appropriateness of the Board of Direc-tors’ and the Managing Director’s use of the going con-cern basis of accounting in preparing the annualaccounts and consolidated accounts. I also draw aconclusion, based on the audit evidence obtained, as towhether any material uncertainty exists related to eventsor conditions that may cast significant doubt on the com-pany’s and the group’s ability to continue as a going con-cern. If I conclude that a material uncertainty exists, I amrequired to draw attention in my auditor’s report to therelated disclosures in the annual accounts and consolida-ted accounts or, if such disclosures are inadequate, tomodify my opinion about the annual accounts and con-solidated accounts. My conclusions are based on theaudit evidence obtained up to the date of my auditor’s re-port. However, future events or conditions may cause acompany and a group to cease to continue as a goingconcern.


Auditor's ReportTo the general meeting of the shareholders of Bublar Group AB (publ), corporate identity number 559019-7462

Evaluate the overall presentation, structure and contentof the annual accounts and consolidated accounts, inclu-ding the disclosures, and whether the annual accountsand consolidated accounts represent the underlyingtransactions and events in a manner that achieves fairpresentation.Obtain sufficient and appropriate audit evidence regar-ding the financial information of the entities or businessactivities within the group to express an opinion on theconsolidated accounts. I am responsible for the direction,supervision and performance of the group audit. I remainsolely responsible for my opinions.

I must inform the Board of Directors of, among other mat-ters, the planned scope and timing of the audit. I must alsoinform of significant audit findings during my audit, includingany significant deficiencies in internal control that I identified.

Report on other legal and regulatory requirements

Opinions

In addition to my audit of the annual accounts and consolida-ted accounts, I have also audited the administration of theBoard of Directors and the Managing Director of BublarGroup AB (Publ) for the year 2017 and the proposed app-ropriations of the company’s profit or loss.

I recommend to the general meeting of shareholders thatthe profit be appropriated in accordance with the proposal inthe statutory administration report and that the members ofthe Board of Directors and the Managing Director be dischar-ged from liability for the financial year.

Basis for opinions

I conducted the audit in accordance with generally acceptedauditing standards in Sweden. My responsibilities underthose standards are further described in the "Auditor’s Re-sponsibilities" section. I am independent of the parent com-pany and the group in accordance with professional ethicsfor accountants in Sweden and have otherwise fulfilled myethical responsibilities in accordance with these require-ments.

I believe that the audit evidence I have obtained is sufficientand appropriate to provide a basis for my opinions.

Responsibilities of the Board of Directors and the Managing Director

The Board of Directors is responsible for the proposal forappropriations of the company’s profit or loss. At the propo-sal of a dividend, this includes an assessment of whether thedividend is justifiable considering the requirements which thecompany’s and the group’s type of operations, size and risksplace on the size of the parent company’s and the group’sequity, consolidation requirements, liquidity and position ingeneral.

The Board of Directors is responsible for the company’s orga-nization and the administration of the company’s affairs. This

includes among other things continuous assessment of thecompany’s and the group’s financial situation and ensuringthat the company’s organization is designed so that the ac-counting, management of assets and the company’s financialaffairs otherwise are controlled in a reassuring manner. TheManaging Director shall manage the ongoing administrationaccording to the Board of Directors’ guidelines and instruc-tions and among other matters take measures that are ne-cessary to fulfill the company’s accounting in accordance withlaw and handle the management of assets in a reassuringmanner.

Auditor's responsibility

My objective concerning the audit of the administration, andthereby my opinion about discharge from liability, is to obtainaudit evidence to assess with a reasonable degree of assu-rance whether any member of the Board of Directors or theManaging Director in any material respect:

has undertaken any action or been guilty of any omissionwhich can give rise to liability to the company, orin any other way has acted in contravention of the Com-panies Act, the Annual Accounts Act or the Articles of As-sociation.

My objective concerning the audit of the proposed approp-riations of the company’s profit or loss, and thereby my opi-nion about this, is to assess with reasonable degree ofassurance whether the proposal is in accordance with theCompanies Act.

Reasonable assurance is a high level of assurance, but is nota guarantee that an audit conducted in accordance with ge-nerally accepted auditing standards in Sweden will always de-tect actions or omissions that can give rise to liability to thecompany, or that the proposed appropriations of the compa-ny’s profit or loss are not in accordance with the CompaniesAct.

As part of an audit in accordance with generally accepted au-diting standards in Sweden, I exercise professional judgmentand maintain professional scepticism throughout the audit.The examination of the administration and the proposedappropriations of the company’s profit or loss is based pri-marily on the audit of the accounts. Additional audit procedu-res performed are based on my professional judgment withstarting point in risk and materiality. This means that I focusthe examination on such actions, areas and relationships thatare material for the operations and where deviations and vio-lations would have particular importance for the company’ssituation. I examine and test decisions undertaken, supportfor decisions, actions taken and other circumstances that arerelevant to my opinion concerning discharge from liability. Asa basis for my opinion on the Board of Directors’ proposedappropriations of the company’s profit or loss I examinedwhether the proposal is in accordance with the CompaniesAct.

Stockholm 3 May 2018

Carl NiringAuthorised Public Accountant


Bublar Group AB (publ)

Skeppargatan 8114 52 Stockholm, SwedenTelefon: +46 (0)8 559 251 20www.bublar.com

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