Record sales and pole position in a multi-billion market, which is just opening

Fingerprint Cards AB (publ), Corp. Reg. No. 556154-2381, (FPC), Third quarter 2013:

• Sales totaled SEK 31.6 M (2.6).
• Gross profit amounted to SEK 15.5 M (loss: 0.9).
• Profit after financial items amounted to a loss of SEK 1.3 M (loss: 9.7).
• Gross margin was 49% (neg: 34).
• The loss per share was SEK 0.03 (loss: 0.22).
• Cash and cash equivalents at the end of the period amounted to SEK 142.3 M (25.9).
• The order backlog at the end of the period was SEK 38.9 M (0.0).
• FPC published a new forecast for 2013 on September 23 as well as forecasts for 2014 and 2015.

• Fujitsu, in cooperation with DoCoMo, launched the first mobile phone incorporating FPC’s fingerprint technology.
• Konka launched its first smartphone with the FPC1080A fingerprint sensor in China.
• WWTT launched FingerQ products with FPC’s 1080A sensor.
• Pantech in South Korea launched a new mobile phone incorporating FPC’s fingerprint technology.
• FPC secured a new DW* from a major Tier 2 OEM in China.
• FPC, in partnership with a leading US operator, won a smartphone DW* from an existing OEM customer in Asia.
• FPC secured a new major DW* for three new smartphones from a prominent existing customer in Asia.
• FPC won new DWs* for smartphones and tablet devices from existing Tier 2 customers in Asia.

• FPC secured a Chinese order for area sensors valued at SEK 24 M.
• FPC won an order for slightly more than 3 million swipe sensors for Asian smartphones.
• FPC announced that Mats Svensson was moving on to new assignments.
• FPC recruited a Customer Support Director for Asia, a Country Manager for Japan and Jan Johannesson as Vice President Strategic Planning and Portfolio Management.
• FPC chose Precise Biometrics’ fingerprint algorithm as one of a number of algorithms in our portfolio.
• FPC acquired some 100 patents from a world-leading patent holder.

Interim period January – September 2013:

• Sales totaled SEK 61.3 M (8.4).
• Gross profit was SEK 24.2 M (loss: 4.2).
• After financial items, a loss of SEK 18.2 M (loss: 28.5) was reported.
• Gross margin was 40% (neg: 50).
• The loss per share was SEK 0.35 (loss: 0.65).
• Cash and cash equivalents at the end of the period totaled SEK 142.3 M (25.9).
• The order backlog at the end of the period was SEK 38.9 M (0.0).

Notable events after the close of the reporting period:

• FPC recruited Jonas Spannel as Vice President Sourcing and Supply.
• FPC received an order for approximately 1 million sensors for Asian smartphones.
• UINT & Mereal Biometrics launched a biometric smartcard with embedded fingerprint sensors and processors from FPC.
• Official denial: Fingerprint Cards has NOT been acquired. Swedish Financial Supervisory Authority and Swedish Economic Crime Authority are investigating.

*FPC’s definition of a Design Win (DW): The decision by a manufacturer to start developing one or more commercial products that will contain FPC’s technology as an integrated element of the manufacturer’s product(s).

For further information, contact: Johan Carlström, President and CEO, Fingerprint Cards AB (publ), +46 31-60 78 20, investrel@fingerprints.com

Fingerprint Cards AB (publ) discloses this information pursuant to the Swedish Securities Market Act (2007:528) and the Swedish Financial Instruments Trading Act (1991:980). The information was issued for publication at 8:00 a.m., on October 17, 2013.

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CEO’s comments – Apple opens a very large market in Android and Windows for FPC
A new, very large market is about to be born, in which hundreds of millions of sensors will be integrated into consumer electronics in 2014 and billions of sensors in 2015. As a result of Apple’s market launch of the iPhone 5S incorporating a Touch ID fingerprint sensor on September 10, the market for embedded fingerprint sensors in smartphones and tablet devices was blown wide open. According to information published in the Wall Street Journal, Apple sold nine million new iPhones in the first three days of the launch, of which 88% comprised the new fingerprint sensor equipped iPhone 5S. The fingerprint sensor, or Touch ID as Apple has elected to call it, was given as the main reason for customers choosing to buy the iPhone 5S.
During the quarter, we significantly bolstered our intellectual property (IP) situation through the acquisition of a patent portfolio comprising some 100 patents in markets including the US, Europe and Asia, of which several are considered essential for wireless communication. This acquisition provides us with an extremely strong IP position, which can be used both defensively and aggressively moving forward.
Normally, we would never speak about our competitors, since we prefer to focus on items that we can affect; namely, the development of our own technology and organization to become the world’s best in our field. However, we are making an exception since Synaptics’ recently announced acquisition of Validity makes a few interesting points about the future very clear:

Synaptics’ acquisition of Validity sends a clear message that a supplier such as Synaptics, which is active in smartphones and tablet devices, has an acute need to include fingerprint technology in its offering. Accordingly, it is likely that touchscreen technology and fingerprint recognition will comprise a key combination in the future for these high-volume segments. FPC is focusing on ensuring that FPC’s fingerprint sensors remain consistently at the forefront of development, an area where we are currently a leader with three smartphone models launched in Asia. The discussions we have had with leading manufacturers of smartphones and tablet devices pertaining to requirements, needs and adaptation of products and technology provide us with a pole position today and for the future.

The market for fingerprint sensors is growing fast and will become very large by 2015. Furthermore, FPC already held a leading market position prior to Synaptics’ acquisition. The decisive factors for market share will be technology, patents, pricing, production capacity and local customer support primarily in Asia. It is FPC’s assessment that competition will be limited over the coming year, which will be beneficial to FPC’s ability to rapidly build a strong market-leading position.

Sales in the third quarter totaled SEK 31.6 M, which is the highest figure to date. Earnings amounted to a loss of SEK 1.3 M, which exceeded the budget. We are currently implementing a recruitment plan aimed at building a world-leading company in a market segment that will shortly become enormous.

The third quarter can be summed up as the best quarter in the company's history with the highest sales to date. In addition, Apple has left the door wide open to a new market in Android and Windows for FPC. Active capacitive touch is a technology that FPC was part of inventing and, which the company has more or less dominated over the last five-ten years.

This technology can be considered the most tried and tested, as confirmed by the launch of the iPhone 5S with capacitive sensors, thereby substantially boosting market interest in FPC’s mobile touch offering. Even if the really major income streams will start in the second half of 2014, income will now start to rise and FPC’s leading market position gain in strength. Accordingly, we are looking forward to the next few quarters and years with abundant confidence.

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