Invitation to acquire shares in Tobii AB (publ) GLOBAL COORDINATOR AND JOINT BOOKRUNNER JOINT BOOKRUNNER

Transcription

1 Invitation to acquire shares in Tobii AB (publ) GLOBAL COORDINATOR AND JOINT BOOKRUNNER JOINT BOOKRUNNER

2 IMPORTANT INFORMATION TO INVESTORS The offering circular (the Offering Circular ) has been prepared in connection with the offering of shares in Tobii AB (publ) (a Swedish public limited liability company) to the public in Sweden and institutional investors and a listing of shares on Nasdaq Stockholm (the Offering ). In the Offering Circular, Tobii, the Company or the Group refers to Tobii AB (publ), the group in which Tobii AB (publ) is the parent company or a subsidiary of the group, as the context may indicate. The Joint Bookrunners refer to Carnegie Investment Bank AB (publ) ( Carnegie ) and ABG Sundal Collier AB ( ABG Sundal Collier ). See section Definitions for the definitions of these and other terms in the Offering Circular. The figures included in the Offering Circular have, in certain cases, been rounded off and, consequently, the tables included in the Offering Circular do not necessarily add up. All financial amounts are in Swedish kronor ( SEK ), unless indicated otherwise. Except as expressly stated herein, no financial information in the Offering Circular has been audited or reviewed by the Company s auditors. Financial information relating to the Company in the Offering Circular that is not part of the information audited or reviewed by the Company s auditor as outlined herein originates from the Company s internal accounting and reporting systems. The Offering is not directed to the general public in any country other than Sweden. Nor is the Offering directed to such persons whose participation requires additional offering circulars, registrations or measures other than those prescribed by Swedish law. No measures have been or will be taken in any other jurisdiction than Sweden, that would allow any offer of the shares to the public, or allow holding and distribution of the Offering Circular or any other documents pertaining to the Company or shares in such jurisdiction. Applications to acquire shares that violate such rules may be deemed invalid. Persons into whose possession the Offering Circular comes are required by the Company and the Joint Bookrunners to inform themselves about and to observe such restrictions. Neither the Company nor either of the Joint Bookrunners accepts any legal responsibility for any violation by any person, whether or not a prospective investor, of any such restrictions. The shares in the Offering have not been reviewed by any U.S. federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of the Offering Circular. Any representation to the contrary is a criminal offence in the United States. The shares in the Offering have not been and will not be registered under the U.S. Securities Act of 1933, as amended, (the Securities Act ) or under any U.S. state securities laws and are being offered and sold in the United States only to qualified institutional buyers as defined in and in reliance on Rule 144A under the Securities Act and to certain non-u.s. persons in transactions outside the United States in reliance on Regulation S under the Securities Act. Prospective purchasers that are qualified institutional buyers are hereby notified that the sellers of the shares in the Offering may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. The shares may not be offered, sold, pledged or otherwise transferred within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable state securities laws. In the United States, the Offering Circular is being furnished on a confidential basis solely for the purpose of enabling a prospective investor to consider purchasing the particular securities described herein. The information contained in the Offering Circular has been provided by the Company and other sources identified herein. Distribution of the Offering Circular to any person other than the offeree specified by the Joint Bookrunners or their representatives and those persons, if any, retained to advise such offeree with respect thereto, is prohibited, and any disclosure of its contents, without the Company s prior written consent, is prohibited. Any reproduction or distribution of the Offering Circular in the United States, in whole or in part, and any disclosure of its contents to any other person is prohibited. The Offering Circular is personal to each offeree and does not constitute any offer to any other person or to the general public to acquire shares in the Offering. The Offering and the Offering Circular are governed by Swedish law. The courts of Sweden have exclusive jurisdiction to settle any conflict or dispute arising out of or in connection with the Offering or the Offering Circular. A Swedish prospectus (the Prospectus ) has been approved and registered by the Swedish Financial Supervisory Authority (Sw. Finansinspektionen) in accordance with Chapter 2, Sections 25 and 26 of the Swedish Financial Instruments Trading Act (1991:1980) (Sw. lagen (1991:980) om handel med finansiella instrument). The Offering Circular is a translation into English of the Prospectus approved and registered by the Swedish Financial Supervisory Authority. In the event of discrepancies between the Offering Circular and the Prospectus, the Prospectus shall prevail with exception for the sections Certain U.S. federal income tax considerations and Transfer restrictions which only relate to matters attributable to the U.S. STABILIZATION In connection with the Offering, Carnegie may carry out transactions aimed at supporting the market price of the shares at levels above those which might otherwise prevail in the open market. Such stabilization transactions may be effected on Nasdaq Stockholm, in the over-the-counter market or otherwise, at any time during the period starting on the date of commencement of trading in the shares on Nasdaq Stockholm and ending no later than 30 calendar days thereafter. Carnegie is, however, not required to undertake any stabilization and there is no assurance that stabilization will be undertaken. Stabilization, if initiated, may be discontinued at any time without prior notice. In no event will transactions be effected at levels above the price set in the Offering. Within one week of the end of the stabilization period, Carnegie will make public whether or not stabilization was undertaken, the date at which stabilization started, the date at which stabilization last occurred and the price range within which stabilization was carried out, for each of the dates during which stabilization transactions were carried out. FORWARD-LOOKING STATEMENTS The Offering Circular contains certain forward-looking statements and opinions. Forward-looking statements are statements that do not relate to historical facts and events and such statements and opinions pertaining to the future that, by example, contain wording such as believes, estimates, anticipates, expects, assumes, forecasts, intends, could, will, should, would, according to estimates, is of the opinion, may, plans, potential, predicts, projects, to the knowledge of or similar expressions, which are intended to identify a statement as forward-looking. This applies, in particular, to statements and opinions in the Offering Circular concerning the future financial returns, plans and expectations with respect to the business and management of the Company, future growth and profitability and general economic and regulatory environment and other matters affecting the Company. Forward-looking statements are based on current estimates and assumptions made according to the best of the Company s knowledge. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause the actual results, including the Company s cash flow, financial condition and results of operations, to differ materially from the stated results, or fail to meet expectations expressly or implicitly assumed or described in those statements or to turn out to be less favorable than the results expressly or implicitly assumed or described in those statements. Accordingly, prospective investors should not place unreasonable high reliance on the forwardlooking statements herein and are strongly advised to read the Offering Circular, including the following sections: Summary, Risk factors, Business overview and Operating and financial review, which include more detailed descriptions of factors that might have an impact on the Company s business and the market in which it operates. None of the Company or any of the Joint Bookrunners can give any assurance regarding the future accuracy of the opinions set forth herein or as to the actual occurrence of any predicted developments. In light of the risks, uncertainties and assumptions associated with forward-looking statements, it is possible that the future events mentioned in the Offering Circular may not occur. Moreover, the forward-looking estimates and forecasts derived from third-party studies referred to in the Offering Circular may prove to be inaccurate. Actual results, performance or events may differ materially from those in such statements due to, without limitation: changes in general economic conditions, in particular economic conditions in the markets on which the Company operates, changed interest rate levels, changed currency exchange rates, changes in competition conditions, changes in laws and regulations, and occurrence of accidents or environmental damages. After the date of the Offering Circular, neither the Company nor any of the Joint Bookrunners assumes any obligation, except as required by law or Nasdaq Stockholm s Rule Book for Issuers, to update any forward-looking statements or to conform these forward-looking statements to actual events or developments. BUSINESS AND MARKET DATA Tobii operates in an industry in which it is difficult to obtain precise industry and market information. Tobii has obtained certain market and competitive position data in this Offering Circular from a report dated November 25, 2014, produced by Arthur D. Little, as well as from a review of Tobii s patent position commissioned from the independent intellectual property consultancy ClearViewIP Ltd and presented in a report dated October 2014 (jointly the Reports ). Tobii has commissioned the Reports and Tobii believes them to be reliable. As part of its supporting information for the Reports, both Arthur D. Little and ClearViewIP Ltd received market and company information from Tobii. Tobii cannot assure the accuracy and completeness of such information, and Tobii has not independently verified the market and competitive position data contained in the Offering Circular. In addition, in many cases Tobii has made statements in the Offering Circular regarding its industry and its competitive position in the industry based on its experience and its own investigation of market conditions. Tobii cannot assure that any of these assumptions are accurate or correctly reflect its competitive position in the industry, and none of Tobii s internal surveys or information have been verified by independent sources, which may have estimates or opinions regarding industry-related information which differ from Tobii s. The contents of the Company s website, the website of any member of the Group and any third party web sites referred to herein do not form any part of this Offering Circular. None of the Company or any of the Joint Bookrunners assumes responsibility for the correctness of any business or market data included in the Offering Circular. Information provided by third parties has been accurately reproduced and, as far as the Company is aware and has been able to ascertain from information published by such third parties, no facts have been omitted which would render the reproduced information inaccurate or misleading. IMPORTANT INFORMATION ABOUT THE POSSIBILITY TO SELL ALLOTTED SHARES Note that notifications about allotment to the public in Sweden will be made through distribution of contract notes, which is expected to occur on or around April 24, After payments for the allocated shares have been processed by Carnegie and Avanza, duly paid shares will be transferred to the securities depository account or the securities account specified by the acquirer. The time required to transfer payments and transfer duly paid shares to the acquirers of shares in Tobii means that these acquirers will not have shares available in the specified securities depository account or the securities account until April 28, 2015, at the earliest. Trading in Tobii s shares on Nasdaq Stockholm is expected to commence on or around April 24, Please note that the circumstance that shares may not be available in an acquirer s securities account or securities depository account until April 28, 2015 at the earliest, can mean that the acquirer may not be able to sell these shares on the stock exchange as from the time trading in the shares commences, but first when the shares are available in the securities account or the securities depository account.

3 Contents Summary 2 Risk factors Background and reasons 25 Terms and conditions 27 Business and market overview 33 Selected financial information 86 Pro forma income statement Auditors report on pro forma financials 93 Operating and financial review 94 Capitalization, indebtedness and other financial information 110 Board of Directors, executive management and auditor 112 Corporate governance 116 Share capital and ownership structure 120 Articles of association 123 Legal considerations and supplementary information 125 Tax considerations in Sweden 130 Certain U.S. federal income tax considerations 132 Transfer restrictions 136 Definitions 138 Audited consolidated annual accounts for the period F-1 Auditor s report regarding audited consolidated annual accounts for the period F-25 Addresses A-1 Summary of the Offering The Offering The Offering Circular has been prepared in connection with the offering of shares in Tobii to the public in Sweden and institutional investors and a listing of shares on Nasdaq Stockholm (the Offering ). Number of shares offered The Offering comprises a total of 17,901,000 20,101,000 shares in Tobii, The Company offers between 16,000,000 18,200,000 newly issued shares whereby the number of shares will be established to such amount that it provides Tobii with gross proceeds of SEK 400 million before transaction costs. Furthermore, a few existing shareholders offer 1,901,000 existing shares. The Company has undertaken, at the request of Joint Bookrunners, to issue a maximum of 3,015,150 additional new shares to cover a possible over-allotment in connection with the Offering. Offering price The price in the Offering is expected to be determined within the range of SEK The final Offering price will be determined through a book-building procedure and, consequently, based on demand and the overall market conditions. The price will be set by Tobii s Board of Directors in consultation with the Joint Bookrunners. The final Offering price is expected to be announced by way of a press release on or about April 24, Indicative timetable Application period for the public offering in Sweden April 14 April 22, 2015 Application period for the institutional offering April 14 April 23, 2015 First day of trading on Nasdaq Stockholm April 24, 2015 Settlement date April 28, 2015 Miscellaneous Short name (ticker) on Nasdaq Stockholm ISIN code Financial calendar TOBII SE Annual report 2014 May 20, 2015 Interim report for the period January 1 March 31, 2015, Q1 May 22, 2015 Annual general meeting June 10,

4 Summary Summary The summary is drawn up in accordance with information requirements in the form of a number of paragraphs which should include certain information. The paragraphs are numbered in sections A E (A.1 E.7). This summary contains all the paragraphs required in a summary for the relevant type of security and issuer. However, as certain paragraphs are not required, there may be gaps in paragraph numbering sequences. Even if it is necessary to include a paragraph in the summary for the security and issuer in question, it is possible that no relevant information can be provided for that paragraph. In such instances, the information has been replaced by a brief description of the paragraph, along with the specification not applicable. Section A Introduction and warnings A.1 Introduction and warnings A.2 Consent for use of the Offering Circular by financial intermediaries Section B Issuer and any guarantor B.1 Company and trading name B.2 Issuer s registered office and corporate form B.3 Description of the Issuer s operations This summary should be read as an introduction to the Offering Circular. Any decision to invest in the securities should be based on an assessment of the Offering Circular in its entirety by the investor. Where statements in respect of information contained in an offering circular are challenged in a court of law, the plaintiff investor may, in accordance with EU-member states national legislation, be forced to pay the costs of translating the Offering Circular before legal proceedings are initiated. Under civil law, only those individuals who have produced the summary, including translations thereof, may be enjoined, but only if the summary is misleading, incorrect or inconsistent with the other parts of the Offering Circular or if it does not, together with other parts of the Offering Circular, provide key information to help investors when considering whether to invest in the securities being offered. Not applicable. Financial intermediaries are not entitled to use the Offering Circular for subsequent trading or final placement of securities. Tobii AB (publ), reg. no Tobii s registered office is in Stockholm county, Danderyd municipality, Sweden. The Company is a Swedish public limited liability company founded in Sweden under Swedish law and operating under Swedish law. The Company s form of association is governed by the Swedish Companies Act (SFS 2005:551). Tobii is a global market leading provider of eye-tracking solutions. A product with an integrated eye-tracking sensor knows what a user is looking at. This makes it possible to interact with computers and machines using the eyes. Tobii conducts its business through three business units that each has its own distinct markets, products and dedicated personnel. The Company is accounting for each business unit as separate segments. Tobii Dynavox a globally leading supplier of assistive technology for communication. Today, the business products comprise of both eye-tracking based and touchscreenbased AAC-devices as well as various software. Tobii Pro a globally leading supplier of eye-tracking solutions for behavioral research studies. 2

5 Summary B.3 Description of the Issuer s operations, (cont.) Tobii Tech a leading supplier of eye-tracking components and platforms to integration customers. Tobii operates globally from offices in Sweden (Headquarters), the U.S. (offices in Boston, Washington DC, Pittsburgh and Mountain View), China, Japan, U.K., Germany and Norway. B.4a Trends Eye-tracking as a technology is a relatively new phenomenon and most of the application areas are in an early market phase. In view thereof, Tobii is affected more by how and to what extent customers and users adopt eye tracking and its applications that eye tracking permits rather than the overall market trends. The business unit Tobii Dynavox is dependant on trends on the market for assistive technology for communication. In a historical perspective, the market for assistive technology for communication has experienced steady growth driven by increased competence among prescribers, public awareness and improved funding systems. However, the total market have declined during the period , primarily in the U.S., due to regular consumer tablets with AAC-apps have been introduced on the market and that a specific, major funding program in Texas, U.S., has largely ceased for these types of products. However, the sub-market for eye tracking in assistive technology where Tobii Dynovox has a stong position, has grown substantially in recent years, to a large extent driven by new products and increasing knowledge and awareness of the opportunities with eye tracking. At an overall level, the entire market is affected by the access to health care financing in different countries, with the U.S. as the most important market. However, assistive technology for communication constitutes a very small percentage of the total health budgets, making the financing of this separate sector not necessarily correlate with the overall health budget. Furthermore, there is a general trend in many parts of the world to gradually strengthen the position and opportunities for people with special needs. The business unit Tobii Pro has academic customers which represent 56% of the business unit s revenues. This segment is affected by the availability of public funding for reseach of academic institutions, which in turn, can be influenced by, among other things, political priorities and the strength of public finances in various countries. It is the Company s understanding that, during the recent years, the climate for reseach budgets remained stable on a global basis. The remaining 44% of Tobii Pro s sales consist of commercial customers, including the market research industry. However, eye-tracking studies constitute a very small part of the total market for market research, therefore the Company is more influenced by how quickly customers start using eye tracking as a method for market research rather than the market as a whole. The total market for market research has, according to Esomar, grown slightly faster than the world GDP in recent years. In addition, there is a trend to use more and more implicit methods for studies, and eye tracking is considered as a typical growing implicit method. The business unit Tobii Tech has an ambition to introduce the Company s technology in several future eye-tracking markets such as computer games, regular computers, vehicles and medical applications. The Company is primarily affected by whether OEMcustomers and end-users start using applications based on eye tracking rather than development for these markets in general. In this context, it may be noted that many of the recent consumer electronic products consist of innovative technologies for user interface as a central part of the products such as Microsoft Kinect (gestures), Apple iphone/ipad (touch screen) and Nintendo Wii (movements). A possible early consumer market for Tobii s technology is the market for consumer games. This is one of the segments in the computer industry that is growing rapidly. B.5 Description of the Group and the issuer s position within the Group The Group comprises the parent company Tobii AB (publ) and 19 directly or indirectly owned subsidiaries. 3

6 Summary B.6 Major shareholders The below table states all the shareholders that immediately prior to the approval of the Prospectus, held 5% or more of the shares in the Company. Name No. of shares Ownership, % Invifed AB* 13,433, % Intel Capital Corporation 7,042, % Northzone Ventures AS 6,730, % Amadeus General Partner Limited 6,430, % Eskilsson, Henrik** 5,005, % The Sixth AP-fund* 5,000, % Elvesjö, John 4,085, % Skogö, Mårten 3,911, % Total 51,638, % * Invifed AB and The Sixth AP-fund are both Corner Investors who have agreed to, directly or indirectly through subsidiaries, acquire shares in the Offering, on the same terms and conditions as for other investors, corresponding to 17.53% and 6.52% of the total number of shares in the Offering respectively (based on full subscription in the Offering and the midpoint of the price range in the Offering (SEK 23.50)). ** Henrik Eskilsson also owns 22.5% of the shares in Eskilsson Consulting AB which in turn owns 1,916,000 shares in Tobii. In addition to the shareholders that hold more than 5% of the capital and the shares and as of the date of approval of the Prospectus, there are no other natural or legal persons that are subject to registration based on their shareholdings. B.7 Financial information in summary The financial information below has been retrieved from the audited consolidated annual accounts for the period , prepared in accordance with IFRS. Summary of consolidated income statement SEK million Net sales Cost of goods and services sold Gross profit Selling expenses Research and development expenses Administrative expenses Other operating income and operating expenses Operating income (EBIT) Profit/loss from financial items Share of profit/loss from associated companies Financial income Financial expenses Total financial income and expenses Income before taxes Taxes Net profit/loss for the year

7 Summary B.7 Financial information in summary, (cont.) Summary of consolidated balance sheet SEK million Non-current assets Intangible assets Tangible assets Other non-current assets Total non-current assets Current assets Accounts receivables Inventories Other receivables Prepaid expenses and accrued income Total current assets Cash and cash equivalents Total assets Equity and liabilities Equity Non-current liabilities Accounts payable trade Accrued expenses and deferred income Other current liabilities Total current liabilities Total equity and liabilities Summary of consolidated cash flow statement SEK million Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Cash flow for the period Cash and cash equivalents at the beginning of the period Exchange rate difference in cash and cash equivalents Cash and cash equivalents at the end of the period Segment information SEK million Net sales Tobii Dynavox Tobii Pro Tobii Tech Other and eliminations Group Operating income (EBIT) Tobii Dynavox Tobii Pro Tobii Tech Other and eliminations Group

8 Summary B.7 Financial information in summary (cont.) Segment information SEK million Adjusted EBIT 1) Tobii Dynavox Tobii Pro Tobii Tech Other and eliminations Group ) Adjusted for non-recurring items related to the aquisition of DynaVox Systems LLC in 2014 and Tobii s IPO. The Group s key information Earnings per share, SEK Earnings per share, assuming dilution, SEK Equity per share, SEK EBITDA, SEK million EBIT, SEK million Free cash flow, SEK million Operating working capital, SEK million Total assets, SEK million Net debt, SEK million Equity, SEK million Equity/asset ratio, % Net debt/equity, % Gross margin, % EBITDA margin, % EBIT margin, % Return on total equity, % Average number of shares in millions Number of shares at period-end in millions Number of (full time) employees at period-end Significant changes during the period January 1, 2012 December 31, 2014 In 2014, Tobii acquired the US company DynaVox Systems LLC, which prior to the acquisition, was Tobii s main competitor in the alternative communication market. DynaVox Systems LLC complements Tobii with a strong North American focus, leading touchscreen-based assistive communication products, leading software for users with cognitive disabilities and market leading software for teaching in special education schools. Two new share issues were completed in 2014 which together provided SEK 166 million in net proceeds and one share issue was completed in 2012 which provided SEK 143 million in gross proceeds. Significant events after December 31, 2014 In February 2015, Tobii and the computer-game company Ubisoft announced that Assassin s Creed Rouge PC, which is one of Ubisoft s most sold games, would implement Tobii s eye tracking in order for the game view to automatically follow where the player is looking, just as when a person is moving their gaze point. Deliveries of the game to stores commenced in March In February 2015, a bill was presented in the U.S. ( Steve Gleason Act ) proposing that (i) congress change the previously taken decision to classify assistive technology for communication as capped rental -products, and (ii) improve the possibilities to get financing for assistive eye-tracking technology through Medicare. If this bill is passed, it may have a positive effect on Tobii Dynavox in the medium term. 6

9 Summary B.8 Pro forma accounting Tobii acquired DynaVox Systems LLC on May 23, The Group s consolidated annual accounts for 2014 reflects the financial development based on this prerequisite, i.e. that the acquisition was concluded in the fifth month of the financial year. The purpose of the pro forma financial information is to present the earnings that the business could have achieved for the full year 2014 if the acquisition had taken place on January 1, The pro forma financial information describes a hypothetical situation and has been produced solely for illustrative purposes. Amounts in this section have been rounded off and the tables in this section may not always add up. SEK million DynaVox Systems LLC Pro forma US GAAP Tobii AB 1/1 5/31 adjustments to IFRS 1) 2014 IFRS 2) US GAAP 1/1 5/31 adjustments Pro forma 2014 Net sales Cost of goods and services sold Gross profit/loss Selling expenses Research and development expenses ) Administrative expenses ) 92.9 Other income and operating expenses ) 3.8 Operating profit/loss (EBIT) Profit/loss from financial items Share of profit in associated companies Financial income Financial expenses ) 18.7 Total financial income and expenses Profit/loss before tax Taxes 3.0 7) 3.0 Net profit/loss for the year Currency rates Pro forma adjustments in the income statement are calculated using an exchange rate of SEK/USD, which is equivalent to the average exchange rate applied by Tobii for the period January 1 May 31, ) Based on the audited consolidated financial statements for the financial year ) Based on unaudited, internally prepared financial statements recalculated using an average exchange rate of SEK/USD for the period January 1 May 31, ) Proforma adjustments amounting to 3.9 MSEK are attributable to the conversion of US GAAP to IFRS following the application of IAS 38 Intangible Assets whereby product development expenses are capitalized to the extent that it is probable that these products will generate future revenues. The amount which has been capitalized as intangible assets during the five-month period of January to May 2014 is 8.5 MSEK and the amortization of intangible assets amounts to 4.6 MSEK. 4) Pro forma adjustments totaling 17.1 MSEK refer to administrative expenses, of which 9.5 MSEK in the DynaVox Systems LLC income statement January 1 May 31, 2014, relates to sales expenses incurred by the previous owners while attempting to sell the DynaVox Group. The adjustment amount also includes acquisition costs incurred by Tobii in the amount of 7.4 MSEK as a result of Tobii s acquisition of DynaVox Systems LLC. Neither of these items would have affected the income statement had the acquisition taken place on January 1, ) Pro forma adjustments amounting to 7.0 MSEK relate to restructuring expenses incurred by DynaVox Systems LLC during the period of January 1 May 31 and are comprised primarily of severance payments to executive officers. 6) Pro forma adjustments totaling 4.4 MSEK are comprised of interest payments of 5.4 MSEK made by DynaVox Systems LLC on restructuring loans received during the period in order to finance restructuring. Had the acquisition taken place on January 1, 2014, these interest expenses would not have been incurred. The pro forma income statement includes interest expenses amounting to 0.9 MSEK, which would have been the borrowing costs incurred by Tobii on its loan taken for the purpose of the acquisition, had the loan been taken on January 1, ) DynaVox Systems LLC is jointly taxed with Tobii Assistive Inc. Tobii Assistive Inc has accumulated losses without corresponding deferred tax assets, therefore there is no impact on tax expense for the year in the pro forma income statement. 7

10 Summary B.9 Profit/loss forecast Not applicable. The Company has not presented any profit/loss forecast. B.10 Audit remarks Not applicable. There are no remarks in the audit reports. B.11 Insufficient net working capital Section C Securities Not applicable. The Board of Directors of Tobii believes that the existing net working capital is sufficient to meet the Company's needs over the next twelve month period. C.1 Securities offered Shares in Tobii AB (publ), reg. no ISIN number SE C.2 Denomination The shares are denominated in SEK. C.3 Total number of shares in the Company C.4 Rights associated with the securities C.5 Restrictions in free transferability C.6 Admission to trading As of the date of the Offering Circular, there are 68,927,883 shares in the Company, each with a quota value of approximately SEK The shares entitles to a total of 68,927,883 votes. All issued shares have been fully paid. The Offering comprises a total of 17,901,000 20,101,000 shares in Tobii, The Company offers between 16,000,000 18,200,000 newly issued shares whereby the number of shares will be established to such amount that it provides Tobii with gross proceeds of SEK 400 million before transaction costs. Furthermore, a few existing shareholders offer 1,901,000 existing shares. 1) The new share issue in the Offering corresponds to approximately 19 21% of the total number of shares and votes in the Company based on a fully diluted basis following the completion of the Offering. To cover possible over-allotment in connection with the Offering, the Company has undertaken to, at the request of the Joint Bookrunners, issue additional shares representing not more than 15% of the number of shares comprised by the Offering (the Overallotment option ), equal to not more than 3,015,150 shares, representing approximately 3% of the total number of shares in the Company on a fully diluted basis. Through the new share issue of a maximum of 18,200,000 shares, Tobii s share capital will increase by a maximum of approximately SEK 132,076 from SEK 500,250 to approximately SEK 632,281. 1) The selling shareholders includes among others, John Elvesjö, board member and a member of the executive management, who offers 150,000 shares and the board member Nils Bernhard, who offers 275,000 shares. Each share in the Company entitles the holder to one vote at shareholders meetings and each shareholder is entitled to cast votes equal in number to the number of shares held by the shareholder in the Company. If the Company issues new shares, warrants or convertibles in a cash issue or a set-off issue, shareholders shall, as a general rule, have preferential rights to subscribe for such securities proportionally to the number of shares held prior to the issue. The shares carry the right to payment of dividend for the first time on the record date for distribution which falls immediately after the listing. All shares in the Company give equal rights to dividends and the Company s assets and possible surpluses in the event of liquidation. Not applicable. The shares are not subject to any restrictions on transferability. Nasdaq Stockholm s listing committee has on March 6, 2015 decided to admit the Company s shares to trading on Nasdaq Stockholm, subject to customary conditions, such as that the distribution requirements in respect of the Company s shares being fulfilled no later than on the first day of trading. In case the Company s Board of Directors ultimately resolves to list the Company s shares, trading in the Company s shares is expected to begin on or around April 24, C.7 Dividend policy Over the next few years, Tobii s development and expansion ambitions for the business unit Tobii Tech will be given priority over dividends to shareholders. 8

11 Summary Section D Risks D.1 Main risks related to the issuer or the industry D.3 Main risks related to the securities Tobii s business and industry are subject to certain risks which are completely or partly outside the control of the Company and which could affect Tobii s operations, financial condition or results of operations. Described below, in no particular order and without claim to be exhaustive, are risks considered to be material to Tobii s future development. The main risks related to the Company s business and industry include: Tobii depends on development, market acceptance and awareness of the Company s products and technology, and if Tobii is unsuccessful in achieving this, it could adversely affect the Company; Tobii operates in a competitive market and the Company may not be able to compete successfully which could adversely affect the Company; Eye-tracking hardware is subject to price decline and if Tobii fails to adapt as its markets evolves, it may adversely affect the Company; Tobii is dependent on funding from public and private insurance and funding systems and changes to these systems could adversely affect the Company; Tobii is dependent on the supply of certain components and its products are subject to expressed and implied warranties making Tobii exposed to interruptions of production, warranty and product liability claims, which could adversely affect the Company; Potential future acquisitions as well as Tobii s acquisition of DynaVox Systems LLC, which was subject to a limited due diligence review, may not fully achieve Tobii s anticipated financial and strategic synergies which could adversely affect the Company; A large part of Tobii s balance sheet consists of intangible fixed assets, which is at risk to be subject to write-off that could adversely affect the Company; Risks relating to the Tobii s loan agreement with Swedbank AB (publ), e.g. the risk that Tobii cannot fulfill its undertakings under the agreement which could adversely affect the Company; Tobii is dependent on intellectual property rights and the Company s methods of protecting these rights may be inadequate, which may adversely affect the Company; There is a risk that Tobii becomes involved in legal and administrative proceedings, including claims relating to Tobii s intellectual property as well as claims of potential infringement of third party s intellectual property rights by Tobii, which could adversely affect the Company; and Tobii is exposed to tax risks and if these risks materialize, it may have an adverse affect on the Company. Any investment in securities involves risks. Any such risk could cause the trading price of the Company s shares to decline significantly and investors could lose all or parts of the value of their investment. Risks related to the Company s shares include: An active, liquid and orderly trading market for the Tobii shares may not develop, the price of the shares may be volatile, and potential investors could lose a part or all of their investment; Tobii may need additional capital, if available, which may dilute investors shareholdings and affect the price of the shares Following the Offering, the existing main shareholders will continue to have significant influence over Tobii and the ability to influence matters requiring shareholders approval; Tobii s ability to pay dividends is dependent upon the Company s future earnings, financial condition, cash flows, net working capital requirements, capital expenditures and other factors; Existing shareholders future sale of shares could cause the share price to decline; Cornerstone Investors may not fulfil their undertakings; Differences in currency exchange rates may adversely affect the value of shareholdings or dividends paid; and Shareholders in the U.S. or other countries outside Sweden may be excluded from future cash issues of shares. 9

12 Summary Section E Offering E.1 Issue proceeds and issue costs E.2a Motive and use of proceeds E.3 Offering forms and conditions The total value of the Offering amounts to approximately SEK million based on the price range. If the Over-allotment option is fully exercised, the total value of the Offering amounts to approximately SEK million. Based on the price range in the Offering, Tobii s shares are valued at approximately SEK billion following completion of the Offering and assuming the Over-allotment option is fully exercised. The Company s gross revenue from the Offering amounts to approximately SEK 400 million before transaction costs. The Company has undertaken to pay provisions to the Joint Bookrunners based on the gross revenues. The Company s costs associated with the listing on Nasdaq Stockholm and the Offering are expected to amount to approximately SEK 28 million. The Offering and the listing will expand the shareholder base, increase Tobii s capital and enable Tobii to access the Swedish and international capital markets, thereby increasing financing alternatives, which is expected to support the Company s sales and profit development. The Board of Directors of Tobii considers that the new share issue and listing of the Company s shares to be a logical and important step in Tobii s development in providing Tobii with growth opportunities and to further strengthen the Company s market position and increase the awareness of Tobii, its products and its technology. Tobii expects to receive gross proceeds of approximately SEK 400 million from the new share issue realized through the Offering. Tobii intends to use the major part of the net proceeds from the Offering for R&D investments into Tobii Tech with the aim to further develop the Company s technology to meet the needs of new potential volume markets and to support the Company s sales, marketing and business development efforts on such markets. The present business plan of Tobii Tech indicates a negative cash flow for the business unit of approximately SEK 400 million up to and including 2018, which the Group intends to finance partly with internal cash flow generated by Tobii Dynavox and Tobii Pro, partly with the proceeds of issue which the Offering aims to contribute to the Group. Tobii will also use the proceeds from the share issue to repay the two bank loans of USD 5 million and USD 6 million to Swedbank AB (publ). A smaller part of the proceeds, and potential proceeds from the Over-allotment option, may also be used for capital expenditures in the existing operations as well as for acquisitions of assets, technologies and companies complementary to the current business of the Company. At this time, Tobii has not identified any such specific assets, technologies or companies. To cover a possible over-allotment in connection with the Offering the Company has undertaken, at the request of Joint Bookrunners, to issue additional new shares so that Tobii may receive an additional maximum of approximately SEK 67 million in gross proceeds in the event that the Over-allotment option is fully exercised. The Offering: The Offering comprises a total of 17,901,000 20,101,000 shares in Tobii, The Company offers between 16,000,000 18,200,000 newly issued shares whereby the number of shares will be established to such amount that it provides Tobii with a gross proceeds of SEK 400 million before transaction costs. Furthermore, existing shareholders offer 1,901,000 existing shares. 1) The new share issue in the Offering corresponds to approximately 19 21% of the total number of shares and votes in the Company based on a fully diluted basis following the completion of the Offering. To cover a possible over-allotment in connection with the Offering, the Company has undertaken to, at the request of the Joint Bookrunners, issue additional shares representing not more than 15% of the number of shares comprised by the Offering (the Overallotment option), equal to not more than 3,015,150 shares, representing approximately 3% of the total number of shares in the Company on a fully diluted basis. The Offering is made to the general public in Sweden and to institutional investors. An offering is also made to certain employees through separate application processes. 1) The selling shareholders includes among others, John Elvesjö, board member and a member of the executive management, who offers 150,000 shares and the board member Nils Bernhard, who offers 275,000 shares. 10

13 Summary E.3 Offering forms and conditions, (cont) The Offering price: The Offering price will be determined by way of a book-building procedure and will consequently be based on demand and overall market conditions. The Offering price will be established by Tobii s Board of Directors in consultation with the Joint Bookrunners, within a range of SEK 22 SEK 25 per share. No commission will be charged. The Offering price is expected to be published on or around April 24, The application period: The application period for the public offering in Sweden is April 14 22, Institutional investors in Sweden and other countries are invited to participate in the book-building procedure that will take place between April 14 23, Application: The general public: Applications by the general public for the acquisition of shares shall comprise a minimum of 400 shares and a maximum of 45,000 shares, in even lots of 100 shares. Applications are binding. Applications shall be made using a specific application form, which is available at Carnegie s offices. The Offering Circular and the application form are also available on Tobii s website ( and Carnegie s website ( Customers of Avanza who are connected to Internet banking services can apply for acquisition of shares via Avanza s Internet services. If more than one application is submitted by the same acquirer, only the first registered application will be considered. Late, incomplete or incorrectly completed application forms may be disregarded. No additions or amendments may be made to the preprinted text on the application form. If you have an account with specific rules for securities transactions, such as an IPSdeposit, ISK-deposit (Sw. Investeringssparkonto) or deposit within an endowment insurance, you should confer with your nominee if and how you can apply for acquisition of shares in the Offering. Institutional investors: Institutional investors are invited to participate in a book-building process, which will take place during the period April 14 23, Tobii reserves the right to shorten or extend the application period in the institutional offering. Any such shortening or extension of the application period will be made public by the Company in a press release prior to the end of the application period. Applications shall be submitted to Carnegie or ABG Sundal Collier in accordance with specific instructions. Further information regarding the application is included in the section Terms and conditions. Allotment: The general public: The allotment of shares will be decided by the Board of Directors of Tobii in consultation with the Joint Bookrunners, whereby the aim to obtain a wide distribution of the shares among the general public in order to facilitate a regular and liquid trading in the Company s shares on Nasdaq Stockholm. Allotment is not dependent on when during the application period the applications are submitted. In the event of over-subscription it is possible that no allotment will be received or that the received allotment comprises fewer shares than applied for and allotment may, in whole or in part, be made through random selection. Certain customers to Carnegie and ABG Sundal Collier may be given special priority. Allotment to existing shareholders will be prioritized. Institutional investors: The decision on allotment of shares is made by the Board of Directors of Tobii in consultation with the Joint Bookrunners, with the aim to ensure that Tobii gets a good institutional shareholder base. The intention is that notifications of interest in participation, which are essentially deemed to be equivalent, should be treated equally. Interest registered by institutional investors who are deemed to be possible longterm shareholders in the Company may be given priority. Allotment to existing shareholders will be prioritized. Allotment will be entirely discretionary and no guarantees for allotment are given. 11

14 Summary E.3 Offering forms and conditions, (cont) Application and allotment for employees: An offering is also made to certain Tobii employees in France, Germany, Hungary, Japan, Norway, Sweden, the U.K. and the U.S. through separate application processes. Applications from all Tobii employees who are subject to the offer will be given special consideration up to a number of shares equal in value to the relevant investment limit. Tobii employees in Sweden will be subject to an investment limit of SEK 30,000. Tobii employees in the remaining jurisdictions will be subject to an investment limit of SEK 190,000. However, some of Tobii s employees in France, Hungary, Japan and the United States who receive the offer may apply for a number of shares that exceeds SEK 190,000 in value, but applications above this level will not be given any special consideration. Tobii employees who wish to acquire shares must follow the instructions issued by the Company. E.4 Interests and conflict of interests E.5 Selling shareholders/lock-up agreements Payment: Full payment for the allotted shares shall be made in cash no later than April 28, 2015 in accordance with the instructions on the received contract note. Registration: It is expected that allotted and paid shares, for both institutional investors and the general public in Sweden, will be registered with Euroclear Sweden AB starting on April 28, 2015, after which Euroclear Sweden AB will send out a securities notice showing the number of shares in the Company registered on the recipient s VP-account. Tobii s financial advisors in connection with the Offering and the listing are Carnegie and ABG Sundal Collier, who jointly are acting as Joint Bookrunners in the Offering. These advisors (and companies closely related to them) have provided, and may in the future provide, services in the ordinary course of business and in connection with other transactions to Tobii for which they have received, and may in the future receive, compensation. Under the placing agreement which is expected to be entered into between the Company and the Joint Bookrunners around April 23, 2015, certain large existing shareholders, shareholding members of the Board of Directors and the executive management, as well as certain other shareholders in the Company will undertake, with certain reservations, not to sell its respective holdings during a certain time period after trading on Nasdaq Stockholm has commenced (the Lock-up period ). The Lock-up period for certain large existing shareholders will be 180 days, while the Lock-up period for shareholding board members and members of the executive management will be 360 days. The Lock-up period for certain other shareholders in the Company will be 180 days. Henrik Eskilsson, John Elvesjö and Mårten Skogö have entered inte these agreements as large shareholders and not as members of the Board of Directors or as members of the executive management. Following the end of the Lock-up period, the shares may be offered for sale, which may affect the market price of the share. The Joint Bookrunners may make exceptions from these undertaking. Pursuant to the agreement, the Company will undertake, with certain exceptions, towards the Joint Bookrunners not to, e.g. resolve upon or propose to the shareholders meeting an increase of the share capital through issuance of shares or other financial instruments for a period of 360 days following the first day of trading of the Company s shares on Nasdaq Stockholm without a written consent from the Joint Bookrunners. E.6 Dilution effect The Offering comprises a total of 17,901,000 20,101,000 shares in Tobii, of which 16,000,000 18,200,000 are newly issued shares and 1,901,000 are existing shares offered by existing minor shareholders. The new share issue in the Offering corresponds to between 19 21% of the total number of shares and votes in the Company based on a fully diluted basis following the completion of the Offering. The Over-allotment option, equals to not more than 3,015,150 shares, representing approximately 3% of the total number of shares in the Company on a fully diluted basis. E.7 Costs imposed on investors by the issuer or offerer Not applicable. Brokerage commission will not be charged. 12

15 Risk factors Risk factors An investment in Tobii s shares involves various risks. A number of factors affect, or could affect, Tobii s business, both directly and indirectly. Described below, in no particular order and without claim to be exhaustive, are some of the risk factors and significant circumstances considered to be material to Tobii s business and future development. The risks described below are not the only risks to which the Company and its shareholders may be exposed. Additional risks that are not currently known to the Company, or that Tobii currently believes are immaterial, may also adversely affect Tobii s business, result of operations or financial condition. Such risks could also cause the price of Tobii s shares to fall significantly, and investors could potentially lose all or part of their investment. In addition to this section, investors should also take into consideration other information contained in this Offering Circular in its entirety. This Offering Circular also contains forward-looking statements that are subject to future events, risks and uncertainties. Tobii s actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, including the risks described below and elsewhere in this Offering Circular. Risks related to Tobii, its business and industry Tobii depends on development, market acceptance and awareness of the Company s products and technology Tobii s future growth depends on the commercial success of the Company s technology. Eye-tracking technology, including the technology developed by the Company, is based on relatively new innovations that have not yet reached a broader market usage. Use cases of the technology, are largely immature and unproven. It is difficult to predict both the extent of and the timing for when end consumers, customers and partners will adopt eye-tracking technology and different applications based on that. There is a particular risk that Tobii will fail with its strategy to enter new volume markets for eye-tracking. Within all business units, Tobii is continuously working towards increased awareness among potential users and demonstrating the benefits of its products and solutions. However, increasing awareness requires substantial investments, both from a financial and time consumption point of view. In addition thereto, there is risk that the Group s target customers will not choose Tobii s technology for technical and commercial reasons. Several of the Group s target customers may decide to use other technologies or applications and may thereby find it difficult or unattractive to continue using, adapt to or switch to Tobii s technology. The Company s business units have planned for continued commercialization of their respective products in key markets. The ability of the Group to meet such projected timetables will depend upon achieving technical, market and commercial milestones. The Company does not have the personnel or economical resources to focus on all potential market opportunities. The business units Tobii Dynavox and Tobii Pro rely on complete solutions, including hardware and comprehensive software, for significant parts of their businesses. As an example, Tobii I-series, Dynavox s T-series, and the software Compass, Tobii Communicator and Tobii Studio are important parts of these business units solutions. There is a risk that the Company s customers may prefer alternate software and complete solutions even if they use the Company s core technology, which may result in significantly lower income for the Company. If Tobii is unsuccessful in increasing awareness about the eye-tracking market in general and its products in particular and if Tobii s future and existing customers do not widely purchase and adopt Tobii s technology and products, this could have a material adverse effect on the Group s business, financial condition or results of operations. Tobii operates in a competitive market and the Company may not be able to compete successfully The Group addresses its market segments through its three business units: Tobii Dynavox, a global market leader in assistive technology for alternative communication, Tobii Pro, a global market leader in eye-tracking solutions used to research and understand human behaviour and Tobii Tech, a business unit developing and selling eyetracking technology to original equipment manu facturers ( OEM ) who integrate the technology into their products. The Company has competitors in all its markets. There is a risk that Tobii s competitors are better or faster in adapting to and developing new and/or better products and technologies. Additionally, in the future, Tobii may encounter competition from other large, well-established and well-financed entities that may acquire, invest in or form joint ventures 13

16 Risk factors with providers of similar or competing technology, at the same time as existing competitors may elect to consolidate. Furthermore, the Company may face increased competition from component suppliers to markets where eyetracking technology can be implemented e.g. the automotive industry, computer producers, video-game console developers and niche competitors focusing only on one, or a few, of the business segments in which the Company is operating, or from makers of products in such applicable markets themselves. The Group is also competing with companies that offer software, for example analysis software for behavioral research and software for a so-called alternative communication. Tobii Dynavox as well as its competitors offer software in the form of apps for AAC (AAC = augmentative and alternative communication), that can be installed on consumer tablets (such as ipads). The market for consumer tablets (which are much cheaper than dedicated AAC-devices) has been growing rapidly in recent years and new AAC-apps have gained market shares from dedicated AAC-devices. Tobii s position in the existing markets could be eroded rapidly if new or existing competitors of the Company develop new, better and/or cheaper products and technologies. Also, current and potential competitors may have greater name recognition, more extensive customer bases and may be successful in increasing market shares by displacing dedicated devices for the benefit of products available on the consumer market. An eroded market position and/or increased competition could have a material adverse effect on the Group s business, financial condition or results. Eye-tracking hardware is subject to price decline and Tobii may fail to adapt as its markets evolve When a new, complex technology is brought to market, it is initially priced at a high price point and eye-tracking technology is no exception in this respect. General technology development combined with the R&D continuously conducted by Tobii and other actors, has in recent years substantially reduced the production cost for eye-tracking hardware. This has led to declining prices and increased volumes. The Company predicts that this trend will continue also in the future. Additionally, Tobii expects that a considerable amount of future revenues will come from software sales. Furthermore, as eye-tracking technology becomes more accessible in consumer electronics, the current price level for dedicated devices with integrated eye tracking could decline. If market prices for eye-tracking hardware decline substantially without Tobii being able to sufficiently meet this price reduction in terms of decreased costs, increased sales volumes, higher prices on other eye-tracking solutions and components or other revenue streams, or if Tobii fails to adapt to the expected shift from hardware to software for parts of its business, it could have a material adverse effect on the Group s business, financial condition or results of operations. Tobii is dependent on funding from public and private insurance and funding systems End consumers purchases of Tobii Dynavox s AAC-products are to a large extent dependent on public and private funding systems. The funding process comprises several steps normally starting with an individual visiting a hospital/evaluation center for a clinical evaluation to determine the individual s need for an AAC-device. Provided that the need is confirmed, the result of the evaluation is passed either through Tobii Dynavox or, by resellers, to a public funding body (such as Medicare/Medicaid in the U.S.), or a private insurer. The ability for customers to obtain funding from these providers is critical for the profitability of Tobii Dynavox. Funding varies from country to country and can significantly impact the demand for the Tobii Dynavox s products. Tobii Dynavox s products for special schools are mainly sold to schools, and the access to funding depends on the general funding climate in the school system. Curtailments, delays, changes in governments, shifts in priorities or general reductions in funding for the above products and solutions could delay or reduce Tobii s revenue. Tobii s business may also be adversely affected by changes in applicable legislation (for example in legislation relating to the U.S. healthcare system) and in the procurement processes or changes in the political leadership. In the past year, there have been both proposed and executed changes to the funding of AACdevices. An example of an executed change has been that Medicare has shifted to a model of so-called capped rental for the funding of AAC-devices, meaning that the payment is made over a series of monthly installments which has had a negative result impact on suppliers like Tobii. Medicare has, from time to time, also interpreted its legal framework differently with respect to funding of eye tracking for AAC-devices. This currently entails increased administration to retrieve payment for the part of the product cost that is constituted by eye tracking which is also reflected in the business current results and cash flow. This interpretation could improve as well as deteriorate in the future and the legal framework may also become clearer by way of a change in policy or new legislation which could have both a negative as well as a positive effect on Tobii. Tobii Pro s product offering is partly directed to universities, which normally have funding programs with budgets adopted on a yearly or project specific basis. The funding availability for these academic customers is uncertain and may vary significantly between different years, affecting which products customers purchase and the prices they are willing to pay. There is also a risk, for various reasons outside of Tobii s control, that parties providing funding withdraw the funding despite that it has previously been approved. If this occurs after Tobii has delivered ordered products to its customers, Tobii may become subject to credit losses. If any of these risks where to materialize, it could have a material adverse effect on Tobii s business, financial condition or results of operations. 14

17 Risk factors Tobii is dependent on the supply of certain components, and its products are subject to expressed and implied warranties making Tobii exposed to interruptions of production, warranty and product liability claims Tobii is dependent on the supply of certain components and other production goods and has supply agreements with a limited number of suppliers. Tobii has been and may also in the future be affected by its suppliers facing financial or operational problems, increasing prices or for other reasons being unable to make deliveries as agreed or in line with the Company s expectations. Incorrect, delayed or missing deliveries from suppliers may in turn result in Tobii s products becoming deficient or delayed. If one or some larger suppliers were to decrease or shut down their operations, this could affect Tobii s operations and the ability to supply the Company s products. Tobii s production comprises a chain of processes in which disruptions or disturbances in any part of the chain, for example due to breakdowns, fires, labor disputes or natural disasters, can have repercussions on Tobii s ability to fulfill its obligations towards its customers. Replacement of assets damaged by such events could be difficult or expensive. Customers may be dependent on planned deliveries from Tobii, and customers may have to reschedule their production or deliveries due to delivery delays on Tobii s part. Tobii is dependent on a strong brand name and on being able to maintain the reputation of and the value associated with its brand name. Should any of the abovementioned factors materialize, it could result in significant negative publicity, product recall, product liability exposure, breach of supply obligation or other events which could cause material damage to Tobii s brand name and lead to significant costs for Tobii. Further, Tobii s products are subject to expressed and implied warranty claims and Tobii may in the future incur significant losses if the Company is subject to e.g. warranty claims. Defects in Tobii s products may also result in product liability claims, product recalls, adverse customer reaction and negative publicity about Tobii and its technology and products. Some of Tobii s products and components are or may in the future be integrated into a variety of applications and products, e.g. computers, gaming devices and vehicles. If any of these products or applications proves to be defective, Tobii may be required to participate in product recalls involving such products. In turn, for Tobii, this could lead to incurring material costs as a result of liability following warranty and product related claims and adverse customer reactions, which could materially and adversely affect the Company s business, financial condition and results of operations. Investigations and disputes involving Tobii, whether meritorious or not, could be costly to defend or handle and could divert management s attention as well as operational resources. A successful claim brought against Tobii, or a requirement to participate in any product or application recall, could negatively affect Tobii s reputation. A large part of Tobii s products also operates in a human and private environment and, accordingly, for example product failures in case of battery explosions, could result in substantial harm to individuals or properties. The occurrence of any of these factors could have a material adverse effect on Tobii s business, financial condition or results of operations. Tobii s eye-tracking solutions are affected by physical and technical limitations The eye-tracking technology offered by Tobii is based on a highly complex hardware and software. The feasibility of utilizing the Company s eye-tracking technologies in different applications is dependent on that the technology fulfills several important requirements and features. Inter alia, it is important that i) the technology works accurately on people with different looks, glasses and other characteristics; ii) the technology works in different environments (e.g. with shifting light settings) iii) that the technology maintain its accuracy when the user is moving, iv) that algorithms are able to operate on a cost-effective and suitable hardware platform and v) ensuring that the technology readily integrates with other platforms and technologies where necessary. Furthermore, the current state of the Company s eyetracking technology but also biological factors such as the eye s shape and its physical attributes, limit the accuracy of eye-tracking technology in such a way that it is not possible to establish the exact fixation point of the eye. The accuracy of an eye tracker varies across different users and conditions, but is typically in the range of 1 2 degrees of visual angle (corresponding to 1 3 cm at normal working distance to a computer display). For some individuals these technological circumstances limit the ability to use eye tracking. The technological circumstances may limit the possibility of using eye tracking for applications and devices requiring an even higher level of accuracy in terms of tracking of the eye s gaze point. In addition, eye tracking is neither suitable for all environments such as strong and direct sunlight nor for all users, such as individuals wearing glasses with thick lenses. Consequently, the accuracy and applicability of eye-tracking technology could be considered as insufficient for certain users and markets which could have a material adverse effect on the Group s business, financial condition or results of operations. Tobii has not studied health effects of eye-tracking technology and the usage of eye tracking is potentially coupled with risk Tobii s products use infrared light ( IR-light ) to illuminate the eye when eye tracking is used. Exposure to high-intensity IR-light can in extreme cases be harmful to the eyes. In view thereof, harmonized standards, such as the IEC regarding photobiological safety of lamps and lamp systems, describe these risks with IR-light. It also defines how to measure and apply safety limits. Eyetracking products that are developed by Tobii are verified according to this standard. Simulations and measure- 15

18 Risk factors ments are done internally and, subsequently, an accredited body is consulted for independent measurement and verification. Tobii has not conducted any own studies on potential IR-light consequences but instead relies on the research that has been conducted as a basis for the re commendations set out in IEC There is a risk that Tobii s eye trackers could have negative effects on the eye and if this risk were to materialize, it could, inter alia, result in product liability claims or in other ways have a material adverse effect on the Group s business, financial condition or results of operations. People that have photosensitive epilepsy may induce seizures if exposed to flashing or flickering light. There are various contributing factors that may induce seizures in a photosensitive person including the frequency of the flashing or flickering light (how quickly the light flashes). Frequencies between 5 to 30 flashes per second (hertz) are most likely to trigger seizures, although this varies depending on the level of sensitivity between different individuals. All of Tobii s eye-tracking products have been designed to avoid visable flickering light in frequencies in the range between 5 to 30 hertz but, regardless of this, seizures may be trigged with certain individuals by visable flickering light in other frequency ranges. Eye tracking normally require that the product is near or worn by the user and there is risk that product failures, such as battery explosions cause severe damage to individuals or property. As a consequence, there is a risk that Tobii s products may cause both photosensitive epilepsy as well as damages in connection with usage which could have a material adverse effect on the Group s business, financial condition or results of operations. Tobii s insurances may not provide complete coverage to reimburse Tobii from any and all liabilities that may occur as a consequence of the business the Company conducts Tobii has insured its businesses against loss and/or potential liability in case of third party claims relating to e.g. property damage, business interruption, occupational injuries, product liability world wide and product recall. There are certain types of losses that generally are not insured because they are either considered uninsurable or for other reasons are excluded in the relevant insurance policies. This may for example be property losses occasioned by war or terrorism or professional/personal liability claims as a consequence of negligence or criminal intent. In addition, most of the insurance policies of Tobii have limitations (sums insured) on the maximum amounts that may be recovered for any single loss event, any series of losses and in aggregate during an insurance period. Recovery is also generally dependent on the insured first making payment of the appropriate excess or deductible and that the maximum limitation amount has not already been exhausted. In the event of an uninsured loss, a loss that exceeds insured limits or a succession of such losses could have a material adverse effect on Tobii s business, financial condition or results of operations. Potential future acquisitions as well as Tobii s acquisition of DynaVox Systems LLC, which was subject to a limited due diligence review, may fail to fully achieve Tobii s anticipated financial and strategic synergies In May 2014, an acquisition of DynaVox Systems LLC from DynaVox Inc. was carried out under an auction procedure in accordance with Chapter 11 of the United States Bankruptcy Code. Due to the public procedure, the acquisition was preceded only by a limited due diligence review and few meetings with DynaVox Systems LLC s management. In addition, DynaVox Systems LLC s financial statements had not been audited since June 2013 and the acquisition agreement did not contain any seller representations and warranties, which would have been the case if the acquisition had been subject to a customary transaction procedure. Consequently, Tobii has no limitations for any liabilities that DynaVox Systems LLC is exposed to. In order to achieve full anticipated financial and strategic synergies of the DynaVox Systems LLC acquisition, Tobii must rationalize, coordinate and integrate the operations conducted by DynaVox Systems LLC. This is a process that involves complex technical, operational and personnel-related challenges, which are time-consuming and expensive and may affect Tobii s ordinary business. The difficulties, costs and delays that could be encountered may, inter alia, include: i) difficulties, costs or complications in combining the companies operations which could result in Tobii not achieving the anticipated synergies; ii) lacking ability to use assets efficiently to develop the business of the combined company; iii) inconsistencies in standards, controls, procedures and policies, business cultures and compensation structures; iv) diversion of management s attention from ongoing business concerns and other strategic opportunities; v) lack of coordination between geographically separate organizations; vi) possible tax costs or inefficiencies associated with integrating the operations of the companies; and vii) restructuring costs and investments. For the above reasons, Tobii may have difficulties to fully achieve the financial and strategic synergies anticipated from its acquisition of DynaVox Systems LLC. In addition, any actual cost savings and synergies may be lower than Tobii expects and may take longer time to achieve than Tobii anticipates. Although the Company does not currently have any binding agreements with respect to any other possible acquisition Tobii will, as part of the business strategy going forward, evaluate and consider strategic relationships and acquisitions that the Company believes could complement the existing business. Tobii may not be able to realize the anticipated benefits of such investments or acquisitions and these transactions could become unprofitable and burden the other parts of the business. Similarly, if Tobii acquires additional businesses, the Company could have difficulties assimilating its personnel and operations, or the key personnel of the acquired business may decide to resign. Tobii could also run into difficulties if acquired technology or products are to be integrated into its operations. 16

19 Risk factors If any of these risks were to materialize, it could have a material adverse effect on the Group s business, financial condition or results of operations. A large part of Tobii s balance sheet consist of intangible fixed assets As at December 31, 2014, the Group s total intangible assets amounted to SEK 311 million. Out of these, SEK 105 million comprise of intangible fixed assets that occurred as a consequence of the acquisition of DynaVox Systems LLC. Tobii continuously invest in R&D relating to products and technology. A large part of the R&D expenditures are capitalized as intangible fixed assets. There is a risk that one or several of Tobii s investments result in products that cannot be commercialized, does not meet required safety standards, are not functional or in other ways does not fulfill Tobii s or the market s requirements. If Tobii for one reason or another fail to develop, receive approval for or commercialize the Company s products, it could result in significant impairments. Future changes in cash flows, evaluations, the cost of capital, or other factors may cause Tobii s intangible fixed assets to decline in value resulting in impairment of the assets. If a future write-off is required, it could have a material adverse effect on Tobii s reported results of operations and equity and may, inter alia, result in the Company not being able to meet its existing loan agreement with Swedbank AB (publ). Tobii s success will depend on its ability to continuously develop competitive products and effectively execute research & development projects Tobii invests a considerable amount of time and money in researching and developing eye-tracking technology and various products and solutions in order for the Group s businesses to survive, develop and grow. This is due to the need to meet the customers changing needs and position Tobii for the expected future eye-tracking markets. In addition, the Company s existing technology and products may become obsolete if competitors develop new products or technologies. It is the Company s prediction that Tobii s future success will inter alia depend on its ability to: develop and/or license new technologies that address the increasingly sophisticated and varied needs of prospective customers, and conduct such development on both a cost effective and a timely basis. Technology and product development entails significant technical and business risks as well as costs. There is a risk that Tobii does not succeed in using its R&D organization in an efficient way and Tobii may also fail to adapt its technology and products to user requirements or emerging industry standards. If Tobii s introductions of new products faces material delays, fail to live up to customers requirements and expectations or are cancelled in its entirety, the Company may fail to maintain existing customers and attract new customers, which could have a material adverse effect on the Group s business, financial condition or results of operations. Risks relating to the Company s loan agreement with Swedbank AB (publ) On May 21, 2014, Tobii and Swedbank AB (publ) entered into a loan agreement under which Swedbank AB (publ) granted Tobii two bank loans of USD 5 million and USD 6 million, respectively and two bank overdraft facilities with a maximum of SEK 85 million and USD 10 million, respectively. The loan agreement includes standard provisions and undertakings inter alia, in the form of financial key ratios for Tobii and its subsidiaries. If Tobii or its subsidiaries cannot fulfill all undertakings and provisions, the creditor is entitled to terminate the bank loans and demand repayment of outstanding loans and, if repayment of the loans does not take place, realize secured assets. Tobii s ability to repay its debts, in other ways fulfill its undertakings and the terms and condition according to the loan agreement as well as the Company s ability to refinance its loans and make payments according to other undertakings depend on Tobii s future results. The Company s future results depend on economical, financial, and competition related factors and other factors outside of the Company s control. Based on the general development within the businesses that Tobii operate or based on the Company s financial and/or operational development, there is a risk that Swedbank AB (publ) and/or other creditors of the Company may demand that existing loan agreements are renegotiated or terminated. To the extent such renegotiations leads to the implementation of additional restrictions or that additional requirements or demands are placed on the Company, the Company may fail to fulfill such obligations. If the loan agreement is terminated or if the Company cannot fulfill its obligations under the loan agreement, or breach undertakings therein, regardless if these obligations are existent or renegotiated, it could have a material adverse effect on Company s business, financial condition or results of operations as well as the Company s ability to obtain additional financing. Tobii may not be able to obtain additional financing to make supplementary investments or fulfill payment obligations To finance investments in, inter alia, R&D and/or working capital, Tobii may have to employ available financial assets and/or obtain additional financing through, for example, taking up loans or issuing new shares. Previous decided and on-going investments may also require additional funds compared to what was initially expected. The availability of additional financing is dependent on a variety of factors, such as market conditions, general availability of credit, overall availability of credit within the financial markets and Tobii s credit rating. There is a risk that Tobii is unable to secure sufficient funds, on favorable terms or 17

20 Risk factors at all, through public or private funding, strategic cooperation or other arrangements, in order to meet its future capital needs. Negative development in sales or margins or any unforeseen liabilities, changes in the timing for tax payments, payments of accounts payables or receipt of accounts receivables may lead to a strained liquidity and working capital position and thereby force a need for additional funding e.g. through equity financing or loans. There is a risk that this cannot take place on acceptable terms and if Tobii is unable to acquire required financing, Tobii could fail executing its business plan which may result in reduced profitability and financial flexibility. Furthermore, Tobii s loan agreement with Swedbank AB (publ) includes undertakings that limit the Group s maneuverability. If any of the risks outlined above was to materialize, it could have a material adverse effect on the Company s business, financial condition or results of operations. Tobii is dependent upon well-functioning IT-systems Tobii relies on an efficient and uninterrupted operation of various computer and communications systems to operate its business, including production systems, R&D, sales, warehousing, distribution and purchasing. A significant breakdown or other disruption to the computer and communications systems could affect the ability to conduct operations at production facilities, to develop technology, to perform effective sales or invoice and deliver products to customers. If Tobii fails to supply its customers with products and services, Tobii may be exposed to liabilities. Additionally, the Company s business involves the use and storage of information about employees and customers. The IT environment in which Tobii operates is also subject to comprehensive laws, rules and regulations, including, but not limited to, protection and processing of personal data, which is being frequently changed. These laws, rules and regulations sometime conflict among the various jurisdictions in which Tobii operates. While Tobii undertakes measures to protect the security and the privacy of personal data and proprietary information, it is possible that the Company s security measures for its systems, as well as other security practices it follows, may not prevent the improper access to or disclosure of personal data or proprietary information. This could harm Tobii s reputation and make the Company liable to pay damages, resulting in increased costs and/or loss of revenue. If any of these events were to materialize, it could have a material adverse effect on Tobii s business, financial condition and results of operations. Tobii operates in a global environment and is affected by political uncertainties, local business risks as well as laws, rules and regulations in many countries Tobii operates in a global environment and is consequently exposed to various risks such as implementation of new, or changes in existing legislation, rules or regulations. Trade restrictions introduced by the authorities in the countries where Tobii operates, or in other countries where Tobii may operate in the future, as well as sanctions or other measures by associations and organizations such as the EU and UN, may restrict the Company s operations, delay or prevent planned investments or otherwise adversely affect Tobii s financial results. Tobii s business is also subject to risks inherent in its business activities, such as: Recessionary trends, inflation or instability in local markets; Differences and unexpected changes in regulatory environments, including environmental, health and safety, detailed development plats and labor laws; The introduction or application of more stringent product norms and standards and associated costs; Exposure to different legal standards and enforcement mechanisms and the cost of compliance with those standards; Being subject to multiple taxation regimes, including regulations relating to transfer pricing and tax deductions on remittance and other payments by or to subsidiaries; Being subject to various, and potentially overlapping, regulations and rules, particularly those relating to export and import controls, anti-corruption and anti-bribery; Longer payment terms for debtors with respect to products and services delivered by the Company and difficulties collecting accounts receivable; Customs duties, charges, export controls, import restrictions and other trade barriers; Changes in pricing restrictions; Foreign exchange control and restriction on repatriation factors of funds; and Political and social unrest and instability. There is risk that Tobii fails to develop and implement systems, policies and practices to completely manage these risks or comply with applicable regulations without incurring substantial costs. The materialization of any of these risks could have a material adverse effect on Tobii s business, financial condition or results of operations. Some of Tobii Dynavox s ACC-products must be registered and approved as medical devices by governmental authorities, such as the U.S. Food and Drug 18

21 Risk factors Administration. If such registrations are delayed or for some other reason not successfully completed, Tobii Dynavox may be significantly restricted in its business and may, accordingly, lose market shares in relation to its competitors. Any of these factors could lead to delays in the release and sale of products and provide time for competing technologies to develop, which may result in loss of revenue and profitability for Tobii. Additionally, Tobii has operations in Suzhou, China, and is subject to general Chinese laws and regulations including laws applicable to wholly foreign-owned investments in China. In 1979, the Chinese government introduced comprehensive laws on economic matters. These laws have enhanced the protection of foreign investments in China. However, regardless of the enhanced legal protection of foreign investments, the Chinese legal system continues to evolve rapidly and the interpretation of many laws and regulations entails uncertainties which may limit the protection available to foreign investments like the Company s subsidiary Tobii Electronics Technology Suzhou Co. Ltd. In addition, resorting to administrative proceedings and to initiate court proceedings for purposes of enforcing legal rights that a contractual party is entitled to, are subject to a certain level of uncertainty. Decisions by administrative authorities and courts are marked by a certain level of discretion in interpreting laws, regulations and contractual terms without necessarily considering the legal aspects. Further, Tobii has a group of computer software programmers retained on a consultant basis in Kiev, Ukraine. Since 2014, Ukraine has been engaged in a territorial conflict with Russia in the south eastern parts of Ukraine which has led to general political uncertainty and acts of violence. If the political situation becomes worse or expands geographically to other parts of Ukraine, there is a risk that the work conducted by the personnel retained by Tobii in Kiev would be partially or fully interrupted, at least for a period of time. The above uncertainties and factors could have a material adverse effect on the Company s business, financial condition or results of operations. Tobii depends on its executives and key personnel as well as maintaining relationships with re-sellers Tobii s technology is very complex and the Company is dependent on executives and key personnel, including a competent sales force as well as expert engineers with a detailed knowledge of the Company s technology and industry. There is a risk that Tobii may not be able to retain or hire such personnel to the extent necessary for a continuous success on a market subject to competition. If Tobii fails to keep and retain executives and key personnel as well as recruiting highly skilled personnel, this could have a negative effect on the Company s business and results of operations and hamper future expansion of its R&D, sales and support operations. Furthermore, in many regions, Tobii is working with re-sellers as sales representatives/agents to sell its products and services. If Tobii fails to find competent re-sellers or if several contracts with re-sellers for some reason are terminated within a short period of time, Tobii may have difficulties to replace such re-sellers which could negatively affect Tobii s revenues. Tobii s risk and compliance management could leave Tobii exposed to unidentified or unanticipated risks With its global presence, Tobii is subject to various compliance related risks, for example, misconduct, fraud, non-compliance with applicable laws and regulations, including but not limited to the U.S. Health Insurance Portability and Accountability Act of 1996, or other improper activities by employees, agents or partners of Tobii. Such conduct could have a significant negative impact on the business and reputation of Tobii and could result in failure to comply with several different laws and regulations, inter alia, with respect to public procurement; protection of classified information; bribery and other corrupt practices; environmental, trade, competition and antitrust laws and regulations and internal controls of financial reporting. Failure to comply could subject Tobii to fines, penalties or other sanctions; or negative effects on its reputation, which could result in reduced revenues and profits. There is a risk that Tobii fails in being fully effective in handling the Company s risk exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated. Some of Tobii s methods of managing risks are based upon Tobii s assumptions and future predictions as regarding market behavior. As a result, the methods may not prevent future risk exposures, which could be significantly greater than current measures indicate, and Tobii may be subject to currently unidentified compliance issues in the various jurisdictions in which the Company operates. Other risk management and compliance methods depend upon evaluation of the markets in which Tobii operates, its customers or other issues and other information that are publicly available or otherwise accessible by Tobii. This information may in some respects be inaccurate, incomplete, not up to date or poorly evaluated. Any failure of Tobii s risk management and compliance methods may have a material adverse effect on its business, financial condition or results of operations. Further, marketing and sale of, in particular, Tobii Dynavox s products often require regulatory approvals in relevant markets. The authorization process for medicalgrade products varies between countries, which mean that it can be difficult for Tobii to predict the amount of resources in terms of time and cost that may be required to receive necessary product approvals in different markets and comply with the requirements surrounding these processes. There is also a risk that Tobii fails to receive and uphold such approvals. In addition, there is a risk that Tobii s personnel do not adhere to the Company s policies and procedures and personnel may take actions which are in direct conflict with 19

22 Risk factors Tobii s established policies and procedures, or alternatively commit actions, including fraudulent and corrupt behavior, that have not been sanctioned by Tobii. Moreover, Tobii s growth and expansion may affect the Company s ability to implement and maintain stringent internal controls. Tobii s risk management and internal control capabilities are also limited by the information, tools and technologies available to the Company. Any material deficiency in Tobii s risk management or other internal control policies or procedures may expose the Company to significant credit, liquidity, market, operational or technical risk, which may in turn have a material adverse effect on the Group s business, results of operations or financial condition. Tobii is dependent on intellectual property rights and the Company s methods of protecting these rights may be inadequate Tobii s business and business strategy are tied to the Company s products and technology. Tobii relies on a combination of patent and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect the Company s intellectual property. As of the date of the Offering Circular, Tobii holds more than 180 granted patents or filed patent applications (of which more than 25 are granted patents in the U.S. and more than 50 are patent applications in the U.S.). As of the date of this Offering Circular, it is Tobii s assessment that the patents and the patent applications will expire at various dates between 2018 and Generally, there is a risk that the Company will not be able to obtain patent protection on the key components of its technology or that the Company will not be able to obtain or uphold patents in key jurisdictions such as the U.S. or within the EU. There is a further risk that new products or technologies developed by Tobii are not patentable, that issued patents will not be able to provide the Company with the expected competitive advantages or that they will be nullified or cancelled by third parties, that the time to obtain issued patents may be greater than the lifetime of the technology, or that the patents of others will impair the Company s ability to develop and conduct its business. Governmental authorities may not approve trademark applications filed by the Company and even if the applications are approved, third parties may seek to oppose or challenge these registrations. A failure to obtain trademark registrations in Sweden, the U.S., Germany, China, Japan and other important markets could limit Tobii s ability to use the Company s trademarks and impede its marketing efforts in those jurisdictions. Tobii believes that the importance of intellectual property rights may increase if eye tracking enters the potential future volume markets with more competitors and more products available than in Tobii s existing markets. Despite Tobii s efforts to protect the Company s intellectual property, unauthorized parties may attempt to copy or obtain and use the Company s technology. Policing unauthorized use of technology is complicated and expensive, and the outcome of potential enforcement actions is uncertain. Consequently, there is a risk that the steps taken by the Company will not be sufficient to prevent misappropriation of its technology. There is a risk that the Company s measures for preserving the confidentiality on trade secrets and confidential information are insufficient to prevent others from obtaining such information. If any of the risks stated above were to materialize, it could have a material adverse effect on the Group s business, financial condition or results of operations. There is a risk that Tobii becomes involved in legal and administrative proceedings, including claims relating to Tobii s intellectual property as well as claims of potential infringement of third party s intellectual property rights by Tobii Substantial litigation pertaining to intellectual property exists in high-technology industries. Due to this, Tobii is subject to the risk of becoming involved in legal or administrative proceedings in the future, which may include substantial claims for damages or other payments, including damage claims by customers or competitors for violations of antitrust laws. Preparations, defense and resolution of these proceedings can be prolonged and costly. The outcome of such proceedings is difficult to predict. In the event of a negative outcome of any material legal, administrative or arbitration proceeding, whether based on a judgment or a settlement agreement, Tobii could be obligated to make substantial payments. In addition, the costs related to disputes and arbitration proceedings may be significant. Tobii s competitors or other persons may have already obtained, or may in the future, obtain patents relating to one or more aspects of the Company s technology. If Tobii is sued for patent infringement, the Company may be forced to incur substantial costs in defending itself and potentially be served with an injunction halting sales of products that are based on the challenged patent as long as the legal process regarding the patent is ongoing. If litigation were to result in a judgment that Tobii infringed a valid and enforceable patent, a court may order the Company to pay substantial damages or licensing fees to the owner of the patent and/or to stop using any infringing technology or products. This could cause a significant disruption in Tobii s business and force the Company to incur substantial costs to develop and implement alternative, non-infringing technology or products, or to obtain a license from the patent owner. This could also cause Tobii s licensees and customers to bring warranty claims against the Company. There is a risk that a successful patent infringement claim by an external party could lead to Tobii being unable to develop competitive alternatives at a reasonable cost that would be commercially acceptable, or that the Company would not be able to obtain a license from a patent owner on commercially reasonable terms, or at all. Following the completion of the acquisition DynaVox Systems LLC, a university in Virgina, U.S., raised a claim against the respondent Eye Response Technologies Inc. previously acquired by DynaVox Systems LLC, which is why 20

23 Risk factors the claim has been addressed to DynaVox Systems LLC. The claim relates to a licensing agreement. The university has initiated an arbitration procedure and a procedure in the United States District Court for the Western District of Virginia against DynaVox Systems LLC and claims damages in the order of USD 3 million. DynaVox Systems LLC is defending against the claim. Tobii has initiated a claim of patent infringement against The Eye Tribe in the Northern District of California, USA. There is a risk that the claim will be unsuccessful and no damages or royalty payments will be awarded to Tobii. This may incur a significant cost in terms of legal costs for Tobii. There is also a risk that Tobii will have to pay the legal costs of The Eye Tribe. Ongoing and future disputes may lead to substantial costs and/or damages which could have a material adverse effect on the Group s business, financial condition or the results of operations. Exposure to currency exchange risks may affect Tobii s cash flow, income statement and balance sheet Currency risk refers to the risk of exchange rate fluctuations having an adverse effect on the Group s cash flow, income statement, and balance sheet. The Company reports in SEK, and SEK is the Company s principal functional currency. Foreign exchange exposure occurs in conjunction with products and services being bought or sold in currencies other than the respective subsidiary s local currency (transaction exposure) and during conversion of the balance sheets and income statements of non- Swedish subsidiaries into SEK (translation exposure). Tobii s global operations give rise to significant cash flows in currencies other than the SEK. Tobii is principally exposed to changes in EUR, USD and JPY in relation to SEK. In 2014, a change of (+/ ) 10% in EUR/SEK would have effected Tobii s operating profits by (+/ ) SEK 6.4 million. The corresponding reduction for a 10% change in USD/SEK was SEK 7.7 million and SEK 2.4 million for JPY/SEK. Accordingly, any exchange rate fluctuations could have an adverse effect on the Group s business operations, financial condition or results of operations. Tobii is exposed to tax related risks Tobii s sales are primarily generated through subsidiaries in a number of countries. Transactions between Group companies are made in accordance with Tobii s transfer pricing policy and according to Tobii s understanding or interpretation of current tax laws, tax treaties, other tax law stipulations and the requirements of the concerned tax authorities. Transfer pricing risk is the risk of sanctions due to non-compliance with transfer pricing regulations. Tax authorities of all countries wish to ensure that the commercial terms between related entities reflect the fair prices which would be agreed between independent parties in similar circumstances, especially in cross-border situations. As a global actor, Tobii has to respect detailed transfer pricing regulations and documentation requirements issued by an ever growing number of countries. On certain markets, the Company only conduct sales through own sale channels which can make it more difficult to establish the transfer pricing since no third party comparisons can be made. This gives rise to a risk that transfer pricing in these countries may deviate from market prices. There is a risk that the tax authorities in these countries may make assessments that deviate from income-tax returns or other filed documents. Several of Tobii s foreign subsidiaries have reported losses in the past. The tax authorities of the countries concerned could make assessments and take decisions which deviate from Tobii s understanding or interpretation of the applicable laws, treaties, documentation requirements and other regulations. There is risk that increased tax costs (including tax surcharges) may arise if a tax authority changes a result which could lead to increased tax costs and tax surcharges, but also reduce the level of the Company s accumulated tax loss carry-forwards. As Tobii s operations have generated deficits, the Company has accumulated tax loss carry-forwards that may lead to future tax reductions of up to the level of SEK 78 million (of which SEK 43 million is reported as deferred tax assets). Ownership changes may result in limitations (fully or in part) in the entitlement to utilize such tax loss carry-forwards in the future. The opportunity of utilizing the tax loss carry-forwards in the future may also be negatively affected by changes in legislation. As mentioned, Tobii conducts sales in a number of countries. In certain countries the end customer is sometimes invoiced directly by Tobii AB (publ). There is a risk that these sales, from a tax perspective, mean that the Company is considered to have a permanent establishment where the sales take place, which in certain countries would lead to that local VAT shall be added to the invoice. This would in such cases result in increased VAT in such countries and it could affect the Company if the VAT is claimed retroactively and the VAT cannot be imposed on the customers. In relation to the acquisition of DynaVox Systems LLC, a risk was discovered during the due diligence exercise relating to non-payments of sales taxes in certain states in the U.S. In consultation with Tobii s tax advisors, the risk was estimated to USD 1.6 million which is included as a reservation in the opening balance. The estimation is based on that DynaVox Systems LLC enters into voluntary disclosure agreements with relevant states for the years 2010 to The Company has initiated the process of making these voluntary adjustments. If the Company fails to conclude the voluntary disclosure agreements for nonpayment of sales taxes, it may lead to the actual amount payable for non-payment of sales tax becomes higher than the amount that has been reserved in the opening balance. The materialization of any of these aforementioned risks could have a material adverse effect on Tobii s business, financial condition or results of operations. 21

24 Risk factors If Tobii is classified as a passive foreign investment company, then the Company s U.S. shareholders could suffer adverse tax consequences as a result Generally, if, for any taxable year, at least 75% of Tobii s gross income is passive income or at least 50% of the average quarterly value of assets is attributable to assets that produce passive income or are held for the production of passive income, including cash, Tobii would be characterized as a passive foreign investment company ( PFIC ) for U.S. federal income tax purposes. For purposes of these tests, passive income includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties (other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business). If Tobii is characterized as a PFIC, U.S. shareholders may suffer adverse tax consequences, including having gains realized on the sale of Tobii s ordinary shares treated as ordinary income, rather than capital gain, the loss of the preferential rate applicable to dividends received on Tobii s ordinary shares by individuals who are U.S. holders, and having interest charges apply to dividends made by Tobii and the proceeds of share sales. Tobii s status as a PFIC, may depend, in part, on how quickly it utilizes the cash proceeds from the Offering in its business. Since PFIC status depends on the composition of the Company s income and the composition and value of its assets (which may be determined in large part by reference to the market value of Tobii s shares, which may be volatile) from time to time, Tobii may be considered a PFIC for any taxable year. While Tobii believes that it was not a PFIC for its prior taxable year, since the PFIC tests are applied only at the end of a taxable year it is not currently possible to determine Tobii s PFIC status for the current or future years. If Tobii is classified as a PFIC then the Company s U.S. investors could suffer adverse tax consequences as a result. Prospective U.S. investors should discuss the issue of Tobii s possible status as a PFIC with their tax advisors. Risks relating to the Offering An active, liquid and orderly trading market for the Tobii shares may not develop, the price of the shares may be volatile, and potential investors could lose a part or all of their investment The Shares have not previously been subject to trading on an exchange. It is therefore difficult to predict the level of trading or the interest the Company s shares will receive. The price at which the shares will be traded and the price at which investors may realize their investment will be influenced by a large number of factors, some specific to Tobii and its operations and some general to quoted companies. Admission to trading on Nasdaq Stockholm should not be taken as implying that there will be a liquid market for the shares. There is also a risk that the share price will be highly volatile in connection with the shares becoming publicly traded and if a liquid trading does not evolve or remain sustainable, it could result in difficulties for shareholders to dispose of the shares. There is also a risk that the market price can differ substantially from the share price under the Offering. If any of these risks where to materialize, it could have a material adverse effect on the share price. Future issuances of shares or other securities in the Company may dilute the shareholding and affect the price of the shares Tobii may need additional capital to fund its business. For several years, Tobii has experienced negative cash flow from operations and investments, and it is Tobii s assessment that this also will be the case during the coming years, but it could also be the case thereafter. In addition, Tobii may need to make additional investments in equipment and/or technology and may need to raise additional funds through the issuance of equity, equity-related or convertible debt securities. There is a risk that additional financing will not be available to the Company on acceptable terms when required, or may not be available at all. Existing shareholders shareholdings may be diluted if the Company resolve to raise additional capital, e.g. by way of a new share issuance, which may affect the price of the shares. If these risk where to materialize, it could have a material adverse effect on the shareholders invested capital and/or the share price. Following the Offering, the existing main shareholders will continue to have significant influence over Tobii and the ability to influence matters requiring shareholders approval The existing main shareholders will continue to have the potential to significantly influence the outcome of matters submitted to Tobii s shareholders for approval, including the election of directors and any share capital increase, merger or sale of all or substantially all of Tobii s assets. To the best of Tobii s knowledge, no agreements between the largest shareholders exist aside from the Sell down agreement which has been entered into between the Joint Bookrunners and certain larger shareholders. Nevertheless, the interests of the main shareholders may not be aligned with Tobii s interests or those of the other shareholders, and the main shareholders could exercise influence over Tobii in a manner that does not promote the interest of the other shareholders in the best way. Tobii s ability to pay dividends is dependent upon its future earnings, financial condition, cash flows, working capital requirements, capital expenditures and other factors Tobii does not intend to pay any dividend during the coming years since the development and expansion plans for the business unit Tobii Tech will be prioritized. In addition, the amount of any future dividends that Tobii may pay, if any, will depend upon a number of factors, such as future revenues, financial condition, cash flows, working capital requirements, capital expenditures and other factors. Tobii may also not have sufficient distributable funds, and Tobii s shareholders may not resolve to pay dividends. 22

25 Risk factors Differences in currency exchange rates may adversely affect the value of shareholdings or dividends paid The shares will only be quoted in SEK and any dividend will be paid in SEK. As a result, shareholders outside Sweden may experience adverse effects on the value of their shareholdings and their dividends, when converted into other currencies, if the Swedish krona depreciates against the relevant currency. Existing shareholders future sale of shares could cause the share price to decline The price of Tobii s shares could decline if there are substantial sales of shares in the Company, particularly sales by the Company s directors, executive management, and significant shareholders, or when a large number of shares are sold. Sales of substantial amounts of shares by the main shareholders or the perception that such sales will occur, could have an adverse effect on the share price. Cornerstone Investors may not fulfil their undertakings Invifed AB, The Sixth AP-fund and RAM ONE (the Cornerstone Investors ) have agreed to, directly or indirectly through subsidiaries, acquire shares in the Offering, on the same terms and conditions as for other investors, corresponding to 17.53%, 6.52%, and 9.00% of the total number of shares in the Offering respectively. 1) The Cornerstone Investors undertakings are however not secured through a bank guarantee, blocked funds or pledge of collateral or similar arrangement. Hence, there is a risk that the Cornerstone Investors will not be able to fulfil their undertakings. Furthermore, the Cornerstone Investors undertakings are associated with certain conditions relating to, among other things, that the Offering is completed within a certain time frame. In the event that any of these conditions are not fulfilled, there is a risk that the Cornerstone Investors do not fulfil their undertakings, which could have an adverse effect on the completion of the Offering. Shareholders in the U.S. or other countries outside Sweden may be excluded from future cash offerings of shares If the Company issues new shares in a cash issue, shareholders have, as a general rule, preferential rights to subscribe for new shares proportionally to the number of shares held prior to the issue. Shareholders in certain countries may, however, be subject to limitations that prevent them from participating in rights offerings or otherwise makes participation difficult or limited. For example, shareholders in the U.S. may be unable to exercise rights to subscribe for new shares unless a registration statement under the Securities Act is effective in respect of such subscription rights and shares or an exemption from the registration requirements under the Securities Act is available. Shareholders in other jurisdictions outside Sweden may be similarly affected if the rights and the new shares being offered have not been registered with, or approved by, the relevant authorities in such jurisdiction. Tobii is under no obligation to file a registration statement under the Securities Act or seek similar approvals under the laws of any other jurisdiction outside Sweden in respect of any subscription rights and shares and doing so in the future may be impractical and costly. To the extent that Tobii s shareholders in jurisdictions outside Sweden are not able to exercise their rights to subscribe for new shares in any future rights issues, their proportional interests in the Company would be reduced. 1) Based on full subscription in the Offering and the midpoint of the price range in the Offering (SEK 23.50) 23

26 Invitation to acquire shares in Tobii AB (publ) In order to support the continued development and growth of the Company, the Board of Directors has resolved on the Offering. The Offering involves a combination of newly issued shares and the sale of existing shares. In line therewith, the Board of Directors has applied for and received an approval for a listing of the Company s shares on Nasdaq Stockholm, provided that, inter alia, the distribution requirement in respect of the Company s shares is fulfilled, The Offering comprises a total of 17,901,000 20,101,000 shares in Tobii, The Company offers between 16,000,000 18,200,000 newly issued shares whereby the number of shares will be established to such amount that it provides Tobii with gross proceeds of SEK 400 million before transaction costs. Furthermore, a few existing shareholders offer 1,901,000 existing shares. 1) Based on the price range, the new share issue in the Offering corresponds to approximately 19 21% of the total number of shares and votes in the Company based on a fully diluted basis following the completion of the Offering. To cover a possible over-allotment in connection with the Offering, the Company has undertaken to, at the request of the Joint Bookrunners, issue additional shares representing not more than 15% of the number of shares comprised by the Offering (the Over-allotment option ), equal to not more than 3,015,150 shares, representing approximately 3% of the total number of shares in the Company on a fully diluted basis following the completion of the Offering. The Offering is made to the general public in Sweden and to institutional investors. The Offering price will be determined by way of a book-building procedure and will consequently be based on demand and overall market conditions. The Offering price will be established by the Board of Directors in consultation with the Joint Bookrunners, within a price range of SEK 22 SEK 25 per share. The Offering price is expected to be published on or around April 24, The new shares will be issued by the Company based on an authorization granted to the Board of Directors at the extraordinary shareholders meeting held on March 9, Through the new share issue of no more than 18,200,000 shares, Tobii s share capital will increase by a maximum of SEK approximately 132,076 from SEK 500,250 to approximately SEK 632,281. Through the Offering, Tobii will receive a capital increase of SEK 400 million, before transaction expenses. In the event that the Over-allotment option is fully exercised, an additional maximum of 3,015,150 new shares will be issued, implying a further increase in the capital share of maximum SEK 21,881 where Tobii will receive a capital increase of no more than approximately SEK 67 million. The total value of the Offering amounts to SEK 442 million SEK 448 million based on the price range. If the Over-allotment option is fully exercised, the total value of the Offering amounts to SEK million. Based on the price range in the Offering, Tobii s shares are valued at approximately SEK 2.0 billion SEK 2.2 billion 2) after completion of the Offering and assuming the Over-allotment option is fully exercised. Pursuant to the terms and conditions set out in this Offering Circular, investors are hereby invited to acquire shares in Tobii AB (publ). Stockholm, April 10, 2015 Tobii AB (publ) The Board of Directors 1) The selling shareholders includes among others, John Elvesjö, board member and a member of the executive management, who offers 150,000 shares and the board member Nils Bernhard, who offers 275,000 shares. 2) Before dilution effects from existing employee stock options and warrants. 24

27 Background and reasons Background and reasons Tobii s background Tobii is the global market leader in the development and sale of eye-tracking technology and solutions 1). Tobii s vision is a world where all technology works in complete harmony with natural human behavior. Tobii conducts its operations in three business units, each with its distinct markets, products and personnel: i) Tobii Dynavox, the global market leader in solutions for assistive technology for communication, ii) Tobii Pro, the global market leader in solutions for understanding human behavior using eye tracking; and iii) Tobii Tech, a supplier of leading core eye-tracking technology, components and platforms, with future opportunity for volume integration into a wide range of devices. Tobii operates and serves customers on several markets with offices in Sweden (Headquarters), the U.S. (offices in Boston, Washington DC, Pittsburgh and Mountain View), China, Japan, Germany and Norway. In 2013, Tobii had a global market share of eye-tracking solutions estimated to approximately 57%. 1) Tobii was founded in 2001 and the first product was released in Since then, Tobii has developed its eyetracking technology and has, according to management, introduced a range of industry-leading products and solutions based on this technology. The Company has entered several markets where its technology has had a profound impact. In 2007, the Norwegian company Viking Software AS was acquired followed by the acquisition of the U.S. company, Assistive Technology Inc. in In 2014, Tobii acquired the U.S. company DynaVox Systems LLC, a company that up until then had been one of Tobii s main competitors in the assistive technology market. Two of the Company s business units Tobii Pro and Tobii Dynavox are profitable and cash-flow positive. Tobii continues to expand the business within both of these units. In the past few years, Tobii has increased investments into its business unit, Tobii Tech, with the aim to bring eye tracking into future volume markets by encouraging OEM customers to integrate, Tobii s core eye-tracking technology in, for example, gaming devices, regular computers, vehicles and medical equipment. Reasons for admitting the Tobii share to trading The Offering and the listing is conducted in order to expand the shareholder base, increase Tobii s capital and enable Tobii to access the Swedish and international capital markets, thereby increasing the Company s financing alternatives which is expected to support the Company s sales and profit development. Tobii s Board of Directors considers the new share issue and listing of the Company s shares to be a logical and important step in Tobii s development in providing Tobii with growth opportunities and to further strengthen the Company s market position and increase the awareness of Tobii, its products and its technology. Tobii expects to receive a gross proceed of SEK 400 million from the new share issue realized as a part of the Offering. Tobii intends to use the major part of the net proceeds from the Offering for R&D investments into the Tobii Tech business unit with the aim to further develop the Company s technology to meet the needs of new potential volume markets and to strengthen the Company s sales, marketing and business development efforts to target such markets. The present business plan of Tobii Tech indicates a negative cash flow of approximately SEK 400 million up to and including 2018 for the business unit, which the Group intends to finance partly with internal cash flow generated by Tobii Dynavox and Tobii Pro, partly with the proceeds of the issue which the Offering aims to contribute to the Group. In addition, Tobii will also use the proceeds from the share issue to repay the two bank loans of USD 5 million and USD 6 million to Swedbank AB (publ). A smaller part of the proceeds, and potential proceeds from the Overallotment option, may also be used for capital expenditures in the existing operations as well as for acquisitions of assets, technologies or companies complementary to the current business of the Company. At this time, Tobii has not identified any such specific assets, technologies or companies. To cover a possible over-allotment in connection with the Offering the Company has undertaken to, at the request of Joint Bookrunners, issue additional new shares, which could result in Tobii receiving an additional maximum of approximately SEK 67 million in gross proceeds in the event that the Over-allotment option is fully exercised. 1) Arthur D. Little 25

28 In other respects, reference is made to the full particulars of the Offering Circular, which has been prepared by the Board of Directors in connection with the application for listing of the Company s shares on Nasdaq Stockholm and the Offering made in connection with the listing. The Board of Directors is solely responsible for the contents of this Offering Circular. It is hereby assured that all reasonable precautionary measures have been taken to ensure that the information contained in this Offering Circular, as far as the Board of Directors knows, corresponds to the factual circumstances and that nothing has been omitted that could affect its purpose. In the event that information comes from a third party, the information has been correctly reflected and no information has been omitted in a way that would make the reflected information false or misleading. Stockholm, April 10, 2015 Tobii AB (publ) The Board of Directors 26

29 Terms and conditions Terms and conditions To facilitate the description of the Offer, this section does not distinguish between the newly issued shares and the existing shares, that could be offered for sale. The Offering The Offer compromises a maximum of 17,901,000 20,101,000 shares, of which 16,000,000 18,200,000 are newly issued shares and 1,901,000 are existing shares, and the Offer is divided into two parts: The offer to the general public in Sweden 1) The offer to institutional investors in Sweden and abroad 2) The outcome of the Offer is expected to be published through a press release around April 24, Over-allotment option Tobii has provided an over-allotment option to the Joint Bookrunners, which allows the Joint Bookrunners, within 30 days following the first day of trading in the Company s shares on Nasdaq Stockholm, at a price equivalent to the Offering price, to request that Tobii issues up to an additional maximum of 3,015,150 shares, corresponding to 15% of the maximum number of shares in the Offering. The over-allotment option may only be exercised in order to cover any potential over-allotment within the Offering. Distribution of shares The distribution of shares to the respective parts of the Offering will be based on demand. The distribution will be decided by Tobii s Board of Directors in consultation with the Joint Bookrunners. Book-building procedure In order to establish a market-based pricing of the shares in the Offering, institutional investors will be given the opportunity to participate in a book-building procedure. The book-building procedure will take place between April 14 23, The Offering price will be determined within the framework of this procedure. The book-building procedure for institutional investors may be terminated in advance or extended. Notice of any such termination or extension will be provided in a press release before the end of the book-building period. See also the section entitled Offering to institutional investors below. Offering price The Offering price will be established in the book-building procedure described above and is expected to be set within the range of SEK per share and is expected to be published in a press release on or about April 24, The Offering price to the general public will not exceed SEK 25 per share. No commission will be charged. The price range has been established by Tobii s Board of Directors in consultation with the Joint Bookrunners based on the expected investment interest from institutional investors. Offering to the general public Application Applications by the general public for the acquisition of shares shall comprise a minimum of 400 shares and a maximum of 45,000 shares 3), in even lots of 100 shares. Applications are binding. Applications can be made between April 14 22, 2015 and should be submitted to Carnegie. Application shall be made using a specific application form, which is available at Carnegie s offices. The Offering Circular and the application form are also available on Tobii s website ( and Carnegie s website ( Customers of Avanza who are connected to internet banking services can apply for acquisition of shares via Avanza s Internet services. If more than one application is submitted by the same acquirer, only the first registered application will be considered. Late, incomplete or incorrectly completed application forms may be disregarded. No additions or amendments may be made in the pre-printed text on the application form. If you have an account with specific rules for securities transactions, such as an IPS-deposit, ISK-deposit (Sw. Investeringssparkonto) or deposit within an endowment insurance, you should confer with your nominee if and how you can apply for acquisition of shares in the Offering. 1) The general public in Sweden comprises private individuals and legal entities in Sweden who apply for the acquisition of up to 45,000 shares. 2) Institutional investors comprise private individuals and legal entities who apply for the acquisition of more than 45,000 shares. 3) Anyone who applies for the acquisition of more than 45,000 shares must contact Carnegie or ABG Sundal Collier in accordance with what is stated in the section Offering to institutional investors. 27

30 Terms and conditions Application via Carnegie Applications may be submitted to Carnegie according to one of the following options: Complete the application form for the Offering and submit it to one of Carnegie s branch offices during the application period. The application form can be obtained from Carnegie s website, ( where the Offering Circular also is available; or The application form can also be sent by mail to Carnegie Investment Bank AB (publ), Transaction Support, Regeringsgatan 56, SE Stockholm, Sweden. Persons who apply for acquisition of shares via Carnegie must have a securities account ( VP-account ), a service account or a custody account with a Swedish account operator, or a custody or investment savings account with Carnegie. In the event that customers with ISK-deposits (Sw. Investeringssparkonto) in Carnegie are allotted shares, Carnegie will purchase the corresponding number of shares in the Offering and then sell them on to the customer at the same price as in the Offering. The application form must be received by Carnegie no later than 5 p.m. (CET) April 22, Application via Avanza Persons who are depository account customers with Avanza can apply for acquisition of shares via Avanza s internet services. Applications via Avanza can be made from April 14, 2015 until April 22, In order to not lose the right to allotment, depository account customers of Avanza must have sufficient funds available on their accounts from April 22, 2015 until April 28, More information is available on Tobii employees An offering is also made to certain Tobii employees in France, Germany, Hungary, Japan, Norway, Sweden, the U.K. and the U.S. through separate application processes. Applications from all Tobii employees who are subject the offer will be given special consideration up to a number of shares equal in value to the relevant investment limit. Tobii employees in Sweden will be subject to an investment limit of SEK 30,000. Tobii employees in the remaining jurisdictions will be subject to an investment limit of SEK 190,000. However, some of Tobii s employees in France, Hungary, Japan and the United States who receive the offer may apply for a number of shares that exceeds SEK 190,000 in value, but applications above this level will not be given any special consideration. Tobii employees who wish to acquire shares must follow the instructions issued by the Company. Allotment The allotment of shares will be decided by Tobii s Board of Directors in consultation with the Joint Bookrunners, whereby the aim to obtain a wide distribution of the shares among the general public in order to facilitate a regular and liquid trading in the Company s shares on Nasdaq Stockholm. Allotment is not dependent on when during the application period the applications are submitted. In the event of over-subscription it is possible that no allotment will be received or that the received allotment comprises fewer shares than applied for and allotment may, in whole or in part, be made through random selection. Certain customers to Carnegie and ABG Sundal Collier may be given special priority. All Tobii employees who receive an offer to subscribe for the acquisition of shares will be given special consideration up to the specified investment limit. Allotment to existing shareholders will be prioritized. Notification of allotment Allotment is expected to take place on or about April 24, As soon as possible thereafter, contract notes will be sent out to those who have been allotted shares in the Offering. Those who have not been allotted shares will not receive any notification. Via Carnegie Notification of allotment is expected to be provided starting from April 24, 2015 at the telephone number To receive notification of allotment, the following information must be provided: name, personal/corporate ID number, and VP-account, service account or custody account number with a bank or another securities firm. Via Avanza Persons who have applied via Avanza s internet services will receive information regarding allotment through a securities note in their designated account, which is expected to occur around 9 a.m. (CET) on April 24, Payment Full payment for the allotted shares shall be made in cash no later than April 28, 2015 in accordance with the instructions on the received contract note. Via Carnegie For those who receive a contract note from Carnegie, payment for allotted shares shall be made in accordance with the instructions on the received contract note. In order for Carnegie to provide delivery of the shares on the settlement date, April 28, 2015, full payment for the allotted shares should be made by bank transfer to bank giro no later than April 28, Via Avanza For individuals who hold depository accounts with Avanza, funds will be deducted from the associated account at the latest on settlement date, April 28, Note that liquid funds for payment of the allotted shares must be available in the depository account from the last day of the application period, April 22, 2015, until settlement date April 28,

31 Terms and conditions Failure or improper payments Please note that if full payment is not received in time or if the bank account specified contains insufficient funds, the allotted shares may be reassigned to another party. If the price received in the reassignment is lower than the Offering price in the Offering, the person who was originally allotted the shares may be liable to pay the difference. Offering to institutional investors Application Institutional investors are invited to participate in a bookbuilding process, which will take place during the period April 14 23, Tobii reserves the right to shorten or extend the application period in the institutional offering. Any such shortening or extension of the application period will be made public by the Company in a press release prior to the end of the application period. Applications shall be submitted to Carnegie or ABG Sundal Collier in accordance with specific instructions. Allotment The decision on allotment of shares is made by the Board of Directors on April 24, 2015 in consultation with the Joint Bookrunners, with the aim to ensure that Tobii gets a good institutional shareholder base. The intention is that notifications of interest in participation, which are essentially deemed to be equivalent, should be treated equally. Interest registered by institutional investors who are deemed to be possible long-term shareholders in the Company may be given priority. Allotment will be entirely discretionary and no guarantees for allotment are given. The Cornerstone Investors are however guaranteed allotment in accordance with their respective undertakings. Allotment to existing shareholders will be prioritized. Notification about allotment Institutional investors are expected to receive notification of allotment in particular order on or about April 24, 2015, after which a contract note is sent out. Payment Full payment for allotted shares must be paid in cash in accordance with the contract note against the delivery of shares on April 28, Failure or improper payments Note that if full payment has not been received within the prescribed time, the allotted shares may be reassigned to another party. If the price received in the reassignment is lower than the Offering price in the Offering, the institutional investor who was originally allotted the shares may be liable to pay the difference. Registration of allotted and paid shares It is expected that allotted and paid shares, for both institutional investors and the general public in Sweden, will be registered with Euroclear Sweden starting on April 28, 2015, after which Euroclear Sweden will send out a securities notice showing the number of shares in the Company registered on the recipient s VP-account. Note that purchasers from the general public who pay for allotted shares to a bank giro account in accordance with instructions on a contract note will receive the acquired shares in their VP-account or securities depository account first when Carnegie or Avanza, respectively, have received full payment. Depending on where, how and at what time of the day payment is made, it may take up to two or three banking days from the time funds are paid in. Notifications to shareholders who have specified that the shares should be delivered to a securities depository account will be made in accordance with each nominee s procedures. Listing of the shares Tobii s Board of Directors has applied for the admission to trading of the Company s shares on Nasdaq Stockholm. On March 6, 2015, the Nasdaq listing committee decided to admit the shares in Tobii to trading on Nasdaq Stockholm, subject to customary conditions, such as the distribution requirement for the Company s shares being fulfilled no later than on the first day of trading. In case the Company s Board of Directors ultimately resolves to list the Company s shares, trading in the Company s shares is expected to begin on or about April 24, Consequently, trading is expected to commence before the shares have been transferred to the acquirer s VP-account or securities depository account and in some cases before the contract note has been received. This means that trading is expected to commence before the terms and conditions for the completion of the Offering have been fulfilled. Trading in the Company s shares made before the Offering becomes unconditional April 28, 2015, will be cancelled if the Offering is not completed. The trading symbol on Nasdaq Stockholm for the Company s share is TOBII. Stabilization In connection with the Offering, Carnegie may execute transactions aimed at supporting the market price of the shares at levels above those which might other wise prevail in the open market. Such stabilization transactions may be executed on Nasdaq Stockholm, in the OTC market or otherwise, at any time during the period starting on the date of commencement of trading in the shares on Nasdaq Stockholm and ending not later than 30 calendar days thereafter. See also Stabilization in the section Legal considerations and supplementary information. Announcement of the outcome of the Offering The final outcome of the Offering is expected to be made public through a press release on or about April 24, The press release will be available on Tobii s website, 29

32 Terms and conditions Right to dividend The offered shares carry the right to dividend from the first dividend record date following the admission to trading of the Company s share. Dividends, if any, are paid following a resolution by the shareholders general meeting. The payment is handled by Euroclear Sweden. The right to dividend applies to shareholders who are registered as owners in the share register maintained by Euroclear Sweden on the record date decided by the shareholders general meeting. Regarding deduction of Swedish preliminary tax, see section Tax considerations in Sweden. For additional information, see also Dividends and dividend policy in section Share Capital and Ownership Structure. Terms and conditions for the fulfillment of the Offering The Company, Carnegie and ABG Sundal Collier intend to enter into an agreement on the placing of shares in Tobii on or about April 23, 2015 (the Placing agreement ). The Offering is conditional on the interest in the Offering, in the Joint Bookrunner s opinion, being sufficient for trading in the shares, that the Placing agreement is entered into, that certain conditions in the Placing agreement are fulfilled and that the Placing agreement is not terminated. Pursuant to the Placing agreement, the Joint Bookrunners commitment to designate purchasers of or, if the Joint Bookrunners fail to do so, themselves acquire the shares comprised by the Offering is conditional upon, inter alia, that no events occur which have such a materially adverse effect on the Company that it would be inappropriate to complete the Offering ( material adverse events ) and certain other conditions. The Joint Bookrunners may terminate the Placing agreement up until the settlement date, April 28, 2015, if any material adverse events occur, if the warranties that the Company has given the Joint Bookrunners should not be true and correct or if any other condition stipulated by the Placing agreement is not fulfilled. The Offering may be suspended if the above stated conditions are not fulfilled and if the Joint Bookrunners terminate the Placing agreement. In such event, neither delivery of nor payment for shares under the Offering will be made. See Placing agreement in the section Legal considerations and supplementary information for more information on the Placing agreement. Important information regarding the possibility to sell allotted shares Notifications about allotment to the general public in Sweden will be made through distribution of contract notes, expected to be distributed on or about April 24, After payments for the allotted shares have been processed by Carnegie and Avanza, respectively, the duly paid shares will be transferred to the securities depository account or the securities account specified by the acquirer. The time required to transfer payments and transfer duly paid shares to the acquirers of shares in Tobii may imply that these acquirers will not have shares available in their specified securities depository account or the securities account until April 28, 2015, at the earliest. Trading in Tobii s shares on Nasdaq Stockholm is expected to commence on or about April 24, Please note that, accordingly, if shares are not available in an acquirer s securities account or securities depository account until April 28, 2015 at the earliest, the acquirer might not be able to sell these shares on the stock exchange as from the time trading in the shares commences, but only once the shares are available in the securities account or the securities depository account. Information concerning processing of personal data Persons who acquire shares in the Offering will submit personal information to Carnegie, ABG Sundal Collier and Avanza, respectively. Personal information provided to Carnegie, ABG Sundal Collier and Avanza respectively, will be processed by computer systems to the extent necessary to provide services and manage customer engagements. Personal data obtained from other than the customer in question may also be processed. Personal data may also be processed in computer systems of companies with which Carnegie, ABG Sundal Collier and Avanza, respectively, co-operate. Information concerning processing of personal data is provided by Carnegie s, ABG Sundal Collier s or Avanza s branch offices, to which requests for correction of personal data should also be sent. Miscellaneous The fact that Carnegie is the issuer agent does not imply that Carnegie views any party that applies for shares in the Offering as a customer of the bank for the investment. Carnegie s, ABG Sundal Collier s or Avanza s receipt and handling of application forms will not result in any customer relationship between acquirers in the Offering and each respective bank. The acquirer is, in relation to the acquisition, considered as a customer of Carnegie, ABG Sundal Collier and Avanza, only if the bank has provided advice to the acquirer regarding the acquisition, or has otherwise contacted the acquirer individually about the acquisition. The consequence of Carnegie, ABG Sundal Collier and Avanza not regarding the acquirer as a customer in relation to the acquisition is that the rules regarding protection of investors under the Securities Markets Act will not be applicable to the acquisition. Among other things, this means that neither so-called customer classification or so-called suitability assessment will be made in relation to the acquisition. As a result, acquirers are themselves solely responsible for having adequate experience and knowledge to understand the risks associated with the acquisition. 30

33 Terms and conditions 31

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35 Business and market overview Tobii Business and market overview Tobii is the global leader in eye tracking based on the Company s total market share 1), leading technology and a comprehensive eye tracking patent portfolio. Eye tracking provides large benefits in a wide range of application areas. This includes established fields such as assistive technology for communication, market research and academic research. Eye tracking also has potential to create large new business opportunities within computer gaming, integration in mainstream computers, vehicle technology, medicial equipment and virtual reality. Tobii Dynavox and Tobii Pro are profitable and market-leading 1) business units, each with significant opportunities for growing both sales and profit margins. The business unit Tobii Tech is well positioned to address potentially significant opportunities for integration of the Group s eye tracking technology in several future volume markets. The Offering Circular includes business and market data concerning Tobii s business and markets but Tobii operates in an industry in which it is difficult to obtain precise industry and market information. Tobii has obtained certain market and competitive position data in this Offering Circular from a report dated November 25, 2014, produced by Arthur D. Little, as well as from a review of Tobii s patent position commissioned from the independent intellectual property consultancy ClearViewIP Ltd and presented in a report dated October 2014 (jointly the Reports ). Tobii has commissioned the Reports and Tobii believes them to be reliable. As part of its research for the Reports, both Arthur D. Little and ClearViewIP Ltd received market and company information from Tobii. Tobii cannot assure the accuracy and completeness of such information, and Tobii has not independently verified the market and competitive position data contained in the Offering Circular. In addition, in many cases Tobii has made statements in the Offering Circular regarding its industry and its competitive position in the industry based on its experience and its own investigation of market conditions. Tobii cannot assure that any of these assumptions are accurate or correctly reflect its competitive position in the industry, and none of Tobii s internal surveys or information have been verified by independent sources, which may have estimates or opinions regarding industry-related information which differ from Tobii s. Market and business information may include estimates regarding future market conditions and other forwardlooking information. Forward-looking information is not a guarantee of future results or development and actual outcomes may differ substantially from the statements set forth in the forward-looking information. Please see Important information to investors Forward-looking information on the inside cover of the Offering Circular. 1) Arthur D. Little 33

36 Business and market overview Tobii Eye tracking provides large benefits in a wide range of application areas A device containing a built-in eye tracking sensor knows what a user is looking at. This makes it possible for users to interact with computers and machines using their eyes, an innovation which provides several benefits: Understand human behavior The human brain accumulates the majority of the impressions that it processes using vision 1). With the ability to observe a user s gaze, it is possible to obtain deep insights into the person s attention and, based on this, conclude driving factors behind their behavior and actions. Enable hands-free interaction By using the eyes as an input to control a computer, in effect a pointer on a computer screen, eye tracking facilitates interactions with computers when the user cannot or does not wish to use hands as the input form. Create new user experiences and intuitive user interface By combining eye tracking with other input modalities, for example keyboard, touchpad and voice commands, it is possible to create new user experiences and innovative interfaces for mainstream consumer devices. These interfaces can be more intuitive, natural, engaging and efficient than conventional user interfaces. Assistive communication Research Mainstream computers A tool to generate speech and provide access to computers for millions of people who are in need of assistive technology for alternative communication. Tranformative insights into human behavior. Innovative user interfaces for mainstream computers and tablets. Gaming Automotive Specialty applications Creative new, immersive gaming experiences. New safety features in vehicles that warn drivers of drowsiness and lack of attention. Numerous other application areas within different medical and industrial applications. 1) European Scientific Journal, September 2014, special edition vol. 3. p

37 Business and market overview Tobii Introduction to eye tracking A device equipped with an eye tracker has the ability to understand what the user pays attention to, what information the person has processed and can give indications about the person s presence, attention, focus, drowsiness, consciousness or other mental states. This makes it possible, for example, to gain deep insights into consumer behavior or make possible new eye tracking enabled user interfaces for, as examples, computer games and mainstream computers. As seen in the illustration below, most eye trackers are comprised of three main components: i) a set of illuminators or projectors, ii) one or more cameras, and (iii) algorithms for image processing and mathematical calculations. These algorithms are run on either a dedicated processing system or on the processor of the host computer to which the eye tracker is connected. The eye tracker can determine with a high degree of accuracy where the user is looking, the position of the user s eyes, the presence of the user and the size of the user s pupils. In addition to the core eye tracking technology, there is also a need for application software that makes use of the data from an eye tracker. Such application software can provide tools for analyzing and understanding human behavior or can be used to create new user experiences and user interfaces. 1 2 An eye tracker consists of cameras, projectors and algorithms. The projectors create a pattern of near-infrared light on the eyes. The cameras 3 take high-frame-rate images of the user s eyes and the patterns. 4 The image-processing algorithms find specific details in the user s eyes and reflection patterns. - Gaze point The eye tracker Based on these details, 5 mathematical algorithms calculate the eyes exact position and gaze point, for instance on a computer monitor. 35

38 Business and market overview Tobii Tobii s three business units Since Tobii s establishment in 2001, Tobii has successfully introduced and commercialized a wide range of products and solutions in several markets. The Tobii Group has established two profitable and cash-flow-generating business units in Tobii Dynavox and Tobii Pro. Both units hold market-leading positions in their respective fields 1). Together, they form a solid foundation for the Group s business, organization and technology development. The third business unit, Tobii Tech, is currently in an investment phase with future opportunities to establish the Company s eye tracking technology within consumer electronics and other high volume markets. Each business unit has its own distinct markets, products and dedicated personnel. The principal operations such as general management, sales, marketing, R&D, support and training is conducted in each of the three business units. Certain functions such as finance, IT, purchasing, production, logistics and human resources are centralized within the Group to ensure that economies of scale are exploited. Tobii Pro, 26% 2) 3) Sales per business unit 2014 Tobii Tech, 6% Tobii Dynavox, 68% Tobii Dynavox supplies assistive technology solutions for alternative communication. The business unit delivers products that help users with a reduced ability to speak and/or motor disabilities to communicate and interact effectively with others. This business unit is active in a market with large unmet needs and, from low current penetration levels of approximately 10%, the market is expected to see short- and long-term growth. In 2014, Tobii Dynavox s sales amounted to SEK 442 million which corresponds to approximately 68% 3) of the Group s sales and SEK 54 million of the Group s adjusted EBIT (with an adjusted EBIT margin of 12%) 4). The business unit s customers include some 20,000 users who rely on Tobii Dynavox products for their everyday communication. Customer example Ryan Carter (21) from Atlanta, USA has Cerebral Palsy (CP) and lacks the ability to fully control his body movements, including his capacity for speech. Since the age of 18, Ryan uses an eye tracking computer from Tobii as his primary method of communication with the world at large. Ryan studies economics at university level and holds public presentations concerning life with functional disabilities. All communication is done through a Tobii I-12 that replaces Ryan s voice and functions as his computer, giving him access to the internet, telephone, social media and much more. Market share (2013) Tobii Dynavox, 45% Source: Arthur D. Little 1) Arthur D. Little 2) In addition to the three business units, external sales exist that correspond to less than 1% or SEK 4 million. 3) Before elimination of internal sales from Tobii Tech to Tobii Dynavox and Tobii Pro. 4) Adjusted for acquisition and restructuring costs related to the acquisition of DynaVox Systems LLC in 2014, for more information see Operating and financial review Use of non-ifrs measures. 36

39 Business and market overview Tobii Tobii Pro provides solutions for the execution of different types of market and academic research studies for the understanding of human behavior using eye tracking. This creates clear benefits for example for optimizing the design of advertisements, product packaging and websites. Tobii Pro is active in a market that is considered by the Company to have favorable long-term growth opportunities as eye tracking is likely to become more of a mainstream research method in many different fields. In 2014, Tobii Pro s sales amounted to SEK 167 million which corresponds to 26% 1) of the Group s sales and SEK 13 million of the Group s EBIT (and an EBIT margin of 8%). The business unit s customers include 2,000 commercial enterprises and 1,500 academic institutions, among which are the world s largest advertisers and market research companies such as Procter & Gamble, Microsoft, Ipsos and GfK as well as 49 of the world s 50 top-rated universities. 2) Customer example Alibaba China uses eye tracking for usability testing on its websites. Alibaba performs tests where users complete typical online purchase process activities while their eye movements are recorded. The eye tracking data shows where the users looked on the web page, as well as for how long and in what order the information was processed. The insights derived from the tests help Alibaba to identify usability problems and optimize the online user experience, which in turn drives increased revenue for the company. Market share (2013) Tobii Pro, 47% Source: Arthur D. Little Tobii Tech supplies platforms and components for eye tracking to OEM customers (original equipment manufacturers) who integrate these into their own products. Tobii Tech targets a number of potentially large future volume markets in areas such as gaming, mainstream computers, automotive, medical devices and virtual reality. Commercially, the business unit is at an early stage and today has a handful of integration customers with smaller volumes. The business unit is investing heavily to develop the core technology further as well as to work towards adoption in these potentially larger, future volume markets. In 2014, Tobii Tech s sales amounted to SEK 37 1) million which corresponds to 6% 1) of the Group s sales and had a negative impact on the Company s EBIT with SEK 122 million of investment in Customer example SteelSeries launched Sentry, the world s first gaming eye tracker for consumers, at the consumer electronics show CES in January The eye tracker offers new possibilities for game streaming, game training and new types of game experiences. 1) Before eliminating internal sales from Tobii Tech to Tobii Dynovox and Tobii Pro. 2) QS World University Rankings 2014/

40 Business and market overview Tobii Global leader in eye tracking Market leader: With its share of over half of the global market, Tobii is the world-leader in eye tracking solutions 1). Since the Company s founding in 2001, Tobii has gradually grown its market share to achieve today s market position. The diagram reflects market shares measured as the sales value of eye tracking solutions. In solutions where eye tracking constitutes the primary function, the value of the entire solution is used. In solutions where eye tracking constitutes only a minor function, the estimated customer value of the function is used. Smart Eye, 3% ASL, 3% SR Research, 4% SensoMotoric Instruments, 9% Seeing Machines, 10% Source: Arthur D. Little Market share (2013) Others, 14% Tobii, 57% Others includes Prentke Romich Company, Utechzone, EyeTech Digital Systems, Mirametrix, I-Scan, LC Technologies, Ergoneers, Forbes Rehab Services, Humanelektronik, NAC Image Technology, Alea, Grinbath, Fujitsu, GazePoint, The Eye Tribe. Leading technological advantage: The Company believes that its core eye tracking technology constitutes a strong competitive advantage and is recognized for its ease of use, functions reliably on many people and in many different environments, consistent high accuracy, cost and energy efficiency, and compact form factor. In addition to the core technology itself, Tobii also has a reputable track record of successfully developing and commercializing a number of complete solutions including different hardware and application software for diverse uses that give users the full benefit of the technology. The Company has made large investments over the past 13 years into this technology, including development of several generations of system designs, proprietary optical components, complex machine vision algorithms trained on millions of eye images, comprehensive so-called interaction engine for user interface concepts, as well as sophisticated software for interactive applications and the analysis of human behavior. Tobii continues to invest significant resources to maintain and strengthen the technological advantage that the Company considers itself to possess, exemplified, among other things, by the development of a custom designed SoC ASIC for eye tracking 2). Comprehensive patent portfolio in eye tracking: According to an external study, Tobii holds the most comprehensive portfolio of patents and patent applications related to eye tracking technology in the USA and Europe 3). The Group s patent portfolio comprises over 180 granted patents and pending patent applications across over 70 distinct inventions. This portfolio continues to grow through a proactive strategy of investment into research and intellectual property. Tobii s IP position provides the Company with key competitive advantages, revenue opportunities and basis for the Company s freedom to operate. Tobii believes that the importance of its intellectual property rights is likely to grow significantly in importance if eye tracking becomes adopted in volume markets. For more information, see section Patents. 1) Arthur D. Little. 2) SoC = System on Chip. ASIC = Application specific integrated circuit. 3) ClearViewIP Ltd. 38

41 Business and market overview Tobii Estimated number of publicly available American and European patents and patent applications specifically directed to eye tracking inventions, as of October 2014, excluding medical/opthalmology technology 1) Number of patents and patent applications Tobii Microsoft Canon Panasonic Sony Oracle Competitive landscape Most of the Company s existing competitors are smaller players that focus on eye tracking. Many of these have been active in eye tracking longer than Tobii, but some new players have emerged in recent years. In addition, some players have implemented eye tracking solutions for military applications. However, because these solutions are not available for commercial purposes these companies are not included in this competitive landscape description. In addition to general eye tracking competitors, Tobii also has competitors within its various market segments. Specifically, Tobii Dynavox has a broad product portfolio for alternative communication that also comprises touchscreen-based products and softwares that are not eye tracking technology-based. Tobii Dynavox has a number of competitors that sell different communication solutions, both with and without eye tracking. Google Delphi Technologies Eyefluence Swisscom Samsung Several large high-tech companies are showing a clear interest in using eye tracking in computers games, mainstream computers and tablets, vehicles, virtual reality, smartphones, and more. The Company deems it likely that large tech companies will use, and possibly even develop in-house, eye tracking technology. Companies that have publically unveiled concepts and prototypes for products using eye tracking include Microsoft, Intel, Hyundai, Mitsubishi, Jaguar-Landrover, NTT- Docomo, Synaptics and General Motors. Several of these have used eye tracking technology from Tobii or one of Tobii s smaller eye tracking competitors as the base for such prototypes. For further information on Tobii s markets, see sections Tobii Dynavox s market, Tobii Pro s market and Tobii Tech s market, respectively. Company Offers solutions in the following segments Behavioral studies Assistive technology 1) Study by ClearViewIP Ltd. See section Patents for details. Vehicles Offers the following types of eye tracking technology Technology for OEM integration Screen-based eye tracking High-frequency eye tracking Wearable eye tracking Tobii X X X X X X Sensomotoric Instruments X X X X X SeeingMachines X X X X ASL X X X X SR Research X X X X Smarteye X X X X The EyeTribe X X X Prentke Romich X X Utechzone X X X X 39

42 Business and market overview Tobii Mission and vision Mission Tobii s mission is to fundamentally transform and improve both lives and entire industries through humanized technology. With eye tracking as a base, Tobii creates the conditions for new insights into human behavior and more human user interfaces in mainstream computers, games, vehicles and other products. Vision Tobii s vision is a world where all technology works in complete harmony with natural human behavior. Business model The Company s business model is different for the three business units: Tobii Dynavox develops and sells communication solutions for people with speech or motor disabilities. These solutions include proprietary hardware and software products as well as services. Several of these products are approved as medical devices, and are often paid for, in their entirety or partially, by public and private insurances or funding sources. Other products are normally paid for directly by end users. Most of Tobii Dynavox s products are sold by way of a one-time payment and include training, multi-year support and warranty obligations. In addition, a portion of the business unit s products are pure software products that are licensed, either with a one-time payment or on a subscription fee basis. Tobii Dynavox mostly sells its products directly to customers in the US, Canada, Sweden and Norway, and through resellers in other regions. Tobii Tech develops and sells eye tracking technology for OEM customers who integrate this into their own products. The business unit is at an early stage commercially with a handful of OEM customers to date that are developing products or have launched products where the Company s technology is an integrated part. The customers either purchase complete white-label products (complete hardware including packaging), board-level integration platforms or key hardware components together with a license to a reference design for the complete system. In all cases, the customer also licenses required software and IP. Tobii Tech also conducts paid development projects together with OEM customers, primarily to adapt or modify the business unit s technology to suit specific integration needs. Tobii Pro develops and sells eye tracking solutions for understanding human behavior. These solutions include proprietary hardware and software as well as services. The customers include both commercial companies and academic research institutions. Hardware products are sold or rented, and software products are either licensed with a one-time payment plus an annual payment for support and upgrade contracts or licensed annually with a recently introduced subscription model. Training services are typically charged for on a daily or hourly basis and research services are often charged for on a per-project basis. Tobii Pro sells its products directly to its customers in most key markets and via resellers in some markets and for specific segments. 40

43 Business and market overview Tobii Financial development Tobii has shown organic revenue growth each year since inception in In addition, a few carefully selected acquisitions have further contributed to the Group s development, the latest being the acquisition of DynaVox Systems LLC in May Net sales have since 2008 grown by a CAGR of 21% and around 16% excluding acquisitions. Tobii s net sales reached SEK 621 million in 2014, and SEK 745 million on a pro forma basis had DynaVox Systems LLC been part of the Group as of January 1, ) SEK million Financial targets Net sales In preparation for the listing on Nasdaq Stockholm, Tobii s Board of Directors has adopted the financial targets for each business unit as depicted to the right. The combined financial targets for the three business units imply positive earnings before taxes and positive cash flow for the Group as of The Board of Directors estimates that the Group should be fully funded to execute its current business plan which stretches through 2018 when the Group as a whole is expected to have a positive cash flow supported by the capital raised from the Offering. Over the next few years, Tobii s development and expansion ambitions for the business unit Tobii Tech will be given priority over dividends to shareholders. Financial targets represent forward-looking information. Forward-looking information means that no guarantee can be given regarding future earnings or development and actual results may differ materially from those expressed in forward-looking information. See also Important information to investors Forward-looking statements on the inside cover of the Offering Circular and Risk factors. The business units Tobii Dynavox and Tobii Pro are profitable with EBIT margins of 12% 2) and 8% respectively in The business unit Tobii Tech invests heavily to develop its eye tracking technology to meet demands from future volume markets and had a negative impact on the Group s EBIT with SEK 122 million in Sales and adjusted EBIT per business unit SEK in millions Net sales Tobii Dynavox Tobii Pro Tobii Tech Other Eliminations The Group Adjusted EBIT Tobii Dynavox 54 1) 21 3 Tobii Pro Tobii Tech Other, net The Group 54 2) ) Adjusted for non-recurring items related to acquisition of DynaVox Systems LLC in ) Adjusted for non-recurring items related to the IPO. Tobii Dynavox Tobii Pro Tobii Tech Tobii Dynavox s long-term goal is to deliver revenue growth in excess of 10% per year, with an EBIT margin of 20%. Tobii Pro s long-term goal is to deliver revenue growth in excess of 15% per year with an EBIT margin in excess of 15%. In the midterm (next 2 3 years), Tobii Pro s goal is to deliver revenue growth of 10% with an EBIT margin of 10%. Tobii Tech s goal is to become cash flow positive during Until then, the business unit plans for a SEK 400 million negative cash flow due to significant investments in core technology. 1) For more information, see Proforma Income Statement ) Adjusted for acquisition and integration costs related to the acquisition of DynaVox Systems LLC 2014, for more information see Operating and financial review Use of non-ifrs measures. 41

44 Business and market overview Tobii History Since the Company s inception in 2001, Tobii has experienced 13 years of consecutive revenue growth. Tobii s development may be described in four stages: Pioneering eye tracking technology and its first application areas ( ) Upon recognizing the large potential of eye tracking, the three entrepreneurs John Elvesjö, Mårten Skogö and Henrik Eskilsson established Tobii in August In 2002, Tobii developed and commercialized its first product the world s first plug and play eye tracker, the Tobii ET-17. The eye tracker was easy to use and allowed the user to move in front of the computer, which was an innovation among similar products. Tobii ET-17 rapidly became an attractive and reliable tool among researchers seeking to gain an objective method for understanding human behavior in fields ranging from psychology to website optimization. This was the starting point of the business unit now known as Tobii Pro. In the subsequent years Tobii released new products based on its eye tracking techno logy and continuously developed the market. Entering the market for alternative communication (2005) Following its success in the market for behavioral research with the Tobii ET-17, Tobii identified the Augmentative and Alternative Communication (AAC) market as an earlyadopter market for eye tracking. Eye tracking enables individuals with reduced ability to speak and/or those with motoric challenges from conditions such as ALS, cerebral palsy (CP), and Retts syndrome to communicate and interact with the outside world. In 2005, the Company released MyTobii D10, its first product targeting the AAC market. This set the foundation for the business unit today known as Tobii Dynavox that has, since its inception, improved the lives of tens of thousands of individuals worldwide who were previously unable to communicate and interact with others effectively. International expansion and strategic acquisitions ( ) Tobii has sold products globally since 2002, but it was not until 2005 that the Company began establishing a physical international presence, opening offices in the USA (2005), Germany (2007), Japan (2008) and China (2008). Tobii also concluded three important strategic acquisitions: (i) Viking Software AS based in Norway in 2007, strengthening Tobii s AAC hardware with industry leading software, (ii) Boston-based Assistive Technology Inc. in 2008, increasing the Company s position in North America, and (iii) Pittsburgh-based DynaVox Systems LLC in DynaVox Systems LLC was Tobii s closest competitor in North America, and complemented Tobii s eye tracking AAC product portfolio with touchscreen-based AAC-devices and market-leading special-education software. Following the acquisition of DynaVox Systems LLC, the business unit that used to be known as Tobii Assistive Technology was renamed Tobii Dynavox. The first larger external round of equity financing was made in Tobii by Investor Growth Capital in In the following financing rounds Amadeus Capital, Intel Capital, Northzone Ventures and The Sixth AP Fund (Sw. Sjätte AP fonden) added. In total Tobii has raised approximately SEK 660 million in equity in the period from new and existing owners. Tobii has brought to market a range of eye tracking products of which most have become market-leading in their respective segments. As of today, five generations of eye tracking technology have been developed and brought to market. From 2008 to 2014, Tobii has reduced the production cost of its eye tracking technology by more than 95% while also improving the products performance and reducing physical size and power consumption. During this period, Tobii evolved from a local Swedish high-tech company to a global leader in eye tracking technology. Growing profitable business units and development for reaching future volume markets (2015 ) Tobii has created a stable business comprising of two growing and profitable business units Tobii Dynavox and Tobii Pro. For Tobii Dynavox, the Company sees opportunity to grow the business and further increase profit margins driven by the overall market growth for assistive technology for communication, by developing new products, by approaching new segments and geographies, and by realizing the full synergies from the acquisition of DynaVox Systems LLC. For Tobii Pro, the Company sees opportunity to grow the business and further increase profit margins driven by overall market growth for eye tracking for research, by developing new products and by approaching new segments. For the third business unit, Tobii Tech, the Company sees opportunities in delivering eye tracking components and platforms aimed at potential volume markets. The first step into such a consumer market was taken at the beginning of 2015 when SteelSeries, a leading provider of computer gaming peripherals and accessories, started to sell the SteelSeries Sentry, an eye tracker from Tobii aimed at enthusiast computer gamers. Furthermore, in March 2015, the computer-games company Ubisoft released Assassin s Creed Rouge PC which includes Tobii s eye tracking. 42

45 Business and market overview Tobii Acquisition of Viking Software Acquisition: Dynavox Systems Inc The first consumer product SteelSeries Sentry 2014 Tobii is founded 2001 Tobii TX-series The graph shows the number of sold eyetrackers per year 2007 Acquisition: Assistive Technology Inc The first high frequenze eyetracker TX Tobii IS3 platform Tobii Glasses 2 Tobii IS20 platform Tobiis first eyetracker Tobii ET-17 The world s first computer with built in eyetracking MyTobii P10 Tobii C-series The first generation of eyetracking-glasses Tobii Glasses 1 Tobii I-series Tobii X2-series 43