in Tobii AB (publ)
GLOBAL COORDINATOR AND JOINT BOOKRUNNER
Carnegie Investment Bank AB (publ) (“Carnegie”) and ABG Sundal Collier AB (“ABG Sundal Collier”). See section “Definitions” for the definitions of these and other terms in the Offering Circular.
The figures included in the Offering Circular have, in certain cases, been rounded off and, consequently, the tables included in the Offering Circular do not necessarily add up. All financial amounts are in Swedish kronor (“SEK”), unless indicated otherwise. Except as expressly stated herein, no financial information in the Offering Circular has been audited or reviewed by the Company’s auditors. Financial information relating to the Company in the Offering Circular that is not part of the information audited or reviewed by the Company’s auditor as outlined herein originates from the Company’s internal accounting and reporting systems.
The Offering is not directed to the general public in any country other than Sweden. Nor is the Offering directed to such persons whose participation requires additional offering circulars, registrations or measures other than those prescribed by Swedish law. No measures have been or will be taken in any other jurisdiction than Sweden, that would allow any offer of the shares to the public, or allow holding and distribution of the Offering Circular or any other documents pertaining to the Company or shares in such jurisdiction. Applications to acquire shares that violate such rules may be deemed invalid. Persons into whose possession the Offering Circular comes are required by the Company and the Joint Bookrunners to inform themselves about and to observe such restrictions. Neither the Company nor either of the Joint Bookrunners accepts any legal responsibility for any violation by any person, whether or not a prospective investor, of any such restrictions. The shares in the Offering have not been reviewed by any U.S. federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of the Offering Circular. Any representation to the contrary is a criminal offence in the United States. The shares in the Offering have not been and will not be registered under the U.S. Securities Act of 1933, as amended, (the “Securities Act”) or under any U.S. state securities laws and are being offered and sold in the United States only to qualified institutional buyers as defined in and in reliance on Rule 144A under the Securities Act and to certain non-U.S. persons in transactions outside the United States in reliance on Regulation S under the Securities Act. Prospective purchasers that are qualified institutional buyers are hereby notified that the sellers of the shares in the Offering may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. The shares may not be offered, sold, pledged or otherwise transferred within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable state securities laws. In the United States, the Offering Circular is being furnished on a confidential basis solely for the purpose of enabling a prospective investor to consider purchasing the particular securities described herein. The information contained in the Offering Circular has been provided by the Company and other sources identi-fied herein. Distribution of the Offering Circular to any person other than the offeree speciidenti-fied by the Joint Bookrunners or their representatives and those persons, if any, retained to advise such offeree with respect thereto, is prohibited, and any disclosure of its contents, without the Company’s prior written consent, is prohibited. Any reproduc-tion or distribureproduc-tion of the Offering Circular in the United States, in whole or in part, and any disclosure of its contents to any other person is prohibited. The Offering Circular is personal to each offeree and does not constitute any offer to any other person or to the general public to acquire shares in the Offering.
The Offering and the Offering Circular are governed by Swedish law. The courts of Sweden have exclusive jurisdiction to settle any conflict or dispute arising out of or in connection with the Offering or the Offering Circular.
A Swedish prospectus (the “Prospectus”) has been approved and registered by the Swedish Financial Supervisory Authority (Sw. Finansinspektionen) in accordance with Chapter 2, Sections 25 and 26 of the Swedish Financial Instruments Trading Act (1991:1980) (Sw. lagen (1991:980) om handel med finansiella instrument). The Offering Circular is a translation into English of the Prospectus approved and registered by the Swedish Financial Supervisory Authority. In the event of discrepancies between the Offering Circular and the Prospectus, the Prospectus shall prevail with exception for the sections “Certain U.S. federal income tax considerations” and ”Transfer restrictions” which only relate to matters attributable to the U.S.
STABILIZATION
In connection with the Offering, Carnegie may carry out transactions aimed at supporting the market price of the shares at levels above those which might otherwise prevail in the open market. Such stabilization transactions may be effected on Nasdaq Stockholm, in the over-the-counter market or otherwise, at any time during the period starting on the date of commencement of trading in the shares on Nasdaq Stockholm and ending no later than 30 calendar days thereafter. Carnegie is, however, not required to under-take any stabilization and there is no assurance that stabilization will be underunder-taken.
Stabilization, if initiated, may be discontinued at any time without prior notice. In no event will transactions be effected at levels above the price set in the Offering. Within one week of the end of the stabilization period, Carnegie will make public whether or not stabilization was undertaken, the date at which stabilization started, the date at which stabilization last occurred and the price range within which stabilization was carried out, for each of the dates during which stabilization transactions were carried out. FORWARD-LOOKING STATEMENTS
The Offering Circular contains certain forward-looking statements and opinions. Forward-looking statements are statements that do not relate to historical facts and events and such statements and opinions pertaining to the future that, by example, contain wording such as “believes”, “estimates”, “anticipates”, “expects”, “assumes”, “forecasts”, “intends”, “could”, “will”, “should”, “would”, “according to estimates”, “is of the opinion”, “may”, “plans”, “potential”, “predicts”, “projects”, “to the knowledge of” or similar expressions, which are intended to identify a statement as forward-looking. This applies, in particular, to statements and opinions in the Offering Circular concerning the future financial returns, plans and expectations with respect to the business and management of the Company, future growth and profitability and general economic and regulatory environ-ment and other matters affecting the Company.
Forward-looking statements are based on current estimates and assumptions made according to the best of the Company’s knowledge. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause the actual results, including the Company’s cash flow, financial condition and results of operations, to differ materially from the stated results, or fail to meet expectations expressly or implicitly assumed or described in those statements or to turn out to be less favorable than the results expressly or implicitly assumed or described in those statements. Accordingly, prospective investors should not place unreasonable high reliance on the forward- looking statements herein and are strongly advised to read the Offering Circular, including the following sections: “Summary”, “Risk factors”, “Business overview” and “Opera-ting and financial review”, which include more detailed descriptions of factors that might have an impact on the Company’s business and the market in which it operates. None of the Company or any of the Joint Bookrunners can give any assurance regarding the future accuracy of the opinions set forth herein or as to the actual occurrence of any predicted developments.
In light of the risks, uncertainties and assumptions associated with forward-looking statements, it is possible that the future events mentioned in the Offering Circular may not occur. Moreover, the forward-looking estimates and forecasts derived from third-party studies referred to in the Offering Circular may prove to be inaccurate. Actual results, performance or events may differ materially from those in such statements due to, without limitation: changes in general economic conditions, in particular economic condi-tions in the markets on which the Company operates, changed interest rate levels, changed currency exchange rates, changes in competition condicondi-tions, changes in laws and regulations, and occurrence of accidents or environmental damages.
After the date of the Offering Circular, neither the Company nor any of the Joint Bookrunners assumes any obligation, except as required by law or Nasdaq Stockholm’s Rule Book for Issuers, to update any forward-looking statements or to conform these forward-looking statements to actual events or developments.
BUSINESS AND MARKET DATA
Tobii operates in an industry in which it is difficult to obtain precise industry and market information. Tobii has obtained certain market and competitive position data in this Offering Circular from a report dated November 25, 2014, produced by Arthur D. Little, as well as from a review of Tobii’s patent position commissioned from the independent intellectual property consultancy ClearViewIP Ltd and presented in a report dated October 2014 (jointly the “Reports”). Tobii has commissioned the Reports and Tobii believes them to be reliable. As part of its supporting information for the Reports, both Arthur D. Little and ClearViewIP Ltd received market and company information from Tobii. Tobii cannot assure the accuracy and completeness of such information, and Tobii has not independently verified the market and competitive position data contained in the Offering Circular.
In addition, in many cases Tobii has made statements in the Offering Circular regarding its industry and its competitive position in the industry based on its experience and its own investigation of market conditions. Tobii cannot assure that any of these assumptions are accurate or correctly reflect its competitive position in the industry, and none of Tobii’s internal surveys or information have been verified by independent sources, which may have estimates or opinions regarding industry-related information which differ from Tobii’s.
The contents of the Company’s website, the website of any member of the Group and any third party web sites referred to herein do not form any part of this Offering Circular.
None of the Company or any of the Joint Bookrunners assumes responsibility for the correctness of any business or market data included in the Offering Circular. Informa-tion provided by third parties has been accurately reproduced and, as far as the Company is aware and has been able to ascertain from informaInforma-tion published by such third parties, no facts have been omitted which would render the reproduced information inaccurate or misleading.
IMPORTANT INFORMATION ABOUT THE POSSIBILITY TO SELL ALLOTTED SHARES
Note that notifications about allotment to the public in Sweden will be made through distribution of contract notes, which is expected to occur on or around April 24, 2015. After payments for the allocated shares have been processed by Carnegie and Avanza, duly paid shares will be transferred to the securities depository account or the securi-ties account specified by the acquirer. The time required to transfer payments and transfer duly paid shares to the acquirers of shares in Tobii means that these acquirers will
Summary of the Offering
The Offering
The Offering Circular has been prepared in connection with the offering of shares in Tobii to the public in Sweden and institutional investors and a listing of shares on Nasdaq Stockholm (the “Offering”).
Number of shares offered
The Offering comprises a total of 17,901,000 – 20,101,000 shares in Tobii, The Company offers between 16,000,000 – 18,200,000 newly issued shares whereby the number of shares will be established to such amount that it provides Tobii with gross proceeds of SEK 400 million before transaction costs. Furthermore, a few existing shareholders offer 1,901,000 existing shares. The Company has undertaken, at the request of Joint Bookrunners, to issue a maximum of 3,015,150 additional new shares to cover a possible over-allotment in connection with the Offering.
Offering price
The price in the Offering is expected to be determined within the range of SEK 22 – 25. The final Offering price will be determined through a book-building procedure and, conse-quently, based on demand and the overall market conditions. The price will be set by Tobii’s Board of Directors in consulta-tion with the Joint Bookrunners. The final Offering price is expected to be announced by way of a press release on or about April 24, 2015.
Indicative timetable
Application period for the public
offering in Sweden April 14 – April 22, 2015 Application period for the
institutional offering April 14 – April 23, 2015 First day of trading on Nasdaq
Stockholm April 24, 2015
Settlement date April 28, 2015
Miscellaneous
Short name (ticker) on Nasdaq
Stockholm TOBII
ISIN code SE0002591420
Financial calendar
Annual report 2014 May 20, 2015 Interim report for the period
January 1 – March 31, 2015, Q1 May 22, 2015 Annual general meeting June 10, 2015
Summary 2
Risk factors 13
Invitation to acquire shares in Tobii AB (publ) 24
Background and reasons 25
Terms and conditions 27
Business and market overview 33
Selected financial information 86
Pro forma income statement 2014 91
Auditors report on pro forma financials 93
Operating and financial review 94
Capitalization, indebtedness and other
financial information 110
Board of Directors, executive management and auditor 112
Corporate governance 116
Share capital and ownership structure 120
Articles of association 123
Legal considerations and supplementary information 125
Tax considerations in Sweden 130
Certain U.S. federal income tax considerations 132
Transfer restrictions 136
Definitions 138
Audited consolidated annual accounts for the period
2012–2014 F-1
Auditor’s report regarding audited consolidated annual accounts for the period 2012–2014 F-25
Summary
The summary is drawn up in accordance with information requirements in the form of a number of
“paragraphs” which should include certain information. The paragraphs are numbered in sections
A–E (A.1–E.7).
This summary contains all the paragraphs required in a summary for the relevant type of security
and issuer. However, as certain paragraphs are not required, there may be gaps in paragraph
numbering sequences.
Even if it is necessary to include a paragraph in the summary for the security and issuer in
question, it is possible that no relevant information can be provided for that paragraph. In such
instances, the information has been replaced by a brief description of the paragraph, along with
the specification “not applicable”.
Section A – Introduction and warnings
A.1 Introduction andwarnings
This summary should be read as an introduction to the Offering Circular. Any decision to invest in the securities should be based on an assessment of the Offering Circular in its entirety by the investor. Where statements in respect of information contained in an offer-ing circular are challenged in a court of law, the plaintiff investor may, in accordance with EU-member states’ national legislation, be forced to pay the costs of translating the Offering Circular before legal proceedings are initiated. Under civil law, only those individuals who have produced the summary, including translations thereof, may be enjoined, but only if the summary is misleading, incorrect or inconsistent with the other parts of the Offering Circular or if it does not, together with other parts of the Offering Circular, provide key information to help investors when considering whether to invest in the securities being offered.
A.2 Consent for use of the Offering Circular by finan cial intermediaries
Not applicable. Financial intermediaries are not entitled to use the Offering Circular for subsequent trading or final placement of securities.
Section B – Issuer and any guarantor
B.1 Company andtrading name
Tobii AB (publ), reg. no. 556613-9654. B.2 Issuer’s registered
office and corporate form
Tobii’s registered office is in Stockholm county, Danderyd municipality, Sweden. The Company is a Swedish public limited liability company founded in Sweden under Swedish law and operating under Swedish law. The Company’s form of association is governed by the Swedish Companies Act (SFS 2005:551).
B.3 Description of the Issuer’s
operations
Tobii is a global market leading provider of eye-tracking solutions. A product with an integrated eye-tracking sensor knows what a user is looking at. This makes it possible to interact with computers and machines using the eyes.
Tobii conducts its business through three business units that each has its own distinct markets, products and dedicated personnel. The Company is accounting for each business unit as separate segments.
• Tobii Dynavox – a globally leading supplier of assistive technology for communication. Today, the business’ products comprise of both eye-tracking based and touchscreen-based AAC-devices as well as various software.
• Tobii Pro – a globally leading supplier of eye-tracking solutions for behavioral research studies.
B.3 Description of the Issuer’s
operations, (cont.)
• Tobii Tech – a leading supplier of eye-tracking components and platforms to inte gration customers.
Tobii operates globally from offices in Sweden (Headquarters), the U.S. (offices in Boston, Washington DC, Pittsburgh and Mountain View), China, Japan, U.K., Germany and Norway.
B.4a Trends Eye-tracking as a technology is a relatively new phenomenon and most of the application areas are in an early market phase. In view thereof, Tobii is affected more by how and to what extent customers and users adopt eye tracking and its applications that eye track-ing permits rather than the overall market trends.
The business unit Tobii Dynavox is dependant on trends on the market for assistive technology for communication. In a historical perspective, the market for assistive tech-nology for communication has experienced steady growth driven by increased compe-tence among prescribers, public awareness and improved funding systems. However, the total market have declined during the period 2010–2013, primarily in the U.S., due to regular consumer tablets with AAC-apps have been introduced on the market and that a specific, major funding program in Texas, U.S., has largely ceased for these types of products. However, the sub-market for eye tracking in assistive technology where Tobii Dynovox has a stong position, has grown substantially in recent years, to a large extent driven by new products and increasing knowledge and awareness of the opportunities with eye tracking. At an overall level, the entire market is affected by the access to health care financing in different countries, with the U.S. as the most important market. How-ever, assistive technology for communication constitutes a very small percentage of the total health budgets, making the financing of this separate sector not necessarily corre-late with the overall health budget. Furthermore, there is a general trend in many parts of the world to gradually strengthen the position and opportunities for people with special needs.
The business unit Tobii Pro has academic customers which represent 56% of the business unit’s revenues. This segment is affected by the availability of public funding for reseach of academic institutions, which in turn, can be influenced by, among other things, political priorities and the strength of public finances in various countries. It is the Company’s understanding that, during the recent years, the climate for reseach budgets remained stable on a global basis. The remaining 44% of Tobii Pro’s sales consist of commercial customers, including the market research industry. However, eye-tracking studies constitute a very small part of the total market for market research, therefore the Company is more influenced by how quickly customers start using eye tracking as a method for market research rather than the market as a whole. The total market for market research has, according to Esomar, grown slightly faster than the world GDP in recent years. In addition, there is a trend to use more and more “implicit methods” for studies, and eye tracking is considered as a typical growing implicit method.
The business unit Tobii Tech has an ambition to introduce the Company’s technology in several future eye-tracking markets such as computer games, regular computers, vehicles and medical applications. The Company is primarily affected by whether OEM-customers and end-users start using applications based on eye tracking rather than development for these markets in general. In this context, it may be noted that many of the recent consumer electronic products consist of innovative technologies for user interface as a central part of the products – such as Microsoft Kinect (gestures), Apple iPhone/iPad (touch screen) and Nintendo Wii (movements). A possible early consumer market for Tobii’s technology is the market for consumer games. This is one of the segments in the computer industry that is growing rapidly.
B.5 Description of the Group and the issuer’s position within the Group
The Group comprises the parent company Tobii AB (publ) and 19 directly or indirectly owned subsidiaries.
B.6 Major share holders
The below table states all the shareholders that immediately prior to the approval of the Prospectus, held 5% or more of the shares in the Company.
Name No. of shares Ownership, %
Invifed AB* 13,433,495 19.49%
Intel Capital Corporation 7,042,300 10.22%
Northzone Ventures AS 6,730,547 9.76%
Amadeus General Partner Limited 6,430,163 9.33%
Eskilsson, Henrik** 5,005,335 7.26%
The Sixth AP-fund* 5,000,000 7.25%
Elvesjö, John 4,085,335 5.93%
Skogö, Mårten 3,911,193 5.67%
Total 51,638,368 74.92%
* Invifed AB and The Sixth AP-fund are both Corner Investors who have agreed to, directly or indirectly through subsidiaries, acquire shares in the Offering, on the same terms and conditions as for other investors, corresponding to 17.53% and 6.52% of the total number of shares in the Offering respectively (based on full subscription in the Offering and the midpoint of the price range in the Offering (SEK 23.50)).
** Henrik Eskilsson also owns 22.5% of the shares in Eskilsson Consulting AB which in turn owns 1,916,000 shares in Tobii. In addition to the shareholders that hold more than 5% of the capital and the shares and as of the date of approval of the Prospectus, there are no other natural or legal persons that are subject to registration based on their shareholdings.
B.7 Financial informa
tion in summary The financial information below has been retrieved from the audited consolidated annual accounts for the period 2012–2014, prepared in accordance with IFRS. Summary of consolidated income statement
SEK million 2014 2013 2012
Net sales 620.6 412.1 369.5
Cost of goods and services sold –181.2 –143.4 –135.0
Gross profit 439.4 268.7 234.4
Selling expenses –252.7 –162.7 –152.8
Research and development expenses –169.6 –104.5 –68.4
Administrative expenses –81.8 –46.4 –63.9
Other operating income and operating expenses –4.2 7.4 –2.3
Operating income (EBIT) –68.9 –37.5 –53.0
Profit/loss from financial items
Share of profit/loss from associated companies –6.5 –13.0 0.0
Financial income 39.3 0.9 2.3
Financial expenses –17.8 –2.3 –8.5
Total financial income and expenses 15.0 –14.3 –6.2
Income before taxes –53.9 –51.8 –59.2
Taxes 3.0 6.7 0.8
B.7 Financial informa tion in summary, (cont.)
Summary of consolidated balance sheet
SEK million 2014-12-31 2013-12-31 2012-12-31
Non-current assets
Intangible assets 310.9 150.0 110.6
Tangible assets 31.0 14.3 17.7
Other non-current assets 53.4 50.3 37.7
Total non-current assets 395.3 214.6 166.0
Current assets
Accounts receivables 147.8 90.8 81.8
Inventories 51.3 27.9 43.1
Other receivables 12.4 7.4 9.9
Prepaid expenses and accrued income 18.8 6.6 11.0
Total current assets 230.3 132.7 145.8
Cash and cash equivalents 119.4 39.2 112.8
Total assets 745.0 386.5 424.6
Equity and liabilities
Equity 389.0 275.6 329.0
Non-current liabilities 94.9 3.7 4.5
Accounts payable trade 53.6 26.1 25.9
Accrued expenses and deferred income 132.2 67.6 49.1
Other current liabilities 75.5 13.5 16.1
Total current liabilities 261.1 107.2 91.1
Total equity and liabilities 745.0 386.5 424.6
Summary of consolidated cash flow statement
SEK million 2014 2013 2012
Cash flow from operating activities –0.7 48.2 36.5 Cash flow from investing activities –209.8 –120.9 –91.1 Cash flow from financing activities 285.3 0.0 140.9
Cash flow for the period 74.8 –72.7 86.3
Cash and cash equivalents
at the beginning of the period 39.2 112.8 27.6 Exchange rate difference in cash
and cash equivalents 5.3 –0.9 –1.1
Cash and cash equivalents
at the end of the period 119.4 39.2 112.8
Segment information SEK million Net sales 2014 2013 2012 Tobii Dynavox 441.7 233.9 206.3 Tobii Pro 167.3 170.9 147.0 Tobii Tech 36.6 20.5 3.3
Other and eliminations –25.0 –13.2 12.9
Group 620.6 412.1 369.5
Operating income (EBIT) 2014 2013 2012
Tobii Dynavox 41.9 20.6 3.0
Tobii Pro 12.9 18.6 0.5
Tobii Tech –121.6 –84.9 –41.0
Other and eliminations –2.0 8.3 –15.6
B.7 Financial informa tion in summary (cont.) Segment information SEK million Adjusted EBIT1) 2014 2013 2012 Tobii Dynavox 54.2 20.6 3.0 Tobii Pro 12.9 18.6 0.5 Tobii Tech –121.6 –84.9 –41.0
Other and eliminations 0.9 8.3 –15.6
Group –53.7 –37.3 –52.9
1) Adjusted for non-recurring items related to the aquisition of DynaVox Systems LLC in 2014 and Tobii’s IPO. The Group’s key information
2014 2013 2012
Earnings per share, SEK –0.82 –0.76 –0.93
Earnings per share, assuming dilution, SEK –0.82 –0.76 –0.93
Equity per share, SEK 6.3 4.6 5.5
EBITDA, SEK million 5.6 26.5 2.1
EBIT, SEK million –68.9 –37.5 –53.0
Free cash flow, SEK million –210.5 –72.7 –54.6 Operating working capital, SEK million 26.6 25.5 54.7
Total assets, SEK million 745.0 386.5 424.6
Net debt, SEK million 15.1 –39.2 –112.3
Equity, SEK million 389.0 275.6 –329.0
Equity/asset ratio, % 52.2 71.3 77.5
Net debt/equity, % 3.9 –14.2 –34.1
Gross margin, % 70.8 65.2 63.4
EBITDA margin, % 0.9 6.4 0.6
EBIT margin, % –11.1 –9.1 –14.3
Return on total equity, % –17.2 –15.0 –18.4
Average number of shares in millions 61.9 59.5 58.7 Number of shares at period-end in millions 68.9 59.5 59.5 Number of (full time) employees at period-end 467 372 332
Significant changes during the period January 1, 2012 – December 31, 2014 • In 2014, Tobii acquired the US company DynaVox Systems LLC, which prior to the
acquisition, was Tobii’s main competitor in the alternative communication market. DynaVox Systems LLC complements Tobii with a strong North American focus, leading touchscreen-based assistive communication products, leading software for users with cognitive disabilities and market leading software for teaching in special education schools.
• Two new share issues were completed in 2014 which together provided SEK 166 million in net proceeds and one share issue was completed in 2012 which provided SEK 143 million in gross proceeds.
Significant events after December 31, 2014
• In February 2015, Tobii and the computer-game company Ubisoft announced that Assassin’s Creed Rouge PC, which is one of Ubisoft’s most sold games, would imple-ment Tobii’s eye tracking in order for the game view to automatically follow where the player is looking, just as when a person is moving their gaze point. Deliveries of the game to stores commenced in March 2015.
• In February 2015, a bill was presented in the U.S. (“Steve Gleason Act”) proposing that (i) congress change the previously taken decision to classify assistive technology for communication as “capped rental”-products, and (ii) improve the possibilities to get financing for assistive eye-tracking technology through Medicare. If this bill is passed, it may have a positive effect on Tobii Dynavox in the medium term.
B.8 Pro forma accounting
Tobii acquired DynaVox Systems LLC on May 23, 2014. The Group’s consolidated annual accounts for 2014 reflects the financial development based on this prerequisite, i.e. that the acquisition was concluded in the fifth month of the financial year.
The purpose of the pro forma financial information is to present the earnings that the business could have achieved for the full year 2014 if the acquisition had taken place on January 1, 2014.
The pro forma financial information describes a hypothetical situation and has been produced solely for illustrative purposes. Amounts in this section have been rounded off and the tables in this section may not always add up.
SEK million Tobii AB 2014 – IFRS DynaVox Systems LLC 1/1–5/31 1) US GAAP Pro forma adjustments 2) 1/1–5/31 US GAAP to IFRS
adjustments Pro forma2014
Net sales 620.6 124.4 – – 745.0
Cost of goods and
services sold –181.2 –31.6 – – –212.8 Gross profit/loss 439.4 92.8 – – 532.2 Selling expenses –252.7 –53.7 – – –306.4 Research and development expenses –169.6 –16.9 1.1 3.93) –181.5 Administrative expenses –81.8 –28.2 17.14) – –92.9
Other income and
operating expenses –4.2 –6.6 7.05) – –3.8
Operating profit/loss
(EBIT) –68.9 –12.6 25.2 3.9 –52.4
Profit/loss from financial items
Share of profit in
associated companies –6.5 – – – –6.5
Financial income 39.3 – – – 39.3
Financial expenses –17.8 –5.4 4.46) – –18.7 Total financial income
and expenses 15.0 –5.4 4.4 – 14.1
Profit/loss before tax –53.9 –18.0 29.6 3.9 –38.4
Taxes 3.0 – –7) – 3.0
Net profit/loss
for the year –50.9 –18.0 29.6 3.9 –35.4
Currency rates
Pro forma adjustments in the income statement are calculated using an exchange rate of 6.582 SEK/USD, which is equivalent to the average exchange rate applied by Tobii for the period January 1 – May 31, 2014.
1) Based on the audited consolidated financial statements for the financial year 2014.
2) Based on unaudited, internally prepared financial statements recalculated using an average exchange rate of 6.582 SEK/USD for the period January 1 – May 31, 2014.
3) Proforma adjustments amounting to 3.9 MSEK are attributable to the conversion of US GAAP to IFRS following the application of IAS 38 Intangible Assets whereby product development expenses are capitalized to the extent that it is probable that these products will generate future revenues. The amount which has been capitalized as intangible assets during the five-month period of January to May 2014 is 8.5 MSEK and the amortization of intangible assets amounts to –4.6 MSEK.
4) Pro forma adjustments totaling 17.1 MSEK refer to administrative expenses, of which 9.5 MSEK in the DynaVox Systems LLC income statement January 1 – May 31, 2014, relates to sales expenses incurred by the previous owners while attempting to sell the DynaVox Group. The adjustment amount also includes acquisition costs incurred by Tobii in the amount of 7.4 MSEK as a result of Tobii’s acquisition of DynaVox Systems LLC. Neither of these items would have affected the income statement had the acquisition taken place on January 1, 2014.
5) Pro forma adjustments amounting to 7.0 MSEK relate to restructuring expenses incurred by DynaVox Systems LLC during the period of January 1 – May 31 and are comprised primarily of severance payments to executive officers.
6) Pro forma adjustments totaling 4.4 MSEK are comprised of interest payments of 5.4 MSEK made by DynaVox Systems LLC on restructuring loans received during the period in order to finance restructuring. Had the acquisition taken place on January 1, 2014, these interest expenses would not have been incurred. The pro forma income statement includes interest expenses amounting to 0.9 MSEK, which would have been the borrowing costs incurred by Tobii on its loan taken for the purpose of the acquisition, had the loan been taken on January 1, 2014.
7) DynaVox Systems LLC is jointly taxed with Tobii Assistive Inc. Tobii Assistive Inc has accumulated losses without corresponding deferred tax assets, therefore there is no impact on tax expense for the year in the pro forma income statement.
B.9 Profit/loss forecast Not applicable. The Company has not presented any profit/loss forecast. B.10 Audit remarks Not applicable. There are no remarks in the audit reports.
B.11 Insufficient net working capital
Not applicable. The Board of Directors of Tobii believes that the existing net working capital is sufficient to meet the Company's needs over the next twelve month period.
Section C – Securities
C.1 Securities offered Shares in Tobii AB (publ), reg. no. 556613-9654. ISIN number SE0002591420. C.2 Denomination The shares are denominated in SEK.
C.3 Total number of shares in the Company
As of the date of the Offering Circular, there are 68,927,883 shares in the Company, each with a quota value of approximately SEK 0.0073. The shares entitles to a total of 68,927,883 votes. All issued shares have been fully paid.
The Offering comprises a total of 17,901,000 – 20,101,000 shares in Tobii, The Company offers between 16,000,000 – 18,200,000 newly issued shares whereby the number of shares will be established to such amount that it provides Tobii with gross proceeds of SEK 400 million before transaction costs. Furthermore, a few existing shareholders offer 1,901,000 existing shares.1) The new share issue in the Offering
corresponds to approximately 19–21% of the total number of shares and votes in the Company based on a fully diluted basis following the completion of the Offering.
To cover possible over-allotment in connection with the Offering, the Company has undertaken to, at the request of the Joint Bookrunners, issue additional shares represent-ing not more than 15% of the number of shares comprised by the Offerrepresent-ing (the “ Over-allotment option”), equal to not more than 3,015,150 shares, representing approxi-mately 3% of the total number of shares in the Company on a fully diluted basis.
Through the new share issue of a maximum of 18,200,000 shares, Tobii’s share capital will increase by a maximum of approximately SEK 132,076 from SEK 500,250 to approximately SEK 632,281.
1) The selling shareholders includes among others, John Elvesjö, board member and a member of the executive management, who offers 150,000 shares and the board member Nils Bernhard, who offers 275,000 shares. C.4 Rights associated
with the securities
Each share in the Company entitles the holder to one vote at shareholders’ meetings and each shareholder is entitled to cast votes equal in number to the number of shares held by the shareholder in the Company. If the Company issues new shares, warrants or con-vertibles in a cash issue or a set-off issue, shareholders shall, as a general rule, have pref-erential rights to subscribe for such securities proportionally to the number of shares held prior to the issue. The shares carry the right to payment of dividend for the first time on the record date for distribution which falls immediately after the listing. All shares in the Company give equal rights to dividends and the Company’s assets and possible surpluses in the event of liquidation.
C.5 Restrictions in free transferability
Not applicable. The shares are not subject to any restrictions on transferability. C.6 Admission to
trading
Nasdaq Stockholm’s listing committee has on March 6, 2015 decided to admit the Company’s shares to trading on Nasdaq Stockholm, subject to customary conditions, such as that the distribution requirements in respect of the Company’s shares being ful-filled no later than on the first day of trading. In case the Company’s Board of Directors ultimately resolves to list the Company’s shares, trading in the Company’s shares is expected to begin on or around April 24, 2015.
C.7 Dividend policy Over the next few years, Tobii’s development and expansion ambitions for the business unit Tobii Tech will be given priority over dividends to shareholders.
Section D – Risks
D.1 Main risks relatedto the issuer or the industry
Tobii’s business and industry are subject to certain risks which are completely or partly outside the control of the Company and which could affect Tobii’s operations, financial condition or results of operations. Described below, in no particular order and without claim to be exhaustive, are risks considered to be material to Tobii’s future development. The main risks related to the Company’s business and industry include:
• Tobii depends on development, market acceptance and awareness of the Company’s products and technology, and if Tobii is unsuccessful in achieving this, it could adversely affect the Company;
• Tobii operates in a competitive market and the Company may not be able to compete successfully which could adversely affect the Company;
• Eye-tracking hardware is subject to price decline and if Tobii fails to adapt as its mar-kets evolves, it may adversely affect the Company;
• Tobii is dependent on funding from public and private insurance and funding systems and changes to these systems could adversely affect the Company;
• Tobii is dependent on the supply of certain components and its products are subject to expressed and implied warranties making Tobii exposed to interruptions of produc-tion, warranty and product liability claims, which could adversely affect the Company; • Potential future acquisitions as well as Tobii’s acquisition of DynaVox Systems LLC,
which was subject to a limited due diligence review, may not fully achieve Tobii’s antici-pated financial and strategic synergies which could adversely affect the Company; • A large part of Tobii’s balance sheet consists of intangible fixed assets, which is at risk
to be subject to write-off that could adversely affect the Company;
• Risks relating to the Tobii’s loan agreement with Swedbank AB (publ), e.g. the risk that Tobii cannot fulfill its undertakings under the agreement which could adversely affect the Company;
• Tobii is dependent on intellectual property rights and the Company’s methods of protecting these rights may be inadequate, which may adversely affect the Company; • There is a risk that Tobii becomes involved in legal and administrative proceedings,
including claims relating to Tobii’s intellectual property as well as claims of potential infringement of third party’s intellectual property rights by Tobii, which could adversely affect the Company; and
• Tobii is exposed to tax risks and if these risks materialize, it may have an adverse affect on the Company.
D.3 Main risks related to the securities
Any investment in securities involves risks. Any such risk could cause the trading price of the Company’s shares to decline significantly and investors could lose all or parts of the value of their investment. Risks related to the Company’s shares include:
• An active, liquid and orderly trading market for the Tobii shares may not develop, the price of the shares may be volatile, and potential investors could lose a part or all of their investment;
• Tobii may need additional capital, if available, which may dilute investors shareholdings and affect the price of the shares
• Following the Offering, the existing main shareholders will continue to have significant influence over Tobii and the ability to influence matters requiring shareholders approval;
• Tobii’s ability to pay dividends is dependent upon the Company’s future earnings, financial condition, cash flows, net working capital requirements, capital expenditures and other factors;
• Existing shareholders’ future sale of shares could cause the share price to decline; • Cornerstone Investors may not fulfil their undertakings;
• Differences in currency exchange rates may adversely affect the value of sharehold-ings or dividends paid; and
• Shareholders in the U.S. or other countries outside Sweden may be excluded from future cash issues of shares.
Section E – Offering
E.1 Issue proceedsand issue costs
The total value of the Offering amounts to approximately SEK 442 – 448 million based on the price range. If the Over-allotment option is fully exercised, the total value of the Offering amounts to approximately SEK 509 – 515 million. Based on the price range in the Offering, Tobii’s shares are valued at approximately SEK 2.0 – 2.2 billion following completion of the Offering and assuming the Over-allotment option is fully exercised.
The Company’s gross revenue from the Offering amounts to approximately SEK 400 million before transaction costs. The Company has undertaken to pay provisions to the Joint Bookrunners based on the gross revenues.
The Company’s costs associated with the listing on Nasdaq Stockholm and the Offering are expected to amount to approximately SEK 28 million.
E.2a Motive and use of proceeds
The Offering and the listing will expand the shareholder base, increase Tobii’s capital and enable Tobii to access the Swedish and international capital markets, thereby increasing financing alternatives, which is expected to support the Company´s sales and profit development. The Board of Directors of Tobii considers that the new share issue and listing of the Company’s shares to be a logical and important step in Tobii’s development in providing Tobii with growth opportunities and to further strengthen the Company’s market position and increase the awareness of Tobii, its products and its technology. Tobii expects to receive gross proceeds of approximately SEK 400 million from the new share issue realized through the Offering. Tobii intends to use the major part of the net proceeds from the Offering for R&D investments into Tobii Tech with the aim to further develop the Company’s technology to meet the needs of new potential volume markets and to support the Company’s sales, marketing and business development efforts on such markets. The present business plan of Tobii Tech indicates a negative cash flow for the business unit of approximately SEK 400 million up to and including 2018, which the Group intends to finance partly with internal cash flow generated by Tobii Dynavox and Tobii Pro, partly with the proceeds of issue which the Offering aims to contribute to the Group.
Tobii will also use the proceeds from the share issue to repay the two bank loans of USD 5 million and USD 6 million to Swedbank AB (publ). A smaller part of the proceeds, and potential proceeds from the Over-allotment option, may also be used for capital expenditures in the existing operations as well as for acquisitions of assets, technologies and companies complementary to the current business of the Company. At this time, Tobii has not identified any such specific assets, technologies or companies. E.3 Offering forms
and conditions
To cover a possible over-allotment in connection with the Offering the Company has undertaken, at the request of Joint Bookrunners, to issue additional new shares so that Tobii may receive an additional maximum of approximately SEK 67 million in gross proceeds in the event that the Over-allotment option is fully exercised.
The Offering: The Offering comprises a total of 17,901,000 – 20,101,000 shares in Tobii, The Company offers between 16,000,000 – 18,200,000 newly issued shares whereby the number of shares will be established to such amount that it provides Tobii with a gross proceeds of SEK 400 million before transaction costs. Furthermore, existing shareholders offer 1,901,000 existing shares.1) The new share issue in the Offering
corresponds to approximately 19–21% of the total number of shares and votes in the Company based on a fully diluted basis following the completion of the Offering.
To cover a possible over-allotment in connection with the Offering, the Company has undertaken to, at the request of the Joint Bookrunners, issue additional shares represent-ing not more than 15% of the number of shares comprised by the Offerrepresent-ing (the Over-allotment option), equal to not more than 3,015,150 shares, representing approximately 3% of the total number of shares in the Company on a fully diluted basis.
The Offering is made to the general public in Sweden and to institutional investors. An offering is also made to certain employees through separate application processes. 1) The selling shareholders includes among others, John Elvesjö, board member and a member of the executive
E.3 Offering forms and conditions, (cont)
The Offering price: The Offering price will be determined by way of a book-building procedure and will consequently be based on demand and overall market conditions. The Offering price will be established by Tobii’s Board of Directors in consultation with the Joint Bookrunners, within a range of SEK 22 – SEK 25 per share. No commission will be charged.
The Offering price is expected to be published on or around April 24, 2015.
The application period: The application period for the public offering in Sweden is April 14–22, 2015. Institutional investors in Sweden and other countries are invited to partici-pate in the book-building procedure that will take place between April 14–23, 2015. Application:
The general public: Applications by the general public for the acquisition of shares shall comprise a minimum of 400 shares and a maximum of 45,000 shares, in even lots of 100 shares. Applications are binding. Applications shall be made using a specific application form, which is available at Carnegie’s offices. The Offering Circular and the application form are also available on Tobii’s website (www.tobii.com) and Carnegie’s website (www.carnegie.se). Customers of Avanza who are connected to Internet banking ser-vices can apply for acquisition of shares via Avanza’s Internet serser-vices.
If more than one application is submitted by the same acquirer, only the first regis-tered application will be considered. Late, incomplete or incorrectly completed applica-tion forms may be disregarded. No addiapplica-tions or amendments may be made to the pre-printed text on the application form.
If you have an account with specific rules for securities transactions, such as an IPS-deposit, ISK-deposit (Sw. Investeringssparkonto) or deposit within an endowment insurance, you should confer with your nominee if and how you can apply for acquisition of shares in the Offering.
Institutional investors: Institutional investors are invited to participate in a book-building process, which will take place during the period April 14–23, 2015. Tobii reserves the right to shorten or extend the application period in the institutional offering. Any such shortening or extension of the application period will be made public by the Company in a press release prior to the end of the application period. Applications shall be submitted to Carnegie or ABG Sundal Collier in accordance with specific instructions.
Further information regarding the application is included in the section “Terms and conditions”.
Allotment:
The general public: The allotment of shares will be decided by the Board of Directors of Tobii in consultation with the Joint Bookrunners, whereby the aim to obtain a wide distri-bution of the shares among the general public in order to facilitate a regular and liquid trading in the Company’s shares on Nasdaq Stockholm.
Allotment is not dependent on when during the application period the applications are submitted. In the event of over-subscription it is possible that no allotment will be received or that the received allotment comprises fewer shares than applied for and allot-ment may, in whole or in part, be made through random selection. Certain customers to Carnegie and ABG Sundal Collier may be given special priority. Allotment to existing shareholders will be prioritized.
Institutional investors: The decision on allotment of shares is made by the Board of Directors of Tobii in consultation with the Joint Bookrunners, with the aim to ensure that Tobii gets a good institutional shareholder base. The intention is that notifications of inter-est in participation, which are essentially deemed to be equivalent, should be treated equally. Interest registered by institutional investors who are deemed to be possible long-term shareholders in the Company may be given priority. Allotment to existing sharehold-ers will be prioritized. Allotment will be entirely discretionary and no guarantees for allotment are given.
E.3 Offering forms and conditions, (cont)
Application and allotment for employees: An offering is also made to certain Tobii employees in France, Germany, Hungary, Japan, Norway, Sweden, the U.K. and the U.S. through separate application processes. Applications from all Tobii employees who are subject to the offer will be given special consideration up to a number of shares equal in value to the relevant investment limit. Tobii employees in Sweden will be subject to an investment limit of SEK 30,000. Tobii employees in the remaining jurisdictions will be subject to an investment limit of SEK 190,000. However, some of Tobii’s employees in France, Hungary, Japan and the United States who receive the offer may apply for a number of shares that exceeds SEK 190,000 in value, but applications above this level will not be given any special consideration. Tobii employees who wish to acquire shares must follow the instructions issued by the Company.
Payment: Full payment for the allotted shares shall be made in cash no later than April 28, 2015 in accordance with the instructions on the received contract note. Registration: It is expected that allotted and paid shares, for both institutional investors and the general public in Sweden, will be registered with Euroclear Sweden AB starting on April 28, 2015, after which Euroclear Sweden AB will send out a securities notice showing the number of shares in the Company registered on the recipient’s VP-account. E.4 Interests and
conflict of interests
Tobii’s financial advisors in connection with the Offering and the listing are Carnegie and ABG Sundal Collier, who jointly are acting as Joint Bookrunners in the Offering. These advisors (and companies closely related to them) have provided, and may in the future provide, services in the ordinary course of business and in connection with other transac-tions to Tobii for which they have received, and may in the future receive, compensation. E.5 Selling sharehold
ers/Lockup agreements
Under the placing agreement which is expected to be entered into between the Company and the Joint Bookrunners around April 23, 2015, certain large existing share-holders, shareholding members of the Board of Directors and the executive manage-ment, as well as certain other shareholders in the Company will undertake, with certain reservations, not to sell its respective holdings during a certain time period after trading on Nasdaq Stockholm has commenced (the “Lock-up period”). The Lock-up period for certain large existing shareholders will be 180 days, while the Lock-up period for share-holding board members and members of the executive management will be 360 days. The Lock-up period for certain other shareholders in the Company will be 180 days. Henrik Eskilsson, John Elvesjö and Mårten Skogö have entered inte these agreements as large shareholders and not as members of the Board of Directors or as members of the executive management. Following the end of the Lock-up period, the shares may be offered for sale, which may affect the market price of the share. The Joint Bookrunners may make exceptions from these undertaking. Pursuant to the agreement, the Company will undertake, with certain exceptions, towards the Joint Bookrunners not to, e.g. resolve upon or propose to the shareholders’ meeting an increase of the share capital through issuance of shares or other financial instruments for a period of 360 days following the first day of trading of the Company’s shares on Nasdaq Stockholm without a written consent from the Joint Bookrunners.
E.6 Dilution effect The Offering comprises a total of 17,901,000 – 20,101,000 shares in Tobii, of which 16,000,000 – 18,200,000 are newly issued shares and 1,901,000 are existing shares offered by existing minor shareholders. The new share issue in the Offering corresponds to between 19–21% of the total number of shares and votes in the Company based on a fully diluted basis following the completion of the Offering.
The Over-allotment option, equals to not more than 3,015,150 shares, representing approximately 3% of the total number of shares in the Company on a fully diluted basis. E.7 Costs imposed on
investors by the issuer or offerer
Risks related to Tobii, its business
and industry
Tobii depends on development, market
acceptance and awareness of the Company’s
products and technology
Tobii’s future growth depends on the commercial success of the Company’s technology. Eye-tracking technology, including the technology developed by the Company, is based on relatively new innovations that have not yet reached a broader market usage. Use cases of the tech-nology, are largely immature and unproven. It is difficult to predict both the extent of and the timing for when end consumers, customers and partners will adopt eye-track-ing technology and different applications based on that. There is a particular risk that Tobii will fail with its strategy to enter new volume markets for eye-tracking.
Within all business units, Tobii is continuously working towards increased awareness among potential users and demonstrating the benefits of its products and solutions. However, increasing awareness requires substantial investments, both from a financial and time consumption point of view.
In addition thereto, there is risk that the Group’s target customers will not choose Tobii’s technology for technical and commercial reasons. Several of the Group’s target customers may decide to use other technologies or appli-cations and may thereby find it difficult or unattractive to continue using, adapt to or switch to Tobii’s technology.
The Company’s business units have planned for continued commercialization of their respective products in key markets. The ability of the Group to meet such pro-jected timetables will depend upon achieving technical, market and commercial milestones. The Company does not have the personnel or economical resources to focus on all potential market opportunities.
The business units Tobii Dynavox and Tobii Pro rely on complete solutions, including hardware and comprehen-sive software, for significant parts of their businesses. As an example, Tobii I-series, Dynavox’s T-series, and the soft-ware Compass, Tobii Communicator and Tobii Studio are important parts of these business units’ solutions. There is a risk that the Company’s customers may prefer alternate software and complete solutions even if they use the Company’s core technology, which may result in signifi-cantly lower income for the Company.
If Tobii is unsuccessful in increasing awareness about the eye-tracking market in general and its products in par-ticular and if Tobii’s future and existing customers do not widely purchase and adopt Tobii’s technology and prod-ucts, this could have a material adverse effect on the Group’s business, financial condition or results of operations.
Tobii operates in a competitive market and the
Company may not be able to compete
successfully
The Group addresses its market segments through its three business units: Tobii Dynavox, a global market leader in assistive technology for alternative communica-tion, Tobii Pro, a global market leader in eye-tracking solu-tions used to research and understand human behaviour and Tobii Tech, a business unit developing and selling eye-tracking technology to original equipment manu facturers (“OEM”) who integrate the technology into their products.
The Company has competitors in all its markets. There is a risk that Tobii’s competitors are better or faster in adapting to and developing new and/or better products and technologies.
Additionally, in the future, Tobii may encounter compe-tition from other large, well-established and well-financed entities that may acquire, invest in or form joint ventures
Risk factors
An investment in Tobii’s shares involves various risks. A number of factors affect, or could affect,
Tobii’s business, both directly and indirectly. Described below, in no particular order and without
claim to be exhaustive, are some of the risk factors and significant circumstances considered to be
material to Tobii’s business and future development. The risks described below are not the only risks
to which the Company and its shareholders may be exposed. Additional risks that are not currently
known to the Company, or that Tobii currently believes are immaterial, may also adversely affect
Tobii’s business, result of operations or financial condition. Such risks could also cause the price of
Tobii’s shares to fall significantly, and investors could potentially lose all or part of their investment.
In addition to this section, investors should also take into consideration other information
contained in this Offering Circular in its entirety. This Offering Circular also contains
forward-look-ing statements that are subject to future events, risks and uncertainties. Tobii’s actual results could
differ materially from those anticipated in these forward-looking statements as a result of many
factors, including the risks described below and elsewhere in this Offering Circular.
with providers of similar or competing technology, at the same time as existing competitors may elect to consoli-date. Furthermore, the Company may face increased com-petition from component suppliers to markets where eye-tracking technology can be implemented e.g. the automotive industry, computer producers, video-game console developers and niche competitors focusing only on one, or a few, of the business segments in which the Company is operating, or from makers of products in such applicable markets themselves.
The Group is also competing with companies that offer software, for example analysis software for behav-ioral research and software for a so-called alternative com-munication. Tobii Dynavox as well as its competitors offer software in the form of apps for AAC (AAC = augmenta-tive and alternaaugmenta-tive communication), that can be installed on consumer tablets (such as iPads). The market for con-sumer tablets (which are much cheaper than dedicated AAC-devices) has been growing rapidly in recent years and new AAC-apps have gained market shares from dedi-cated AAC-devices.
Tobii’s position in the existing markets could be eroded rapidly if new or existing competitors of the Company develop new, better and/or cheaper products and technologies. Also, current and potential competitors may have greater name recognition, more extensive customer bases and may be successful in increasing mar-ket shares by displacing dedicated devices for the benefit of products available on the consumer market. An eroded market position and/or increased competition could have a material adverse effect on the Group’s business, financial condition or results.
Eye-tracking hardware is subject to price decline
and Tobii may fail to adapt as its markets evolve
When a new, complex technology is brought to market, it is initially priced at a high price point and eye-tracking technology is no exception in this respect. General tech-nology development combined with the R&D continuously conducted by Tobii and other actors, has in recent years substantially reduced the production cost for eye-tracking hardware. This has led to declining prices and increased volumes. The Company predicts that this trend will con-tinue also in the future. Additionally, Tobii expects that a considerable amount of future revenues will come from software sales. Furthermore, as eye-tracking technology becomes more accessible in consumer electronics, the current price level for dedicated devices with integrated eye tracking could decline.If market prices for eye-tracking hardware decline sub-stantially without Tobii being able to sufficiently meet this price reduction in terms of decreased costs, increased sales volumes, higher prices on other eye-tracking solu-tions and components or other revenue streams, or if Tobii fails to adapt to the expected shift from hardware to soft-ware for parts of its business, it could have a material adverse effect on the Group’s business, financial condition or results of operations.
Tobii is dependent on funding from public and
private insurance and funding systems
End consumers’ purchases of Tobii Dynavox’s AAC-prod-ucts are to a large extent dependent on public and private funding systems. The funding process comprises several steps normally starting with an individual visiting a hospi-tal/evaluation center for a clinical evaluation to determine the individual’s need for an AAC-device. Provided that the need is confirmed, the result of the evaluation is passed either through Tobii Dynavox or, by resellers, to a public funding body (such as Medicare/Medicaid in the U.S.), or a private insurer. The ability for customers to obtain fund-ing from these providers is critical for the profitability of Tobii Dynavox. Funding varies from country to country and can significantly impact the demand for the Tobii
Dynavox’s products.
Tobii Dynavox’s products for special schools are mainly sold to schools, and the access to funding depends on the general funding climate in the school system.
Curtailments, delays, changes in governments, shifts in priorities or general reductions in funding for the above products and solutions could delay or reduce Tobii’s revenue. Tobii’s business may also be adversely affected by changes in applicable legislation (for example in legislation relating to the U.S. healthcare system) and in the procurement processes or changes in the political leadership. In the past year, there have been both proposed and executed changes to the funding of AAC-devices. An example of an executed change has been that Medicare has shifted to a model of so-called “capped rental” for the funding of AAC-devices, meaning that the payment is made over a series of monthly installments which has had a negative result impact on suppliers like Tobii. Medicare has, from time to time, also interpreted its legal framework differently with respect to funding of eye tracking for AAC-devices. This currently entails increased administration to retrieve payment for the part of the prod-uct cost that is constituted by eye tracking which is also reflected in the business current results and cash flow. This interpretation could improve as well as deteriorate in the future and the legal framework may also become clearer by way of a change in policy or new legislation which could have both a negative as well as a positive effect on Tobii.
Tobii Pro’s product offering is partly directed to univer-sities, which normally have funding programs with budgets adopted on a yearly or project specific basis. The funding availability for these academic customers is uncertain and may vary significantly between different years, affecting which products customers purchase and the prices they are willing to pay.
There is also a risk, for various reasons outside of Tobii’s control, that parties providing funding withdraw the funding despite that it has previously been approved. If this occurs after Tobii has delivered ordered products to its customers, Tobii may become subject to credit losses.
If any of these risks where to materialize, it could have a material adverse effect on Tobii’s business, financial condition or results of operations.
Tobii is dependent on the supply of certain
components, and its products are subject to
expressed and implied warranties making Tobii
exposed to interruptions of production, warranty
and product liability claims
Tobii is dependent on the supply of certain components and other production goods and has supply agreements with a limited number of suppliers. Tobii has been and may also in the future be affected by its suppliers facing finan-cial or operational problems, increasing prices or for other reasons being unable to make deliveries as agreed or in line with the Company’s expectations. Incorrect, delayed or missing deliveries from suppliers may in turn result in Tobii’s products becoming deficient or delayed. If one or some larger suppliers were to decrease or shut down their operations, this could affect Tobii’s operations and the ability to supply the Company’s products.
Tobii’s production comprises a chain of processes in which disruptions or disturbances in any part of the chain, for example due to breakdowns, fires, labor disputes or natural disasters, can have repercussions on Tobii’s ability to fulfill its obligations towards its customers. Replace-ment of assets damaged by such events could be difficult or expensive. Customers may be dependent on planned deliveries from Tobii, and customers may have to resched-ule their production or deliveries due to delivery delays on Tobii’s part.
Tobii is dependent on a strong brand name and on being able to maintain the reputation of and the value associated with its brand name. Should any of the above-mentioned factors materialize, it could result in significant negative publicity, product recall, product liability expo-sure, breach of supply obligation or other events which could cause material damage to Tobii’s brand name and lead to significant costs for Tobii.
Further, Tobii’s products are subject to expressed and implied warranty claims and Tobii may in the future incur significant losses if the Company is subject to e.g. war-ranty claims. Defects in Tobii’s products may also result in product liability claims, product recalls, adverse customer reaction and negative publicity about Tobii and its technol-ogy and products.
Some of Tobii’s products and components are – or may in the future – be integrated into a variety of applica-tions and products, e.g. computers, gaming devices and vehicles. If any of these products or applications proves to be defective, Tobii may be required to participate in prod-uct recalls involving such prodprod-ucts. In turn, for Tobii, this could lead to incurring material costs as a result of liability following warranty and product related claims and adverse customer reactions, which could materially and adversely affect the Company’s business, financial condition and results of operations. Investigations and disputes involving Tobii, whether meritorious or not, could be costly to defend or handle and could divert management’s attention as well as operational resources. A successful claim brought against Tobii, or a requirement to participate in any product or application recall, could negatively affect Tobii’s reputation.
A large part of Tobii’s products also operates in a human and private environment and, accordingly, for example product failures in case of battery explosions, could result in substantial harm to individuals or properties.
The occurrence of any of these factors could have a material adverse effect on Tobii’s business, financial condition or results of operations.
Tobii’s eye-tracking solutions are affected by
physical and technical limitations
The eye-tracking technology offered by Tobii is based on a highly complex hardware and software. The feasibility of utilizing the Company’s eye-tracking technologies in differ-ent applications is dependdiffer-ent on that the technology fulfills several important requirements and features. Inter alia, it is important that i) the technology works accurately on people with different looks, glasses and other charac-teristics; ii) the technology works in different environments (e.g. with shifting light settings) iii) that the technology maintain its accuracy when the user is moving, iv) that algorithms are able to operate on a cost-effective and suit-able hardware platform and v) ensuring that the technol-ogy readily integrates with other platforms and technolo-gies where necessary.
Furthermore, the current state of the Company’s eye-tracking technology but also biological factors such as the eye’s shape and its physical attributes, limit the accuracy of eye-tracking technology in such a way that it is not pos-sible to establish the exact fixation point of the eye. The accuracy of an eye tracker varies across different users and conditions, but is typically in the range of 1–2 degrees of visual angle (corresponding to 1–3 cm at normal working distance to a computer display). For some individuals these technological circumstances limit the ability to use eye tracking. The technological circum-stances may limit the possibility of using eye tracking for applications and devices requiring an even higher level of accuracy in terms of tracking of the eye’s gaze point. In addition, eye tracking is neither suitable for all environ-ments such as strong and direct sunlight nor for all users, such as individuals wearing glasses with thick lenses. Consequently, the accuracy and applicability of eye-track-ing technology could be considered as insufficient for certain users and markets which could have a material adverse effect on the Group’s business, financial condition or results of operations.
Tobii has not studied health effects of
eye-tracking technology and the usage of eye
tracking is potentially coupled with risk
Tobii’s products use infrared light (“IR-light”) to illuminate the eye when eye tracking is used. Exposure to high-inten-sity IR-light can in extreme cases be harmful to the eyes. In view thereof, harmonized standards, such as the IEC 62471 regarding photobiological safety of lamps and lamp systems, describe these risks with IR-light. It also defines how to measure and apply safety limits. Eye- tracking products that are developed by Tobii are verified according to this standard. Simulations and
measure-ments are done internally and, subsequently, an accred-ited body is consulted for independent measurement and verification. Tobii has not conducted any own studies on potential IR-light consequences but instead relies on the research that has been conducted as a basis for the re commendations set out in IEC 6247. There is a risk that Tobii’s eye trackers could have negative effects on the eye and if this risk were to materialize, it could, inter alia, result in product liability claims or in other ways have a material adverse effect on the Group’s business, financial condition or results of operations.
People that have photosensitive epilepsy may induce seizures if exposed to flashing or flickering light. There are various contributing factors that may induce seizures in a photosensitive person including the frequency of the flash-ing or flickerflash-ing light (how quickly the light flashes). Fre-quencies between 5 to 30 flashes per second (hertz) are most likely to trigger seizures, although this varies depend-ing on the level of sensitivity between different individuals.
All of Tobii’s eye-tracking products have been designed to avoid visable flickering light in frequencies in the range between 5 to 30 hertz but, r
