a n n u a l r E p o r T 2 0 1 0 fileNetop MyVision Netop Vision Netop School Netop Pointer Netop...

Moving Forward, looking up

a n n u a l r E p o r T 2 0 1 0

Netop develops and sells software solutions enabling swift, stable and secure transfer of video, screen images, sound and

data over the Internet. The company has three core business areas: Administration, Education and Communication.

Netop’s unique and cost-saving Administration solutions make work easier for IT professionals through Remote Control and

IT Asset Management. Netop’s market-leading Education solutions for classroom management and corporate e-learning

help students and teachers achieve optimum results through virtual teaching. Netop’s Communication solutions allow

customers, business partners and colleagues to meet easily and safely in virtual space through chat, video or voice over

the Internet.

At 31 December 2010, Netop had 122 employees and subsidiaries in the USA, the UK, Romania and Switzerland. The company

sells its solutions to public and private sector customers in more than 80 countries. Netop Solutions A/S is listed on Nasdaq

OMX Copenhagen. Netop generated revenue of DKK 92.1 million in 2010. For more information, go to www.netop.com.

nETop SoluTionS a/S in a FlaShnETop SoluTionS – aT a glancE

nETop

CommunicationNetop Live Guide

nETop

EducationNetop MyVisionNetop VisionNetop SchoolNetop PointerNetop Learning Center

nETop

AdministrationNetop Remote ControlNetop OnDemandNetop Mobile and EmbeddedNetop ProtectOn ProNetop PrintLimit Pro

2 nETop SoluTionS aT a glancE

Kurt Groth Bager, CEO

Jesper Slot, CFOKent Madsen, CTO

annual rEporT 2010

CONTENTS

To our shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Financial highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Management’s review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Risk factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Know-how and competencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

CSR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Shareholder information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Board of Directors and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Responsibility statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Group overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Notes to the Consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . 44

Annual Accounts for Netop Solutions A/S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Notes to the annual financial statements for Netop Solutions A/S . . . . . . . . 87

CVR: 1622 1503

Translation: The English version is not audited. In the event of any inconsistency between this document and the Danish language version, the Danish language version shall be the governing version.

3conTEnT

Netop Solutions had a good year in 2010, in which creating a stable and

sustainable platform was the Board’s main objective. We achieved decent

revenue growth as well as positive cash flows from operations. Our actual

EBITDA surpassed our most recent guidance and also outperformed the

original forecast for the year that we expressed in the spring of 2010

by a fair margin. We ended the year at a net profit of DKK 0.9 million,

but the company’s financial performance improved consistently quarter

by quarter. In other words, Netop Solutions achieved a positive financial

performance on a successful effort to strengthen and streamline the

company, and we have emerged from 2010 stronger and well prepared

for the coming years.

In the Administration segment, our focus on direct sales to Enterprise

clients, particularly in the countries where Netop Solutions has its own

subsidiaries, has produced substantial growth, and we are now in much

better control of the sales process. Netop Remote Control is strongly po-

sitioned towards Enterprise clients, and we see a big potential in this

market that we intend to exploit going forward.

Although the Education market came under pressure in 2010, this is a

market that we expect a lot from. However, the important US market is

still feeling the impact of the financial crisis, and that is restricting op-

portunities to sell new licenses and to attract new customers. WE have

launched our new cloud-based solution for the school market, which is

being sold in Software-as-a-Service (SaaS) form. This represents the next

generation of Education products. We expect that this initiative and the

way we generally work the market will help us attract additional new

customers and generate new sales in 2011 and thereby strengthen our

market-leading position.

All through 2010, we continued to develop our Netop Live Guide Com-

munication product, which is also a cloud-based SaaS product. To date,

Netop Live Guide has mainly been sold in the Danish market, where it has

gained a strong position, and in 2011 we will increasingly begin to promote

this product in the US and UK markets. Market growth is substantial and

Netop Live Guide is a competitive, unique Netop Solutions product. We

recorded a large percentage increase in the number of subscribers to

this SaaS solution in 2010 as well as a high rate of customer satisfaction.

In response, we will allocate additional sales resources to this important

growth market in 2011, and we expect to generate substantial growth in

this segment going forward.

Throughout 2010, we recorded consistent quarter-by-quarter improve-

ments in our financial results, and management’s committed efforts to

relocate our development department to Romania and optimise internal

processes really produced the desired results during the year. In addi-

tion, we kept a tight rein on the company’s costs throughout 2010 while

ensuring that it did not impact on the investments necessary in product

development and sales-promoting activities.

New, updated versions have been released in all product areas, the de-

velopment department in Romania is operating to the latest standards

for software development, and we have streamlined our entire organisa-

tion and built strong skills and capabilities. A number of Netop Solutions’

products are now available in SaaS form, taking advantage of one of the

hottest trends in the world of information technology right now, Cloud

Computing, and this is the direction that several of our products will be

taking. Combined with extra resources allocated to our sales organisation

and a leaner Netop Solutions organization, this will provide a powerful

platform for future growth and earnings for our company.

I would like thank all employees of Netop Solutions for their great efforts

and commitment in 2010 towards creating a profitable, cost efficient and

strong company. Finally, I wish to thank our shareholders, business part-

ners and customers for their support and the confidence they showed us

during 2010.

Ib Kunøe

Chairman

Ib Kunøe

Chairman

T o o u r S h a r E h o l d E r S

4 To our SharEholdErS

Q4 2010

• We recorded strong growth in Q4 2010 with revenue ending hig-

her than we had expected for the quarter. This confirmed the

positive trend in revenue and EBITDA which prevailed throug-

hout 2010, and sales to the Enterprise market and a number

of new customers in the Communication segment improved

during Q4 2010.

• Revenue in Q4 2010 ended at DKK 25.9 million, against DKK 17.0

million in Q4 2009, corresponding to an increase of about 52%.

• EBITDA was a profit of DKK 2.5 million in Q4 2010, against a loss

of DKK 0.6 million in the same period of last year.

• Cash flows from operating activities amounted to DKK 4.8 mil-

lion against an outflow of DKK 0.1 million in the same period of

last year.

Highlights of 2010

• Our main objective in 2010 was to create a stable and sustaina-

ble platform, and achieve positive EBITDA, positive cash flows

from operating activities and revenue growth. Netop Solutions

surpassed these goals in all three areas.

• Consolidated revenue for the year was DKK 92.1 million against

DKK 85.3 million in 2009, an increase of DKK 8%. The develop-

ment in revenue was satisfactory in light of the fact that we

have continued to feel an impact from the economic crisis,

especially in the Education segment. Revenue for 2010 was hig-

her than the Group’s most recent forecast and also exceeded

the expectations expressed in the annual report for 2009.

• EBITDA was DKK 8.2 million in 2010, against a loss of DKK 34.5

million in 2009. In 2010, we reduced the cost base by 26% com-

pared to 2009 and EBITDA improved continuously throughout

2010. The performance exceeds both the most recent forecast

of DKK 7-8 million and, by a wide margin, the original guidance

of DKK 0-5 million expressed on the release of the annual re-

port for 2009.

• Cash flows from operating activities were DKK 5.6 million in

2010 against an outflow of DKK 29.3 million last year.

• Profit for the year after tax was DKK 0.9 million against a loss of

DKK 82.5 milllion in 2009.

• Management considers the performance to be satisfactory and

is pleased to see that Netop Solutions has started off 2011 on a

significantly stronger note in all areas, backed by a significan-

tly improved equity ratio, positive cash flows from operating

activities and no interest-bearing debt.

Outlook for 2011

• After an extensive restructuring process in 2009 and 2010, we

are now ready to exploit the growth potential that exists in our

markets.

Based on our initiatives and a general improvement in market

conditions, we expect revenue of DKK 97–102 million, correspon-

ding to an expected improvement of 6–11%. Based on strict cost

management and necessary investments in future growth, we

expect EBITDA of DKK 7–12 million.

Net revenue, DKKm EBITDA, DKKm Profit for the year, DKKm

0

20

40

60

80

100

2006 2007 2008 2009 2010-40

-30

-20

-10

0

10

20

2006 2007 2008 2009 2010-90

-70

-50

-30

-10

10

2006 2007 2008 2009 2010

h i g h l i g h T S

5highlighTS

6 Financial highlighTS

7Financial highlighTS

Financial highlights and ratios for the Netop group

DKK '000 2010 2009 2008 2007 2006

HIGHLIGHTS

Income statement

Revenue 92.071 85.287 91.485 85.303 97.861

Operating profit before depriciation and amortisation (EBITDA) 8.212 (34.524) (33.896) (20.587) 7.086

Operating profit/(loss) (EBIT) (1.883) (67.399) (45.084) (32.006) 1.101

Profit/(loss) of financial items (2.103) (474) (8.032) 1.147 1.015

Profit/(loss) before tax (3.986) (67.873) (53.116) (30.859) 2.116

Profit/(loss) for the year 905 (82.539) (48.746) (31.734) 670

Balance sheet

Non-current assets 76.385 75.901 108.653 68.650 78.772

Current assets 34.288 22.220 73.752 114.441 147.962

Total assets 110.674 98.121 182.405 183.091 226.734

Assets excl. cash 96.634 93.273 134.259 98.977 113.560

Share capital 31.951 21.046 21.046 19.252 19.252

Equity 84.752 63.870 145.923 167.742 208.972

Non-current liabilities 5.257 6.017 15.259 0 2.163

Current liabilities 25.921 34.251 36.482 15.349 15.599

Cash flow statement

Cash flow from operating activities 5.628 (29.348) (36.248) (16.968) (6.057)

Cash flow from investing activities (4.586) (5.499) 8.854 (2.569) (34.382)

of which investments in property, plant an equipment (135) (528) (1.004) (1.040) (3.406)

Cash flows from financing activities 8.626 (440) (4.141) (9.523) (148)

Change in cash at bank and in hand 9.668 (43.425) (35.968) (29.060) (40.587)

RATIOS

Financial ratios1)

EBITDA margin (%) 9 (40) (37) (24) 7

EBIT margin (%) (2) (79) (49) (38) 1

Solvency ratio (%) 77 65 80 92 92

Return on equity (%) 1 (79) (31) (17) 1

Share ratios1)

Earnings per share 0,2 (20,2) (12,3) (8,4) 0,2

Diluted earnings per share, EPS-D (DKK) 0,2 (20,2) (12,3) (8,4) 0,2

Net asset value per share (DKK) 18,1 15,2 34,7 43,8 54,3

Price earnings ratio 0,6 0,5 1,0 1,7 2,2

P / E-value 57,3 (0,4) (2,8) (8,7) 587,5

Cash flow from operating activities per share (DKK) 1,2 (7,0) (8,6) (4,4) (1,6)

Dividend per share (DKK) 0,0 0,0 0,0 0,0 2,5

Payout ratio (%) 0,0 0,0 0,0 0,0 2,5

Share price 31 December 11,4 7,8 35,0 73,0 117,5

Average number of shares (1,000 of DKK 5 each) 4.689 4.209 4.209 3.850 3.850

Number of shares at the end of the year (1,000 of DKK 5 each) 6.390 4.209 4.030 3.850 3.850

Ratios relating to staff

Average no. of employees 115 150 138 84 72

Basic and diluted earnings per share are calculated in accordance with IAS 33 (note 13). Other financial ratios are calculated inaccordance with ‘Recommendations & Ratios, 2010’, issued by the Danish Society of Financial Analysts. See the definitions of financialratios in the accounting policies set out in note 1.

M a n a g E M E n T ’ S r E v i E w

8 ManagEMEnT’S rEviEw

Our main objective in 2010 was to create a stable and sustainable platform,

and achieve a positive EBITDA, positive cash flows from operating activi-

ties and revenue growth. Netop Solutions met and surpassed these goals

in all three areas.

EBITDA was DKK 8.2 million in 2010 and cash flows from operating activities

amounted to DKK 5.6 million. Revenue improved by 8% compared with last

year and amounted to DKK 92.1 million. EBITDA and revenue were higher

than the Group’s most recent forecast and also exceeded the expectations

expressed in the annual report for 2009. Management considers the per-

formance to be satisfactory and is pleased to see that Netop Solutions

has started off 2011 on a significantly stronger note in all areas, backed by

a significantly improved equity ratio, positive cash flows from operating

activities and no interest bearing debt.

The extensive transition process Netop Solutions went through in 2009 and

2010 has been completed as planned. and the cost base has been reduced

by approximately 26% compared with 2009. Throughout 2010, Netop Solu-

tions remained focused on tight cost management and achieving improve-

ments in EBITDA and cash flows during each quarterly period. A central

point for management has been to make sure that the tight cost man-

agement would not impact the necessary investments in sales, marketing

and product improvements, and those investments were made according

to plan.

In the beginning of 2010, Netop Solutions’ markets were still character-

ised by uncertainties in the wake of the economic crisis. During the sec-

ond quarter of the year, we noted an improvement in market conditions,

especially in the Administration segment and the sales strategy focusing

on the Enterprise market began to show the anticipated effect. Increased

contact with the existing customer base and targeted, value-based mar-

keting aimed at the Enterprise market has produced a stronger business

platform. The organisation has been adjusted relative to the areas where

Netop Solutions intends to create growth going forward.

Dedicated sales and marketing staff have been appointed in the Enterprise

segment. In addition, additional resources have been provided to the R&D

centre in Romania and, as a result, new generations of Netop products

have been released to the market. Moreover, we have made a number of

investments in, among other things, online sales, support for the Software-

as-a-service (SaaS) platform and process optimized systems in order to

contribute to continued growth in revenue and earnings going forward.

HigHligHts and new initiatives in 2010

Focus on the Enterprise market

In 2010, Netop Solutions increased its focus on the Enterprise market,

which consists of large companies with large data centres – typically

geographically located in several locations. These companies often have

special requirements and needs for the suppliers and the products offered

by Netop Solutions, especially in areas such as Administration and Commu-

nication. Netop Solutions has introduced a more systematic approach to

how to communicate with these customers, and this has produced a large

increase in the number of orders worth more than DKK 50,000.

In December 2010, Netop Solutions won an order worth DKK 1.9 million

from a large American financial institution which has implemented Netop

Remote Control as centralised tool to provide secure remote control IT

support to the employees and other selected hardware in the institution’s

branches. The order was a result of Netop Solutions’ sales strategy of

focusing on large organisations in which Netop Solutions’ products can

contribute to more efficient use of remote control tools and where safety,

compliance and risk management are important parameters – particularly

their ability to ensure compliance with the strict safety regulations ap-

plicable to the financial sector such as Sarbanes-Oxley in the USA and the

PCI security standards.

The centralised solution ensures that a small and streamlined IT support

organisation can provide efficient service both to customers and employ-

ees, thereby providing substantial cost savings as compared with alterna-

tive solution models. The financial institution is a new customer that chose

our solution , following a trial period of testing the product.

Direct Touch

In 2010, a program was initiated with a view to contacting a large number

of existing customers to ensure that they comply with the licence terms

applicable to Netop Solutions’ products. In a number of cases, it turned

out that they did not comply with the applicable licence terms. Against

this background, Netop Solutions has had a constructive dialogue with a

number of large customers that subsequently has resulted in additional

sales of licenses, and bringing Netop Remote Control back on the agenda

of a large number of major customers. In addition, it opened a dialogue

about needs and opportunities in which Netop Solutions and the customer

explored additional business opportunities. Several customers are there-

fore considering whether they should upgrade to new versions or expand

through solutions modules such as WebConnect or Security Server.

This programme will continue in 2011. In 2010, Netop Solutions was only

in contact with a small percentage of the existing customer base and we

expect to reap additional benefits from this programme over the next few

years.

Gazelle award in Romania

In 2010, Netop Solutions’ Romanian R&D centre won two awards as a high-

growth ‘Gazelle’ company. The centre won first place in the category for

“best small/medium-sized company in the IT segment” in the Bucharest

region and third place in the category for “best company in IT”, right be-

hind large multinationals such as Adobe and Bitdefender. The R&D centre

continued to grow during the year and now has 67 employees. The R&D

9ManagEMEnT’S rEviEw

centre implemented a number of development and quality tools which mi-

nimised “time to market” and the margin of error substantially. As a part

of this process, we established a close collaboration with the Technical

University of Bucharest, which has set up a so-called “Quality Control Unit”

that regularly tests Netop Solutions products in order to keep software

errors at a minimum. In addition, we give grants and other funds to stu-

dents with a view to providing better study conditions and secure a future

recruitment base. Management believes that Netop Solutions is now much

better positioned than the competition, and the relocation has contributed

considerably to the achieved results.

The high level of skills available at R&D centre and its process standards

has attracted the interest of other software developers, and at the end of

2010, Netop Solutions signed an agreement with a Danish software manu-

facturer with a view to facilitating software development.

Adjustment of the product portfolio

Netop Solutions has sold the rights to the Netop Remote Control Mobile

and Embedded product, a niche product in the Netop Solutions Remote

Control portfolio, to WiseMo A/S. The sale was one of the steps taken to

adjust the product portfolio. The product played a peripheral role in the

Netop Solutions Administration portfolio and with only limited resources

allocated to it.

We will continue to sell the product as a global, non-exclusive distributor

and will retain the existing customer portfolio which primarily is a number

of OEM distributors. The agreed selling price was DKK 5.0 million. DKK 2.0 of

the amount was paid in cash when the contract was signed. The remaining

amount will be paid over a five-year period through a discount arrange-

ment to Netop Solutions as provided in a distributor agreement. The agree-

ment was concluded with effect from 1 February 2010.

Convertible loan

Following the 2010 general meeting, the Board of Directors was autho-

rised to raise a convertible loan in the amount of EUR 2.5 million because

the Board of Directors wanted to strengthen Netop Solutions’ capital re-

sources. The loan was raised on 27 April and the lender was Consolidated

Holdings A/S, Netop Solutions’ largest shareholder. The Chairman of Netop

Solutions’ board of directors, Ib Kunøe, has a controlling interest in Con-

solidated Holdings A/S and also serves as that company’s chairman. The

loan was raised in accordance with the authorisation granted by the share-

holders in general meeting.

The loan was converted into shares in two steps. On 17 May 2010, EUR

763,135 was converted and the remaining amount of EUR 1,736,865 was con-

verted on 14 December 2010. Netop Solutions has thus completed a capital

increase of DKK 10,905,480, equal to 2,181,096 shares, corresponding to the

amount converted. With the conversion, the convertible loan has been re-

paid in full and Netop Solutions has no longer any interest-bearing debt.

Business performance

Revenue performance by business area

Netop Solutions concentrated its marketing and sales efforts during the

year on Netop Remote Control, Netop OnDemand and Netop ProtectOn Pro.

Revenue from Administration products amounted to DKK 53.0 million in

2010, a 23.7% increase from DKK 42.8 million in 2009. Revenue was thus in

line with revenue recorded before the economic crisis set in. Administra-

tion is now the strongest growing of our business segments, accounting for

57% of total revenue, as compared with 50% in 2009. The revised strategy

of focusing on the Enterprise segment in which a number of large orders

have been won, combined with the improved market conditions contrib-

uted to the stronger performance in the segment. In the important US mar-

ket, Administration revenue increased by 25% while only limited growth

was recorded in EMEA/APAC. We believe that there is still an unexploited

potential in the Enterprise market where Netop Solutions’ products have

gained a very strong position. In 2011, additional resources will be applied

to development, sales and marketing to ensure continued revenue growth

going forward.

Revenue from Education products amounted to DKK 36.6 million in 2010, a

0.1% increase from DKK 36.2 million in 2009. Products sold and marketed

during the year were Netop School, Netop Vision and Netop MyVision. The

Education segment accounted for 40% of Netop Solutions’ total revenue in

2010 against 42% in 2009.

Throughout 2010, the Education market was impacted by weakened mar-

ket conditions, especially in the USA where almost all school districts are

facing a difficult economic situation. However, we have maintained our

position as the largest player when it comes to classroom management

solutions. The growth rate was about 0.1%, in which upgrade and mainte-

nance agreements where the main contributors to maintaining the level of

revenue while the sale of new licenses has still not recovered to the pre-

crisis level. We expect to see market conditions improve during 2011, and in

combination with launches of new and improved versions of all products,

there will be an overall growth potential available to Netop Solutions that

must be exploited. MyVision is our Software-as-a-Service (SaaS) solution

for the classroom management segment. During the first year after its

release, almost 4,000 schoolteachers worldwide have registered as using

the product.

Revenue in the Communication segment, where the Netop Live Guide prod-

uct is our only product, was DKK 2.6 million in 2010 against DKK 1.4 in 2009,

after revenue from the discontinued products Netop Live Communicator

has been reclassified to discontinued operations. Revenue gowth was very

high in this segment in 2010 at 86%, but it still only accounted for about

2% of consolidated revenue. This improvement did not live up to man-

agement’s expectations and the conclusion is that we had not allocated

sufficient resources available to grow the revenue further. The number of

customers increased sharply and new customer groups have discovered


the significant benefits available from using the product. In 2010, we fa-

cilitated more than one million chat sessions for our customers. The prod-

uct is sold as Software-as-a-Service (SaaS), which means that it generates

subscription-based revenue. The number of new agreements increased by

more than 200% and 99% of the existing customers extended their sub-

scriptions. Netop Solutions has primarily addressed the Danish market, but

in 2011, we plan to reach the USA, the UK and Sweden as well, and therefore

expect significant growth in the Communication business. Management

expects that Communication is an area in which we will generate a sub-

stantially larger part of our revenue within the next three to five years.

Revenue by business area:

Share Share

DKKm 2010 % 2009 %

Administration 52.9 57 42.8 50

Education 36.6 40 36.2 42

Communication 2.6 3 1.4 2

Other - - 4.9 6

Total 92.1 100 85.3 100

Revenue performance by market

Revenue from the Americas, covering North, and South America climbed

23% to DKK 43.2 million, mainly driven by significant revenue growth in

the Administration segment. Also, the US dollar appreciated by 5% against

Danish kroner in 2010 relative to 2009, which lifted revenue by around DKK

2.5 million.

In our second-, third- and fourth-largest markets, Denmark, Germany and

the UK, revenue was down due to the persistently difficult market condi-

tions and because we won several large orders in the Danish market in

2009.

Revenue by geographical market:

Share Share

Geographical regions 2010 % 2009 %

USA 43.2 47 34.9 41

Denmark 10.5 11 14.2 17

Germany 7,0 8 8.8 10

United Kingdom 5,1 6 5.2 6

Other countries 26,3 43 22.2 26

Total 92.1 100 85.3 100

Operating profit

EBITDA was DKK 8.2 million in 2010, which is a significant improvement

relative to the original EBITDA forecast of DKK 0-5 million and the recent

upgrade to DKK 7-8 million. Relative to EBITDA for 2009, which was a loss

of DKK 34.5 million, the 2010 performance was satisfactory. EBITDA for 2010

included a one-off gain of DKK 4.7 million for the sale of the rights to the

Netop Remote Control Mobile and Embedded, which was sold at the be-

ginning of February 2010 and was thus reflected in the original guidance.

In Q4 2010, provisions of DKK 0.6 million were made for losses on other

receivables.

EBITDA was DKK 2.5 million in Q4 2010, compared with DKK 0.6 million in

Q4 2009.

EBIT for 2010 was a loss of DKK 1.9 million compared with a DKK 67.4 million

loss in 2009 and profit for the year was DKK 0.9 million compared with a

loss of DKK 82.5 million in 2009. This equals an EPS of DKK 0.2 per share

(Earnings per share – EPS) in 2010 compared with a negative EPS of DKK

20.2 per share in 2009.

EBIT amounted to DKK 1.3 million in Q4 2010 against a loss of DKK 22.8 mil-

lion in Q4 2009.

Tax on profit for the year

Tax on the profit for the year represents an income of DKK 4.9 million

against an expense of DKK 5.8 million in 2009. The income was primarily

attributable to capitalisation of the part of the Group’s deferred tax assets

that management expects to use within the next three years.

Costs

Total operating costs for production (direct costs), external costs, staff

costs and other operating costs totalled DKK 88.7 million in 2010, a fall of

about 26% from DKK 120 million in 2009. The cost saving initiatives com-

pleted at the end of 2009 did not take full effect until after the second

quarter of 2010. The fall was due to general cost adjustments in all areas,

including the full effect of the relocation of development resources from

Denmark and Switzerland to Romania and to the general staff reductions

in the Group.

Net financials

Net financial items amounted to an expense of DKK 2.1 million in 2010 as

against an expense of DKK 0.5 million in 2009. Besides the realised and

unrealised value adjustments, financial items also include interest on a

convertible debt instrument of DKK 0.4 million.


Assets

Non-current assets amounted to DKK 76.4 million at 31 December 2010,

against DKK 75.9 million at 31 December 2009. Apart from ordinary ad-

ditions and disposals of property, plant and equipment, we capitalised

development costs concerning further development of the Group’s main

products by a total of DKK 4.4 million. Other receivables under non-current

assets increased, as part of the proceeds from the sale of Netop Remote

Control Mobile and Embedded activities will be paid over a period of up to

five years.

Current assets amounted to DKK 34.3 million at 31 December 2010, against

DKK 22.2 million at 31 December 2009. At the end of 2010, debtors amounted

to DKK 17.1 million against DKK 14.6 million at the end of 2009. In addition

to the normal increase in activity, the increase in debtors at 31 December

2010 was partly due to a large customer order. At the end of 2010, cash

amounted to DKK 14.0 million, up from DKK 4.8 million in 2009. The increase

was partly attributable to the issuance of a convertible debt instrument

and positive cash flows from operating activities.

Equity

Equity was DKK 84.8 million at 31 December 2010 against DKK 63.9 million at

31 December 2009. In addition to comprehensive income of DKK 2 million,

equity was affected by a capital injection of DKK 18.6 million. The equity

ratio was 77% at 31 December 2010 compared with 65% at the end of 2009.

Liabilities

Total debt was reduced by DKK 8.3 million relative to 2009 and now

amounts to DKK 25.9 million against DKK 34.2 million at 31 December, 2009.

This is due to the settlement of the guarantee commitment of DKK 10 mil-

lion that Netop Solutions provided in connection with the acquisition of

GenevaLogic in 2008 and which fell due for payment in September 2010.

Cash flows

Cash flows from operating activities amounted to DKK 5.6 million against

a cash outflow of DKK 29.3 million in 2009. The improvement was attribut-

able to a combination of increased revenue and a substantially lower cost

level than in 2009.

Cash flows from investing activities was an outflow of DKK 14.6 million in

2010, against an outflow of DKK 5.5 million in 2009. In addition to usual

investments in product development, investing activities were influenced

by the payment of the outstanding purchase price for GenevaLogic of DKK

10 million.

The Group’s cash resources at 31 December 2010 amounted to DKK 14.0 mil-

lion and constituted cash only, as was also the case at 31 December 2009

when cash resources amounted to DKK 4.8 million.

outlook for 2011

After an extensive restructuring process in 2009 and 2010, we are now

ready to exploit the growth potential that exists within our markets.

In the Administration segment, we will continue to focus on the Enterprise

area. Due to the recently allocated sales resources, mainly in the USA, and

with the launch of Version 10 of Netop Remote Control, our main prod-

uct, we expect to win market share and to generate double-digit revenue

growth relative to 2010.

Our goal for the Education segment in 2011 is to become even better at

communicating the significant improvements to classroom teaching that

schools experience when using our classroom management solutions. We

expect slight revenue growth in the Education segment.

The Communication market, which is currently experiencing rapid growth,

will have additional sales resources allocated to it in 2011. We expect signifi-

cant revenue growth in 2011 now that Netop Live Guide is also sold through

the Netop Solutions web shop.

Based on our initiatives and a general improvement of the market condi-

tions, we expect revenue of DKK 97–102 million, corresponding to an expect-

ed improvement of 6–11%. Based on strict cost management and necessary

investments in future growth, we expect EBITDA of DKK 7–12 million. Our

revenue guidance for 2011 is based on a USD/DKK exchange rate of DKK

5.60. At a USD/DKK exchange rate of 5.7, revenue will improve by about DKK

1.0 million and EBITDA will be about DKK 0.5 million higher.

Forward-looking statements

The above forward-looking statements, including in particular the fore-

casts of future revenue and financial results, reflect management’s current

expectations for future events and are thus subject to risk. A number of

factors, some of which will be beyond Netop Solutions’ control, may cause

actual developments and results to differ materially from the expectations

expressed by the company. Such factors include general economic devel-

opments, developments in the financial markets, technology innovation,

changes and amendments to legislation and regulations governing Netop

Solutions’ markets, changes in the demand for Netop Solutions’ products,

competition, and the integration of company acquisitions. Please also refer

to ‘Risk factors’ on page 22.

Financial highlights

Revenue from Administration products amounted to DKK 53.0 million in

2010, a 23.7% increase from DKK 42.8 million in 2009. Netop Solutions con-

centrated its marketing and sales efforts during the year on Netop Remote

Control, Netop OnDemand and Netop ProtectOn Pro.

Activities

Netop Solutions marketed the following three products in the Administra-

tion business area in 2010: Netop Remote Control, Netop OnDemand and

Netop ProtectOn Pro.

Netop Solutions’ Remote Control is an advanced remote control solution

creating big value for our customers. Many of these customers benefit

from Netop Solutions’ remote control modules, including Netop Security

Server, Netop Name Server and Netop Gateway, all providing a fast and

secure connection. The modules also include advanced support tools used

to access all types of devices in a company’s computer systems. The flex-

ibility provided by Netop Solutions through support for multiple platforms

and communication protocols makes the solutions even more attractive

and unique.

In 2010, Netop Solutions increased its focus on the Enterprise market,

which consists of large companies with large data centres – typically

geographically located in several locations. These companies often have

special requirements and needs for the suppliers and the products offered

by Netop Solutions, especially in areas such as Administration and Commu-

nication. Netop Solutions has introduced a more systematic approach to

how to communicate with these customers, and this has produced a large

increase in the number of orders worth more than DKK 50,000.

Our solutions help to make administrating a company’s PC and IT infra-

structure more efficient, helping customers to control remote units faster

and more securely, while other product functionality ensure compliance

with industry-specific or official regulations. Enterprise is an attractive

segment and communications with these clients are based mainly on cre-

ating value for the client by way of cost savings, improved service, better IT

security for the company and compliance assurance by supporting various

security standards, such as PCI, FIPS, HIPAA and ISO.

Netop OnDemand adds value to companies by facilitating remote support

of computer devices without the need to install software. This can be used

by customers and employees not connected to a company’s network and

needing to install a temporary host to enable the Support or the IT de-

partment to take over a device even if it is located outside the company’s

network.

Launched in May 2009, Netop ProtectOn Pro enables users to protect data

and secure their network devices. This tool helps to block out the use of

CD-drives, USB keys or wifi equipment and restrict access to certain Inter-

net sites. Also, it can fully or partly block specific users from accessing

folders or hard disk content.

With many features for communication and collaboration Netop Remote Control is the ideal tool for Support and Helpdesk environments.pc MagazinE (gErMany)

”“

a d M i n i S T r aT i o n


We believe that we distanced ourselves from our nearest competitors in

2010, especially in the Enterprise market, partly because we can offer

Netop Remote Control as a remote support software solution featuring

various modules. The current combination solution contains the following:

• Netop Remote Control OnDemand, used to remote control computers

not already known by the remote control operator.

• Netop WebConnect, for connecting devices outside of firewalls

• Netop Security Server, for defining various safety levels and roles

• Netop Remote Control Mobile and Embedded, for remote control of

mobile units, such as smart phones.

In other words, a combined solutions enables clients to consolidate all

IT tools in a single solution that satisfies the requirements a business or

large organization has for a remote control product, all at a very competi-

tive price.

Product development

Our main Administration development focus has been to align the prod-

uct’s source code, so it can quickly and affordably be customized to spe-

cific needs, such as compliance with specific security standards or similar

needs unique to Enterprise clients. For that purpose, 2010 was a year of

frequent software launches with custom features inspired by specific cli-

ent requests.

In the second half of the year, a dedicated development team began pro-

gramming the next generation of Netop Remote Control products, the

changes mainly involving improvements to existing code bases, the devel-

opment of new code bases and new development platforms. Netop Remote

Control, Version 10, expected to be launched in the first quarter of 2011,

is the first step towards a new, market-leading generation of Netop Re-

mote Control products. It will be characterized by much greater flexibility,

stability and allowing for fast, client-specific features and fewer product

portfolio maintenance costs going forward. This development product is

expected to be finalised in early 2012.

nETop

administration• Netop Remote Control• Netop OnDemand• Netop Mobile and Embedded• Netop ProtectOn Pro• Netop PrintLimit Pro

iT infrastructureMillions of problems solved remotely, Millions saved in time and money.

MobilityTake any device, Take it anywhere, Take full control.

control & complianceTake stock of your it assets, reduce cost, improve productivity, Stay license compliant.


Trust

ed p

rovi

der w

ith 2

5

year

s of e

xper

ienc

e

Achieve full compli-ance and consolidation

Significantly improve

IT security levelCut costs by 30%

Why Netop Remote

Control?

The Version 10 will help Netop Solutions retain its competitive strength

in the Enterprise segment by releasing updated versions more frequently,

customizing the product to client needs, launching web-based solutions

such as Software-as-a-Service (SaaS) based on cloud computing.

Markets and competition

The global economic crisis forced many corporations to cut back on their

staffing and instead focus on lifting productivity, thereby bringing more

attention to cost-saving IT solutions. Virtualisation, cloud computing and

Software-as-a-Service all rank high on the list of many companies’ pre-

ferred investments, as they help to reduce capital tie-ups, imply less main-

tenance and increased automation of corporate IT infrastructures.

Sales of mobile units such as smartphones and iPads are growing steadily

year by year. The combination of mobile units and being able to store data

“in the Cloud”, that is, on en external server accessed via the internet will

enable companies to offer their employees greater freedom of choice and

flexibility as to where they perform their work. In turn, this will help com-

panies retain staff and enable them to recruit qualified staff without being

bound by geographical restrictions.

This means that the market for traditional solutions is expected to contract

over the coming year, whereas the number of competitors will stay the

same. At Netop Solutions, we believe we had around 6% of the market

in 2010, and that we took market share during the year. The market for

traditional remote support solutions was estimated at around DKK 1.0 bil-

lion in 2010.

Many large businesses plan to invest in remote support solutions in order

to better be able to assist staff working from different locations or from

home, as well as a third-party consultant bringing his own PC and only

needing limited access to the company’s IT resources. Remote support so-

lutions can also be used for clients reporting a problem that can easily be

solved remotely by taking control of his computer. Several of these solu-

tions will be traditional remote support solutions, but a large percentage

of them will be web-based, clientless solutions due to their greater user

friendliness and flexibility. The market is expanding.

Upcoming challenges

Netop Solutions built and trained a new sales organisation in 2010 whose

main priority is what kind of qualitative and not least quantitative value

clients get when investing in Netop Remote Control. Going forward, our

sales organization will remain dedicated to gaining an even firmer foot-

hold in the Enterprise segment in order to create sustained growth in this

segment.

Another important issue going forward is providing technical support and

helping to solve the problems customers experience in connection with us-

ing the software. Ensuring maximum client satisfaction is a key parameter

in respect of Enterprise clients, providing assistance and service to these

customers and understanding the special circumstances that apply in

large organizations. We are constantly training our support function staff

in order to ensure that Netop Solutions can generate additional licensing

sales and achieve higher support and software upgrade renewal rates.

Netop Solutions will continue to deliver a best-in-class remote control

product that fully satisfies the requirements the largest corporate cus-

tomers have for the best remote support solution on the market. As a re-

sult, we will continuously renew our products by providing increased user

friendliness, added flexibility in terms of new payment options, web-based

functionality and hosted solutions.

We continue to sell a number of products to the SMB (small and medium-

sized businesses) market. Many players operating on the SMB market offer

low-priced or free products to customers that do not always need the extra

functionality offered by Netop Solutions products. Going forward, we will

mainly cover the SMB market through our business partner channels and

our business partners will be able to draw on the expertise of Netop Solu-

tions’ presales and channel sales staff, who will also be available to attend

customer meetings. We will continue our current strategy at Enterprise lev-

el through which we identify and serve the largest customers in selected

geographical areas and segments through our in-house sales organisation,

with due consideration for our valuable business partners and distributors

and with a view to providing coordinated services to all customers.

nETop

administration• Netop Remote Control• Netop OnDemand• Netop Mobile and Embedded• Netop ProtectOn Pro• Netop PrintLimit Pro



Revenue from Education products amounted to DKK 36.6 million in 2010, a

0.1% increase from DKK 36.2 million in 2009. Products sold and marketed

during the year were Netop School, Netop Vision and Netop MyVision. The

Education segment accounted for 40% of Netop Solutions’ consolidated

revenue in 2010 against 42% in 2009.

Activities

Netop Solutions provides three solutions for K-12 classroom teaching in

public schools, special schools, upper secondary schools and universities:

Netop School, Netop Vision and Netop MyVision.

The core markets are the USA, the UK, Germany and France, as well as a

number of smaller European and Asian countries. The US is the largest

market for Netop Solutions’ school products.

Netop Solutions’ range of classroom management solutions combine to

address three different segments: for limited needs (Netop MyVision), for

standard classroom management and for advanced users of classroom

management solutions.

The three solutions are positioned by price and functionality, ranging from

the cost effective, web-based solution with limited functionality (Netop

MyVision) to the more expensive, advanced solutions (Netop Vision and

Netop School). Schools that have already invested in classroom manage-

ment solutions from Netop Solutions experience significant improvements

in their classroom teaching, and our goal for 2011 is to become even better

at communicating these messages to potential customers.

The school markets of the individual countries differ from the private sec-

tor in that they are tax-funded and run on politically determined budgets.

Very often, a very large proportion of investments are used to pay teach-

ers’ salaries, books or computer hardware.

In Netop Solutions’ largest market, the US, the economic downturn has ad-

versely affected school sector procurement, as budgets are closely corre-

lated with the tax revenue of individual cities and municipal governments.

As a result, sales of new Netop Solutions licenses rose slightly in 2010, and

that trend is expected to continue in the first half of 2011. In spite of the

financial situation, Netop Solutions still managed to generate reasonable

Education revenue in 2010, mainly due to a number of initiatives directed

at existing clients, especially in the USA, to resubscribe their support and

software upgrade agreements.

In the US market, about 35% of our solutions are sold through dealers

while the rest is sold direct to schools. The school segment is a market

requiring direct marketing that targets teachers at each individual school,

and 2010 was no exception. In the other two main markets, EMEA/APAC,

some 80–90% of sales go through the dealer channel.

E d u c aT i o n

From a teacher’s point of view, this software is very easy to use. It is so intuitive that everyone catches on quickly. Netop School thinks like a teacher.

STEvE wEST, aShEvillE MiddlE School

“”


Product development

Netop Vision in a version supporting 64-bit computers was launched in the

second quarter of 2010. Netop Vision and Netop School are Netop Solutions’

core Education products. Developing an improved version of the Netop Vi-

sion product was an important project in 2010. The Vision 7 was launched

on January 12, 2011 and presented at the annual BETT trade show in London.

Vision 7 has a new user interface and several improvements to the underly-

ing code base ensuring better user security and stability.

In December 2010, Netop School was launched in a new version support-

ing the popular Netop TeachPad (a USB device) that enables teachers to

apply basic classroom functionality, such as blocking internet access,

demonstrating a screen to students and locking students’ mouse and key-

boards, while standing at the blackboard and using the TeachPad instead

of a keyboard.

Netop MyVision is sold to teachers in online subscriptions. This was our

first online product, launched at the end of 2009. The purpose was to test

the market and harvest useful experience. Our expectations for Netop

MyVision is to see the product evolve, so that it will comply with the future

demands for digital classrooms, such as differentiated, interactive learn-

ing, learning based on student-teacher interaction and student-to-student

learning.

nETop

Education• Netop MyVision• Netop School• Netop Pointer• Netop Learning Center

classroom Management Solutionswith more than 20 years of international, educational software expertise.

deliver Training and Education anywherevirtual learning environments, it administration for educational institutions.

corporate TrainingBest in class e-learning system, train your employees effectively with netop education solutions.


Achi

eve

50%

hig

her

stude

nt c

omm

itmen

t

Concentrate 100%

on teaching

Lift average grades by up to a full grade point

Improve classroom efficiency by 30%

Why Netop

Classroom Management?

nETop

Education• Netop MyVision• Netop School• Netop Pointer• Netop Learning Center


Recent trends in teaching is to involve students and give them a greater

responsibility for their own learning. The teacher’s role is to stimulate the

students’ creative skills and support them in their personal development.

This means that the teaching of the future will involve virtual teaching,

social network media, e-learning, school portals and online fora. Most

schools have interactive blackboards installed today, but classrooms of

the future will also have Netbooks (1:1 computing) and mobile units for re-

cording and storing data, such as mobile phones and e-books.

Due to the schools’ limited financial means, IT supplied as a service via

cloud computing can be a good financial investments for schools wanting

to reduce their in-house IT costs.

Backed by our estimated global market share of around 20%, Netop Solu-

tions remains the market leader.

We have calculated the market share on the basis of the estimated global

sales of classroom management solutions of about DKK 150 million. Esti-

mating the overall market more precisely can be rather difficult, but we

believe the market is at least twice as big. In Netop Solutions’ core mar-

kets of the USA, the UK, Germany, Switzerland and France, the respective

governments spend from 10% to 15% of their national budgets on schools

and teaching, and although we have a market leading position, there are

still thousands of schools in these countries that currently do not have

classroom management solutions.

The USA is considered one of the most mature countries in terms of using

IT as a learning tool in schools, and here the rate of students per computer

in schools is 3:1. European countries have also lowered their rate consider-

ably in recent years and it is currently at about 3–5:1. The fewer students

per computer the more relevant computer-based classroom teaching be-

comes and the greater the need for classroom management solutions.

While previously, providing computers for students has been the responsi-

bility of the schools, there will be a growing trend of the students bringing

their own computers. This is a trend already seen in the USA and the Nordic

countries.

Upcoming challenges

In addition to the challenge of the economic crisis which has impacted the

school segment at a certain lag, Netop Solutions intends to consolidate its

position as market leader by growing its Education revenue and market

share. We aim to achieve this by moving closer to our core target group,

the teachers, and we intend to continue our marketing initiatives intended

to further illustrate the benefits of using the products rather than focusing

on a specific functionality.

In addition, Netop Solutions has a large existing client base, which provides

good up-selling opportunities, such as through upgrades and improved or

new functionality.

Many new technologies, such as mobile learning, virtual teaching, school

portals or learning games, will be relevant for school classrooms within the

next two or three years. We intend to adapt our Netop Solutions products to

these trends and to design and develop classroom management solutions

that will remain an active teaching element in high-tech classrooms.



Communication is a new product area featuring the product Netop Live

Guide. Communication revenue surged by 85% in 2010, but it still only ac-

counts for about 2% of consolidated revenue. Revenue was DKK 2.6 million

in 2010 against DKK 1.4 million in 2009.

Activities

In 2010, we concentrated our Communication sales and marketing resourc-

es on Netop Live Guide, our web-based contact center solution that facili-

tates faster and more efficient customer service via the internet thanks to

the product’s text, audio and video chat functionality.

Netop Live Guide was mainly sold in the Danish market i 2010, because we

had not allocated sufficient resources to focus on the larger markets of the

USA and the UK. By focusing on Netop Live Guide’s text-chat functionality,

we have successfully attracted several large new clients in various sectors

such as travel agencies, insurance companies, banks and e-commerce, and

we have actively applied these success stories in an effort to attract more

new customers within the same sectors.

It is fairly simple to make a positive ROI projection for Netop Live Guide

that can clearly show each company their cost savings potential from in-

troducing chat as a new contact channel for their customers whether in

customer service or in sales. Live chat typically costs one third of the cost

of a phone call and a chat consultant can in many cases handle twice as

many customers per hour than a colleague using the phone. The reason

why companies still experience long selling cycles with Netop Live Guide is

that many of them need to align their current business processes and com-

munications strategies before they can implement chat as a tool.

In June, Netop Live Guide was made available for online purchasing on

www.netop.com, allowing customers to subscribe to the product without

the need for a traditional selling process. Additional initiative and improve-

ments are planned for the first half of 2011 in order to facilitate additional

automated and scalable product sales.

Netop Live Guide is entirely web-based and is provided as a hosted cloud ap-

plication. During the year, we implemented a number of improvements that

made the application more scalable and less vulnerable to internet disrup-

tions. We also applied resources to redesign the entire administration mod-

ule, with the main emphasis on user friendliness. The administration module

is the first module potential customers encounter when they first download

a Netop Live Guide trial version, and the first impression customers get from

this module is crucial for their buying decision. The redesigned administra-

tion module will be available from the beginning of 2011.

Netop Live Guide has increased our service efficiency by min. 100%, as we can manage an average of 5-6 chats in the time that it takes to conduct one telephone conversation.

STEphan roSEnkildE, E-coMMErcE, SaS

”

“

c o M M u n i c aT i o n


Naturally, we also use Netop Live Guide ourselves to provide web-based

support for existing as well as potential customers, making our sales pro-

cess and technical support more efficient. Our use of Netop Live Guide has

also led to specific enquiries about the product from customers who have

seen for themselves the benefit of receiving customer service via online

chat.


E-commerce has virtually exploded in recent years, and in our core markets

very few people have not yet tried to buy or sell goods via the internet.

E-commerce is expected to grow by 10% per year until 2014. In the USA,

e-commerce is expected to grow from USD 155 billion in 2009 to USD 249

billion by 2014. Substantial growth is also expected in Western Europe.

Customer service surveys show that the internet will be where most cus-

tomers will receive service in the future and that the internet will be the

preferred channel of contact between businesses and their customers.

A virtual, or online, customer contact center has many benefits that help

both the customers making contact to get help and the customer service

staff. Businesses will no longer have to rely on their staff coming to its

physical address to perform their work, because they can access IT sys-

tems from elsewhere. Several surveys indicate that virtual employees are

nETop

communication• Netop Live Guide

customer Serviceproblems? click for personal support when you need it.

remote Supportremotely assist customers on their computers for instant service when they need it. demonstrate product features or help any customer, regardless of location.

Sales assistanceQuestions? click for personalassistance when you are ready.


more efficient than staff making use of conventional tools such as a tele-

phone or e-mail. The market is still in its infancy, however, and an element

of learning and understanding on the part of the customer about the value

provided by the product and how it is used is still necessary.

There are no official statistics to indicate the size of the market for online

communication through text, audio and video chat. However, all trends

continue to suggest massive growth in e-commerce and customer service.

The chat market is dominated by one large and about 20 smaller players.

Live Person is the market leader, generating revenue of around USD 110

million.

Live Person’s revenue is based on around 8,500 customers, mainly in the

USA, which indicates a huge global chat market and that we have still only

seen the tip of the iceberg. According to Forrester Consulting, it is estimat-

ed that about 20% of US retail chains already use chat and another 25%

are considering buying programs for that purpose. In spite of the relatively

limited use of chat, the USA is still considered the most mature market in

terms of online communication.

Upcoming challenges

Netop Solutions already has an advanced product for the chat market:

Netop Live Guide, which is available at an affordable price, and we believe

there is a substantial market potential for a product of this type.

Our main challenge will be to make our product accessible and to increase

awareness of the product globally as well as to create a market position

that can make our company one of the leading players in online commu-

nication. By investing in market awareness of the product, we will create a

significant future source of income for Netop Solutions.

It will take a lot of dedication in the individual markets that we aim to

penetrate and the customer segments we hope to create value for. As a

result, we plan to invest considerable resources in marketing and selling

in order to grow sales.

In 2011, we intend to invest additional resources in the online sales channel

and to identify dealers or strategic partnerships that we can use to reach

critical mass in the global market.

Impr

ove

staf

f

effic

ienc

y by

35%

Lift customer satisfaction by 50%

Improve service

levels by 30%

Boost sales by 35%

Why Netop Live

Guide?

nETop

communication• Netop Live Guide


22 riSk FacTorS

Netop Solutions seeks to counter and reduce risks that the company can

influence through its own actions. Netop Solutions’ business involves a

number of commercial and financial risks. The global economic downturn

that affected the company in 2009 also affected Netop Solutions’ overall

risk factors into 2010 at which time Netop Solutions was still feeling a slight

impact. We believe that the economic crisis is wearing off and in 2010, we

experienced improved market conditions in several markets. We expect

revenue and operating profit to continue to increase in 2011.

Current developments in the global foreign exchange markets are relevant

to the company, as a strong USD and a weak RON (Romanian Lei) have posi-

tive effects on the profits from our US operations and on the costs in our

Romanian development company.

In the beginning of 2010, Netop Solutions’ cash resources were under pres-

sure, reaching a level at which the company required an injection of addi-

tional capital in order to achieve its strategic goals for 2010. The company’s

main shareholder, Consolidated Holdings A/S, granted Netop Solutions a

convertible loan of EUR 2,500,000, which in 2010 was converted into shares

in two steps.

In the final two quarters, Netop Solutions generated a cash inflow from op-

erating activities and this was also the case for the full-year 2010. The com-

pany expects that, with the available budgets for 2011, our cash resources

will increase throughout 2011. At 31 December 2010, Netop Solutions had

no interest-bearing debt and trade payables were at a relatively low level.

Risks deemed to possibly have an adverse effect on the company’s future

growth, operations, financial position and financial results are described

in the sections below. The description is not exhaustive, nor are the risk

factors described presented in any order of priority.

commercial risks

Product development, technologies and compatibility

Netop Solutions’ business platform is primarily based on a proprietary

technology, the NetOp technology used in most of the software applica-

tions of the two business areas Administration and Education. By acquir-

ing GenevaLogic in 2008 and a development company in Romania, Netop

Solutions expanded its business areas and technological platforms, making

the development resources considerably more effective and at the same

time reducing the costs of product development. In its development and

production processes, Netop Solutions has introduced a number of man-

agement and measuring tools providing better measurement and manage-

ment of development assignments, while at the same time lowering the

margin of error in the products considerably. The transactions have given

Netop Solutions added flexibility and scalability in development processes,

reducing the risk of costly bottleneck situations as well as reducing the

time to market.

The company’s future success, including its potential for future growth,

depends on its ability to continue to improve existing products as well as

to develop and launch new products adapted to cutting-edge technology

and customer needs. Within the Administration segment, the company has,

in 2010, adapted the products relative to major organisations’ need for

increased security and compliance in relation to the authorities’ increased

focus on regulation such as Sarbanne-Oxley, Basel and PCI. Management

believes that the company is strongly positioned in these areas compared

to its nearest competitors.

The growing use of the Internet and especially the concept of cloud com-

puting, which means that corporate IT infrastructures are operated via the

Internet, raises new demands and provides new opportunities within all of

Netop Solutions’ business areas. The demand for Internet-based solutions

and solutions that support cloud computing in Netop Solutions’ business

areas is increasing, whereas growth in demand for conventional applica-

tion-based solutions is stagnant.

Netop Solutions has further developed its versions of its key products

within Administration and Education to support these trends and is de-

veloping Internet-based versions of several of the other products on an

ongoing basis. Netop Solutions is rapidly building a position from which to

offer an increasing part of its product portfolio as services or web-based

solutions. Succeeding in this transition will be crucial for Netop Solutions’

market position going forward.

In the fourth quarter of 2009, we launched MyVision, our first SaaS (Soft-

ware as a Service) product in the Education segment. The product was

tested in the market in 2010 and the launch has given Netop Solutions valu-

able experience in selling web-based services that can be applied in the fu-

ture roll-out of this strategy approach. This product bring Netop Solutions

technologically a step ahead of its competitors as no one has introduced

anything like it. In 2011, the company expects to launch a new and improved

version of the product as growth within this product area is estimated to

be strong over the next couple of years.

In the Education segment, the company is focused on integrating the prod-

ucts acquired from GenevaLogic into Netop Solutions’ software product.

The integration will take place in 2011. It is considered important from an

earnings point of view and cost synergies from development activities will

only be fully achieved when the integration has been completed.

The software market is dependent on developments in the market for op-

erating systems and software platforms, in which Microsoft Corporation

continues to set the standard, as these products generally determine how

software is developed. However, other operating systems are increasingly

being used, and several major players are beginning to penetrate this mar-

ket. This could mean that development companies like Netop Solutions will

have support multiple platforms. We would welcome such a situation, as

this has been one of our strong points for several years.

r i S k F a c T o r S

23riSk FacTorS

Also, when new versions of operating systems are launched, software

manufacturers, including Netop Solutions, have to adapt their products to

possible new standards. The launch of new versions of existing operating

systems and new types of operating systems could adversely affect Netop

Solutions if such launches result in a need for comprehensive programming

changes to existing products. With the development unit consolidated at a

single location and the strongly improved processes, Netop Solutions will

increasingly be able to reduce not only costs related to product upgrades,

but also time to market, by a substantial margin.

More and more of Netop Solutions’ customers as well as potential custom-

ers are increasingly using mobile devices such as smart phones and prod-

ucts like the iPad. We project that within the next few years, a not insignifi-

cant part of these devices will be used as a supplement or substitute for

the standard workstation. Netop Solutions already supports a part of these

mobile devices through its Administration products. The development is

monitored closely, existing products are developed and new solutions are

being developed, which in the future will address these needs.

Protection of technology

Netop Solutions’ software products and underlying technology are propri-

etary and form the basis for the company’s business, and Netop Solutions

actively seeks to protect its rights primarily through trademark registra-

tion. However, these activities only offer limited protection against copying

and unauthorized use which may lead to a reduction in the sales of Netop

Solutions’ products. Netop Solutions will introduce a new licensing system

in 2011 that is expected to result in a number of improvements in end-user

application control, which would make it much more complicated to copy

or use the company’s software in an unauthorized manner. The introduc-

tion will take place as and when Netop Solutions is launching new versions

of its products.

Competitive situation

Netop Solutions operates in three markets – Administration, in which our

main products are Remote Control-software for IT-related administrative

tasks; Education, which is the market for software enabling and support-

ing computer-based classroom teaching and Communication, the market

for unified communication, which includes web-based communication and

conferencing solutions. These are markets characterized by fierce compe-

tition, rapid technological innovation and changes in customer needs and

preferences.

Remote control software is sold by small company software specialists,

who manufacture stand-alone software, by major software providers, who

manufacture complete software suites and to various extents by manu-

facturers of operating systems. During the past few years, especially Re-

mote Control functions integrated in the general software program pack-

ages, or operating systems have been improved significantly and software

from Netop Solutions’ competitors forms part of software suites. Despite

increasing competition from providers of freeware, i.e. providers of free

software, together with the total market for remote control being stagnant,

Netop Solutions still sees a good potential for profitable earnings in this

market in the years ahead. Many companies continue to focus strongly on

security and stability, which is precisely a key strength of Netop Remote

Control, and the product enjoys a good market position. To this should

be added an increased attention, especially from regulated industries, on

compliance of a steadily growing number of regulations. New rules have

been impossed particularly in the banking, financial, medical and car in-

dustries and a number of other industries such as Sarbanne Oxley, Basel

I+II, FIPS, PCI, in preparation for increased public control. Netop Solutions

products support these rules and make it easier for companies to docu-

ment a number of standards. In addition, the transition to web-based ac-

cess to computers laptops, and other mobile devices will make up a market

in which Netop Solutions wants to have an image as a serious provider.

In Education, especially within classroom management, Netop Solutions

has become the largest player in the market after acquiring GenevaLogic.

The Education market is characterised by a number of minor competitors,

and the market is extremely competitive. However, Netop Solutions holds

a strong position, both in terms of technology and distribution, and we will

focus strongly on expanding this position in the future. In addition, Netop

Solutions intends to monitor developments in this segment with respect to

synchronous and asynchronous teaching solutions as well as web-based

solutions.

Communications is a strongly growing market which attracts new players.

In particular, providers of conferencing solutions have made up a signifi-

cant part of the market. Netop Solutions’ product Live Guide addresses a

part of this market by offering Communication products as a service to

users. The solution is hosted and serviced by Netop Solutions, giving the

user the necessary flexibility. It is essential for Netop Solutions to establish

a positive position in this growth market, and we are making every effort

to achieve that. In order to retain this focus, we have concentrated our

sales operations in the Scandinavian, the UK and US markets, appointing

dedicated salespersons for these regions. When sales in these regions have

reached satisfactory levels, we intend to expand our sales operations to

the rest of Europe and the Asian markets.

Establishment of subsidiaries

In 2006, Netop Solutions established subsidiaries in the US, the UK and

Germany and recruited local employees with extensive experience from

the IT business and in-depth knowledge of the individual local markets. In

connection with establishing the subsidiaries, Netop Solutions focused on

organising the operations in the companies according to local conditions,

legislation and regulations. On establishing the subsidiaries, Netop Solu-

tions assumed increased commercial and financial risk. In connection with

the acquisitions made during the summer of 2008 and the realignment of

the organization in 2009, management closed down the company’s offices

in Frankfurt, Berlin and China, reduced the staff at the London and Langen-

thal (Switzerland) offices and expanded operations at the two US offices in

24 riSk FacTorS

Chicago and Portland, which have merged into a single subsidiary. This has

helped to reduce costs, creating a more transparent organization.

Employees

Having skilled and committed employees is a prerequisite for Netop So-

lutions being able to achieve growth and satisfactory earnings in future.

Netop Solutions’ future success depends, among other things, on its abil-

ity to strengthen the product portfolio by developing new products and

product upgrades. The transformation of ideas to sustainable products

demanded by customers requires that the company is able to attract and

retain skilled and qualified employees and that Netop Solutions ensures

that the information flow from end-customers to developer is optimal. This

information flow has previously had its shortcomings, because Netop Solu-

tions has traditionally been a development-driven company rather than a

customer- and market-driven company. This has now changed, as we have

optimised the relationship between sales and development through the

product management organisation. The new organization will ensure that

only products demanded by the market on a short- or a long-term basis

are being developed.

Customer and markets

The company sells its products through its subsidiaries in the USA, the

UK, Switzerland and Romania and through business partners in more than

80 countries. In order to achieve our goal of continuing revenue growth,

positive cash flows and growing operating profits, we need to successfully

expand and develop the skills and knowledge available in the subsidiaries

within each business segment by focusing on selling our products to large

organizations, while at the same time expanding the business partner

channels and increasing the awareness of the company’s products. Going

forward, the objective is to generate an ever growing proportion of Netop

Solution revenue from the sale and distribution of products and Software-

as-a-Service products through web shops. In future, an increasing part of

the Netop Solutions product portfolio will address this rapidly growing

market, and we have launched a number of products for this market and

built up important knowledge and experience within this area. Manage-

ment believes that the transition will not have a negative, but rather a

complementary effect on the existing distribution channel.

Netop Solutions’ invoices a wide range of business partners and distribu-

tors all over the world and no single customer accounted for more than

10% of revenue. Netop Solutions is therefore not believed to be dependent

on any single customer.

Acquisitions

Company and technology acquisitions form an integral part of Netop Solu-

tions’ expansion strategy. Such acquisitions are associated with both risks

and challenges – for instance in connection with the integration of the ac-

tivities acquired, including integration of products and technologies, sales

channels and employees.

Insurance

It is Netop Solutions’ policy to insure against risks which could potentially

threaten the company’s financial position. In the license terms which cus-

tomers must accept before they are technically able to install Netop Solu-

tion products, the company has to the maximum extent possible included

clauses to limit liability. The purpose of these clauses is to limit the com-

pany’s liability attributable to potential defects that may occur in the prod-

ucts sold.

Netop Solutions has taken out such insurance policies as are usual for

companies of a similar nature The company has also taken out insurance

for property and operating equipment. Management believes that the com-

pany maintains adequate and appropriate insurance coverage. Netop Solu-

tions’ policy on insurance cover is reviewed annually in consultation with

the Board of Directors.

financial risks

Due to the international nature of Netop Solutions’ operations, a number

of financial risks have an impact on the company’s results of operations. It

is the company’s policy to identify and hedge such risks according to the

guidelines defined by the Board of Directors and the Management Board.

Foreign exchange risk

Netop Solutions is exposed to currency fluctuations, because individual

group companies conduct purchase or sales transactions and have receiv-

ables and debt in currencies other than their own functional currency.

As Netop Solutions is incorporated in Denmark, a large part of the Group’s

costs are incurred in Danish kroner. In 2010, the company invoiced approxi-

mately 14% of its sales in Danish kroner, 26% in euros, 52% in US dollars

and the remaining 8% in pound sterling. With respect to expenses, the

Group mainly incurs expenses in Danish kroner, US dollars, Romanian Lei

(RON) and pound sterling.

Netop Solutions’ foreign exchange exposure is thus primarily in euro and US

dollars in terms of revenue and in US dollars and Romanian Lei (RON) in terms

of costs. Management does not believe that the euro exposure involves par-

ticular risk. As regards US dollars, the company’s exposure has been reduced

following the establishment of a subsidiary in Chicago and the acquisition

in Portland. Management monitors the situation and the company hedges

up to 50% of the USD-denominated cash flows from operations from time

to time. No hedging contracts were entered into in 2010, as Netop Solutions

had a net surplus of US dollars. About 10% of the Group’s costs are in RON.

Management continuously monitors movements in the Rumanian currency

and regularly considers whether hedging future payments to Romania would

be appropriate, either by way of currency options or forward contracts. No

option or forward contracts were entered into in 2010. The average DKK/RON

exchange rate in 2010 was 1.77, against 1.76 in 2009.

25riSk FacTorS

Interest rate exposure

Considering its positive cash holdings, Netop Solutions does not have a

large risk exposure to interest rate fluctuations. The risk is mainly limited

to the interest return on the Group’s positive cash holdings. The Group’s

cash holdings are mainly placed in demand deposits at variable rates of

interest.

Liquidity risk

Netop Solutions pursues a policy of consistently ensuring the existence of

adequate financial resources. In 2010, Netop Solutions issued a convertible

debt instrument of EUR 2.5 million, of which EUR 0.8 milllion was converted

into share capital on 17 May 2010, while the remaining part was converted

into share capital on 14 December 2010. Part of the proceeds from the con-

vertible debt instrument was used to repay a guarantee commitment of

DKK 10 milllion made in connection with the acquisition of GenevaLogic in

2008. In addition, the Group has generated a cash inflow from operating

activities during the past two quarters. At the end of 2010, cash amounted

to DKK 14.0 million. Accordingly, management is confident that the cash

reserves are sufficient to implement the Group’ current strategy.

Credit risk

Netop Solutions’ credit risks are mainly related to receivables and bank

deposits. The Group’s sales are primarily made on open account. Most of

Netop’s sales are to customers with whom the Group has maintained a

business relationship for several years. The Group operates fixed terms of

payment and has defined policies on how to follow up on non-payment. For

customers not assessed to be sufficiently creditworthy, the Group changes

the terms of payment or requires a down payment.

Netop Solutions manages its credit exposure risk through monthly moni-

toring and follow-up procedures. Historically, the Group has incurred rela-

tively small losses from customer non-payment. In 2009, a provision of

DKK 1.3 million was made for one specific case which resulted in a loss in

2010. This is considered to be a one-off case and the loss on other claims

corresponds to what management designates as a normal level.

environmental issues

As part of its business activities, the Netop Solutions seeks to estimate

and limit its environmental impact. The company gives high priority to

making direct and indirect contributions to a sustainable environment.

Encompassing the development and selling of software products, Netop

Solutions’ operations have a very limited direct environmental impact.

Netop Solutions’ impact on the external environment thus mainly derives

from heating and cooling of the company’s premises as well as electricity

and water consumption. It is important to us that environmentally-friendly

solutions are applied in these areas.

The company is not involved in environmental claims, and Netop Solutions

is not comprised by the rules on environmental approval or the act on

presentation of ”green accounts” (environmental report).

26 know-how and coMpETEnciES

Netop Solutions’ principal resource is our skilled and committed employ-

ees. Netop Solutions develops concepts and software solutions that we

want to be the best of its kind in the world, and which we regularly con-

ceptualise and develop further to make sure that they satisfy the needs

of our customers and markets. Competencies, know-how and high profes-

sional standards are important building blocks and in a knowledge-based

and knowledge-intensive business like Netop Solutions, skilled employees

contribute to creating new ideas, innovation, products and results.

Development

2010 was an eventful year for our development organisation. Lean process-

es have taken root and after constantly implementing process enhance-

ments throughout 2010, we have now built the foundation for a learning or-

ganisation. We have achieved regular product deliveries and implemented

product management tools enabling the entire organisation to monitor

what is being developed, learn about development priorities and get the

current status on customer issues.

We have set up dedicated QA resources in all product teams and have es-

tablished a Quality Control Center in cooperation with Fortess in Russia and

the Technical University of Bucharest. Also during 2010, we consolidated

our development resources, so we now only have development teams in

the Philippines and Romania, the latter now being the largest Netop Solu-

tions office outside Denmark.

Global coverage and network

Netop Solutions has established a global network of sales subsidiaries and

distribution partners, enabling us to move quickly to deliver new solutions

to new markets and/or existing solutions to new markets. Customer growth

and innovation in one part of the world can quickly be shared on other

continents for everybody’s mutual benefit, inspiration and for experience-

exchange purposes.

Customer solutions

The only way to develop innovative customer solutions that make a dif-

ference in the everyday lives of our customers anywhere in the world is

to maintain close business relations with our customers and business

partners. We endeavour to exchange experience not only across the globe,

but also across our own business areas of Administration, Education and

Communication.

Employees

Our vision is “Netop wants to position itself as leading the revolution of

remote solutions”. In order to achieve that, it goes without saying that we

rely on our skilled employees. Their skills and knowledge are crucial for us

when developing value-creating solutions for our customers.

High professional standards and professionalism are the characteristics of

Netop Solutions employees at different locations around the world. Com-

bining this with an eagerness to learn and an ability for innovative think-

ing across business areas in order to develop optimum solutions for our

customers, partners and Netop Solutions are essential if we are to remain

competitive.

At the end of 2010, Netop Solutions had 122 full-time employees working in

six different countries.

Working in a multi-cultural organisation places big demands on our em-

ployees’ ability to work across cultural and linguistic barriers. Accordingly,

cultural skills are an important everyday component in our work with col-

leagues and in our ongoing endeavour to fortify our relations with busi-

ness partners and customers.

In terms of human resources, Netop Solutions plans to step up our employ-

ee retention and development efforts in 2010. However, the most important

source of skills development remains our day-to-day project work, through

which our employees perfect their ability to further develop their skills and

create the best and most long-term solutions for our customers.

k n o w - h o w a n d c o M p E T E n c i E S

27corporaTE Social rESponSiBiliTy and EnvironMEnTal iSSuES

Netop Solutions does not have a policy on corporate social responsibility

(CSR). Instead, our efforts are concentrated on selected activities within

the areas of the environment, climate and human resources.

Environment and climate

Given the climate changes facing the world today, we take pleasure in

being able to provide products and solutions that indirectly incorporate

environmental and climate-related considerations. Our software supports

lower carbon emissions, in that our solutions enable businesses and or-

ganisations to reduce their travel budgets and provide a climate-friendly

alternative saving both time and money by meeting online. Taking an on-

line meeting instead of a trip from, say Aalborg to Copenhagen, produces

the following savings for the environment:

Train 12 kg CO2/person

Air 66 kg CO2/person

Bil 88 kg CO2/person

*Source: Danish Energy Authority – http://www.ens.dk/da-dk/info/nyheder/

nyhedsarkiv/2009/sider/20090909co2beregnerforudsaetningerkvalitetssi

kret.aspx

In addition, our remote solutions can help businesses reduce technical or

support staff mileage while still providing support to users.

We use online meetings and remote support in-house at Netop Solutions,

at all our locations and externally when communicating with customers

or business partners. This approach contributes to reducing the Group’s

travel activities.

Employees

Our employees, their knowledge and skills are our most valuable resource,

and we aim to support their everyday well-being and commitment by pro-

viding a sound and stimulating working environment.

Healthy people live longer and are less prone to illness. In order to support

health-promoting activities that will support our employees’ health and

physical well-being, we make fitness facilities available to all members of

our staff association free of charge. We also offer canteen services at sev-

eral locations, bringing focus to a healthy and varied diet, which includes a

fruit service. Also, our management has made a health insurance scheme

available, enabling the staff to get psychological assistance for example if

they need help to handle a situation of crisis or grief.

Having a good psychological and physical working environment is not the

only important platform we provide for our employees. A large degree of

flexibility and a sense of responsibility also contribute to giving each em-

ployee a good working environment and helping them to strike a balance

between work and leisure. For this purpose, employees at Netop Solutions

are given opportunities to work from home part of the time and to have

flexible working hours. Also, in order to promote good relations between

employees and managers, each team leader conducts employee perfor-

mance reviews once a year to support the employees’ professional and

personal development.

c S r

28 SharEholdEr inForMaTion

Share information

Netop Solutions’ shares are listed on NASDAQ OMX Copenhagen under

securities identification code DK0010288125 and the symbol NETOP. Netop

Solutions’ shares are a component of the SmallCap index. Netop Solutions

has one freely negotiable share class. Netop Solutions A/S’ share capital

totalled DKK 31,951,020 at 31 December 2010 consisting of 6,390,204 shares

of DKK 5.0 each, corresponding to a total of 6,390,204 voting rights. The

shares are not subject to voting right restrictions.

At 31 December 2010, Netop Solutions shares were quoted at a price of

DKK 11.40 compared with DKK 7.80 at 1 January 2010, an increase of about

46%.

Changes to the share capital in 2010

In 2010, Netop Solutions increased its share capital by DKK 10,905,480, is-

suing 2,181,096 shares of DKK 5.0 each in the conversion of a convertible

debt instrument of DKK 2,500,000 that the company’s main shareholder

provided to Netop Solutions on 27 April 2010. The conversion was made in

amounts of DKK 3,325,000 on 17 May 2010 and of 7,580,480 on 14 December

2010. Accordingly, nothing of the convertible loan remains outstanding.

Ownership

At 31 December 2010, Netop Solutions had just over 900 registered share-

holders, who represented approximately 93% of the share capital. The

following shareholders hold 5% or more of the company’s share capital:

Consolidated Holdings A/S (54.1%)

Fredheimsvej 9, DK-2950 Vedbæk

Peter Grøndahl Nielsen, (9.46%)

Øverødvej 38, DK-2840 Holte

PROFESSIONEL FORENING LD HF (LD Pensions), Vendersgade 28,

DK-1363 København K (7.37%)

Netop Solutions held 138.669 treasury shares at 31 December 2010,

equivalent to 2.2 % of the share capital. Netop Solutions did not acquire

treasury shares in 2010.

Authorisations to the Board of Directors

The Board of Directors of Netop Solutions has been given a number of au-

thorisations by the shareholders in general meeting to increase the share

capital, issue warrants to management and employees and to acquire

Netop Solutions shares for up to 10% of the share capital.

Netop Solutions’ Board of Directors is authorised to issue a total of

283,529 warrants, see article 4 of the articles of association. Until the

end of 2010, the Board of Directors has issued 283,226 warrants and

consequently, only an additional 303 warrants may be issued pursuant to

the authority.

For use in carrying out the capital increase associated with the exercise of

the warrants issued, the Board of Directors is also authorised in the period

until 30 June 2013 to increase the company’s share capital by DKK 1,417,645

in one or more issues without preemptive rights to the company’s existing

shareholders.

Furthermore, until 27 April 2015, the Board of Directors is authorised to

increase the share capital by up to a nominal value of DKK 1,745,870 in

one or more issues without preemptive rights to the company’s existing

shareholders through the issuance of up to 349,174 new shares each with a

nominal value of DKK 5 per share.

Furthermore, the board of directors is authorised to acquire, until 27 April

2015, up to 10% of the company’s share capital.

General meetings

The shareholders in general meeting are the supreme authority in all com-

pany matters, subject to the provisions laid down by statute and by the

articles of association.

General meetings are convened at not less than three weeks’ and not more

than five weeks’ notice. A notice including all proposals will be published

through the stock exchange. Moreover, the notice is sent to all registered

shareholders. Shareholders who have so requested will also receive the

annual report.

All shareholders are entitled to attend and vote at general meetings, pro-

vided they have obtained an admission card as prescribed by the articles

of association. At general meetings, shareholders are free to ask ques-

tions to the Board of Directors and the Management Board. Within a given

deadline, they can also submit resolutions for consideration by the Annual

General Meeting. The Board of Directors and Management Board must, to

the extent possible, always attend general meetings.

Netop Solutions believes that registration by name is a major advantage

as it provides an opportunity for direct communication with shareholders.

Shareholders may exercise their voting rights if the shares have been en-

tered in the register of shareholders or if the shareholder has notified the

company of and documented his/her acquisition prior to the convening of

the general meeting concerned. The voting right may be exercised by a

proxy holder, who must produce a written and dated instrument of proxy.

In connection with sending out the agenda, a proxy form to the board of

directors will be enclosed. Proxies may be given for each proposal.

Any shareholder is entitled to attend general meetings if he/she has re-

quested to receive an admission card at Netop Solutions office not later

than three days prior to the general meeting, or has requested to receive

an admission card electronically in accordance with the procedure set out

on the company’s website,www.netop.com under Investor Relations.

S h a r E h o l d E r i n F o r M aT i o n

29SharEholdEr inForMaTion

All resolutions adopted at general meetings is adopted by a simple major-

ity of votes unless the Danish Companies Act or Netop Solutions’ articles of

association prescribe special rules on representation and majority.

Unless Danish legislation provides for a greater majority or unanimity, the

adoption of resolutions regarding amendments to Netop Solutions’ articles

of association or Netop Solutions’ dissolution requires a majority of not

less than two-thirds of all the votes cast as well as of the voting share

capital represented at the relevant general meeting, and that not less than

50% of the share capital is represented at the general meeting.

Board of Directors

Netop Solutions is managed by a Board of Directors composed of from

three to six members elected by the shareholders in general meeting for

terms of one year; they are eligible for re-election. Furthermore, the Board

of Directors includes members elected pursuant to the statutory rules on

employee representation on the Board of Directors. In 2010, Netop Solu-

tions had four Board members elected by the general meeting and three

members elected by the employees.

Annual general meeting

The company’s annual general meeting will be held on 15 April 2010 at the

offices of Netop Solutions, Bregnerødvej 127, DK-3460 Birkerød.

Board decisions and proposed resolutions

for consideration at the Annual General Meeting

Allocation of profit

At regular intervals and at least once a year the Board of Directors as-

sesses the size and composition of Netop Solutions’ capital base, includ-

ing, in particular, expectations for financial results and cash flows as well

as any relevant uncertainty and risk factors. The dividend for the year is

determined on the basis of this assessment.

Based on the performance in 2010, the Board of Directors recommends that

no dividend be distributed in 2011. Also, the Board recommends that the

parent company’s profit for the year of DKK 4.8 million be carried forward

to 2011.

Other proposals

The Board of Directors intends to submit the following proposals:

• Proposal to amend the authority in article 4.12 of the Articles of As-

sociation to the effect that the Board of Directors is authorised to in-

crease the Company’s share capital by up to a nominal amount of DKK

2,824,260.

• Proposal to authorise the Board of Directors to resolve to issue warrants

with a view to setting up an incentive scheme for the company’s employees.

30 SharEholdEr inForMaTion

Management

Hanne Jespersen Hansen, employee representative, resigned from the

Board of Directors of Netop Solutions A/S on 5 February, 2010 in connec-

tion with resigning from the company. Søren Bach subsequently joined the

Board as new employee representative.

CFO Claus Finderup Grove resigned his position effective from 30 April 2010

in order to take up a similar position outside the Netop Solutions group.

Per Rank, employee representative, resigned from the Board of Direc-

tors 30 June, 2010 in connection with resigning from the company. Helle

Uldbjerg, his alternate, joined the Board as employee representative.

Helle Uldbjerg resigned from the Board on 4 August and was replaced by

Marcus Kaber.

On 30 September, Jesper Slot was appointed new CFO. Jesper Slot (38)

joined the company from Ernst & Young, where since 1994 he had served a

number of large corporate clients, including listed companies.

On 31 January 2011, Max Møller resigned from the Board in connection with

resigning from the company. He was replaced by Jakob Bork.

Financial calendar 201115 April 2011 Annual general meeting

26 April 2011 Quarterly report, Q1 2011

16 August 2011 Quarterly report, Q2 2011

15 November 2011 Quarterly report, Q3 2011

Announcements in 2010 5 February Employee representative resigns from the Board of Directors

11 February Incentive plans

22 February New employee representative enters the Board of Directors in Netop Solutions

25 February Netop Solutions announces the sale of the rights to Mobile Embedded

16 March Netop Solutions A/S releasing Annual Report 2009

26 March Changes in Management

31 March Notice to ordinary general meeting in Netop Solutions A/S

27 April Netop Solutions A/S - Profit announcement for the first quarter of 2010

27 April Proceedings at the annual general meeting of Netop Solutions A/S

27 April Convertible loan

17 May Part of a convertible loan to be converted

18 May Capital increase registered

18 May Major shareholder announcement

15 June Report by the Board of Directors of Netop Solutions A/S in relation to mandatory takeover bid

30 June Change in employee representatives in the Board of Directors

30 June Statement of share capital and voting rights

14 July Result of mandatory tender offer

4 August Change in employee representatives in the Board of Directors

17 August Profit announcement for the second quarter and first half-year of 2010

30 September Netop Solutions appoints new CFO

30 September Incentive plans for managers in Netop Solutions A/S

12 November Supplementary/corrective information to the 2009 annual report.

16 November Q3 2010 profit announcement for Netop Solutions A/S

16 November Report on transactions in Netop Solutions shares by executives, directors and other

senior employees of Netop Solutions and their related parties





26 November Financial calendar 2011

14 December Rest of Convertible loan to be converted

17 December Capital increase registered

17 December Major shareholder announcement

29 December Netop Solutions wins large order on the US market

31SharEholdEr inForMaTion

Corporate governance

Pursuant to clause 4.3 of the “Rules for issuers of Shares – NASDAQ OMX

Copenhagen”, listed companies must report on how they address the

“Recommendations for corporate governance” based on the “comply or

explain” principle. The main purpose of this requirement is to create trans-

parency in corporate governance matters.

In accordance with the new rules, the information specific to Netop Solu-

tions can be found at:

http://www.netop.com/investors/corporate-governance.htm, including how

Netop Solutions’ position on each individual recommendation.

Investor Relations

Netop Solutions’ ambition is to provide strong and reliable information.

By pursuing open and active communications with investors, analysts, the

press and other stakeholders, the company aims to provide the equity

market with the optimum foundation from which to price Netop Solutions

shares. Communication with investors consists of regular publication of an-

nouncements, investor presentations and of holding individual meetings.

Netop Solutions’ website, www.netop.com, the primary source of informa-

tion for the company’s stakeholders, regularly provides new and relevant

information about Netop Solutions’ performance, activities and strategy.

The website also contains a separate section on the 2010 annual general

meeting, from which it is possible to see or download the annual report

or to register for the annual general meeting. Moreover, the articles of

association and the notice convening the annual general meeting are avail-

able on the website. Shareholders, analysts, investors, securities compa-

nies and other interested parties should direct any questions about Netop

Solutions to:

Netop Solutions A/S

Bregnerødvej 127

DK-3460 Birkerød

CVR no.: 1622 1503

Contact: Kurt Bager (CEO)

Tel. +45 4590 2525.

E-mail: [email protected]

BOARD OF DIRECTORS

Ib Kunøe, 67

Chairman of Netop Solutions A/S and Netop

Business Solutions A/S since July 2005.

Chairman of the boards of directors of:Atea ASA, CDrator A/S, Columbus IT A/S, Consoli-

dated Holdings A/S, Core Workers A/S, DAN-Pal-

letiser A/S, DAN-Palletiser Holding A/S, Morsing

PR ApS and Thrust IT A/S.

Member of the boards of directors of:Atrium Partners A/S and Primare Systems AB.

Special qualifications: General corporate management, including man-

agement of IT businesses, mergers and acquisi-

tions.

Henning Hansen, 61

Board member of Netop Solutions A/S and Netop

Business Solutions A/S since February 2001.

Attorney-at-law. Partner with Philip law firm.

Member of the boards of directors of: Casino Ejendomsselskab A/S, Non Nobis Fonden,

Carl Wine A/S and Toki Ejendomme A/S.

Special qualifications: General management, general and corporate

law issues

Jan Elbæk, 50

Executive VP, member of the executive board of

Atea A/S

Member of the board of directors of: Westergaard CSM A/S, Intranote A/S, DKT Audio

produkter A/S and DMSave A/S

Special qualifications: International sales and management of IT busi-

nesses

The Group consists of: Netop Solutions A/S (parent company), Netop Business Solutions A/S (wholly owned), Netop Tech Ltd. (wholly

owned), Netop Tech Inc. (wholly owned), Netop Tech S.R.L as well as Genevalogic Holding AG (wholly owned) and its subsidiary

Genevalogic Langenthal Ltd.

The members of the Board of Directors of Netop Solutions A/S are listed below. The Board of Directors of Netop Business Solutions

A/S consists of Ib Kunøe (Chairman), Henning Hansen and Jan Elbæk. The Management Board consists of Kurt Groth Bager.

B o a r d o F d i r E c T o r S a n d M a n a g E M E n T

32 Board oF dirEcTorS and ManagEMEnT

Peter Schüpbach, 48

Member of the boards of directors of: FashionFriends AG, Switzerland, NewBorn Ven-

tures AG, Switzerland, ABILITA AG, Switzerland,

Edelight GmbH, Germany.

Special qualifications: Development and management of IT businesses

Marcus Kaber, 37

Senior Vice President, Sales

Board member of Netop Solutions A/S

since August 2010. Elected by the

company’s employees.

Jakob Bork, 40

Vice President Legal


since January 2011.

Elected by the company’s employees.

Søren Bach, 34

Facility Manager


since 22 February 2010.

Kurt Groth Bager, 45

Chief Executive Officer of

Netop Solutions A/S since

21 February 2008.

Kent F. Madsen, 45

Chief Technical Officer since 1 June 2008.

Jesper Slot, 39

Chief Financial Officer

since 1 November 2010.

MANAGEMENT

33Board oF dirEcTorS and ManagEMEnT

statement By management

We have today presented the annual report of Netop Solutions A/S for the

financial year 1 January – 31 December 2010.

The consolidated financial statements are presented in accordance with

International Financial Reporting Standards as adopted by the EU, and the

parent company financial statements are presented in accordance with the

Danish Financial Statements Act. In addition, the consolidated financial

statements and the parent company financial statements are prepared

in accordance with additional Danish disclosure requirements for listed

companies.

In our opinion, the consolidated financial statements and the parent com-

pany financial statements give a true and fair view of the Group’s and the

parent company’s assets and liabilities, financial position and results of

operations as well as of the Group’s cash flows. Furthermore, in our opin-

ion, the management’s review includes a fair review of the matters covered

by the review.

We recommend that the annual report be adopted at the annual general

meeting.

Birkerød, 15 March 2011

management

Kurt Groth Bager

Adm. direktør

Board of directors

Ib Kunøe Henning Hansen Jan Elbæk

Formand

Jakob Bork Marcus Kaber Peter Schüpbach

Søren Bach

r E S p o n S i B i l i T y S TaT E M E n T S

34 rESponSiBiliTy STaTEMEnTS

independent auditor’s report

To the shareholders of Netop Solutions A/S

Report on the consolidated financial

statements and parent financial statements

We have audited the consolidated financial statements and parent finan-

cial statements of Netop Solutions A/S for the financial year 1 January -

31 December 2010, which comprise the income statement, balance sheet,

statement of changes in equity and notes, including the accounting poli-

cies, for the Group and the Parent, respectively, as well as the statement

of comprehensive income and the cash flow statement of the Group. The

consolidated financial statements have been prepared in accordance with

International Financial Reporting Standards as adopted by the EU, and the

parent financial statements have been prepared in accordance with the

Danish Financial Statements Act. Further, the consolidated financial state-

ments and parent financial statements have been prepared in accordance

with Danish disclosure requirements for listed companies.

Management’s responsibility for the consolidated

financial statements and parent financial statements

Management is responsible for the preparation and fair presentation of

consolidated financial statements in accordance with International Fi-

nancial Reporting Standards as adopted by the EU and Danish disclosure

requirements for listed companies as well as the preparation and fair

presentation of parent financial statements in accordance with the Dan-

ish Financial Statements Act and Danish disclosure requirements for listed

companies. This responsibility includes: designing, implementing and

maintaining internal control relevant to the preparation and fair presenta-

tion of consolidated financial statements and parent financial statements

that are free from material misstatement, whether due to fraud or error,

selecting and applying appropriate accounting policies, and making ac-

counting estimates that are reasonable in the circumstances.

Auditor’s responsibility and basis of opinion

Our responsibility is to express an opinion on these consolidated financial

statements and parent financial statements based on our audit. We con-

ducted our audit in accordance with Danish Standards on Auditing. Those

Standards require that we comply with ethical requirements and plan and

perform the audit to obtain reasonable assurance whether the consoli-

dated financial statements and parent financial statements are free from

material misstatement.

An audit involves performing procedures to obtain audit evidence about

the amounts and disclosures in the consolidated financial statements

and parent financial statements. The procedures selected depend on the

auditor’s judgement, including the assessment of the risks of material

misstatement of the consolidated financial statements and parent finan-

cial statements, whether due to fraud or error. In making those risk as-

sessments, the auditor considers internal control relevant to the entity’s

preparation and fair presentation of consolidated financial statements and

parent financial statements in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the entity’s internal control. An audit also

includes evaluating the appropriateness of accounting policies used and

the reasonableness of accounting estimates made by Management, as well

as evaluating the overall presentation of the consolidated financial state-

ments and parent financial statements.

We believe that the audit evidence we have obtained is sufficient and ap-

propriate to provide a basis for our audit opinion.

Our audit has not resulted in any qualification.

Opinion

In our opinion, the consolidated financial statements give a true and fair

view of the Group’s financial position at 31-12-2010, and of its financial per-

formance and its cash flows for the financial year 1 January - 31 December

2010 in accordance with International Financial Reporting Standards as ad-

opted by the EU and Danish disclosure requirements for listed companies.

Further, in our opinion, the parent financial statements give a true and

fair view of the Parent’s financial position at 31-12-2010, and of its financial

performance for the financial year 1 January - 31 December 2010 in ac-

cordance with the Danish Financial Statements Act and Danish disclosure

requirements for listed companies.

Statement on the management commentary

Management is responsible for preparing a management commentary that

contains a fair review in accordance with the Danish Financial Statements

Act and Danish disclosure requirements for listed companies.

Our audit did not include the management commentary, but we have read

it pursuant to the Danish Financial Statements Act. We did not perform any

procedures other than those performed during the audit of the consoli-

dated financial statements and parent financial statements.

Based on this, we believe that the disclosures in the management commen-

tary are consistent with the consolidated financial statements and parent

financial statements.

Copenhagen, 15 March 2011

Deloitte

Statsautoriseret Revisionsaktieselskab

Peter Skov Hansen Bill Haudal Pedersen

State Authorised State Authorised

Public Accountant Public Accountant

35rESponSiBiliTy STaTEMEnTS

Netop Solutions A/S

Netop Business Solutions A/S

Netop Tech Inc.united states

Netop Tech Ltd.united kingdom

Netop Tech AGswitzerland

Netop Tech SLRromania

g r o u p o v E r v i E w

group ovErviEw36

37conSolidaTEd accounTS

CONSOLIDATED ACCOUNTS

Income statement 38

Statement of comprehensive income 39

Balance sheet 40

Statement of changes in equity 42

Cash flow statement 43

Notes to the consolidated accounts 44

Page

38 incoME STaTEMEnT

CONSOLIDATED INCOME STATEMENT 1 JANUARY – 31 DECEMBER

DKK '000 2010 2009

Revenue 3,4 92.071 85.287

Direct costs (888) (685)

Gross profit 91.183 84.602

Other operating income 6 4.817 322

External costs 9 (32.703) (45.756)

Amortisation, depreciation and impairment losses 5 (10.095) (32.875)

Staff costs 8 (55.085) (73.500)

Other operating costs 7 - (192)

Operating profit (EBIT) (1.883) (67.399)

Financial income 10 98 471

Financial expenses 11 (2.201) (946)

Profit before tax af continuing business (3.986) (67.873)

Corporation tax of continuing business 12 4.891 (5.776)

Profit for the year of continuing business 905 (73.649)

Profit for the year of discontinuing business 31 - (8.891)

Profit for the year 905 (82.539)

Earning per share (EPS)

Earning per share (EPS) 13 0,20 (20,24)

Earnings per share, diluted (EPS-D) 13 0,20 (20,24)

Earning per share of continuing business (EPS) 13 0,20 (18,06)

Earning per share of continuing business, diluted (EPS-D) 13 0,20 (18,06)

39STaTEMEnT oF coMprEhEnSivE incoME

CONSOLIDATED INCOME STATEMENT 1 JANUARY – 31 DECEMBER

DKK '000 2010 2009

Revenue 3,4 92.071 85.287

Direct costs (888) (685)

Gross profit 91.183 84.602

Other operating income 6 4.817 322

External costs 9 (32.703) (45.756)

Amortisation, depreciation and impairment losses 5 (10.095) (32.875)

Staff costs 8 (55.085) (73.500)

Other operating costs 7 - (192)


Financial income 10 98 471

Financial expenses 11 (2.201) (946)

Profit before tax af continuing business (3.986) (67.873)

Corporation tax of continuing business 12 4.891 (5.776)


Profit for the year of discontinuing business 31 - (8.891)


Earning per share (EPS)

Earning per share (EPS) 13 0,20 (20,24)

Earnings per share, diluted (EPS-D) 13 0,20 (20,24)

Earning per share of continuing business (EPS) 13 0,20 (18,06)

Earning per share of continuing business, diluted (EPS-D) 13 0,20 (18,06)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 31 DECEMBER

DKK '000 2010 2009


Other comprehensive income

Exchange rate adjustments relating to foreign entities 1.089 794

Tax of other comprehensive income - -

Other comprehensive income after tax 1.089 794

Total comprehensive income 1.994 (81.746)

40 BalancE ShEET

CONSOLIDATED BALANCE SHEET 31 DECEMBER

DKK '000 2010 2009

ASSETS

Goodwill 31.022 31.022

Customer relations 7.500 10.500

Acquired licences 5.415 7.702

Completed development projects 7.294 6.620

Development projects in progress 1.848 1.410

Software internal use 250 294

Intangible assets 14 53.328 57.548

Other fixtures and fittings, tools and equipment 808 1.611

Leasehold improvements 56 68

Property, plant and equipment 15 864 1.678

Deposits 13.012 13.132

Other receivables 18 2.973 1.540

Deferred tax 16 6.209 2.004

Other non-current assets 22.194 16.675

Total non-current assets 76.385 75.901

Trade receivables 17 17.082 14.569


Cash at bank and in hand 24 14.040 4.848

Total current assets 34.288 22.220

Total assets 110.674 98.121

41BalancE ShEET


DKK '000 2010 2009

ASSETS

Goodwill 31.022 31.022

Customer relations 7.500 10.500

Acquired licences 5.415 7.702

Completed development projects 7.294 6.620

Development projects in progress 1.848 1.410

Software internal use 250 294

Intangible assets 14 53.328 57.548

Other fixtures and fittings, tools and equipment 808 1.611

Leasehold improvements 56 68

Property, plant and equipment 15 864 1.678

Deposits 13.012 13.132





Trade receivables 17 17.082 14.569


Cash at bank and in hand 24 14.040 4.848




DKK '000 2010 2009

EQUITY AND LIABILITIES

Equity

Share capital 19 31.951 21.046

Share premium 7.721 -

Other reserves 9.700 8.348

Retained earnings 35.380 34.476

Total equity 84.752 63.870


Provisions 20 (0) 1.311

Pension obligations 21 226 226

Other liabilities 23 1.241 805

Deferred income 1.165 -

Total non-current liabilities 5.257 6.017

Provisions 20 142 10.146

Trade payables 3.634 3.193

Corporation tax 22 0 45

Other liabilites 23 10.313 10.839

Deferred income 6.575 4.012

Total current liabilities 20.664 28.234

Total liabilities 25.921 34.251

Total equity and liabilities 110.674 98.121

42 STaTEMEnT oF changES in EQuiTy

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 1 JANUARY - 31 DECEMBER

DKK '000

Share

premium

Equity at 1 January 2009 21.046 - 5.914 1.508 117.455 124.877 145.923

Total comprehensive income in 2009

Profit for the year (82.539) (82.539) (82.539)

Other comprehensive income:

Exchange rate adjustments relating to foreign entities 794 - - 794 794

Tax of other comprehensive income - - - - -

Total other comprehensive income - - 794 - - 794 794

Total comprehensive income for the period - - 794 - (82.539) (81.746) (81.746)

Transaction with owners:

Acquisition of treasury shares - - (440) (440) (440)

Share based payments - 133 - 133 133

Total transactions with owners - - - 133 (440) (307) (307)

Equity at 31 December 2009 21.046 - 6.708 1.641 34.476 42.824 63.870


Profit for the year - - - - 905 905 905


Exchange rate adjustments relating to foreign entities 1.089 - - 1.089 1.089


Total other comprehensive income - - 1.089 - - 1.089 1.089

Total comprehensive income for the period - - 1.089 - 905 1.994 1.994


Capital increase 10.905 7.721 - - - 7.721 18.626

Share based payments - - - 263 - 263 263

Total transactions with owners 10.905 7.721 - 263 - 7.984 18.889

Equity at 31 December 2010 31.951 7.721 7.797 1.904 35.380 52.801 84.752

Share capital

Translation

reserve

Retained

earnings

Reserve for

share based

payments

Reserve

total Total

On 27 April 2010, Netop Solutions issued a convertible debt instrument. The convertible debt instrument of EUR 2.5m (DKK18.6m) was converted into share capital in two rounds on 17 May 2010 and on 14 December 2010, respectively.

43caSh Flow STaTEMEnT

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 1 JANUARY - 31 DECEMBER

DKK '000

Share

premium

Equity at 1 January 2009 21.046 - 5.914 1.508 117.455 124.877 145.923


Profit for the year (82.539) (82.539) (82.539)


Exchange rate adjustments relating to foreign entities 794 - - 794 794


Total other comprehensive income - - 794 - - 794 794

Total comprehensive income for the period - - 794 - (82.539) (81.746) (81.746)


Acquisition of treasury shares - - (440) (440) (440)

Share based payments - 133 - 133 133

Total transactions with owners - - - 133 (440) (307) (307)

Equity at 31 December 2009 21.046 - 6.708 1.641 34.476 42.824 63.870


Profit for the year - - - - 905 905 905


Exchange rate adjustments relating to foreign entities 1.089 - - 1.089 1.089


Total other comprehensive income - - 1.089 - - 1.089 1.089

Total comprehensive income for the period - - 1.089 - 905 1.994 1.994


Capital increase 10.905 7.721 - - - 7.721 18.626

Share based payments - - - 263 - 263 263

Total transactions with owners 10.905 7.721 - 263 - 7.984 18.889

Equity at 31 December 2010 31.951 7.721 7.797 1.904 35.380 52.801 84.752

Share capital

Translation

reserve

Retained

earnings

Reserve for

share based

payments

Reserve

total Total

On 27 April 2010, Netop Solutions issued a convertible debt instrument. The convertible debt instrument of EUR 2.5m (DKK18.6m) was converted into share capital in two rounds on 17 May 2010 and on 14 December 2010, respectively.

CONSOLIDATED CASH FLOW STATEMENT 1 JANUARY - 31 DECEMBER

DKK '000 2010 2009

Operating Profit (EBIT) (1.883) (67.399)

- -

Adjustments for non-cash transactions: - -

Share based payments 269 133

Unrealised exchange rate adjustments (550) -

Adjustment pension obligations 0 (459)

Adjustment provisions (1.315) 1.457

Amortisation, depreciation and impairment losses 5 10.095 32.875

Gains and losses on sold intangible assets and property, plant and equipment 6,7 (92) (74)

Adjustment deferred income 3.729 234

10.253 (33.234)

Change in net working capital: - -

Change in receivables (4.267) 6.734

Change in trade payables and other liabilities (72) (3.063)

Cash generated from operations 5.915 (29.563)

- -

Interest paid 98 471

Interest received (226) (159)

Cash generated from operations activities 5.787 (29.251)

Corporation tax paid (159) (97)

Cash flow from operating activities of continuing business 5.628 (29.348)

- -

Cash flow from operating activities of discontinuing business 30 - (8.139)

Cash flow from operating activities 5.628 (37.486)

- -

Purchase of intangible assets 14 (4.571) (7.007)

Disposal of intangible assets 14 - 1.625

Purchase of property, plant and equipment 15 (135) (528)

Disposal of property, plant and equipment 15 - 48

Purchase/disposal of other non-current assets 120 40

Disposal investments in associates - 398

Acquisition of subsidiaries 25 - (75)

Cash flow from investing activities (4.586) (5.499)

- -

Acquisition of treasury shares - (440)

Payment for purchase of GenevaLogic in 2008 (10.000) -

Convertible loan issued 18.626 -

Cash flow from financing activities 8.626 (440)

- -

Change in cash at bank and in hand 9.668 (43.425)

Cash at bank and in hand at 1 January 24 4.848 48.146

Exchange rate adjustments (476) 127

Cash at bank and in hand at 31 December 24 14.040 4.848

44

NOTES TO THE CONSOLIDATED ACCOUNTS

Group accounting policies 1

Critical accounting judgements and estimates 2

Segment Information 3

Revenue 4

Amortisation, depreciation and impairment losses 5

Other operating income 6

Other operating costs 7

Staff costs 8

Fees to auditors appointed by the Annual General Meeting 9

Financial income 10

Financial expenses 11

Corporation tax 12

Earnings per share (EPS) 13

Intangible assets 14

Property, plant and equipment 15

Deferred tax 16

Trade receivables 17

Other receivables 18

Share capital, treasury shares and dividend 19

Provisions 20

Pension obligations 21

Corporation tax 22

Other liabilites 23

Cash at bank and in hand 24

Acquisition of subsidiaries 25

Share options - and warrants program plans 26

Related party transactions 27

Management's shareholding of Netop Solutions A/S shares 28

Contractual obligations 29

Discontinuing activities 30

Financial instruments, risk and financial management 31

Contingent liabilities 32

Subsequent events 33

Note

noTES To ThE conSolidaTEd accounTS

45


Group accounting policies 1

Critical accounting judgements and estimates 2

Segment Information 3

Revenue 4



Other operating costs 7

Staff costs 8


Financial income 10


Corporation tax 12

Earnings per share (EPS) 13

Intangible assets 14


Deferred tax 16

Trade receivables 17


Share capital, treasury shares and dividend 19

Provisions 20

Pension obligations 21

Corporation tax 22

Other liabilites 23


Acquisition of subsidiaries 25

Share options - and warrants program plans 26

Related party transactions 27

Management's shareholding of Netop Solutions A/S shares 28

Contractual obligations 29

Discontinuing activities 30

Financial instruments, risk and financial management 31

Contingent liabilities 32

Subsequent events 33

Note

Notes to the consolidated financial statements

NOTE 1 ACCOUNTING POLICIES

Accounting policies for the Group The consolidated financial statements of Netop Solutions A/S for 2010 are presented in accordance with International Financial Reporting Standards, as adopted by EU and additional Danish disclosure requirements for annual reports for listed companies. The parent company annual report, which is set out on pages 82-96, has been presented in accordance with the Danish Financial Statements Act and additional Danish disclosure requirements for listed companies. Basis of preparation The consolidated financial statements have been prepared under the historical cost convention, with the exception of derivative financial instruments used for hedging purposes. Non-current assets held for sale are measured at the lower of the carrying amount before reclassification and the fair value less costs to sell. The accounting policies set out below have been consistently applied in the financial year and to the comparative figures. The consolidated financial statements are presented in DKK rounded to the nearest thousand kroner. Implementation of new accounting standards In 2010, Netop Solutions A/S implemented the following new or amended standards and interpretations as adopted by the EU, which have taken effect as from accounting periods commencing on 1 January 2010. • “Improvements to IFRS” (issued in 2009)

Implementation only entails minor changes in the presentation of certain elements of the consolidated financial statements. • IFRS 3 Business combinations

Implementation only entails changes to the accounting policy for future acquisitions and divestments.

The new standards and interpretations have no effect on earnings per share or diluted earnings per share. Other new or amended standards and interpretations as adopted by the EU, which have taken effect as from accounting periods commencing on 1 January 2010 are not relevant to the Group. IASB has issued the following new financial reporting standards and interpretations that are relevant to the Group but not mandatory in the preparation of Netop’s annual report for 2010: • “Improvements to IFRS” (issued in 2010) • IFRS 9 Financial instruments Implementation of these standards is not expected to lead to material changes to the applied accounting policies. The Netop Group expects to implement the new financial reporting standards in connection with its financial reporting in respect of 2011 and 2013, at which time they become mandatory. The amendments and interpretations are not expected to affect the amounts of the Netop Group’s profit/loss, assets or liabilities and equity when taking effect. Consolidation The consolidated financial statements consolidate the financial statements of the parent company, Netop Solutions A/S, and subsidiaries in which Netop Solutions A/S directly or indirectly holds more than 50% of the voting rights or in other ways exercises a controlling interest. Enterprises in which the Group holds between 20% and 50% of the voting rights and over which it exercises significant influence, but which it does not control, are considered associates. An assessment of whether Netop Solutions A/S exercises control or a significant influence takes potential voting rights into consideration. See the Group overview on page 36. The consolidated financial statements are prepared by adding the financial statements of the parent company and the individual subsidiaries, all of which are prepared in accordance with the Group’s accounting policies, and eliminating intra-group income and expenses, investments, balances and dividends as well as realised and unrealised intra-group gains and losses.


46

Business combinations Newly acquired or newly established companies are recognised in the consolidated financial statements from the date of acquisition. Companies divested or wound up are included in the consolidated income statement until the date of disposal. Comparative figures are not restated to reflect acquisitions. Discontinued operations are stated separately (see below). The date of acquisition is the date on which control of the acquired company actually passes to Netop. The purchase method is applied on acquisitions if the parent company gains control of the company acquired. Identifiable assets, liabilities and contingent liabilities of acquired enterprises are stated at their fair value at the date of acquisition. Identifiable intangible assets are recognised insofar as they are separable or arise from contractual rights. Deferred tax on revaluations made is recognised. Any excess of the cost of acquisition over the fair value of the acquired identifiable assets, liabilities and contingent liabilities is recognised as goodwill under intangible assets. Goodwill is not amortised, but is tested annually for impairment. The first impairment test is performed before the end of the year of acquisition. Upon acquisition, goodwill is allocated to the cash-generating units subsequently providing a basis for the impairment tests. Any goodwill arising and any fair value adjustments made on the acquisition of a foreign entity whose functional currency is not the same as the Group’s presentation currency are treated as assets and liabilities of the foreign entity and translated to the foreign entity’s functional currency at the exchange rate ruling at the transaction date. Negative differences (negative goodwill) is recognised in the income statement at the date of acquisition The consideration for an enterprise consists of the fair value of the agreed consideration in the form of assets, liabilities incurred and equity instruments issued. If part of the consideration is contingent on future events, such part is recognised at its fair value at the date of acquisition. Costs attributable to business combinations are recognised directly in the income statement as incurred. If uncertainties regarding measurement of identifiable assets, liabilities and contingent liabilities or the determination of the consideration exist at the acquisition date, initial recognition will take place on the basis of preliminary fair values. If it later turns out that the identification or measurement of the consideration or assets, liabilities and contingent liabilities acquired had a different fair value at the time of acquisition than that originally assumed, adjustment is made for the acquisition, including goodwill, retrospectively until 12 months after the acquisition. The effect of the adjustments will be recognised in the opening equity, and comparative figures will be restated accordingly. Changes to estimates of contingent consideration are generally recognised directly in the income statement. Any gains or losses on the disposal of subsidiaries and associates are stated as the difference between the sales sum or the proceeds from the winding-up and the carrying amount of net assets, including goodwill, at the date of disposal and expenses for selling or winding-up. Foreign currency translation Functional currency A functional currency is determined for each of the Group’s companies. The functional currency is the currency used in the primary financial environment in which the individual enterprise operates. Transactions in currencies other than the functional currency are transactions in foreign currencies. Translation of transactions and amounts The consolidated financial statements are presented in Danish Kroner (DKK), which is the functional and presentation currency of the Group. On initial recognition, transactions denominated in foreign currency are translated at the exchange rate ruling on the transaction date. Exchange differences arising between the exchange rate at the transaction date and the date of payment are recognised in the income statement as financial income or expense. Receivables, payables and other monetary items denominated in foreign currency are translated at the exchange rates ruling at the balance sheet date. The difference between the exchange rate ruling on the balance sheet date and the exchange rate at the date when the receivable or payable arose or was recorded in the most recent annual financial statements is recognised in the income statement under financial income or expenses. Translation of subsidiaries On consolidation of companies with functional currencies other than DKK, the income statements are translated at the exchange rate ruling at the transaction date and the balance sheets at the exchange rate ruling at the balance sheet date. The average exchange rate for each individual month is used as the rate at the transaction date, provided this does not give a much different view. Exchange differences arising on the translation of the opening equity of such companies at the exchange rates ruling at the balance sheet date and on the translation of the income statements from the exchange rates ruling at the transaction date to the exchange rates ruling at the balance sheet date are recognised directly in other comprehensive income and presented as a separate reserve for currency translation in equity.


47

INCOME STATEMENT Revenue Sales of software are recognised at the time when software licenses are configured for the end user or when delivery and transfer of risk to the distributor has taken place, and when the income can be measured reliably and is expected to be received. Income from license agreements according to which the purchaser is entitled to implement some of the Group’s products for a group of end users is recognised at the invoice date. Income from subscription agreements is recognised according to the straight-line amortisation method over the term of the subscription period. Other income is recognised in the income statement when delivery of services has taken place. Revenue is recognised excluding VAT, taxes and discounts related to sales. Direct costs Direct costs comprise costs directly attributable to consumables and royalty costs for the use of software to which the Netop Group does not hold the rights to the software. Other operating income and expenses This item contains income and expenses not related to revenue or to any other income statement items. Most often, this comprises items of a secondary nature relative to the Group's activities, including gains and losses on regular sales and replacement of intangible assets and property, plant and equipment. Gains and losses on the disposal of intangible assets and property, plant and equipment are computed as the difference between the selling price and the carrying amount at the date of disposal. External costs External costs include costs incurred during the year for office premises, losses on trade receivables, marketing expenses, consultants fees, including external audit fees and legal assistance, communication costs, minor acquisitions, hardware and software leasing expenses as well as general administrative expenses. Depreciation, amortisation and impairment Depreciation, amortisation and impairment covers ordinary straight-line amortisation of intangible assets and depreciation of property, plant and equipment during the financial year as well as write-downs made on the basis of impairment tests. Staff costs Staff costs include all staff costs incurred during the year, including all wages and salaries to staff in Denmark and abroad, pension costs, social security costs and other staff-related costs. Financial income and expenses Financial income and expenses include interest receivable and payable, capital gains and losses on securities, payables and transactions in foreign currency, amortisation of financial assets and liabilities, as well as additions and reimbursements under the on-account tax scheme, etc. Financial income and expenses are recognised in the amounts relating to the financial year. Tax on profit for the year Netop Solutions A/S is taxed jointly with all Danish group companies. The current income tax liability is allocated among the companies of the tax pool in proportion to their taxable income (full allocation subject to reimbursement in respect of tax losses). The jointly taxed companies are taxed under the Danish tax prepayment scheme. Tax for the year, consisting of the year's current tax and differences in deferred tax, is recognised in the income statement as regards the amount that can be attributed to the profit for the year and posted directly in other comprehensive income as regards the amount that can be attributed to entries taken directly to other comprehensive income. Tax recognised in the income statement is classified under tax on profit/loss from continuing or discontinued operations as the case may be. BALANCE SHEET Goodwill On initial recognition goodwill is recognised in the balance sheet at cost as described under ‘Business combinations’. Goodwill is subsequently measured at cost less accumulated impairment. Goodwill is not amortised. The carrying amount of goodwill is allocated to the Group's cash-generating units at the time of acquisition. The determination of cash-generating units is based on the management structure and the in-house financial management. The financial reporting follows the Group's segment structure of the three main product groups: Administration, Education and Communication. As already mentioned, these are the Group's cash-generating units. The carrying amount of goodwill is tested for impairment at least once a year together with the other non-current assets of the cash-generating unit to which goodwill has been allocated and is written down over the income statement to the lower of the recoverable amount and the carrying amount.


48

Development projects Development costs comprise salaries and other costs directly attributable to the company's development activities. Development projects which are clearly defined and identifiable, where the level of technical utilisation, sufficient resources and a potential future market or business opportunity for the company can be demonstrated and where the intention is to manufacture, market or utilise the project are recognised as intangible assets if the cost can be reliably measured and there is sufficient certainty that the future earnings can cover production and selling costs, administrative expenses and the specific product development costs. Other development costs are recognised in the income statement as incurred. Recognised development costs are measured at cost less accumulated amortisation and impairment. After completion of the development work, development costs are amortised on a straight-line basis over the estimated useful life. The usual amortisation period is from one to five years. The basis of amortisation is reduced by any impairment write-downs. Other intangible assets Acquired licenses, customer relations and software are measured at cost less accumulated amortisation. Licenses are amortised on a straight-line basis over the term of the agreement, up to a maximum of five years. Customer relations and software are generally amortised over five years. Gains and losses on the disposal of intangible assets are determined as the difference between the selling price less the costs of disposal and the carrying amount at the date of divestment. Gains and losses are recognised in the income statement under Other operating income and expenses. Property, plant and equipment Leasehold improvements and other fixtures and equipment are measured at cost less accumulated depreciation. Cost encompasses the purchase price and costs directly associated with the purchase until the time when the asset is ready to be brought into use. The depreciation base is cost less the estimated residual value at the end of the expected useful life. Assets are depreciated on a straight line basis over their estimated useful lives based on the following assessment of the expected lives of the assets:

Other fixtures and fittings, tools and equipment 3 – 5 years

Leasehold improvements 5 years Depreciation is recognised in the income statement under depreciation, amortisation and impairment. Property, plant and equipment is written down to the lower of the recoverable amount and the carrying amount. Gains and losses on the divestment of property, plant and equipment are determined as the difference between the selling price less divestment costs and the carrying amount at the date of divestment. Gains and losses are recognised in the income statement under other the item Other operating income and expenses. Impairment of long-term assets Goodwill and intangible assets with indefinite useful lives are tested for impairment annually, the first impairment test being performed prior to the end of the year of acquisition. Similarly, annual impairment tests are performed on development projects in progress. The carrying amount of other non-current assets is also tested annually for any indication of impairment. When such an indication exists, the recoverable amount of the asset is determined. The recoverable amount is the higher of the fair value of the asset less expected costs to sell and the value in use. The value in use is determined as the present value of the future cash flows expected to be derived from the asset or the cash-generating unit to which the asset belongs. An impairment loss is recognised if the carrying amount of an asset or a cash-generating unit, respectively, exceeds the recoverable amount of the asset or the cash-generating unit. Impairment losses are recognised in the income statement under “Depreciation, amortisation and impairment”. Impairment on goodwill is not reversed. Impairment losses on other assets are reversed to the extent changes have occurred to the assumptions and estimates on which the impairment loss was based. Write-downs are only reversed to the extent the new carrying amount of an asset does not exceed the carrying amount the asset would have had net of depreciation, had the asset not been written down. Receivables Receivables are measured at amortised cost. Receivables are tested individually to identify any evidence of impairment. If such an indication exists, a provision is made for the anticipated loss.


49

Prepayments Prepayments recognised under Other receivables comprise costs incurred relating to the following financial year and are measured at cost. Dividends Proposed dividends are recognised as a liability at the date when they are adopted at the annual general meeting (time of declaration). Dividend expected to be paid in respect of the financial year is stated as a separate line item under equity. Interim dividend is recognised as a liability at the date of resolution. Treasury shares Cost and selling prices of treasury shares as well as dividends are recognised directly in retained earnings under equity. Gains and losses on the sale of treasury shares are therefore not recognised in the income statement. Exchange adjustment reserve The exchange adjustment reserve in the consolidated financial statements comprises foreign exchange differences arising on the translation of the financial statements of foreign enterprises from their functional currencies to the parent company’s presentation currency. On full or partial realisation of a net investment, foreign exchange adjustments are recognised in the income statement. Share premiums Share premiums reflect amounts in excess of the nominal share capital paid in by shareholders in connection with capital increases and gains on the sale of treasury shares. The reserve forms part of the Group's free reserves. Incentive plans The Group's incentive plans comprise share option programmes and warrant programs. Share option programs The value of services received as consideration for options granted is measured at the fair value of the options at the date of grant using the Black & Scholes formula, with due consideration for the individual employee's own payment when the remuneration instrument is exercised at a later point in time. For equity-settled share options, the fair value is measured at the grant date and recognised in the income statement under staff costs over the vesting period. The balancing item is recognised directly in equity. On initial recognition of share options, the number of options expected to vest is estimated. See the condition of service described in note 26. Subsequent to initial recognition, the estimate is adjusted to reflect the actual number of exercised share options. At the time of exercise, i.e. when an option is exercised by way of subscription of new contributed capital, payments and any share premiums are recognised directly in equity. Warrant programs Netop Solutions has established equity-settled share-based payment plans (warrant programs). The employee services received in exchange for the grant of the warrants or shares are recognised as an expense and allocated over the vesting period. The amount is determined as the fair value of the equity instruments granted. The total amount recognised over the vesting period corresponds to the fair value of the warrants or shares that actually vest. In addition, a warrant program has been established as part of the purchase price in a company acquisition. This program is recognised as a direct equity-based scheme and is not subject to ongoing adjustment, because the acquisition date represents the vesting period. At each balance sheet date, Netop reassesses its estimates of the number of warrants expected to be exercised and recognises the effect in the income statement through a corresponding adjustment of equity. Income tax and deferred tax Current tax liabilities and current tax receivables are recognised in the balance sheet as estimated tax on the taxable income for the year, adjusted for tax on prior years’ taxable income and for tax paid under the on-account tax scheme. Deferred tax is measured in accordance with the balance sheet liability method on all temporary differences between the carrying amount and tax base of assets and liabilities. However, no deferred tax is recognised on temporary differences regarding non-deductible goodwill or other items for which temporary differences, with the exception of acquisitions, have arisen at the acquisition date without affecting either the profit/loss for the year or the taxable income. When the tax value can be calculated according to alternative taxation rules, deferred tax is measured on the basis of the planned usage of the tax asset or settlement of the tax liability, as the case may be.


50

Deferred tax assets, including the tax value of tax losses carried forward, are recognised under other non-current assets at the value at which they are expected to be used, either by setting off tax on future earnings or by setting off deferred tax liabilities within the same legal tax entity and jurisdiction. Adjustment is made to deferred tax relating to eliminations of unrealised intra-group profits and losses. Deferred tax is measured according to the tax rules and at the tax rates applicable in the respective countries at the balance sheet date when the deferred tax is expected to be realised or settled. Changes in deferred tax as a result of changes in tax rates are recognised in the income statement. Provisions Provisions are recognised when the Group has a legal or constructive obligation resulting from an event occurring before or at the balance sheet date, and it is probable that there may be an outflow of economic benefits to meet the obligation. In the measurement of provisions, the costs required to settle the liability are discounted if such discounting would have a material effect on the measurement of the liability. The changes in present values for the financial year are recognised as a financial expense. Provisions are measured as Management’s best estimate of the amount which is expected to be required to settle the liability. Pension obligations In most of its countries of operation, the Group operates defined contribution plans. Obligations imposed on the Group in relation to such plans and under which the Group regularly pays fixed contributions into an independent pension fund, are recognised in the income statement in the period to which they relate, and outstanding payments are recognised in the balance sheet under other payables. The Group still has defined benefit plans in one country. Costs related to this plan are calculated annually on the basis of actuarial estimates. Costs reflect the present value of future benefits payable under the pension plan. The calculation of the present value builds upon assumptions such as the future developments of factors such as wages and salaries, interest rates, inflation and mortality rates. The present value is calculated solely for those benefits that have been earned by the employees in return for past service rendered to the Group. The actuarial calculation of the net present value less the fair value of any assets related to the plan is included in the balance sheet as pension obligations. The actuarial gains and losses are recognised as an income or an expense if the accumulated unrealised gains and losses exceed the higher numerical value of 10% of the defined benefit compared with prior reporting and the value of the underlying asset plan at the reporting date. A defined benefit plan that constitutes a net asset is recognised only to the extent future economic benefits are expected to flow to the Group through reimbursements from the pension plan or a reduction of future benefits. Liabilities other than provisions Other creditors, which comprise trade creditors and affiliated and associated companies and other creditors, are measured at amortized cost. Deferred income Deferred income comprises payments received relating to income in subsequent financial years, measured at cost. CASH FLOW STATEMENT The cash flow statement shows the cash flows for the year, broken down by operating, investing and financing activities, and the year's changes in cash and cash equivalents as well as the Group’s cash and cash equivalents at the beginning and end of the year. The cash effect of acquisitions and disposals of businesses is shown separately in cash flows from investing activities. Cash flows from the acquisition of enterprises are recognised in the cash flow statement from the date of acquisition. Cash flows from the disposal of enterprises are recognised up to the date of disposal. Cash flows in currencies other than the functional currency are translated at average exchange rates unless these differ materially from the exchange rate ruling at the transaction day. Cash flows from operating activities Cash flows from operating activities are calculated using the indirect method as the profit for the year before tax adjusted for non-cash operating items, changes in working capital, interest received and interest paid, dividends received and income taxes paid. Cash flows from investing activities Cash flows from investing activities comprise payments made in connection with the acquisition and disposal of companies and activities and of intangibles, property, plant and equipment and investments. The cash effect of acquisitions and disposals of entities is disclosed separately.


51

Cash flows from financing activities Cash flows from financing activities comprise changes in the size or composition of the Group’s share capital and associated costs and the raising of loans, repayment of interest-bearing debt and dividend payments to shareholders. Cash and cash equivalents Cash and cash equivalents comprise cash and short-term marketable securities with a term of three months or less which are subject to an insignificant risk of changes in value. SEGMENT REPORTING The segment information has been prepared in accordance with the Group’s accounting policies and is based on the internal management reporting. Segment revenue and costs and segment assets and liabilities comprise items which are directly attributable to the individual segment and the items which can be allocated to the individual segment on a reliable basis. Unallocated items mainly comprise assets and liabilities as well as income and costs relating to the Group’s administrative functions, and financial items. FINANCIAL RATIOS Earnings per share (EPS) and diluted earnings per share (EPS-D) are calculated in accordance with IAS 33. Other key ratios are calculated in accordance with "Recommendations and Ratios 2010" issued by the Danish Society of Financial Analysts. The ratios listed in the key figures and ratios section were calculated as follows: EBITDA margin EBITDA / revenue * 100 EBIT margin Operating profit / revenue * 100 Equity ratio Equity at year end / total assets at year end * 100 Return on equity Profit/(Loss) for the year / average equity * 100 Earnings per share (EPS) Profit/(Loss) for the year / average number of shares Diluted earnings per share (EPS-D) Profit/(Loss) for the year / average number of diluted shares Net asset value per share Equity at year end / number of shares at year end Price/net asset value (P/NAV) Share price/ net asset value P/E Share price at year end/ earnings per share (EPS) Cash flows from operating activities per share Cash flows from operating activities / average number of shares EBITDA Earnings before interest, taxes, depreciation and amortisation EBIT Operating profit


52

NOTES TO THE CONSOLIDATED ACCOUNTS NOTE 2 ACCOUNTING ESTIMATES AND JUDGMENTS

Estimation uncertainty The determination of the carrying amount of certain assets and liabilities requires assessments, estimates and assumptions of future events. The estimates and assumptions applied are based on historical experience and other factors that Management considers reasonable under the circumstances, but which are inherently uncertain and unpredictable. Such assumptions may be incomplete or inaccurate, and unexpected events or circumstances may occur. In addition, the company is subject to risks and uncertainties that may cause actual outcomes to deviate from these estimates. Risk factors specific to the Netop Solutions Group are described in “Risk factors” on page 22 and in note 31. It may be necessary to change previous estimates as a result of changes to the assumptions on which the estimates were based or due to new information or subsequent events. Due to developments in the global economy and the crisis that has devastated the financial markets, some assumptions about the future have changed relative to prior years. This applies to, for instance, credit risks, sales volumes and other areas. Estimates material to the financial reporting are made in the calculation of, inter alia, impairment losses, provisions as well as contingent liabilities and assets. Goodwill impairment test In the annual goodwill impairment test or in case of any indication of impairment, an assessment is made as to whether the parts of the business (cash-generating units) to which the goodwill relates will be able to generate sufficient cash flows in future to support the value of goodwill and other net assets in the relevant part of the business. As a result of the nature of the company’s business, expected cash flows must be estimated over a period of a number of years, which inherently produces some degree of uncertainty. This uncertainty is reflected in the discount rate applied and in the company's conservative budgets. The impairment test and the associated particularly sensitive factors are described in note 14 to the consolidated financial statements. Impairment testing of development projects Ongoing development projects are tested annually for impairment. All ongoing development projects are progressing to plan, and we have no information from customers or the competition that would indicate that the new products will not be sold in the expected volumes. Based on the above, management has estimated the recoverable amounts of the development projects by way of expected future net cash flows including costs of completion. In addition, management has not found evidence of impairment in the completed development projects amortised on a straight-line basis over a useful life of from one to five years. Receivables Receivables are measured at cost less impairment losses due to failure to pay. Management estimates losses in connection with an assessment of the likelihood that receivables at the balance sheet date will be received. Such assessment also considers the international economic situation, as it may strongly influence the risk of losses of doubtful debts. See also note 17. Deferred tax Deferred tax assets are recognised for all unutilised tax losses if management considers it likely that they can be utilised within a foreseeable future by offsetting against future positive taxable income. Management performs such assessment annually using budgets and business plans as a decision-making basis for estimating the size of the deferred tax assets. Note 16 provides further information about assumptions applied and the amounts of deferred tax assets.



NOTE 3 SEGMENT INFORMATION

DKK '000

2010

Admini-

stration Education

Communi-

cation Total

Segment income statement

External revenue 52.924 36.591 2.556 92.071

Operating profit before depriciation and amortisation (EBITDA) 17.704 8.973 627 27.304

Depreciation and amortisation (564) (7.856) (464) (8.884)

Other segment items

Segment assets 2.179 49.021 1.879 53.079

Additions to property, plant and equipment and intangible assets 1.454 2.554 440 4.448

Impairment losses (recognised in the income statement) - - - -

2009

Admini-

stration Education

Communi-

cation Total

Segment income statement

External revenue 42.781 36.163 1.468 80.412

Operating profit before depriciation and amortisation (EBITDA) (6.602) (6.025) (570) (13.197)

Depreciation and amortisation (3.771) (5.794) (531) (10.096)

- - - -

Other segment items - - - -

Segment assets 4.222 51.191 1.593 57.005

Additions to property, plant and equipment and intangible assets 2.175 3.482 343 6.000

Impairment losses (recognised in the income statement) (20.068) (865) - (20.933)

In 2010, further costs were allocated for the individual segments to better reflect the actual results for the segment and so that othernon-allocated costs could primarily be attributed to the Group's administrative functions. The comparative figures for 2009 have beenrestated.

In 2010, it was found that the revenue from discontinued activities of DKK 1,555 thousand by mistake had been reduced from theAdministration segment and not from the Communication segment. Furthermore, deferred income relating to Communication had beenreduced from the Administration segment by mistake. The segment revenue for 2009 has been restated to reflect the correct allocation.

53noTES To ThE conSolidaTEd accounTS



Geographic information

DKK'000

Revenue

Non-current

assets Revenue

Non-current

assets

USA 43.196 3.606 34.865 3.409

Denmark 10.524 72.318 15.803 71.695

Germany 6.976 - 8.774 -

Great Britain 5.084 50 5.207 62

Romania 413 411 4.875 501

Other countries 25.879 - 17.318 234

Discontinued business (primary Denmark) - - (1.555) -

92.071 76.385 85.287 75.902

Important customers

2010 2009

The company's management receives information on the product groups Administration, Education and Communication. It is possibleto divide each product group into customers and end-users despite the fact that most of Netop's legal entities have operations involvingall the products. The three main product groups constitute 100% of revenue in 2010.

Income and costs contained in the segment results are, when they can be reliably measured, directly or indirectly distributed to eachsegment. Indirect costs are broken down by each segment’s share of total revenue.

Both current and non-current assets of a segment are distributed when they are used directly in the operations of a segment.

External revenue is distributed on individual countries when the Group generates more than 5% of consolidated revenue in thatcountry. Other revenue is shown under ‘Other countries’. Revenue is broken down geographically on the basis of customers’geographical location. Non-current assets are broken down on the basis of physical location.

No single end-customer accounted for more than 10% of consolidated revenue in 2010. This was also the case in 2009.

54 noTES To ThE conSolidaTEd accounTS



Geographic information

DKK'000

Revenue

Non-current

assets Revenue

Non-current

assets

USA 43.196 3.606 34.865 3.409

Denmark 10.524 72.318 15.803 71.695

Germany 6.976 - 8.774 -

Great Britain 5.084 50 5.207 62

Romania 413 411 4.875 501

Other countries 25.879 - 17.318 234

Discontinued business (primary Denmark) - - (1.555) -

92.071 76.385 85.287 75.902

Important customers

2010 2009

The company's management receives information on the product groups Administration, Education and Communication. It is possibleto divide each product group into customers and end-users despite the fact that most of Netop's legal entities have operations involvingall the products. The three main product groups constitute 100% of revenue in 2010.

Income and costs contained in the segment results are, when they can be reliably measured, directly or indirectly distributed to eachsegment. Indirect costs are broken down by each segment’s share of total revenue.

Both current and non-current assets of a segment are distributed when they are used directly in the operations of a segment.

External revenue is distributed on individual countries when the Group generates more than 5% of consolidated revenue in thatcountry. Other revenue is shown under ‘Other countries’. Revenue is broken down geographically on the basis of customers’geographical location. Non-current assets are broken down on the basis of physical location.

No single end-customer accounted for more than 10% of consolidated revenue in 2010. This was also the case in 2009.



DKK '000 2010 2009

Revenue

Reportable segments' revenue 92.071 80.412

All other segments' revenue - 6.633

Elimination of internal revenue between segments - (1.758)

Revenue c.f. income statement 92.071 85.287

Operating profit before depriciation and amortisation (EBITDA)

Reportable segment's operating profit before depreciation and amortisation (EBITDA) 27.304 (13.197)

All other segments' revenue - 4.875

Non-allocated group costs, administrative functions (19.092) (26.202)

Operating profit before depriciation and amortisation (EBITDA) c.f. income statement 8.212 (34.524)

Other important items - depreciation and amortisation

Total for reportable segments 8.884 10.096

Depreciation on non-allocated assets e.g. head office functions 1.211 1.846

Writedown on non-allocated assets - 20.933

Other important items - depreciation and amortisation c.f. income statement 10.095 32.875

Assets

Reportable segments' assets 53.079 57.005

Other non-allocated assets, e.g. head office functions 57.595 41.116

Assets c.f. balance sheet 110.674 98.121

Reconciliation of reportable segment's revenue, EBITDA, assets and other important items



NOTE 4 REVENUE

DKK '000 2010 2009

Sale of software 56.232 76.659

Sale of service 29.055 15.418

85.287 92.077

NOTE 5 AMORTISATION, DEPRECIATION AND IMPAIRMENT LOSSES

DKK '000 2010 2009

Amortisation, depreciation and impairment losses of non-current assets are specified as follows:

Amortisation, intangible assets 9.323 10.727

Impairment losses, intangible assets (0) 20.933

Depreciation, property, plant and equipment 771 1.940

Impairment losses, property, plant and equipment - 27

10.095 33.627

Amortisation, depreciation and impairment losses of non-current assets are specified as follows in the income statement:

Amortisation, depreciation and impairment losses 10.095 32.875

Profit for the year of discontinuing business - 752

10.095 33.627

NOTE 6 OTHER OPERATING INCOME

DKK '000 2010 2009

Gain on disposal of rights to Mobile Embedded 4.725 0

Gains on sold intangible assets and property, plant and equipment 92 267

Others - 56

4.817 323

NOTE 7 OTHER OPERATING COSTS

DKK '000 2010 2009

Losses on sold intangible assets and property, plant and equipment - 192

- 192

In 2010, the Group sold the rights to the Mobile Embedded product. The Group received DKK 2 million on the signing of theagreement, and the remaining DKK 3 million falls due over the coming years in connection with Netop's sale of Mobile Embeddedproducts. The share of the gain, a total of DKK 275 thousand, which is attributable to a financing element, is recognised in theincome statement as financial income over the coming years.



NOTE 4 REVENUE

DKK '000 2010 2009

Sale of software 56.232 76.659

Sale of service 29.055 15.418

85.287 92.077


DKK '000 2010 2009

Amortisation, depreciation and impairment losses of non-current assets are specified as follows:

Amortisation, intangible assets 9.323 10.727

Impairment losses, intangible assets (0) 20.933

Depreciation, property, plant and equipment 771 1.940

Impairment losses, property, plant and equipment - 27

10.095 33.627

Amortisation, depreciation and impairment losses of non-current assets are specified as follows in the income statement:

Amortisation, depreciation and impairment losses 10.095 32.875

Profit for the year of discontinuing business - 752

10.095 33.627

NOTE 6 OTHER OPERATING INCOME

DKK '000 2010 2009

Gain on disposal of rights to Mobile Embedded 4.725 0

Gains on sold intangible assets and property, plant and equipment 92 267

Others - 56

4.817 323

NOTE 7 OTHER OPERATING COSTS

DKK '000 2010 2009

Losses on sold intangible assets and property, plant and equipment - 192

- 192

In 2010, the Group sold the rights to the Mobile Embedded product. The Group received DKK 2 million on the signing of theagreement, and the remaining DKK 3 million falls due over the coming years in connection with Netop's sale of Mobile Embeddedproducts. The share of the gain, a total of DKK 275 thousand, which is attributable to a financing element, is recognised in theincome statement as financial income over the coming years.


NOTE 8 STAFF COSTS

DKK '000 2010 2009

Staff costs are specified as follows:

Wages and salaries, etc. 46.203 62.149

Defined contribution plans 1.953 2.176

Defined benefit plans - (265)

Other social security expenses 4.482 5.178

Share-based payment 269 133

Other staff costs 2.177 4.129

55.085 73.500

Average number of employees 115 150

Attributable to:

Board of Directors

Board remuneration 600 533

600 533

Executive Management

Wages and salaries, etc. 3.831 4.797

Pension schemes 232 498

Share-based payment 229 133

4.291 5.428

In 2010, two executives made up the Group's Management Board until April 2010, after which it consisted only of the CEO. In 2009,the Management Board had three members.

Performance-based bonus schemes have been set up for members of the Management Board. Members of the Management Boardalso participate in multi-year share option schemes and incentive plans.

The service contracts for members of the Management Board contain terms, including for notice of termination, which are customaryfor members of the management boards of listed companies.

Members of the Board of Directors of Netop Solutions A/S received total remuneration of DKK 600 thousand in 2010 (2009: DKK 533thousand) for services rendered to the company and other companies of the Netop Group. Members of the Board of Directors receive afixed remuneration that is not driven by the Group’s financial results or other performance. Board members do not participate in shareoption schemes, incentive plans, pension plans or other Group schemes. No arrangements have been made in respect of severancepayments to Board members, nor have any such payments been made.



NOTE 9 FEES TO AUDITORS APPOINTED BY THE ANNUAL GENERAL MEETING

DKK '000 2010 2009

Total fee to Deloitte are specified as follows:

Audit 653 586

Other assurance statements - 12

Tax assistance 21 45

Other services 46 8

719 651

Total fee to other auditors (not appointed byt the annual general meeting) are specified as follows:

Audit 161 256

Other assurance statements - -


Other services 127 25

420 535

- -

Total fee 1.139 1.186

NOTE 10 FINANCIAL INCOME

DKK '000 2010 2009

Interest income, banks etc. 43 282

Interest component, discounted assets 55 -

Interest income securities - 189

98 471

NOTE 11 FINANCIAL EXPENSES

DKK '000 2010 2009

Interest expenses, banks etc. 224 103

Interest expenses convertible debt 423 -

Interest expenses securities - 56

Exchange rate adjustments (net) 1.553 709

Fair value adjustment of securities 1 78

2.201 946




DKK '000 2010 2009


Audit 653 586

Other assurance statements - 12


Other services 46 8

719 651

Total fee to other auditors (not appointed byt the annual general meeting) are specified as follows:

Audit 161 256



Other services 127 25

420 535

- -

Total fee 1.139 1.186


DKK '000 2010 2009

Interest income, banks etc. 43 282

Interest component, discounted assets 55 -

Interest income securities - 189

98 471


DKK '000 2010 2009

Interest expenses, banks etc. 224 103

Interest expenses convertible debt 423 -

Interest expenses securities - 56

Exchange rate adjustments (net) 1.553 709

Fair value adjustment of securities 1 78

2.201 946


NOTE 12 CORPORATION TAX

DKK '000 2010 2009

Corporation tax is specified as follows:

Current tax on profit for the year of continuing business (4.891) 5.776

Tax on changes in equity - -

Tax of discontinuing business - -

(4.891) 5.776

Corporation tax of continuing business is specified as follows:

Current tax on profit for the year 97 142

Deferred tax on profit for the year (5.255) 5.863

Adjustments relating to previous years (net) 266 (229)

(4.891) 5.776

Analysis of tax on profit from ordinary activities of continuing business:

25% tax of profit from ordinary activities of continuing business before tax (997) (16.968)

Non-capitalised deferred tax (4.086) 23.655

Computation of effective tax rate:

Non-taxable income - (545)

Non-tax deductible expenses (75) (136)

Adjustment relating to previous years 266 (230)

(4.891) 5.776

Effective tax rate 122,7% -8,5%



NOTE 13 EARNING PER SHARE (EPS)

DKK '000 2010 2009

Netop group's share of profit for the year 905 (82.539)

Weighted average number of ordinary shares (1,000) 4.689 4.209

Weighted average number of treasury shares (1,000) (139) (132)

Weighted average number of ordinary shares outstanding 4.551 4.077

Dilutive effect of outstanding options 48 -

Average number of shares outstanding including dilutive effect of options (1,000) 4.598 4.077

DKK DKK

Earnings per share (EPS) of DKK 5 0,20 (20,24)

Earnings per share (EPS-D) of DKK 5, diluted 0,20 (20,24)

Profit for the year of discontinuing business - (8.891)



A total of 101,798 share options and warrants (2009: 9,000) that are out-of-the-money were not included in the calculation of dilutedearnings per share, but they may potentially dilute earnings per share in the future.

Calculations for 2009 of earnings per share for continuing business and discontinuing business are based on same figures as earningsper share:



NOTE 13 EARNING PER SHARE (EPS)

DKK '000 2010 2009


Weighted average number of ordinary shares (1,000) 4.689 4.209

Weighted average number of treasury shares (1,000) (139) (132)

Weighted average number of ordinary shares outstanding 4.551 4.077

Dilutive effect of outstanding options 48 -

Average number of shares outstanding including dilutive effect of options (1,000) 4.598 4.077

DKK DKK

Earnings per share (EPS) of DKK 5 0,20 (20,24)

Earnings per share (EPS-D) of DKK 5, diluted 0,20 (20,24)




A total of 101,798 share options and warrants (2009: 9,000) that are out-of-the-money were not included in the calculation of dilutedearnings per share, but they may potentially dilute earnings per share in the future.

Calculations for 2009 of earnings per share for continuing business and discontinuing business are based on same figures as earningsper share:


NOTE 14 INTANGIBLE ASSETS

DKK '000 Goodwill

Customer

relations

Acquired

licenses

Completed

development

projects

Development

projects in

progress

Software

internal use Total

2010

Cost at 1 January 45.978 15.000 25.507 15.125 1.410 1.033 104.053

Exchange rate adjustments - - 92 - - 39 131

Additions - - 0 0 4.448 123 4.571

Disposals - - - (49) - - (49)

Transfer - - (440) 4.011 (4.011) 250 (190)

45.978 15.000 25.159 19.087 1.848 1.445 108.516

14.956 4.500 17.805 8.505 - 739 46.505

Exchange rate adjustments - - 92 - - 38 130

Amortisation for the year - 3.000 2.597 3.287 - 439 9.323

Impairment losses for the year - - (0) - - - (0)

Reversal of amortisation of disposals in the year- - - - - 0 0

- - (750) - - (21) (771)

14.956 7.500 19.744 11.793 - 1.195 55.188

31.022 7.500 5.415 7.294 1.848 250 53.328

- - - 7.294 1.848 - 9.142

0 5 yrs 4-5 yrs 1-5 yrs 3-5 yrs

DKK '000 Goodwill

Customer

relations

Acquired

licenses

Completed

develop-ment

projects

Develop-ment

projects in

progress

Software

internal use Total

2009

Cost at 1 January 45.978 15.000 28.161 7.163 2.401 1.012 99.715

- - (20) - - (15) (35)

Additions - - - 4.922 2.049 36 7.007

Disposals - - (4.075) - - - (4.075)

Transfer - - 1.441 3.040 (3.040) - 1.441

45.978 15.000 25.507 15.125 1.410 1.033 104.053

2.000 1.500 10.517 1.617 - 496 16.130

- - 2 - - (11) (9)

Amortisation for the year - 3.000 5.003 2.471 - 253 10.727

Impairment losses for the year 12.956 - 3.559 4.418 - - 20.933

Reversal of amortisation of disposals in the year- - (2.717) - - - (2.717)

Transfer - - 1.441 - - - 1.441

14.956 4.500 17.805 8.505 - 739 46.505

31.022 10.500 7.702 6.620 1.410 294 57.548

- - - 3.935 1.410 - 5.345

5 yrs 4-5 yrs 1-5 yrs 3-5 yrsAmortisation period

Amortisation and

Carrying amount at 31

Internally generated assets

Internally generated assets

Amortisation period

Cost at 31 December

Exchange rate adjustments

Amortisation and impairment


Cost at 31 December


Transfer

Amortisation and


The Group's consolidated R&D costs amounted to DKK 15.3 million (2009: DKK 18,5 million), consisting of the costs of running thedevelopment department in Romania and the development costs consisting of consultancy agreements at the head office.




GoodwillAs at 31 December 2010, management performed an impairment test of the carrying amount of goodwill. For the purpose of impairmenttests, the carrying amount of goodwill at 31 December 2010 was determined as relating to the cash-generating unit Education.

The impairment test performed on the above-mentioned cash-generating unit is conducted by comparing the recoverable amount(value in use) with the carrying amount of the cash-generating unit. Recoverable amounts are based on the value in use as calculatedas the discounted value of the expected future cash flows on the basis of management’s budgets and business plans for 2011-15.

For all cash-generating units, the most important parameters are revenue, costs related to operations, applied working capital, expectedinvestment in the further development of products as well as growth assumptions.Growth assumptions are double-digit percentageincreases during the period 2011–2013 but even with single-digit increases the recoverable amount exceeds the carrying amount.Costs relating to operations equal about 80% of revenue in each budget year.

To determine any indication of impairment, a discount rate of 13.10% (2009: 11.60%) was applied in the calculation of the recoverableamount. The rate is net of tax and reflects the risk-free rate of interest for the entire company plus a company-specific risk premium.The risk-free interest rate was 4% (2009: 4%), the company-specific premium was 8.75% (2009: 7.25%) and the beta value was 1.49(2009: 1.49). Also, we have applied a growth rate of 2.5% (2009: 2.5%) during the terminal period, corresponding to a marketassessment for peer companies. The estimated discounting rate before tax is 15.6% (2009: 13.6%).

Based on the impairment test performed, management believes that goodwill is not impaired.

In 2009, goodwill of DKK 12,956 thousand relating to M-Net was written off, because the company did not expect to generate anyfuture earnings from this product.

Development projects in progressCosts relating to development projects in progress of DKK 1,848 thousand (2009: DKK 1,410 thousand) have been recognised in theconsolidated financial statements. The costs relate to the further development of the Group's core products. The development projectswere tested for impairment at the end of the financial year, which did not lead to writedowns.

Other intangible assetsThe Group has other intangible assets, such as capitalised customer relations, licenses, completed development projects and software.Management assessed at the end of the financial year that these assets show no indications of impairment.




GoodwillAs at 31 December 2010, management performed an impairment test of the carrying amount of goodwill. For the purpose of impairmenttests, the carrying amount of goodwill at 31 December 2010 was determined as relating to the cash-generating unit Education.

The impairment test performed on the above-mentioned cash-generating unit is conducted by comparing the recoverable amount(value in use) with the carrying amount of the cash-generating unit. Recoverable amounts are based on the value in use as calculatedas the discounted value of the expected future cash flows on the basis of management’s budgets and business plans for 2011-15.

For all cash-generating units, the most important parameters are revenue, costs related to operations, applied working capital, expectedinvestment in the further development of products as well as growth assumptions.Growth assumptions are double-digit percentageincreases during the period 2011–2013 but even with single-digit increases the recoverable amount exceeds the carrying amount.Costs relating to operations equal about 80% of revenue in each budget year.

To determine any indication of impairment, a discount rate of 13.10% (2009: 11.60%) was applied in the calculation of the recoverableamount. The rate is net of tax and reflects the risk-free rate of interest for the entire company plus a company-specific risk premium.The risk-free interest rate was 4% (2009: 4%), the company-specific premium was 8.75% (2009: 7.25%) and the beta value was 1.49(2009: 1.49). Also, we have applied a growth rate of 2.5% (2009: 2.5%) during the terminal period, corresponding to a marketassessment for peer companies. The estimated discounting rate before tax is 15.6% (2009: 13.6%).

Based on the impairment test performed, management believes that goodwill is not impaired.

In 2009, goodwill of DKK 12,956 thousand relating to M-Net was written off, because the company did not expect to generate anyfuture earnings from this product.

Development projects in progressCosts relating to development projects in progress of DKK 1,848 thousand (2009: DKK 1,410 thousand) have been recognised in theconsolidated financial statements. The costs relate to the further development of the Group's core products. The development projectswere tested for impairment at the end of the financial year, which did not lead to writedowns.

Other intangible assetsThe Group has other intangible assets, such as capitalised customer relations, licenses, completed development projects and software.Management assessed at the end of the financial year that these assets show no indications of impairment.


NOTE 15 PROPERTY, PLANT AND EQUIPMENT

DKK '000

Other fixtures

and fittings,

tools and

equipment

Leasehold

improve-

ments Total

2010

Cost at 1 January 11.804 81 11.885

Exchange rate adjustments 199 - 199

Additions 271 56 327

Disposals (1.305) (81) (1.387)

Transfer (759) - (759)

10.210 56 10.266

10.193 14 10.207

Exchange rate adjustments 143 - 143

Amortisation for the year 704 67 771

Impairment losses for the year - - -

Reversal of amortisation of disposals in the year (1.288) (81) (1.369)

Transfer (350) - (350)

9.402 (0) 9.402

808 56 864

3-5 yrs 5 yrs

DKK '000

Other fixtures

and fittings,

tools and

equipment

Leasehold

improve-

ments Total

2009

Cost at 1 January 12.498 283 12.781

8 41 49

Additions 447 81 528

Disposals (1.017) (324) (1.340)

Transfer (132) - (132)

11.804 81 11.885

9.238 127 9.365

17 30 47

Amortisation for the year 1.876 64 1.940

Impairment losses for the year 27 - 27

Reversal of amortisation of disposals in the year (833) (207) (1.040)

Transfer (132) - (132)

10.193 14 10.207

1.611 68 1.678

3-5 yrs 5 yrs


Amortisation and



Amortisation and




Amortisation period

Amortisation period

Cost at 31 December

Cost at 31 December



NOTE 16 DEFERRED TAX

DKK '000 2010 2009

Deferred tax at 1 January (net) (1.671) 3.508

Deferred tax, acquisition of subsidiary - 939

Adjustment relating to previous years - (255)

Changes in corporation tax rate - -

Deferred tax on profit for the year 5.255 (5.863)

Deferred tax at 31 December (net) 3.584 (1.671)

Deferred tax is recognized in the balance as follows:

Deferred tax assets 6.209 2.004

Provision for deferred tax (2.625) (3.675)


Deferred tax concerns:

Intangible assets 4.579 2.203

Property, plant and equipment 312 118

Trade receivables 1.127 1.337

Other liabilities 55 673

Share-based payments - 33

Tax loss 20.372 26.923

Write down (22.861) (32.958)

3.584 (1.671)

The recognised value of tax losses derives from the aggregate financial results of the period from 2007 to 2010 of the Danish com-panies that are taxed jointly with Netop Solutions A/S. The Group became jointly taxed with Consolidated Holdings A/S effective on 19May 2010.

However, as management does not find it likely that the full value of the deferred tax assets will be realised within a three-year horizon,the value of the tax assets has been written down to DKK 6.2 million (2009: DKK 2.0 million. This value is expected to be realisable onthe basis of current, updated budgets for the next three years.

Tax losses in foreign subsidiaries are not included in the estimated deferred tax asset. Whether the losses can be used to offsetagainst expected future income within the limitation periods applying in the countries where the losses were incurred is subject touncertainty. The tax value of the non-capitalised deferred taxes in foreign tax jurisdictions amounts to approximately DKK 6.0 million(2009: DKK 8.7 million).




DKK '000 2010 2009

Deferred tax at 1 January (net) (1.671) 3.508

Deferred tax, acquisition of subsidiary - 939



Deferred tax on profit for the year 5.255 (5.863)



Deferred tax assets 6.209 2.004

Provision for deferred tax (2.625) (3.675)


Deferred tax concerns:

Intangible assets 4.579 2.203

Property, plant and equipment 312 118


Other liabilities 55 673

Share-based payments - 33

Tax loss 20.372 26.923

Write down (22.861) (32.958)

3.584 (1.671)

The recognised value of tax losses derives from the aggregate financial results of the period from 2007 to 2010 of the Danish com-panies that are taxed jointly with Netop Solutions A/S. The Group became jointly taxed with Consolidated Holdings A/S effective on 19May 2010.

However, as management does not find it likely that the full value of the deferred tax assets will be realised within a three-year horizon,the value of the tax assets has been written down to DKK 6.2 million (2009: DKK 2.0 million. This value is expected to be realisable onthe basis of current, updated budgets for the next three years.

Tax losses in foreign subsidiaries are not included in the estimated deferred tax asset. Whether the losses can be used to offsetagainst expected future income within the limitation periods applying in the countries where the losses were incurred is subject touncertainty. The tax value of the non-capitalised deferred taxes in foreign tax jurisdictions amounts to approximately DKK 6.0 million(2009: DKK 8.7 million).


NOTE 17 TRADE RECEIVABLES

DKK '000 2010 2009


-

Yearly write-downs recognized in profit/loss (net) 159 566

Write-downs included in trade receivables, developed as follows:

Not overdue 11.410 7.728

0-30 days overdue 2.781 1.982

31 og 90 days overdue 713 591

More than 90 days overdue 379 366

15.283 10.667

Write-downs at 1 January 5.348 4.782

Realised in the year (1.440) (1.276)

Reversals (317) (162)

Write-downs in the year 618 2.004

Write-downs at 31 December 4.208 5.348

Impairment losses are recognised for trade receivables if the value is found to be impaired based on an individual assessment of eachdebtor’s ability to pay, for example in case of suspension of payment, bankruptcy, etc. Write-downs are recognised at estimated netrealisable value. The carrying amount of receivables before write-down to net realisable value based on an individual assessmentamounted to DKK 21,2 million (2009: 19.9 million).

The Group’s currency and credit risks relating to receivables are described in note 31.

We have not been given collateral for our trade receivables, but we are in close contact with the relatively few business partners withoverdue balances and have received reasonable assurance that these amounts will be settled.

Write-downs are registered in a summary account used to reduce the carrying amount of trade receivables, the values of which areimpaired due to risk of loss. Based on historical experience, amounts are recognized in the summary write-down account when areceivable has been overdue for more than three months and no plan for payment has been entered into with the debtor.



NOTE 18 OTHER RECEIVABLES

DKK '000 2010 2009

Prepayments 2.482 1.451

Other receivables 3.657 2.892

6.139 4.343

0 0

– specified as follows: 0 0

0 - 1 year 3.167 2.803

> 1 year 2.973 1.540

6.139 4.343

Other receivables consist generally of receivables from the sale of the products Netfilter, M-Net and Mobile Embedded, which amountswill be paid by the buyers as earn-out payments as Netop sells the products under a distributor agreement over the next three to fiveyears. The DKK 1,298 thousand receivable relating to M-Net was written off in 2009. In addition to this a provision of DKK 600thousand is recorded against other receivables.

Prepayments covers prepaid costs such as rent, insurance, software licenses, etc.




DKK '000 2010 2009

Prepayments 2.482 1.451


6.139 4.343

0 0

– specified as follows: 0 0

0 - 1 year 3.167 2.803

> 1 year 2.973 1.540

6.139 4.343

Other receivables consist generally of receivables from the sale of the products Netfilter, M-Net and Mobile Embedded, which amountswill be paid by the buyers as earn-out payments as Netop sells the products under a distributor agreement over the next three to fiveyears. The DKK 1,298 thousand receivable relating to M-Net was written off in 2009. In addition to this a provision of DKK 600thousand is recorded against other receivables.

Prepayments covers prepaid costs such as rent, insurance, software licenses, etc.


NOTE 19 SHARE CAPITAL, TREASURY SHARES AND DIVIDEND

DKK '000

Share capital

2010 2009 2010 2009

Number of shares at 1 January 4.209.108 4.209.108 21.046 21.046

Capital increase 2.181.096 - 10.905 -

Number of shares at 31 December 6.390.204 4.209.108 31.951 21.046

Managing capital

Treasury shares

2010 2009 2010 2009 2010 2009

Number of shares at 1 January 138.669 125.260 695 628 3,42% 3,10%

Acquired - 13.409 - 67 0,00% 0,32%

Capital increase -1,25% 0,00%

Number of shares at 31 December 138.669 138.669 695 695 2,17% 3,42%

Shares issued

Number of shares Nominel value

Number of shares Nominel value % of share capital

The share capital consists of 6,390,204 shares with a nominal value of DKK 5 each. All shares rank equally. No shares are subject torestrictions on transferability or voting rights.

The share capital is fully paid up.

Netop Solutions A/S has been authorised by the shareholders in general meeting to acquire own shares for a nominal value of up toDKK 3,195 thousand, equal to 10% of the share capital.

In 2010, Netop Solutions A/S did not acquired or dispose own shares. In 2009 the company acquired own shares for a total nominalvalue of DKK 67 thousand in several transactions at an average price of DKK 32,80, for an aggregate purchase price of DKK 440thousand.

No dividend was declared in 2010 or in 2009 in respect of the 2009 and 2008 financial years.

Netop Solutions' capital structure is based almost entirely on the company's equity. The company expects to finance its current strategythrough operations. The company's capital structure is discussed regularly at Board meetings. Evaluations of the capital structure arebased on the company's budgets and strategic plans.



NOTE 20 PROVISIONS

DKK '000 2010 2009

Price guarantee

Price guarantee 1 Januar 10.000 10.000

Adjustments (10.000) -

Price guarantee 31 December - 10.000

The price guarantee is expected to be payable as follows:

Current liabilites - 10.000

Non-current liabilities - -


Other provisions

Other provisions 1 Januar 1.457 -

Provisions during the year 142 1.457

Reclassified to deferred income (1.457) -

Other provisions 31 December 142 1.457

Other provisions is expected to be payable as follows:

Current liabilites 142 146

Non-current liabilities (0) 1.311


Provisions total are expected to be payable as follows:

Current liabilites 142 10.146


Provisions 31 December 142 11.457

When acquiring GenevaLogic Holding AG, Netop undertook to pay a price guarantee of up to DKK 10,000 thousand in the event theshares issued as part of the purchase price lost a corresponding amount or more of their official market value. On 30 September 2010Netop paid the maximum price guarantee of DKK 10,000 thousand.



NOTE 20 PROVISIONS

DKK '000 2010 2009

Price guarantee








Other provisions

Other provisions 1 Januar 1.457 -

Provisions during the year 142 1.457

Reclassified to deferred income (1.457) -


Other provisions is expected to be payable as follows:

Current liabilites 142 146



Provisions total are expected to be payable as follows:

Current liabilites 142 10.146


Provisions 31 December 142 11.457

When acquiring GenevaLogic Holding AG, Netop undertook to pay a price guarantee of up to DKK 10,000 thousand in the event theshares issued as part of the purchase price lost a corresponding amount or more of their official market value. On 30 September 2010Netop paid the maximum price guarantee of DKK 10,000 thousand.


NOTE 21 PENSION OBLIGATIONS

The companies of the Netop Group have a number of pension and severance plans, which comply with the various requirements andthe labour market legislation in force in the different countries where Netop’s employees are based. As only about three per cent of theGroup’s employees (2009: about three per cent) are covered by defined benefit plans, the part of the overall pension plans for whichthe company has an obligation other than the contributions made, is not significant.

The remaining 97% of the pension plans are defined contribution plans, under which Netop has no obligation in excess of the agreedcontributions.

For defined contribution plans, the employer undertakes to pay a defined contribution (e.g. a fixed amount or a fixed percentage of thepay). Under a defined contribution plan, the Group carries no risk related to future developments in interest rates, inflation, mortality ordisability.

For defined benefit plans, the employer undertakes to pay a defined benefit (e.g. a retirement pension at a fixed amount or a fixedpercentage of the employee’s final salary). Under a defined benefit plan, the Group carries the risk related to future developments ininterest rates, inflation, mortality or disability. Defined benefit plans typically provide employees covered with a pension based on theirfinal earnings.

The pension commitments of the Group’s Danish businesses are funded. The pension obligations of certain foreign businesses arealso funded. Foreign companies whose pension obligations are not or only partly funded (defined benefit plans) recognise theircommitments on an actuarial basis at the present value at the balance sheet date. Such pension plans are funded in full or in part inemployee pension funds. In the consolidated financial statements, an amount of DKK 226 thousand (2009: DKK 226 thousand) hasbeen recognised under liabilities in relation to the Group’s obligations towards current and former employees after deduction of planassets.

The only defined benefit plan for which Netop has an obligation involves the company’s employees in Switzerland.

The company decided to calculate the 2010 provision for defined benefit obligations without actuarial assistance, in consideration of thequite substantial costs of such services in proportion to the amount of the provision.

Management has assessed the actuarial assumptions used for the actuarial calculation of 2008 and has found no significant changesfor 2010 relative to 2008.




DKK '000 2010 2009

Corporation tax 1 January 45 3

Adjustments relating to previous years - -

Corporation tax for the year 97 142

Corporation tax paid in the year (142) (100)

Corporation tax at 31 December 0 45

NOTE 23 OTHER LIABILITIES

DKK '000 2010 2009

Non-current liabilities 1.241 805

Current liabilities 10.313 10.839

11.555 11.645

Other liabilities are specified as follows:

Staff costs 7.825 8.124

Bullet loan (The Danish tax authorities) 1.076 805

Other payables 2.654 2.716

11.555 11.645

NOTE 24 CASH AT BANK AND IN HAND

DKK '000 2010 2009

Cash at bank and in hand 14.040 4.848

Cash at 31 December as per cash flow statement 14.040 4.848




DKK '000 2010 2009

Corporation tax 1 January 45 3

Adjustments relating to previous years - -

Corporation tax for the year 97 142

Corporation tax paid in the year (142) (100)

Corporation tax at 31 December 0 45


DKK '000 2010 2009

Non-current liabilities 1.241 805

Current liabilities 10.313 10.839

11.555 11.645


Staff costs 7.825 8.124

Bullet loan (The Danish tax authorities) 1.076 805

Other payables 2.654 2.716

11.555 11.645


DKK '000 2010 2009


Cash at 31 December as per cash flow statement 14.040 4.848


NOTE 25 ACQUISITION OF SUBSIDIARIES

DKK '000

Carrying

amount prior

to acquisition

Fair value

adjustment

Fair value at

date of

acquisition

Acquisitions in 2009

Acquisition of Netop Netfilter A/S (former named Enologic A/S)

Deferred tax - 939 939

Trade receivables 16 - 16

Cash at bank and in hand 794 - 794

Current liabilities (12) - (12)

Net assets acquired 798 939 1.737

Calculated goodwill

Total cost for 100% of the shares 1.737

Fee for 50% of the shares (869)

Cash acquired 794

Net cash flow impact (75)

With effect from 1 September 2009, Netop Solutions A/S acquired 50% of the shares of Enologic A/S. Netop Solutions A/S already held50% of the shares and is now the company’s sole shareholder.

The determination of the fair values of the acquired assets, liabilities and contingent liabilities was completed at 31 December 2009.

The company was not operational in 2009. Accordingly, no share of the profits for 2009 of Enologic A/S was recognised in theconsolidated profit for the year.



NOTE 26 SHARE OPTIONS - AND WARRANTS PROGRAM PLANS

Share option programsIn 2003 and 2004, Netop granted share options to executives (one person) and a number of other employees (17 persons), for at total of 18people in the organisation. The right to exercise share options granted in the 2003 program expired on 27 June 2010 with no options beingexercised.

At 31 December 2010, 4,500 share options from the 2004 program remained outstanding. Each share option entitles the holder to acquireone existing Netop share of DKK 5 nominal value.

The options were issued at an exercise price equivalent to the average of the market price of the company’s shares on NASDAQ OMXCopenhagen during the ten days prior to grant. The share options vest as long as the option holder is employed with the company, but thereis no requirement that option holders must be in continuing employment at the date of exercise.

Options granted cannot be exercised earlier than three years from the date of grant and not later than seven years after the date of grant,and may only be exercised during two-week periods following the release of periodic profit announcements.

Option Program 2004The date of grant for all options under Option Program 2004 was 17 August 2004. These options cannot be exercised earlier than 36 monthsafter the date of grant and not later than 84 months after the date of grant. The share options only vested as long as option holders wereemployed with the company, but, as with Option Program 2003, there is no requirement that option holders must be in continuingemployment at the date of exercise.

Under the 2004 Program, a total of 43,200 options were granted. None of these options have been exercised, but 38,700 options havelapsed due to natural wastage. At 31 December 2010, 4,500 options were outstanding under the program.

The Option Program 2004 does not apply cash settlement, and options can only be exercised by the purchase of shares at the agreedexercise price of DKK 99 per share.

Warrant programsMembers of the Management Board, executives and other employees were granted warrants in 2008 and 2010, and warrants were grantedin 2008 as part of the consideration in connection with the acquisition of GenevaLogic Holding AG.

Warrantprogram 2008In 2008, Netop Solutions A/S established a warrant program for the company’s Management Board. A total of 20,562 warrants were grantedfor an aggregate value of DKK 1,500,000. When vested, each warrant gives the holder the right to subscribe one share of DKK 5 nominalvalue in the company.

The date of grant was 26 June 2008 at which date the shares were subscribed at the average opening price (on NASDAQ OMXCopenhagen) of the 10 days immediately preceding the date of grant. The exercise price was fixed at DKK 72.95 per share.

The warrants vest over a period of two years beginning on 1 July 2008 at 1/24 for each month the warrant holder is employed by NetopSolutions A/S. The value has been calculated at DKK 264 thousand, which amount is accrued over the vesting period. The warrants can beexercised after expiry of the vesting period on 30 June 2010, but not later than on 26 June 2013.

Warrant Program 2008 – part of the acquisition price of GenevaLogic Holding AGWhen acquiring GenevaLogic Holding AG, Netop Solutions A/S paid a part of the purchase price by a grant of warrants.The warrant program gives the seller the right to subscribe 71,736 shares with a nominal value of DKK 5 each in Netop Solutions A/S.

The date of grant was equal to the date of acquisition, 1 July 2008, and the price was fixed at DKK 69.70 per share. The price wasdetermined on the basis of the average market price of the ten trading days immediately before 30 June 2008 as quoted on Nasdaq OMXCopenhagen.

The warrants were fully vested at the date of grant, but the seller of GenevaLogic Holding AG cannot exercise the warrants granted until 24months after 1 July 2008. The right to exercise applies for a period of 12 months from 1 July 2010 and will lapse on 30 June 2011.

Warrant Program 2010In 2010, Netop Solutions A/S established warrant programs for the company’s Management Board, in February 2010, and for it executives,in September 2010. A total of 189,135 warrants were granted for an aggregate value of DKK 1,710,000. When vested, each warrant givesthe holder the right to subscribe one share of DKK 5 nominal value in the company.

The respective dates of grant were 11 February and 30 September 2010 at which dates the shares were subscribed at the average openingprice (on NASDAQ OMX Copenhagen) during the 10 days immediately preceding the date of grant. The exercise prices were fixed at DKK10.19 and DKK 7.86 per share.

The warrants vest over a period of two years beginning on the date of grant at 1/24 for each month the warrant holder is employed by NetopSolutions A/S. The respective values have been calculated at DKK 402 thousand and at DKK 321 thousand, which amount is accrued overthe vesting period. The warrants can be exercised after expiry of the 24-month vesting periods, on 28 February 2013 and 30 September2013 respectively.




Share option programsIn 2003 and 2004, Netop granted share options to executives (one person) and a number of other employees (17 persons), for at total of 18people in the organisation. The right to exercise share options granted in the 2003 program expired on 27 June 2010 with no options beingexercised.

At 31 December 2010, 4,500 share options from the 2004 program remained outstanding. Each share option entitles the holder to acquireone existing Netop share of DKK 5 nominal value.

The options were issued at an exercise price equivalent to the average of the market price of the company’s shares on NASDAQ OMXCopenhagen during the ten days prior to grant. The share options vest as long as the option holder is employed with the company, but thereis no requirement that option holders must be in continuing employment at the date of exercise.

Options granted cannot be exercised earlier than three years from the date of grant and not later than seven years after the date of grant,and may only be exercised during two-week periods following the release of periodic profit announcements.

Option Program 2004The date of grant for all options under Option Program 2004 was 17 August 2004. These options cannot be exercised earlier than 36 monthsafter the date of grant and not later than 84 months after the date of grant. The share options only vested as long as option holders wereemployed with the company, but, as with Option Program 2003, there is no requirement that option holders must be in continuingemployment at the date of exercise.

Under the 2004 Program, a total of 43,200 options were granted. None of these options have been exercised, but 38,700 options havelapsed due to natural wastage. At 31 December 2010, 4,500 options were outstanding under the program.

The Option Program 2004 does not apply cash settlement, and options can only be exercised by the purchase of shares at the agreedexercise price of DKK 99 per share.

Warrant programsMembers of the Management Board, executives and other employees were granted warrants in 2008 and 2010, and warrants were grantedin 2008 as part of the consideration in connection with the acquisition of GenevaLogic Holding AG.

Warrantprogram 2008In 2008, Netop Solutions A/S established a warrant program for the company’s Management Board. A total of 20,562 warrants were grantedfor an aggregate value of DKK 1,500,000. When vested, each warrant gives the holder the right to subscribe one share of DKK 5 nominalvalue in the company.

The date of grant was 26 June 2008 at which date the shares were subscribed at the average opening price (on NASDAQ OMXCopenhagen) of the 10 days immediately preceding the date of grant. The exercise price was fixed at DKK 72.95 per share.

The warrants vest over a period of two years beginning on 1 July 2008 at 1/24 for each month the warrant holder is employed by NetopSolutions A/S. The value has been calculated at DKK 264 thousand, which amount is accrued over the vesting period. The warrants can beexercised after expiry of the vesting period on 30 June 2010, but not later than on 26 June 2013.

Warrant Program 2008 – part of the acquisition price of GenevaLogic Holding AGWhen acquiring GenevaLogic Holding AG, Netop Solutions A/S paid a part of the purchase price by a grant of warrants.The warrant program gives the seller the right to subscribe 71,736 shares with a nominal value of DKK 5 each in Netop Solutions A/S.

The date of grant was equal to the date of acquisition, 1 July 2008, and the price was fixed at DKK 69.70 per share. The price wasdetermined on the basis of the average market price of the ten trading days immediately before 30 June 2008 as quoted on Nasdaq OMXCopenhagen.

The warrants were fully vested at the date of grant, but the seller of GenevaLogic Holding AG cannot exercise the warrants granted until 24months after 1 July 2008. The right to exercise applies for a period of 12 months from 1 July 2010 and will lapse on 30 June 2011.

Warrant Program 2010In 2010, Netop Solutions A/S established warrant programs for the company’s Management Board, in February 2010, and for it executives,in September 2010. A total of 189,135 warrants were granted for an aggregate value of DKK 1,710,000. When vested, each warrant givesthe holder the right to subscribe one share of DKK 5 nominal value in the company.

The respective dates of grant were 11 February and 30 September 2010 at which dates the shares were subscribed at the average openingprice (on NASDAQ OMX Copenhagen) during the 10 days immediately preceding the date of grant. The exercise prices were fixed at DKK10.19 and DKK 7.86 per share.

The warrants vest over a period of two years beginning on the date of grant at 1/24 for each month the warrant holder is employed by NetopSolutions A/S. The respective values have been calculated at DKK 402 thousand and at DKK 321 thousand, which amount is accrued overthe vesting period. The warrants can be exercised after expiry of the 24-month vesting periods, on 28 February 2013 and 30 September2013 respectively.



Others

Board of

directors

Executive

manage-

ment

Other

executives

Other

employees Total

Exercise

price per

option

(DKK)

Fair value

(DKK)

Option plan 2004

1 January 2009 - - - - 19.000 19.000

Exercised in 2009 - - - - - -

Lapsed in 2009 - - - - (14.500) (14.500)

- - - - 4.500 4.500 99 -

1 January 2010 - - - - 4.500 4.500

Exercised in 2010 - - - - - -

Lapsed in 2010 - - - - - -

- - - - 4.500 4.500 99 -

- - - - 4.500 4.500

- - - - 4.500 4.500

Warrant programme 2008

1 January 2009 - - 20.562 - - 20.562

Exercised in 2009 - - - - - -

Lapsed in 2009 - - - - - -

- - 20.562 - - 20.562 73 -

1 January 2010 - - 20.562 - - 20.562

Exercised in 2010 - - - - - -

Lapsed in 2010 - - - - - -

- - 20.562 - - 20.562 73 31

1 January 2009 76.736 - - - - 76.736

Exercised in 2009 - - - - - -

Lapsed in 2009 - - - - - -

76.736 - - - - 76.736 70 -

1 January 2010 76.736 - - - - 76.736

Exercised in 2010 - - - - - -

Lapsed in 2010 - - - - - -

76.736 - - - - 76.736 70 -

Outstanding at 31 December 2009




Number of exercisable options at

31 December 2010

Number of exercisable options at

31 December 2009



Warrant program 2008 - part of

acquisition price Genevalogic Holding

AG

Warrants issued in 2008 to management and which are outstanding at 31 December 2010 cannot be exercised later than 30 June 2013.

Warrants issued in 2008 relating to Genevalogic and which are outstanding at 31 December 2010 cannot be exercised later than 30 June2011.

Options relating to Option Program 2004 and which are outstanding at 31 December 2010 cannot be exercised later than 1 August 2011.


NOTER TIL KONCERNREGNSKABET


Others

Board of

directors

Executive

manage-

ment

Other

executives

Other

employees Total

Exercise

price per

option

(DKK)

Fair value

(DKK)

1 February 2010 - - 98.135 - - 98.135

Exercised warrants in 2010 - - - - - -

Lapsed 2010 - - - - - -

- - 98.135 - - 98.135 10 591

30 September 2010 - - - 91.000 - 91.000


Lapsed 2010 - - - - - -

- - - 91.000 - 91.000 8 662

Warrantprogram total 2010 76.736 0 118.697 91.000 0 286.433

76.736 - 20.562 - - 97.298

- - - - - -

Warrant program 2010 (II)

Total warrants which can be exercised

31 December 2010


31 December 2009


Warrant program 2010 (I)


The earliest exercise date of warrants in the 2010 programs is 1 March 2012.

Grants in 2010The market value of the subscription rights of the 2010 warrant program (i) was calculated using the Black-Scholes model for the valuation ofoptions and warrants. The fair value per option at the date of grant has been computed at DKK 4.10. The calculation is based on a dividendper share of 0% of the share price, a volatility of 80%, a risk-free interest rate of 4% and a share price of DKK 10.19.

The market value of the subscription rights of the 2010 warrant program (ii) was calculated using the Black-Scholes model for the valuationof options and warrants. The fair value per option at the date of grant has been computed at DKK 3.53. The calculation is based on adividend per share of 0% of the share price, a volatility of 80%, a risk-free interest rate of 4% and a share price of DKK 7.86.

The expected volatility is derived from the historical volatility of the Netop Solutions A/S share for the two years preceding the date of grant.

Market value at 31 December 2010The market values of the individual share option and warrant programs at 31 December 2010 were calculated using the Black-Scholesmodel for the valuation of options and warrants. For 2010, the calculation at 31 December 2010 was based on a dividend per share of 0% ofthe share price (2008: 0%), volatility of 86.87% (2008: 71.83%) and a risk-free interest rate of 4% (2008: 2.2%).

The expected volatility is derived from the historical volatility of the Netop Solutions A/S share for the past two years.


NOTE 27 RELATED PARY TRANSACTIONS

DKK '000 2010 2009

Consolidated Holdings A/S

Interest on convertible debt 423 -

Interest payable to Consolidated Holdings A/S 423 -

ATEA A/S

Purchase of IT equipment from Atea A/S 197 724

Sale of software to Atea A/S 3.032 4.303

Receivables from Atea A/S 116 1.590

Payable to Atea A/S 13 201

Columbus IT Partner A/S

Purchase of software and consultancy services from Columbus IT Partner A/S 52 119

Payable to Columbus IT Partner A/S - -

CDRator A/S

Sale of consultancy services to CDRator 173 -

Philip & Partnere (Board member Henning Hansen)

Legal assistance from Philip and Partners Law Firm 576 372

Payable to Philip and Partners Law Firm 29 15

Netop Solutions A/S is controlled by Consolidated Holdings A/S, which holds 54.1% of the shares in Netop Solutions A/S. Theremaining shares are held by a diversified group of shareholders. Consolidated Holdings A/S is considered the ultimate parentcompany of the Group and is considered a related party together with its board of directors and its group enterprises e.g. Atea A/S,Columbus IT Partner A/S and CDRator A/S.

Other related parties are Netop Solutions' Board of Directors, Management Board and executives as well as close relatives of thesepersons and companies owned by them.

Apart from ordinary remuneration, there were no other transactions with members of the Board of Directors or the Management Board,or with executives of the Group.

Apart from the Board members elected by the company’s employees, no members of the Board were employed with the Group duringthe 2009 and 2010 financial years.


NOTER TIL KONCERNREGNSKABET


Others

Board of

directors

Executive

manage-

ment

Other

executives

Other

employees Total

Exercise

price per

option

(DKK)

Fair value

(DKK)

1 February 2010 - - 98.135 - - 98.135


Lapsed 2010 - - - - - -

- - 98.135 - - 98.135 10 591

30 September 2010 - - - 91.000 - 91.000


Lapsed 2010 - - - - - -

- - - 91.000 - 91.000 8 662

Warrantprogram total 2010 76.736 0 118.697 91.000 0 286.433

76.736 - 20.562 - - 97.298

- - - - - -

Warrant program 2010 (II)


31 December 2010


31 December 2009


Warrant program 2010 (I)


The earliest exercise date of warrants in the 2010 programs is 1 March 2012.

Grants in 2010The market value of the subscription rights of the 2010 warrant program (i) was calculated using the Black-Scholes model for the valuation ofoptions and warrants. The fair value per option at the date of grant has been computed at DKK 4.10. The calculation is based on a dividendper share of 0% of the share price, a volatility of 80%, a risk-free interest rate of 4% and a share price of DKK 10.19.

The market value of the subscription rights of the 2010 warrant program (ii) was calculated using the Black-Scholes model for the valuationof options and warrants. The fair value per option at the date of grant has been computed at DKK 3.53. The calculation is based on adividend per share of 0% of the share price, a volatility of 80%, a risk-free interest rate of 4% and a share price of DKK 7.86.

The expected volatility is derived from the historical volatility of the Netop Solutions A/S share for the two years preceding the date of grant.

Market value at 31 December 2010The market values of the individual share option and warrant programs at 31 December 2010 were calculated using the Black-Scholesmodel for the valuation of options and warrants. For 2010, the calculation at 31 December 2010 was based on a dividend per share of 0% ofthe share price (2008: 0%), volatility of 86.87% (2008: 71.83%) and a risk-free interest rate of 4% (2008: 2.2%).

The expected volatility is derived from the historical volatility of the Netop Solutions A/S share for the past two years.



DKK '000 2010 2009




ATEA A/S








CDRator A/S











DKK '000 2010 2009




ATEA A/S








CDRator A/S











NOTE 28 MANAGEMENT'S SHAREHOLDING OF NETOP SOLUTIONS A/S SHARES

Change in

number of

shares during

2010

Number of

shares at year

end

Market value

at 31.12.2010

(DKK'000)

Board of Directors:

Ib Kunøe - - -

Peter Schüpbach - - -

Henning Hansen - - -

Jan Elbæk - - -

Søren Bach - - -

Marcus Kaber - - -

Jakob Bork - - -

I alt - - -

Management:

Kurt Groth Bager 6.000 6.000 68

I alt 6.000 6.000 68

NOTE 29 CONTRACTUAL ACTIVITIES

DKK '000 2010 2009

The minimum lease obligations relating to operating leases fall due:

Land and buildings – falling due within one year 3.945 4.282

Other plant – falling due within one year 1.239 1.972

5.184 6.254

Land and buildings – falling due within five years 11.768 10.505

Other plant – falling due within five years 569 1.555

12.337 12.060

Land and buildings – falling due after five years 17.142 19.439

Other plant – falling due after five years - -

17.142 19.439

34.663 37.753

Costs of operating leases included in the income statement 6.972 8.531

The Group has concluded lease agreements in respect of domicile offices in countries where the Group is represented by a company.Such leases outside of Denmark run for a maximum of five years. The main liability comprises a lease for domicile offices at Birkerød,Denmark. The annual lease payments amount to DKK 2.1 million and are subject to a 3% increase per annum. The agreement is non-terminable until 2023, but the company has an option to buy back the property at a price of DKK 36.7 million on 1 October 2016.

The company leased out parts of the building in 2010, receiving rental income of DKK 0.4 million. The annual rental income amounts toDKK 0.5 million and is subject to annual indexation. The tenant has a notice period of 6 months.

Through a shareholding in Consolidated Holdings A/S Ib Kunøe indirectly owns 54.1% of the shares in Netop Solutions A/S.



NOTE 28 MANAGEMENT'S SHAREHOLDING OF NETOP SOLUTIONS A/S SHARES

Change in

number of

shares during

2010

Number of

shares at year

end

Market value

at 31.12.2010

(DKK'000)

Board of Directors:

Ib Kunøe - - -

Peter Schüpbach - - -

Henning Hansen - - -

Jan Elbæk - - -

Søren Bach - - -

Marcus Kaber - - -

Jakob Bork - - -

I alt - - -

Management:

Kurt Groth Bager 6.000 6.000 68

I alt 6.000 6.000 68

NOTE 29 CONTRACTUAL ACTIVITIES

DKK '000 2010 2009

The minimum lease obligations relating to operating leases fall due:

Land and buildings – falling due within one year 3.945 4.282

Other plant – falling due within one year 1.239 1.972

5.184 6.254

Land and buildings – falling due within five years 11.768 10.505

Other plant – falling due within five years 569 1.555

12.337 12.060

Land and buildings – falling due after five years 17.142 19.439

Other plant – falling due after five years - -

17.142 19.439

34.663 37.753

Costs of operating leases included in the income statement 6.972 8.531

The Group has concluded lease agreements in respect of domicile offices in countries where the Group is represented by a company.Such leases outside of Denmark run for a maximum of five years. The main liability comprises a lease for domicile offices at Birkerød,Denmark. The annual lease payments amount to DKK 2.1 million and are subject to a 3% increase per annum. The agreement is non-terminable until 2023, but the company has an option to buy back the property at a price of DKK 36.7 million on 1 October 2016.

The company leased out parts of the building in 2010, receiving rental income of DKK 0.4 million. The annual rental income amounts toDKK 0.5 million and is subject to annual indexation. The tenant has a notice period of 6 months.

Through a shareholding in Consolidated Holdings A/S Ib Kunøe indirectly owns 54.1% of the shares in Netop Solutions A/S.


NOTE 30 DISCONTINUED BUSINESS

DKK '000 2010 2009

Revenue - 1.555

External costs - (5.255)

Amortisation, depreciation and impairment losses - (752)

Staff costs - (4.439)

Result before tax - (8.891)

Corporation tax - -


Cash flow from operating activities of continuing business - (8.139)

Cash flow from investing activities - -

Cash flow from financing activities - -

Change in cash at bank and in hand - (8.139)

- -

Property, plants and equipment - -

Assets held for sale - -

Earning per share of discontinuing business (EPS) - (2,18)

Earning per share of discontinuing business, diluted (EPS-D) - (2,18)

The partnership agreement between Netop and Medianet was terminated with effect from the end of 2009. As a result, the relatedactivities have been identified and the related revenue and costs have been determined for all of 2009. At the expiry of the agreement,Netop had a contractual commitment to return all of the assets, including employees, transferred to Netop when the agreement wassigned in 2008.



NOTE 31 FINANCIAL INSTRUMENTS, RISK AND FINANCIAL MANAGEMENT

Currency risk 31 December 2010

DKK '000

Currency

Payment /

maturity Receivable

Cash at bank

and in hand Debt

Hedging

contracts Net position

USD < 1 år 9.066 3.455 1.282 - 11.239

Due to the nature of its operations, investments and financing activities, the Netop Group is exposed to a number of financial risks.These risks relate to market risk, which for Netop consists of foreign exchange and interest rate risk, as well as credit risk and liquidityrisk.

It is the Group’s policy not to actively speculate in financial instruments. The sole purpose of the Group’s financial management is tomanage and reduce financial risk.

Management monitors the risks the Group is exposed to and aligns policies to hedge such risks.

Management is authorised to enter into forward currency contracts, but the Group was not party to any current contract at the balancesheet date.

Currency riskNetop Solutions is exposed to currency fluctuations, because individual group companies conduct purchase or sales transactions andhave receivables and debt in currencies other than their own functional currency.

As Netop Solutions is incorporated in Denmark, a large part of the Group’s costs are incurred in Danish kroner. In 2010, the companyinvoiced approximately 14% of its sales in Danish kroner, 26% in euros, 52% in US dollars and the remaining 8% in British poundsterling. With respect to expenses, the Group incurs expenses in Danish kroner, US dollars, Romanian Lei (RON) and pound sterling.Netop Solutions' foreign exchange exposure is thus primarily in euro and US dollars in terms of revenue and in US dollars andRomanian Lei (RON) in terms of costs. Management does not believe that the euro exposure involves particular risk. As regards USdollars, the company’s exposure has been reduced following the establishment of a subsidiary in Chicago and the acquisition inPortland. Management monitors the situation and the company hedges up to 50% of the USD-denominated cash flows from operationsfrom time to time. No hedging contracts were entered into in 2010, as Netop Solutions had a net surplus of US dollars. About 10% ofthe Group's costs are in RON. Management continuously monitors movements in the Rumanian currency and regularly considerswhether hedging future payments to Romania would be appropriate, either by way of currency options or forward contracts. No optionor forward contracts were entered into in 2010. The average DKK/RON exchange rate in 2010 was 1.77, against 1.76 in 2009.

Value adjustment of investments in foreign group undertakings using functional currencies other than Danish kroner is taken directly toequity and is shown in the statement of comprehensive income. Related foreign exchange risks are not hedged. The Group believesthat continuous exchange rate hedging of such long-term investments would not be the best solution in an overall risk and cost context.

A sensitivity analysis shows that had the USD-DKK exchange rate in 2010 been at the same level as in 2009, which was 5% lower, at5.36, revenue would have been DKK 2.5 million lower and EBIT DKK 1.2 million lower. Had the USD-DKK exchange rate been 10%higher, at 6.19, revenue would have been DKK 4.7 million higher and EBIT would have been DKK 2.4 million higher.

The company's principal currency exposure in the balance sheet is towards USD in current financial instruments.

At 31 December 2010, a 10% increase in the USD-DKK exchange rate would increase the value of the Group's financial instrumentsby approximately DKK 1.1 million, of which equity would be increased by DKK 0.8 million and the income statement would increaseby DKK 0.3 million. A fall in the USD-DKK exchange rate of 10% would result in a corresponding decline in equity and the incomestatement. The Group has no USD-denominated receivables or debt falling due after more than 12 months apart from deposits paidon inception of leases, which amounts were not included in the sensitivity analysis.





DKK '000

Currency

Payment /

maturity Receivable

Cash at bank

and in hand Debt

Hedging


USD < 1 år 9.066 3.455 1.282 - 11.239

Due to the nature of its operations, investments and financing activities, the Netop Group is exposed to a number of financial risks.These risks relate to market risk, which for Netop consists of foreign exchange and interest rate risk, as well as credit risk and liquidityrisk.

It is the Group’s policy not to actively speculate in financial instruments. The sole purpose of the Group’s financial management is tomanage and reduce financial risk.

Management monitors the risks the Group is exposed to and aligns policies to hedge such risks.

Management is authorised to enter into forward currency contracts, but the Group was not party to any current contract at the balancesheet date.

Currency riskNetop Solutions is exposed to currency fluctuations, because individual group companies conduct purchase or sales transactions andhave receivables and debt in currencies other than their own functional currency.

As Netop Solutions is incorporated in Denmark, a large part of the Group’s costs are incurred in Danish kroner. In 2010, the companyinvoiced approximately 14% of its sales in Danish kroner, 26% in euros, 52% in US dollars and the remaining 8% in British poundsterling. With respect to expenses, the Group incurs expenses in Danish kroner, US dollars, Romanian Lei (RON) and pound sterling.Netop Solutions' foreign exchange exposure is thus primarily in euro and US dollars in terms of revenue and in US dollars andRomanian Lei (RON) in terms of costs. Management does not believe that the euro exposure involves particular risk. As regards USdollars, the company’s exposure has been reduced following the establishment of a subsidiary in Chicago and the acquisition inPortland. Management monitors the situation and the company hedges up to 50% of the USD-denominated cash flows from operationsfrom time to time. No hedging contracts were entered into in 2010, as Netop Solutions had a net surplus of US dollars. About 10% ofthe Group's costs are in RON. Management continuously monitors movements in the Rumanian currency and regularly considerswhether hedging future payments to Romania would be appropriate, either by way of currency options or forward contracts. No optionor forward contracts were entered into in 2010. The average DKK/RON exchange rate in 2010 was 1.77, against 1.76 in 2009.

Value adjustment of investments in foreign group undertakings using functional currencies other than Danish kroner is taken directly toequity and is shown in the statement of comprehensive income. Related foreign exchange risks are not hedged. The Group believesthat continuous exchange rate hedging of such long-term investments would not be the best solution in an overall risk and cost context.

A sensitivity analysis shows that had the USD-DKK exchange rate in 2010 been at the same level as in 2009, which was 5% lower, at5.36, revenue would have been DKK 2.5 million lower and EBIT DKK 1.2 million lower. Had the USD-DKK exchange rate been 10%higher, at 6.19, revenue would have been DKK 4.7 million higher and EBIT would have been DKK 2.4 million higher.

The company's principal currency exposure in the balance sheet is towards USD in current financial instruments.

At 31 December 2010, a 10% increase in the USD-DKK exchange rate would increase the value of the Group's financial instrumentsby approximately DKK 1.1 million, of which equity would be increased by DKK 0.8 million and the income statement would increaseby DKK 0.3 million. A fall in the USD-DKK exchange rate of 10% would result in a corresponding decline in equity and the incomestatement. The Group has no USD-denominated receivables or debt falling due after more than 12 months apart from deposits paidon inception of leases, which amounts were not included in the sensitivity analysis.




DKK '000

Currency

Payment /

maturity Receivable

Cash at bank

and in hand Debt

Hedging


USD < 1 år 5.632 1.810 3.481 - 3.960

Financial liabilities 31 December

DKK 1.000

Maturity < 1

år

Maturity > 1

år < 4 år

Maturity > 4

år Total

2010

Trade payables 3.634 - - 3.634

Other Payables 10.313 - 1.241 11.555

2009

Trade payables 3.193 - - 3.193

Other Payables 10.839 - 805 11.644

Interest rate riskConsidering its positive cash holdings, Netop Solutions does not have a large risk exposure to interest rate fluctuations. The risk ismainly limited to the interest return on the Group’s positive cash holdings. The Group’s cash holdings are mainly placed in demanddeposits at variable rates of interest.

In 2009, the Group was not a contractual party to derivative financial instruments for which interest rate fluctuations can cause changesin their fair values, and it thus does not have any interest rate exposure.

In January 2010, Netop Solutions signed a factoring agreement regarding sales in the Nordic region, which adds a CIBOR-based rateof interest for a percentage of outstanding amounts. This involves a minute interest exposure. The factoring agreement expired in April2010.

On 27 April 2010, Netop Solutions issued a convertible debt instrument of EUR 2.5 million to Consolidated Holdings A/S, a relatedparty of the Group. The debt instrument carries a fixed rate of interest of 5%. The instrument of debt was converted into shares during2010 and, accordingly, the Group is not exposed to any material interest rate exposure.

Liquidity riskNetop Solutions pursues a policy of consistently ensuring the existence of adequate financial resources. In 2010, Netop Solutionsissued a convertible debt instrument of EUR 2.5 million, of which EUR 0.8 milllion was converted into share capital on 17 May 2010,while the remaining part was converted into share capital on 14 December 2010. Part of the proceeds from the convertible debt instru-ment was used to repay a guarantee commitment of DKK 10 milllion made in connection with the acquisition of GenevaLogic in 2008.In addition, the Group has generated a cash inflow from operating activities during the past two quarters. At the end of 2010, cashamounted to DKK 14.0 million. Accordingly, management is confident that the cash reserves are sufficient to implement the Group'current strategy.The maturities of the Group's financial obligations over the coming years are set out below.

At 31 December 2010, a 10% increase in the USD-DKK exchange rate would increase the value of the Group's financial instrumentsby approximately DKK 1.1 million, of which equity would be increased by DKK 0.8 million and the income statement would increase byDKK 0.3 million. A fall in the USD-DKK exchange rate of 10% would result in a corresponding decline in equity and the incomestatement. The Group has no USD-denominated receivables or debt falling due after more than 12 months apart from deposits paidon inception of leases, which amounts were not included in the sensitivity analysis.




DKK'000 2010 2009

Categories of Financial instruments




Measured at amortised cost (receivables and deposits) 34.779 22.309


Other liabilities 11.555 11.644

Measured at amortised cost (loans and other debt) 15.188 14.838

Credit riskNetop Solutions' credit risks are mainly related to receivables and bank deposits. The Group’s sales are primarily made on open account.Most of Netop’s sales are to customers with whom the Group has maintained a business relationship for several years. The Groupoperates fixed terms of payment and has defined policies on how to follow up on non-payment. For customers not assessed to besufficiently creditworthy, the Group changes the terms of payment or requires a down payment.

Netop Solutions manages its credit exposure risk through monthly monitoring and follow-up procedures. Historically, the Group hasincurred relatively small losses from customer non-payment. In 2009, a provision of DKK 1.3 million was made for one specific case whichresulted in a loss in 2010. This is considered to be a one-off case and the loss on other claims corresponds to what managementdesignates as a normal level.

The maximum credit risk corresponds to the values recognised in the balance sheet. For more information on this, see note 17.

At the end of the financial year, the Group was not exposed to significant risks concerning individual customers or business partners.

The fair value of financial assets and liabilities is assessed not to deviate significantly from the carrying values.




DKK'000 2010 2009

Categories of Financial instruments




Measured at amortised cost (receivables and deposits) 34.779 22.309


Other liabilities 11.555 11.644

Measured at amortised cost (loans and other debt) 15.188 14.838

Credit riskNetop Solutions' credit risks are mainly related to receivables and bank deposits. The Group’s sales are primarily made on open account.Most of Netop’s sales are to customers with whom the Group has maintained a business relationship for several years. The Groupoperates fixed terms of payment and has defined policies on how to follow up on non-payment. For customers not assessed to besufficiently creditworthy, the Group changes the terms of payment or requires a down payment.

Netop Solutions manages its credit exposure risk through monthly monitoring and follow-up procedures. Historically, the Group hasincurred relatively small losses from customer non-payment. In 2009, a provision of DKK 1.3 million was made for one specific case whichresulted in a loss in 2010. This is considered to be a one-off case and the loss on other claims corresponds to what managementdesignates as a normal level.

The maximum credit risk corresponds to the values recognised in the balance sheet. For more information on this, see note 17.

At the end of the financial year, the Group was not exposed to significant risks concerning individual customers or business partners.

The fair value of financial assets and liabilities is assessed not to deviate significantly from the carrying values.


NOTE 32 CONTINGENT LIABILITIES

NOTE 33 SUBSEQUENT EVENTS

No significant events requiring specific mention in the annual report have occurred in 2011.

Netop is not involved in any litigation proceedings or other situations that will have a material effect on the financial position of theNetop Group.


ANNUAL ACCOUNTS FOR NETOP SOLUTIONS A/S

Income statement 83

Balance sheet 84


Notes to the annual accounts 87

Page

82 annual accounTS For nETop SoluTionS a/S

ANNUAL ACCOUNTS FOR NETOP SOLUTIONS A/S

Income statement 83

Balance sheet 84


Notes to the annual accounts 87

Page

INCOME STATEMENT 1 JANUARY – 31 DECEMBER FOR NETOP SOLUTIONS A/S

DKK '000 2010 2009

Revenue 2 2.660 2.583

External costs 5 (4.186) (3.691)

Amortisation, depreciation and impairment losses 3 - -

Staff costs 4 (600) (533)


Profit/losses sale of investments - 1.915

Write-down of receivables from subsidiaries 11 - (110.361)

Write-down of investments 8 - (34.904)

Financial income 6 4.857 10.317

Financial expenses 7 (743) (521)

Profit before tax 1.989 (135.196)

Corporation tax 9 - (2.075)

Profit for the year 1.989 (137.271)

Distributed as follows:

Retained earnings 1.989 (137.271)

1.989 (137.271)

83incoME STaTEMEnT For nETop SoluTionS a/S

BALANCE AT 31. DECEMBER FOR NETOP SOLUTIONS A/S

DKK '000 2010 2009

ASSETS

Other fixtures and fittings, tools and equipment 10 - -

Property, plant and equipment - -

Investments in subsidiaries 8 68.311 48.403

Receivables from subsidiaries 11 6.846 15.963

Deposits 12.525 12.525




Other receivables 12 967 590

Cash at bank and in hand 14 11 181



84 BalancE For nETop SoluTionS a/S


DKK '000 2010 2009

ASSETS

Other fixtures and fittings, tools and equipment 10 - -

Property, plant and equipment - -

Investments in subsidiaries 8 68.311 48.403


Deposits 12.525 12.525




Other receivables 12 967 590

Cash at bank and in hand 14 11 181




DKK '000 2010 2009

EQUITY AND LIABILITIES

Equity 15

Share capital 31.951 21.046

Other reserves 1.764 1.495

Retained earnings 50.732 41.022

Total equity 84.446 63.563

Provisions 16 - 10.000

Total non-current liabilities - 10.000

Debt. acquisition of subsidiaries 6.291 6.006

Trade payables 1.170 744

Corporation tax 2.038 2.038

Other liabilities 17 1.107 456

Total current liabilities 10.607 9.245

Total liabilities 10.607 9.245

Total equity and liabilities 95.053 82.808

85BalancE For nETop SoluTionS a/S

STATEMENT OF CHANGES IN EQUITY 1 JANUARY - 31 DECEMBER FOR NETOP SOLUTIONS A/S

DKK '000

Equity at 1 January 2009 21.046 178.733 1.362 180.095 - 201.141

Capital increase - - - - - -

Acquisition of treasury shares - (440) - (440) - (440)

Share based payments - - 133 133 - 133

Profit for the year - (137.271) - (137.271) - (137.271)

Equity at 31 December 2009 21.046 41.022 1.495 42.517 - 63.563


Capital increase 10.905 7.721 - 7.721 0 18.626

Acquisition of treasury shares - - - - - -


Profit for the year - 1.989 - 1.989 - 1.989


Share capital

Retained

earnings

Reserve for

share based

payments Reserve total

Proposed

dividends

86 changES in EQuiTy For nETop SoluTionS a/S

STATEMENT OF CHANGES IN EQUITY 1 JANUARY - 31 DECEMBER FOR NETOP SOLUTIONS A/S

DKK '000


Capital increase - - - - - -

Acquisition of treasury shares - (440) - (440) - (440)


Profit for the year - (137.271) - (137.271) - (137.271)



Capital increase 10.905 7.721 - 7.721 0 18.626

Acquisition of treasury shares - - - - - -


Profit for the year - 1.989 - 1.989 - 1.989


Share capital

Retained

earnings

Reserve for

share based

payments Reserve total

Proposed

dividends

NOTES TO THE ANNUAL ACCOUNTS FOR NETOP SOLUTIONS A/S

Accounting policies 1

Revenue 3




Financial income 7


Investments in subsidiaries 9

Corporation tax 10


Receivables from subsidiaries 12


Deferred tax 14


Share capital 16

Provisions 17

Other liabilities 18

Note

87noTES To ThE annual accounTS For nETop SoluTionS a/S

88 noTES To ThE annual accounTS For nETop SoluTionS a/S

NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS

NOTE 1 ACCOUNTING POLICIES

Accounting policies applied by the parent company The parent company financial statements are presented in accordance with the Danish Financial Statements Act (reporting class D enterprises) and additional Danish disclosure requirements for listed companies. Accounting policies Where relevant for the parent company, the accounting policies are applied in accordance with the accounting policies for the consolidated financial statements (see note 1 to the consolidated financial statements). Due to the nature of the parent company, the following additions apply to the accounting policies: Revenue The parent company’s revenue relates to rental income from the letting of office premises to a third party. This income is recognised in the income statement on a straight-line basis during the year at the fair value of the contractual consideration. Investments in subsidiaries and associates in the parent company’s financial statements Investments in subsidiaries and associates are measured at cost. Where the recoverable amount is lower than cost, the investments are written down to this lower value. Cost is written down to the extent that distributed dividend exceeds the accumulated earnings after the acquisition date. Tax Netop Solutions A/S is subject to the Danish rules on compulsory joint taxation and was, during the period form 1 January–18 May 2010, the management company of the Group’s Danish subsidiaries. Consolidated Holdings A/S was the management company during the period from 19 May–31 December 2010. The management company for the joint taxation arrangement settles all corporate tax payments to the tax authorities. Joint tax contributions to/from subsidiaries are recognised under tax on the profit for the year. Tax payable and tax receivable is recognised under current assets/liabilities. Joint taxation contributions payable and receivable are recognised in the balance sheet under receivables from or debt to subsidiaries.


NOTE 2 REVENUE

DKK '000 2010 2009

Rental income 2.660 2.583

2.660 2.583


DKK '000 2010 2009

Amortisation, depreciation and impairment losses are specified as follows:

Depreciation, property, plant and equipment - -

- -

NOTE 4 STAFF COSTS

DKK '000 2010 2009

Staff costs are specified as follows:

Remuneration to Board of directors 600 533

600 533

The parent company had no employees in 2010 (2009: 0 employees).

Members of the Board of Directors of Netop Solutions A/S received total remuneration of DKK 600 thousand in 2010 (2009: DKK 533thousand) for services rendered to the company and other companies of the Netop Group. The Board of Directors receive a fixedremuneration and Board members do not participate in share option schemes, incentive plans, pension plans or other Group schemes.No arrangements have been made in respect of severance payments to Board members, nor have any such payments been made.




DKK '000 2010 2009


Audit 294 152



Other services - -

315 174


DKK '000 2010 2009

Financial income from subsidiaries 3.843 9.777

Other interest income 3 418

Exchange rate income 1.011 121

4.857 10.317


DKK '000 2010 2009

Financial expenses to subsidiaries 285 286

Interest convertible loan 424 -

Other interest costs 0 56

Exchange rate loss 33 101

Price adjustments securities - 77

743 521



NOTE 8 INVESTMENTS IN SUBSIDIARIES

DKK '000 2010 2009

Cost at 1 January 108.641 77.818

Acquisition of subsidiary - 869

Capital increase - 32.212

Contribution to subsidiaries 19.639 -

Share based payments in subsidiaries 269 -

Disposals - (2.258)

128.549 108.641

60.238 25.334

Amortisation - 34.904

60.238 60.238

68.311 48.403

Name

Registered

address

Interest held

2010

Interest held

2009

Danware Security A/S Birkerød, Danmark 100% 100%

Genevalogic AG Langenthal, Schweiz 100% 100%

Genevalogic Holding AG Langenthal, Schweiz 100% 100%

Netop Tech Inc. Chicago, USA 100% 100%

Netop Tech Ltd. London, England 100% 100%

Netop Tech GmbH Neu-Isenburg, Tyskland 100% 100%

Netop Tech SRL Bukarest, Rumænien 100% 100%

Netop Tech Development Center SRL Bukarest, Rumænien 100% 100%

Netop Business Solutions A/S Birkerød, Danmark 100% 100%

Netop Netfilter A/S Birkerød, Danmark 100% 100%

Cost at 31 December

Value adjustments at 31 December

Carrying amount at 31 December

Value adjustments at 1 January

The increase in 2009 related to the acquisition of the outstanding 50% of the shares in Netop Netfilter A/S.

In 2010 the Company made a contribution to Netop Business Solutions A/S In order to increase the equityratio in the subsidiary. Noncurrent receivables from subsidiaries has therefore been converted to investments in subsidiaries DKK 19,639 net of a previouslyrecorded impairment write-down.

The write-down in 2009 related to the investment in GenevaLogic Holding AG. The present value of the expected future cash flows fromthe operation of the company (and underlying companies) is not estimated to match the carrying amount of the investments at 31December 2009 of DKK 48,295 thousand before write-downs. Accordingly, the investment has been written down to the value in use ofDKK 13,391 thousand.



DKK '000 2010 2009


Audit 294 152



Other services - -

315 174


DKK '000 2010 2009

Financial income from subsidiaries 3.843 9.777

Other interest income 3 418

Exchange rate income 1.011 121

4.857 10.317


DKK '000 2010 2009

Financial expenses to subsidiaries 285 286

Interest convertible loan 424 -

Other interest costs 0 56

Exchange rate loss 33 101

Price adjustments securities - 77

743 521




DKK '000 2010 2009

Current tax on profit for the year - 2.038

Deferred tax on profit for the year - 37

Adjustments relating to previous years (net) - -

- 2.075

Corporatio tax is specified as follows:

Tax on profit for the year - 2.075


- 2.075


25% tax of profit from ordinary activities of continuing business before tax 497 (33.799)

Non-capitalised deferred tax - 36

Change in corporation tax rate - -

Computation of effective tax rate: - -

Non-taxable income (497) (479)

Non-tax deductible write-downs - 36.316

Non-tax deductible expenses - -

Tax depreciation - 1

Adjustment relating to previous years - -

0 2.075




NOTE 10 PROPERTY, PLANT AND EQUIPMENT

DKK '000

Other fixtures

and fittings,

tools and

equipment Total

2010

Cost at 1 January 68 68

Additions - -

Disposals - -

Cost at 31 December 68 68

68 68

Amortisation for the year - -

Impairment losses for the year - -

Reversal of amortisation of disposals in the year - -

Amortisation and impairment losses at 31 December 68 68

Carrying amount at 31 December - -

3-5 yrs

DKK '000

Other fixtures

and fittings,

tools and

equipment Total

2009

Cost at 1 January 68 68

Additions - -

Disposals - -

68 68

68 68

Amortisation for the year - -

Impairment losses for the year - -

Reversal of amortisation of disposals in the year - -

Amortisation and impairment losses at 31 December 68 68

Carrying amount at 31 December - -

3-5 yrs

Amortisation period


Amortisation period

Cost at 31 December




DKK '000 2010 2009

Current tax on profit for the year - 2.038

Deferred tax on profit for the year - 37

Adjustments relating to previous years (net) - -

- 2.075

Corporatio tax is specified as follows:

Tax on profit for the year - 2.075


- 2.075


25% tax of profit from ordinary activities of continuing business before tax 497 (33.799)

Non-capitalised deferred tax - 36

Change in corporation tax rate - -

Computation of effective tax rate: - -

Non-taxable income (497) (479)

Non-tax deductible write-downs - 36.316

Non-tax deductible expenses - -

Tax depreciation - 1

Adjustment relating to previous years - -

0 2.075




NOTE 11 RECEIVABLES FROM SUBSIDIARIES

DKK 1.000 2010 2009

Receivables 1 January 131.470 121.069

Reclassified to investments in subsidiaries (130.000) -

Additions 11.769 10.401

13.239 131.470

110.361 -

Write downs during the year - 110.361

Write downs reclassified to investments in subsidiaries (110.361) -

- 110.361

13.239 21.109

Receivables from subsidiaries total are expected to be payable as follows:

Current assets 6.393 5.147

Non-current assets 6.846 15.963

Receivables 31 December 13.239 21.110


Receivables 31 December

Write downs at 1 January

Write downs at 31 December




DKK '000 2010 2009

Prepayments 942 570

Other receivables 25 20

967 590

– specified as follows:

0 - 1 year 967 590

> 1 year - -

967 590


DKK '000 2010 2009

Deferred tax at 1 January (net) - 36

Deferred tax, acquisition of subsidiary - -



Deferred tax on profit for the year - -

Deferred tax at 31 December (net) - -


Deferred tax assets - -

Provision for deferred tax - -

Deferred tax at 31 December (net) - -


DKK '000 2010 2009

Cash at bank and in hand 11 181

Cash at 31 December 11 181

NOTE 15 SHARE CAPITAL

Equity mix, treasury shares shares and dividends are shown in note 19 to the consolidated financial statements


NOTE 11 RECEIVABLES FROM SUBSIDIARIES

DKK 1.000 2010 2009

Receivables 1 January 131.470 121.069

Reclassified to investments in subsidiaries (130.000) -

Additions 11.769 10.401

13.239 131.470

110.361 -

Write downs during the year - 110.361

Write downs reclassified to investments in subsidiaries (110.361) -

- 110.361

13.239 21.109

Receivables from subsidiaries total are expected to be payable as follows:

Current assets 6.393 5.147

Non-current assets 6.846 15.963

Receivables 31 December 13.239 21.110


Receivables 31 December

Write downs at 1 January

Write downs at 31 December



NOTE 16 PROVISIONS

DKK '000 2010 2009

Price guarantee









DKK '000 2010 2009


Current liabilities 1.107 456

1.107 456


Other 1.107 456

1.107 456

When acquiring GenevaLogic Holding AG, Netop undertook to pay a price guarantee of up to DKK 10,000 thousand in the event theshares issued as part of the purchase price lost a corresponding amount or more of their official market value. At the balance sheetdate, the shares have lost more than DKK 10,000 thousand in value and, accordingly, full provision has been made for the price


UNITED KINGDOMAtrium CourtThe Ring BracknellBerkshire RG12 1 BWUnited KingdomT: +44 (0) 845 466 9000 [email protected]

SWITZERLANDChasseralstrasse 1-9CH-4900 LangenthalSwitzerlandT: +41 (0)62 957 70 [email protected]

ROMANIASos Virtutii, No 19D, Floor 5Sector 6 Cod Postal 060787, BucharestRomaniaT: +40 21 312 7709M: +40 788 152 [email protected]

DENMARKBregnerodvej 1273460 Birkerod - DKT: +45 4590 25 25 Support: +45 4590 25 10Fax: +45 4590 [email protected]

UNITED STATES15725 SW Greystone Ct. Suite 105Beaverton, Oregon 97006 USAT: +1 866 725-7833Fax: 503 [email protected]

737 N. Michigan Ave Suite 1510Chicago, IL 60611 USAT: +1 866 907-2971 Fax: 312 [email protected]

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