January-September 2005 Interim Report

• Third quarter sales totalled SEK 23 million (32), while sales for the Anoto business unit declined to SEK 18 million (22). January-September sales were SEK 81 million (118), of which the Anoto business unit accounted for SEK 65 million (73). • The Group’s third quarter gross profit rose to 75% (61), or SEK 17 million (20). The Group’s gross profit for January-September increased to 69% (60), or SEK 56 million (71). • Cash flow amounted to SEK –5 million (–18) for the third quarter and SEK 30 million (–57) for January-September. The Group is well on its way to meeting its target of positive cash flow for full-year 2005. • The loss before depreciation and amortisation came to SEK –21 million (–16) for the third quarter and SEK –37 million (–22) for January-September. A restructuring reserve of SEK 15 million for closing the Stockholm office was charged to third quarter earnings. • The loss after taxes was SEK –27 million (–32) for the third quarter and SEK –62 million (–70) for January-September. • Earnings per share totalled SEK –0.22 (–0.27) for the third quarter and SEK –0.52 (–0.60) for January-September. Operations • Forms sales continued to grow in the third quarter, including a number of new commercial installations. The interest in forms solutions has increased as the number of commercial applications has become known. In cooperation with its partners, Anoto launched talks with many new end-customers. Approximately 18,000 digital pens have been fully commercialised so far, and the company knows of an additional 19,000 that will be. That represents 20% more commercialised pens than in the second quarter. • Anoto decided in the third quarter to run its Swedish operations out of Lund only and to close its Stockholm office. The phase-out of the Stockholm office in 2006 will affect some 15 employees. The associated costs have been set aside to a restructuring reserve. • Anoto CEO Anders Tormod left the company, and Örjan Johansson, board member and manager of strategic business development, took over as acting CEO starting on 1 October 2005. In cooperation with a leading recruitment agency, Anoto has begun looking for a new CEO. Key Developments after 30 September • Sales of the Fly pentop computer, an interactive pen manufactured by Anoto partner LeapFrog (ticker symbol LF on the New York Stock Exchange) for children and adolescents, began on 17 October in the United States. • Jim Marggraff, LeapFrog’s Executive Vice President Worldwide Content, was appointed as new CEO of Anoto, Inc., a wholly owned subsidiary of Anoto Group AB. He will set up the company's Silicon Valley office and assume responsibility for promoting pentop computing, the new digital pen and paper segment. Anoto Group AB (publ), company registration no. 556532-3929 Scheelevägen 19 C SE-223 70 Lund, Sweden Phone: +46 46 540 12 00 www.anoto.com