QUARTERLY REPORT FOR TAGMASTER AB (publ.) 556487- 4534 PERIOD 2012-07-01 – 2012-09-30

Continued focus on our customers!

  · Net sales quarter two: 10.1 MSEK (7.0)
  · Result quarter three: +0.2 MSEK (-3.1)
  · Result quarter three after goodwill depreciation for TagMaster SB: -3.2 MSEK
  · Accumulated result: +0.7 MSEK (-7.0)
  · Accumulated result after goodwill depreciation for TagMaster SB: -3.3 MSEK
  · Good order intake continues in spite of summer holidays
  · Jonas Svensson new CEO in place
  · Big interest for TagMaster at InnoTrans in Berlin
  · Quality work continues
  · New organization and new direction strengthens customer focus
  · Depreciation of goodwill for TagMaster SB and decision to review the future
of the company during the fourth quarter

New marketing and sales oriented CEO with growth experience in place since
October 1

Jonas Svensson started to get acquainted with the company already during
September and started officially on October 1. Jonas has previous experience
from both bigger and smaller companies internationally and he has himself built
a company from 0 to 200 MSEK including a stock market introduction. Jonas
thereby has experience from big as well as small organizations and of how you go
from the small to the big. These experiences will become useful for the
continued development of TagMaster.

The employment of Jonas is the result of a very wide search process where we had
more than 200 interested candidates, man of them with very qualified background
and experience. Jonas finally became the board’s choice of person best fitted to
take care of and develop TagMaster.

Invoicing and result

Order intake as well as invoicing has reached an acceptable level in spite of
the summer holidays. In spite of costs for relocation and CEO recruitment costs
the result is now positive for the quarter. The second quarter ended up with a
net invoicing of 10.1 MSEK (7.0), of which 9.5 MSEK from the mother company. The
result turned out to be +0.2 MSEK (-3.1), of which +0.5 MSEK from the mother
company corresponding to +0.01 SEK (-0.04) per share (totally 107,731,708 and
101,003,884 average number of shares respectively).

For the three first quarters the net invoicing is totally 31.5 MSEK (24.9), of
which 29.6 MSEK from the mother company. The operating result for the three
first quarters 0.7 MSEK (-7.0), of which +1.1 MSEK from the mother company.

The costs during the quarter were 5.7 MSEK (7.0).

Liquidity

Per September 30, 2012 the Group had 2.0 MSEK (1.5). The revolving credit is 4.0
MSEK (4.0) and locked funds is 0.5 MSEK (0.5). The company has during the first
nine months had an operational cash flow of -4.4 MSEK (-8.2). The negative cash
flow is explained by higher cost for the first six months and a gradual payback
of supplier credits during the third quarter.

The Group’s cash position has improved slightly during the period from a very
tough position at the end of quarter two. The main reasons for the improvement
are an acceptable invoicing and lower costs. The relocation to more cost
efficient premises Mid-September has not yet influenced the costs, which,
however, the relocation costs have. Thanks to understanding and cooperative
suppliers we have managed the tough cash situation during the summer.

Liquidity planning for the company is based on regular follow-up of costs and
income and also a detailed analysis of the cash flow for the next future.
Liquidity and cash flow have priority in the daily work and the dialogue with
creditors, suppliers and customers is continuous. The board therefore today, and
based on the reduced cost structure in the company and the positive sales
development we see now, makes the judgment that the company has sufficient
liquidity for the coming 12 months.

Accounts receivable were 7.7 MSEK (6.0) and supplier debts were 4.7 MSEK (3.1).
The goods for sale were 6.6 MSEK (8.0).

Sales

Our customers have shown continued confidence during the period and orders have
been received in all business areas. We have also been able to deliver parts of
bigger orders from the second quarter within Transportation. Our own increased
customer and sales focus has also contributed to increased market activity in
spite of the summer period being a bit slow or even stopping in some areas. The
orders in hand are therefore only marginally less than at the end of quarter
two.

New organization in place

After our strategy work during July and August, a new organization has been
established and the work has started in the different areas and in the agreed
direction.

Access and Parking (AVI): The efforts to search for, identify and engage
distributors in the most important markets have started and is expected to
result in establishment in key markets during the autumn. In this way TagMaster
should be able to reach more integrators and become part of more projects with
less own effort after an introductory establishment phase.

Transportation: The big event during the quarter was the exhibition, InnoTrans,
which is held in Berlin every second year. TagMaster participated as part of the
SWERIG stand and attracted much interest. All the big actors and many of the
smaller participate in this enormous exhibition. The customers we already know
as well as many new potential customers found us there. It is very obvious that
the companies already working with TagMaster appreciate the quality,
functionality and competence the company offers. There are many projects around
the globe, both in mass transit (local trains) and in long distance (national)
rail to track the rolling stock and its valuable load and to enable more
efficient use of the infrastructure with shorter distance between trains on the
tracks. Both areas where TagMaster solutions, both within UHF and within 2,45
MHz fit well.

Logistics: A first order has been received during the quarter to TagMaster SB in
Malaysia for University of Sabah in Borneo.

Quality certification (ISO 9001)

A gap analysis has been done with the help of external expertise. The result
will be used in the plan that is now under establishment to reach the target of
being certified by June 30, 2013. A certain amount of external support will be
required. It is, however, of great importance that the major part of the work
with clarifying processes and document and define our working methods comes from
inside, which means most of the organization will be involved in the work.

TagMaster SB

Since TagMaster AB acquired Free2Move Asia and thereby established TagMaster SB
with its business in Malaysia, the growth expectations have changed
substantially, partly due to not realized sales volumes (much lower volume and
negative result) and partly due to delays regarding commercialization of new
products and projects. These changed market conditions have made it necessary to
reevaluate the goodwill from the acquisition of Free2Move Asia, and ended up in
write down of the goodwill with 3 MSEK. The remaining value of immaterial assets
from the acquisition of Free2Move Asia is thereby 0 MSEK. Reconsideration of the
future of TagMaster SB has been started and should be finalized during Q4, 2012.

Looking forward

The company has with its new direction and focus very good growth opportunities
within Access/Parking as well as in Transportation. Logistics will continue to
be an area to create and take care of new opportunities with TagMaster’s
established products and solutions. TagMaster’s market share is still small in a
big and growing, in some parts even fast growing market, which means that future
growth is mostly dependent on the company’s own ability and which resources the
company can create and provide.

Coming reports

February 14, 2013, Year-end report 2012

Annual General Meeting

April 18, 2013

Contact persons

Jonas Svensson, CEO, +46 8-6321950, Jonas.Svensson@TagMaster.se

Sven Wramner, Economy, +46 8-6321950, Sven.Wramner@TagMaster.se