Annual Report 2013

Transcript

ANNUAL REPORT 2013 ZINZINO ZINZINO Zinzino AB is a leading direct sales company, represented in Sweden, Norway, Denmark, Finland, Iceland, Lithuania, Latvia, Estonia and the USA. Zinzino markets and sells espresso machines, coffee, tea and accessories along with a product line in functional food, Zinzino Food. We offer customers products that are centred around quality, environment, health and a feeling of everyday luxury. Our values are based around high quality, proximity to the customer and a focus on active product development. Our products are marketed through direct selling. The company has around 50 employees and has its head office in Gothenburg. Our best year yet! 2013 was an eventful year. We opened a sales company and office in the USA, implemented major changes in our warehouse and logistics management and saw our new Balance products take sales to new heights. But, 2013 will be most remembered as the year that we really made our mark on customer focus and customer growth! 2013 was the best year in Zinzino's history in many ways, but I promise that 2014 will be even better! Dag Bergheim Pettersen CEO, Zinzino CONTENTS A brief history of the company 1 Lithuania 18 CEO's statement 2 Latvia 19 Figures at a glance 3 USA 20 2013 in review, quarters 1-2 4 Direkthandelns Förening 21 2013 in review, quarters 3-4 5 Head office in Gothenburg 22 Significant events after year-end 6 Board of Directors 23 Our product lines 7 Management 24 Balance products 8 Financial information Zinzino BalanceTest 9 Directors' report 27 Fairtrade 10 Future financial targets 29 Coffee 11 Ownership and share performance 30 Share price development 31 Results and financial position 32 Quick facts Norway 12 Sweden 13 Denmark 14 Income statement 33 Balance sheet, assets 34 Balance sheet, equity 35 Finland 15 Cash flow statement 36 Iceland 16 Additional information 37 Estonia 17 Notes to individual items 38 ANNUAL GENERAL MEETING The annual general meeting will be held on Friday 16 May at 1:00 pm in the company's offices at Hulda Lindgrens gata 8 in Gothenburg. The Annual Report is available at www.zinzino.com and www.aktietorget.se. REPORT CALENDAR: Quarterly report Q1 Half year report Quarterly report Q3 25 April 2014 29 August 2014 24 October 2014 BRIEF HISTORY Business activities commenced in autumn 2007. The principal activity of the business is to own and develop companies in direct marketing and related businesses. In 2009, Zinzino Nordic AB was acquired through both a directed issue in kind to shareholders in Zinzino Nordic AB and through the rights issue Zinzino Nordic conducted in December 2009. This gave Zinzino AB control over 97% of votes and 92% of capital in Zinzino Nordic AB. By 31 December 2013, participating interest had increased to 93% of capital. Since 20 September 2010, Zinzino AB has been listed on the Aktietorget stock exchange. Share performance has been very positive, particularly over the past two years. In 2011, the Group expanded with companies in Estonia and Lithuania. In 2012, companies were also launched in Latvia and Iceland. In 2013, a company was founded in the USA, with its seat in Jupiter, Florida. Unlike previous group structures, the new subsidiaries are directly owned by Zinzino AB. GROUP STRUCTURE Zinzino AB Zinzino Nordic AB 93% SIA Zinzino (Latvia) 100% Zinzino Annual Report Zinzino Ehf (Iceland) 100% Zinzino Sverige AB 100% Zinzino Oy (Finland) 100% Zinzino Aps (Denmark) 100% Zinzino AS (Norway) 100% Zinzino UAB (Lithuania) 100% Zinzino OÜ (Estonia) 100% Zinzino LLC (USA) 100% 1 “ “ Customer focus is the common denominator of all of our processes and is a key factor for further growth and profitability. Dag Bergheim Pettersen, CEO: CUSTOMER IN FOCUS At Zinzino, we are very proud that our growth continued to increase as planned in 2013. All of Zinzino's markets increased in growth compared with the previous year. This shows that our concept and our products continue to be a hit! This gives us great confidence and belief that we will succeed in the USA, which is the world's largest direct selling market. In 2013, we opened an office in Florida and launched Zinzino USA. This serves as a source of inspiration and courage within the organisation for continued expansion of the Group. Germany, Poland and the Netherlands are next in line in 2014. We look back on 2013 as the year we really made our mark on customer focus and customer growth. We have thought through, adjusted and implemented several changes to further improve the customer satisfaction of both existing and new customers. In 2013, we developed and made significant investments in our range and our Customer Service department, which is one of the areas for which we receive a lot of positive feedback from our customers and distributors. Customer focus is the common denominator of all of our processes and is a key factor for further growth and profitability. Logistics is also a key focus area where we worked in a structured and target-oriented manner in 2013. All of our customers and distributors get their products from us by post. It is therefore vital to customer satisfaction that logistics functions optimally. In 2013, we moved our warehouse and logistics management to a global third party. This change makes us faster and better able to handle large growth and ventures into new markets. Logistics is an important factor in achieving our long-term target of 1 million customers by 2020. Zinzino Annual Report The focus on the new product line Zinzino Food, with our Balance products, has been a huge success since its launch at the end of 2012. We now have two product lines, Coffee and Food – both of which are doing well and are experiencing growth. We have seen that our distributors are increasing sales in Food, compared with Coffee. With Food, we have found new target groups and we see extremely high potential for growth in these segments. The success and the positive feedback we receive motivate the organisation and the distributors and foster a strong belief that we  will increase our customer base significantly in the coming years. Another pleasant side effect of the increased sales in Food is that our cost of goods is decreasing while profitability is increasing. Our cost of goods in 2013 was 4% less than in 2012. This itself is a small feat and bodes well for coming years. Zinzino has invested and will continue to invest heavily in coming years to achieve its growth and profitability targets. For example, we invested in trademark protection in over 80 countries. IT is another area in which we will invest relatively heavily, enabling us to reap great benefits later on. This includes both new web shops and structural system changes. Product development is also given high priority for investments in coming years. And, as mentioned previously, both new markets and continued focus on customer service and support to our talented and loyal distributors are also high on our list. 2013 was the best year in Zinzino's history in many ways, but I promise that 2014 will be even better! “The best is yet to come.” CEO Zinzino, Dag Bergheim Pettersen 2 FIGURES AT A GLANCE Zinzino entered 2013 on the heels of its strongest year ever. Growth in 2012 was an incredible 75% and total sales had increased from SEK 101.4 million to SEK 177.2 million. Zinzino's Board of Directors and management decided to continue the company's aggressive strategy. An extremely tough sales target was set in combination with a challenging operating profit target. At the same time, several major projects were slated for implementation during the year, including establishment in the USA. Now that the figures for 2013 have been added up, it is clear that total income amounted to SEK 254.5 million, representing a growth of 43%. Operating profit, which totalled SEK 10.5 (5.3) million, had almost doubled. In addition to this, the Group established a company and began selling its products in the USA, transitioned to external logistics and developed a new product line. Despite the investment costs, the gross profit margin improved through streamlining of business operations. The geographic distribution of sales in 2013 and sales growth compared with the previous year can be broken down as follows on the map: FINLAND NORWAY USA 0.2% n/a 18% 41% 30% 21% ICELAND 8%220% ESTONIA DENMARK 13% 26% 11% 67% SWEDEN 10% 2% LATVIA LITHUANIA 5%176% 5%159% Geographic distribution of sales 2013 Sales growth per market in 2013 compared with previous year FINANCIAL SUMMARY (SEK million) Zinzino Annual Report GROUP 2013 2012 Net sales 226.3 161.6 Total income 254.5 177.2 Gross profit margin 28% 24% Operating profit 10.5 5.3 Operating margin 4.11% 2.97% Profit/loss before tax 10.4 5.3 Net income 9.0 4.6 Earnings per share (SEK) 0.33 0.17 Liquid assets 10.9 16.5 Equity/assets ratio 38% 26% Equity per share 0.8 0.46 3 1 2013 IN REVIEW FIRST QUARTER The first quarter of 2013 was marked by strong growth. As the cooperation with Zinzino's provider of payment solutions in Sweden, Norway, Denmark and Finland no longer worked well, it was terminated at the beginning of March. During the first quarter, work began for establishment on the American market and there was a transition to an external logistics provider. Moving to an external provider gives the Group greater opportunities to increase capacity at short notice, which will facilitate Zinzino's expansion. The new product line Zinzino Food was further developed during the first quarter, and a new flavour of BalanceOil was launched. The increased amount of capital tied up in inventory related to the launch of new product lines challenged the Group's short-term liquidity. Zinzino therefore took measures and improved procedures related to the forecast of purchases, which reduced inventory levels. In connection with the Group's change of banks, operating financing increased by SEK 6 million. Net sales for the first quarter amounted to SEK 49.0 (27.2) million, representing a growth of 80%. Operating profit amounted to SEK 126,000 (-772,000). Divided between the product lines, Coffee accounted for 80% and Food for 20%. During Q1, the Group registered 11,300 (3,300) new customers. The sales force increased by 2,700 (1,300) distributors. Growth vs.mot Q1 föregående of previous år year Tillväxt per per market marknad Q1 450% 425% 400% 350% 300% 250% 200% 166% 150% 100% 48% 50% 34% 30% 9% 0% 2 SV NO FI DK IS LIT 0% n/a LAT SECOND QUARTER The second quarter's net sales totalled SEK 46.6 (28.1) million and operating profit/loss was SEK 1.2 (-1.4) million. Total second quarter growth in the Group was 68% compared with the previous year. The percentage spread of sales across the product lines in the second quarter of 2013 was 67% for Coffee and 33% for Food. Sales for Coffee were SEK 31.3 (28.7) million, representing a growth of 10% compared with the same period of the previous year. Sales for Food amounted to SEK 15.3 million. Work to start operations in the USA continued during the second quarter via the newly established company Zinzino LLC. The decision was made to establish a local sales office in the USA. This was situated in Jupiter, Florida, while the warehouse and logistics function for the American market was situated in Norfolk, Virginia. Even at this early stage, potential distributors on the market were beginning to show great interest in the company. Further development of the Zinzino Food product line continued and the range was expanded with additional products – BalanceShake and BalanceBar. Sales of the product line did extremely well, increasing from SEK 9.5 million in Q1 to SEK 15.3 million in Q2. The new product line continued to be a hit and took off faster than expected, causing the Coffee concept to gradually decrease in volume. Zinzino Coffee increased by 10% during the second quarter. One consequence of this was that the espresso machine inventory did not reduce as planned, which tied up capital and affected the Group's short-term liquidity. Zinzino continued to work intensively with inventory optimisation and normal levels were expected to be achieved in Q4. During Q2, the Group registered 8,566 (3,214) new customers. The sales force increased by 1,845 (1,509) distributors. Growth vs.mot Q2 föregående of previous år year Tillväxtper permarket marknad Q2 300% 240% 250% 200% 139% 150% 100% 50% 52% 50% NO FI 18% 34% n/a 0% SV Zinzino Annual Report DK IS LIT LAT 4 3 THIRD QUARTER Zinzino's net sales for the third quarter of 2013 amounted to SEK 57.3 (44.2) million, representing a growth of 29%. Operating profit totalled SEK 4.3 (2.8) million, which were the best results for a single period in Zinzino's history. During the third quarter, Zinzino transitioned completed to the new external logistics solution and thus phased out its own warehouse operations. The transition process was extensive and required significant investments in appropriate IT technology. Logistics is running smoothly and Zinzino is reaping huge benefits from the solution. The percentage spread of sales across the product lines in the third quarter was 58% for Zinzino Coffee and 42% for Zinzino Food. Sales for Coffee were SEK 33.2 million while sales for Food were SEK 24.1 million. Establishment on the US market entered its final phase during the quarter and Zinzino's management team worked closely with staff in the USA to get the final pieces to fall into place for the start of sales. The biggest challenges were in the US banking system, but after hard work Zinzino was granted permission to take payments via internet and credit card. A company sales record was set on 15th October when 2,200 new customers were registered in a single day. In total, 2,761 (3,186) new distributors and 11,159 (7,349) new customers were added during the quarter. Growth vs. Q3 of föregående previous yearår Q3 Tillväxtper permarket marknad mot 250% 234% 200% 160% 150% 93% 100% 45% 50% 9% 12% 18% SV NO FI 29% 0% 4 DK IS LIT LAT EST FOURTH QUARTER Fourth quarter net sales amounted to SEK 73.4 (62.1) million, representing a growth of 18%. Divided between the product lines, Zinzino Coffee totalled SEK 37.0 million and Zinzino Food totalled SEK 36.4 million. This means that sales in general were evenly spread between the product lines. Zinzino Food launched its sales in the USA in early December with the products BalanceTest, BalanceOil and BalanceShake. By year-end, sales had already spread to 23 states, indicating great potential for continued geographic expansion and strong sales. The local office was established in Jupiter, Florida and the warehouse in Norfolk, Virginia. A total of 17,165 (12,330) new customers and 3,057 (2,507) partners were registered during the quarter. Never before has Zinzino had so many active customers as it had at the end of 2013. Growth vs.mot Q4 of previous year Tillväxt per permarket marknad föregående år Q4 450% 416% 400% 350% 300% 250% 200% 167% 150% 108% 100% 50% 10% 16% FI DK 0% -50% -100% SV -17% Zinzino Annual Report NO 0% IS LIT -38% LAT EST 5 SIGNIFICANT EVENTS AFTER YEAR-END STRONG GROWTH AND IMPROVED BOTTOM LINE IN Q1 All markets showed growth in Q1. Total income amounted to about SEK 75 million, representing growth of almost 40%. Profit before tax in Q1 was also better compared with the previous year, amounting to SEK 2.9 (0.0) million. OFFICIAL LAUNCH IN THE USA The market was officially opened on 8 February 2014. This was celebrated with a “Launch Celebration Day” in Atlanta, Georgia. Approximately 200 enthusiastic American and European independent sellers were on hand to celebrate the opening, along with representatives from the company. Interest in the company on the American market is huge. Management and the local Zinzino staff in Florida are working closely with the market's distributors to provide training and find the best possible tools to ensure continued stable growth. Development in the USA is going according to plan and Q1 sales amounted to about $500,000 (approx. SEK 3.3 million). INCREASED OWNERSHIP IN BIOACTIVE FOODS AS NEW DIVIDEND POLICY AND COMMUNICATION OF FUTURE FINANCIAL TARGETS Zinzino Annual Report To strengthen its influence in Bioactive Foods AS, Zinzino has increased its holding in the company from 6% to 10% through an additional investment of SEK 2.4 million. Greater ownership in Bioactive Foods AS ensures access to products, skilled researchers and the production of goods within the framework of Zinzino Food. Over the long term, Zinzino expects the ownership in Bioactive Foods AS to generate lower cost prices, which will ensure better gross profit margins and in turn a stronger bottom line. Zinzino's Board of Directors has decided from the 2013 financial year to propose that the annual general meeting approves a dividend of 30% of the net income to the shareholders annually, provided that the liquidity and financial strength of the Group permits this. The future financial targets are presented under the heading “Financial information” later in this report. 6 OUR PRODUCT LINES ZINZINO COFFEE ZINZINO FOOD At Zinzino, we love coffee. With Zinzino Coffee you can easily make your own latte, espresso or cappuccino. With accessories such as cups, glasses, confectionery and milk frothers, you can create a complete café experience right in your own home. Our Balance Food product line focuses on longterm health. Zinzino BalanceOil contains a unique combination of fish and olive oil that adjusts the fatty acid balance in the body. A simple blood test for home use reveals your balance values. Zinzino Annual Report 7 ZINZINO BALANCE BALANCE PRODUCTS QUALITY + SYNERGY = RESULTS BalanceOil is more than just fish oil. Our scientists have formulated BalanceOil for results. This includes selecting the species of fish with attention to content of EPA and DHA (bio-active omega-3 essential fatty acids), then synergistically combining this with a special, high-quality high-polyphenol olive oil. Our formulation, plus use as recommended, is why BalanceOil and BalanceShake help adjust the omega-6 to omega-3 ratio to optimal levels for balance. And, our data show proven results of balance (near 3:1 ratio) within 120 days. FISH OIL Our fish oil, containing sardines, anchovies and mackerel, comes from Lysi, a leading fish oil manufacturer in Iceland. Iceland specialises in fisheries and 70% of its economy relates to fish in some way. Lysi meets all regulatory requirements for production and follows good manufacturing practice (GMP) for food products and pharmaceuticals. Our products are free of genetically modified organisms (GMOs). Zinzino Annual Report HIGH-QUALITY OLIVE OIL We use extra-virgin olive oil from Spain. The olive oil is cold pressed, which means that a minimal amount of heat is used when the oil is pressed out of the olives. With this method, the oil retains the nutrients normally lost during heating, solvent extraction and refining of the oil. PROOF OF BALANCE WITHIN 120 DAYS St. Olavs Hospital in Trondheim, Norway and other leading laboratories have tested 37,070 people as of 22 January 2014. The average omega 6:3 ratio for individuals not taking an omega-3 supplement was 11.9:1 in Europe and 28.1:1 in the USA. Individuals who were taking an omega-3 supplement had a balance value of 7.0:1 in Europe and 18.7:1 in the USA. Of the 5,541 people who took Zinzino BalanceOil as recommended for 120 days, the average balance ratio was reduced to near 3:1. These results show that on average use of BalanceOil reduces the omega 6:3 ratio. Source: BioActive Foods AS, Oslo, Norway. 8 ZINZINO BALANCE ZINZINO OFFERS A UNIQUE HEALTH TEST Purchase Zinzino BalanceTest Collect the blood sample at home Send in your sample for analysis Start using our Balance products Your first test results will be available at www.zinzinotest.com within 20 days After 120 days, take our test again to find out how your values have changed Are you in balance? Zinzino's BalanceTest can give you the answer. We offer a unique test that lets you know your balance values. Zinzino BalanceTest is a blood test for home use that takes less than a minute. St. Olavs Hospital in Trondheim, Norway and other leading laboratories analyse the test, which identifies the levels of 11 fatty acids in your blood with 98% certainty. You will learn your percentage level of omega-3 and your omega 6:3 ratio. You will also receive a report to increase your health and dietary awareness. Zinzino Annual Report 9 ZINZINO Zinzino works continuously with environmental initiatives and is affiliated with Elreturen, which recycles and disposes of old espresso machines in a safe and reliable manner. Zinzino is also a  member of the Fair Trade Federation in Scandinavia. At Zinzino, we have chosen to cooperate specifically with Rombouts & Malongo because they have an active ethics policy and an explicit strategy to work primarily with Fairtrade growers. ROMBOUTS & MALONGO Europe's most exclusive roasting house Our coffee supplier is Rombouts, founded in Antwerp, Belgium in 1896. Malongo is its sister company in Nice, France. The company is still familyowned and is proud of its traditions and its passion for coffee. Their vision is to deliver the absolute highest quality of coffee from carefully selected suppliers on small plantations, preferably Fairtrade and with unique flavours. They only buy hand-picked beans processed using the wet method, purchasing them on site at the plantation and inspecting every sack before sending them to be slowly roasted and packaged. This has helped them earn the honour of supplying the Belgian royal family and prestigious hotels and airports across the globe in cities like Paris, New York, Tokyo and Dubai. Zinzino Annual Report 10 ZINZINO COFFEE WE BELIEVE IN A TOTAL COFFEE EXPERIENCE WE LOVE COFFEE Coffee is a drink loved by countless people around the world. Here at Zinzino, we not only think that coffee should taste fantastic and maintain the highest quality, we also believe it should be a total experience. ZINZINO COFFEE Our goal is to take coffee to a whole new level. And this is exactly what we will accomplish with our Zinzino Coffee product line. The basic idea is to offer people the chance to create their own home café with the best products on the market. Zinzino Annual Report QUALITY In addition to our professional and easy-care machines, we also sell accompanying coffee pods from the French suppliers Rombouts and Malongo – known for their passion and precision Our product range also includes Fairtrade coffee, which helps to ensure proper working conditions, concern for the environment and quality. With Zinzino Coffee you can easily make your own latte, espresso or cappuccino. With accessories such as cups, glasses, confectionery and milk frothers, you can create a complete café experience right in your own home. 11 NORWAY Norway is one of the three markets where Zinzino first began selling its products in 2005. Product sales in the country are through the subsidiary Zinzino AS. Since 2010, Norway has been Zinzino's biggest market sales-wise and is the market where Zinzino has the most registered distributors. In addition, Norwegians represent a large proportion of Zinzino's ownership. 2013 saw the addition of 2,133 new distributors and 11,228 new customers in Norway. These are the highest number in both segments across the entire Group. 2013 was another successful year for the Norwegian market, with stable growth of over 20%. Profitability was strong, with earnings of SEK 9.7 million before operating expenses. This made Zinzino AS the most profitable subsidiary in the Group before intra-Group costs. As on several of Zinzino's other markets, the new Zinzino Food product line is making up an increasingly greater proportion of total sales. In 2013, Zinzino Food accounted for 38% (SEK 25.4 million) of total sales. SEK THOUSAND Growth compared to previous year 21% Percentage of Zinzino's total sales 30% Net sales 67,299 Other revenue 10,254 Total income 77,553 Earnings before operating expenses “ -67,865 9,688 “ Total direct costs ZINZINO FOOD ZINZINO COFFEE 38% of total sales Total sales: SEK 25,404 thousand 62% of total sales Total sales: SEK 41,895 thousand ØYVIND AND KINE LIEN – NORWAY Independent Zinzino distributors since 2010 As a partner in Zinzino, you have the freedom to make your own choices and are responsible for your own bottom line. It takes a lot of hard work, but the challenge and flexibility suits us as a family. We love Zinzino's products – they are fantastic! We are extremely satisfied with the results from last year, particularly since we saw huge customer growth. We have high hopes for 2014. We will continue striving to increase customer growth and naturally make sure that we keep our existing customers happy and satisfied. Zinzino Annual Report 12 SWEDEN SWEDEN Sweden is Zinzino's home market and home to its head office in Västra Frölunda, Gothenburg. Sweden is one of the three countries in which Zinzino first began its operations. Sales and growth on the Sweden market were stable in 2013. In total, 691 new distributors and 3,934 new customers were added during 2013. The market increased its sales at the start of 2014 and is showing strength as regards both sales and growth. The Swedish market has huge potential, particularly since the head office is situated in Sweden. This means that all of Zinzino's staff speak and understand Swedish and have vast knowledge of the Swedish market. Like the other mature markets, Zinzino Food has taken a large share of total sales in 2013. SEK THOUSAND Growth compared to previous year 2% Percentage of Zinzino's total sales 10% Other revenue Total income Total direct costs Earnings before operating expenses 35% of total sales Total sales: SEK 7,988 thousand 22,519 3,014 25,533 -21,180 ZINZINO COFFEE 4,353 “ Net sales ZINZINO FOOD 65% of total sales Total sales: SEK 14,531 thousand KATARINA SÖDERGREN – SWEDEN Independent Zinzino distributor since 2005 I am passionate about helping people live a healthy life. In January, we started focusing on developing leadership within the team. Sweden is a relatively large and elongated country. Thus far, we have had too few leaders in relation to the size of the country. The more key people we have in the different geographic areas, the faster the growth. I have high expectations for 2014. We have been aggressive this year and will only continue to expand. Zinzino Annual Report 13 DENMARK Denmark is one of Zinzino's three original markets and has shown steady growth for several years. In 2013, growth was 26% compared with the previous year. With total income of SEK  34 million, the Danish market accounted for 13% of the Group's total sales. As in the other mature markets, Zinzino Food has had major penetration and accounted for 41% of the total sales on the market in 2013. In total, 1,111 new distributors and 5,687 new customers were added during the year. Zinzino is investing major resources to ensure it is at the forefront with product certifications from the Danish authorities. This, combined with a strong sales network, gives Zinzino a profitable subsidiary in Denmark. SEK THOUSAND Growth compared to previous year 26% Percentage of Zinzino's total sales 13% Other revenue Total income Total direct costs FOOD 41% of total sales Total sales: SEK 12,525 thousand 30,290 3,750 34,040 -30,411 Earnings before operating expenses IB NIELSEN – DENMARK Independent Zinzino distributor since 2005 59% 3,629 ZINZINO COFFEE “ Net sales ZINZINO Percentage Coffee 59% of total sales Total sales: SEK 17,765 thousand Zinzino has helped me create a wonderful life for me and my family and has given me the opportunity to help so many people over the past 8½ years. It takes a lot of focus to work as an independent distributor and it takes time to reach your targets. But, it is fantastic how much can be achieved by doing a little each week over a 5-year period. The recent years have been fabulous, with many new, responsible leaders and growth of 200% in my organisation. The number of customers who want to buy our products has generally increased in Denmark. I expect the positive trend to continue in 2014. Zinzino Annual Report 14 FINLAND In 2005, Finland was the fourth market that Zinzino ventured into. The market showed modest growth at first, but things really took off in 2010. As a market, Finland has shown some of the strongest growth within the Zinzino Group during the period 2011 to 2013. In 2013, growth was 41% and the Finnish market accounted for 17% of the Group's total sales. This makes Finland Zinzino's second largest market. SEK THOUSAND Growth compared to previous year 41% Percentage of Zinzino's total sales 17% Other revenue Total income Total direct costs Earnings before operating expenses “ ZINZINO FOOD 43% of total sales Total sales: SEK 16,784 thousand 38,696 5,727 44,423 -36,806 7,617 MANU REKOLA – FINLAND Independent Zinzino distributor since 2011 ZINZINO COFFEE 57% of total sales Total sales: SEK 21,913 thousand “ Net sales The Finnish sales network is committed, energetic and focused. 1,661 new distributors and 9,889 new customers and 2013 are proof of this. Zinzino's management is working actively with sales network training and effective customer support to reduce the somewhat high percentage of product return. Life in the direct selling industry is very positive. You have less financial risk, and the work is more efficient because the company provides IT, customer service, logistics, etc. As an independent distributor, I can focus on sales and training. In 2013, my team managed to increase our customer base by 70%, representing over 11,000 customers. We have placed great emphasis on training, which has improved the quality of sales. Our target in Finland is to increase the customer base by 100% and the year has started well. We are expanding into new market areas in Finland and will cover almost all of Finland by the end of 2014. Zinzino Annual Report 15 ICELAND Zinzino began selling on the Icelandic market in 2008 (via export) and founded the subsidiary Zinzino Ehf in 2011. During its first year on the Icelandic market, Zinzino experienced modest growth and sales, with profitability that was virtually non-existent. With the launch of Zinzino Food, there was a drastic change and the Icelandic sales network saw a huge, positive response on the Icelandic market. In 2013, growth was 220% compared with the previous year and the country accounted for 8% of the Group's total sales. In total, 1,159 new distributors and 4,102 new customers were added during the year. The number of new customers represents 1.3% of Iceland's total population. The significant increase in the number of customers and sellers in conjunction with the launch of Zinzino Food also contributed to a major boost in sales of espresso machines and coffee on the market. SEK THOUSAND 220% Percentage of Zinzino's total sales Net sales Other revenue Total income Total direct costs Earnings before operating expenses 8% 65% of total sales Total sales: SEK 11,013 thousand 17,358 1,807 19,164 -18,257 908 ZINZINO COFFEE 35% of total sales Total sales: SEK 6,345 thousand “ Growth compared to previous year ZINZINO FOOD GUÐRUN BRYNJULFSDÓTTIR & ÁSGEIR HALDORSSON – ICELAND Independent Zinzino distributors since 2008 During the year, we have put in a lot of work and had a lot of fun. This has led to incredible results – growth has been phenomenal! It's amazing to work with our best friends and family while enjoying life together. We are very proud to be a part of Zinzino and look forward to another fantastic year! Zinzino Annual Report 16 ESTONIA The Estonian subsidiary Zinzino OÜ was founded in 2013. Since its founding, Zinzino OÜ has been the strongest of Zinzino's Baltic companies and in 2013 had good growth of 67% compared with the previous year. In 2013, the company accounted for 11% of the Group's total sales. In total, 1,801 new distributors and 6,161 new customers were added during the year. Estonia has a strong and structured sales network that also runs its own café in Tallinn. There, they meet potential new customers and distributors and offer them a cup of their delicious espresso. On the Estonian market, it is still the Zinzino Coffee product line that accounts for the largest share of sales. Even though Zinzino Food has better margins compared with Zinzino Coffee, Zinzino OÜ contributes a strong profit before operating expenses. SEK THOUSAND Growth compared to previous year 67% Percentage of Zinzino's total sales 11% Other revenue Total income Total direct costs Earnings before operating expenses 20% of total sales Total sales: SEK 5,403 thousand 26,574 2,160 28,735 -23,931 4,804 VIKTOR JASSKA – ESTONIA Independent Zinzino distributor since 2011 ZINZINO COFFEE “ Net sales ZINZINO FOOD 80% of total sales Total sales: SEK 21,171 thousand Zinzino has changed my life in an incredibly positive way. I simply love working with Zinzino! There was very strong growth in 2013 and it's great that sales of Balance products are going so well. My goal for 2014 is to continue the trend on the home market and expand my team to international markets. Zinzino Annual Report 17 LITHUANIA In Lithuania, the subsidiary Zinzino UAB was founded in 2010. The company showed strong growth in 2013, with 159% compared with the previous year. In total, the sales account for 5% of the Group's total income. 847 new distributors and 4,382 new customers were added during the year. Zinzino has a stable network of sellers in Lithuania. Even though Zinzino's premium products are regarded as high priced relative to the average income in the country, the market continues to show strong growth. Like other Baltic countries, the Zinzino Coffee product line stills sells more than the Zinzino Food line. SEK THOUSAND Percentage of Zinzino's total sales Net sales Other revenue Total income Total direct costs Earnings before operating expenses 159% 5% Total sales: SEK 3,510 thousand 642 13,073 -12,455 619 JONAS LAPINSKAS – LITHUANIA Independent Zinzino distributor since 2011 28% of total sales 12,431 ZINZINO COFFEE “ Growth compared to previous year ZINZINO FOOD 72% of total sales Total sales: SEK 8,921 thousand I had been a business owner in the construction industry for 15 years, but my life has only changed for the better since I chose to work with Zinzino. My organisation in the Lithuanian market has enjoyed stable growth of over 50% for the three years I have been in business. In 2014, I expect even more growth and I look forward to helping others in Lithuania and other countries to start up sustainable businesses with Zinzino. Zinzino Annual Report 18 LATVIA Zinzino SIA in Latvia is the latest European addition to the Zinzino Group. The company was founded in spring 2012. Zinzino SIA showed strong growth of 176% in 2013 compared with the previous year and accounts for 5% of the Group's total sales. 535 new distributors and 2,742 new customers were added on the market in 2013. As with the other Baltic markets, Zinzino Coffee remains the dominate product line. The Latvian sales network is extremely structured. They do a great job of selling the relatively high-priced premium products in a country with a lower average income than in the Nordic countries. SEK THOUSAND 176% Percentage of Zinzino's total sales Net sales 5% Other revenue Total income Total direct costs 22% of total sales Total sales: SEK 2,328 thousand 10,641 868 11,509 -10,832 Earnings before operating expenses 677 ZINZINO COFFEE “ Growth compared to previous year ZINZINO FOOD 78% of total sales Total sales: SEK 8,314 thousand ELĪNA VIŠA OCH IVARS VIŠS – LATVIA Independent Zinzino distributors since 2012 Being an independent Zinzino distributor means freedom and the opportunity to change our own lives and our friends' lives for the better. We are proud to work with Zinzino's amazing products. It is fun, challenging and a learning experience. During the year, we doubled our number of customers. Sales are going well, but the market of 2 million inhabitants is still unsaturated. This means we have huge potential in Latvia. Zinzino Annual Report 19 NEW MARKET USA SUCCESSFUL START OF SALES Zinzino Food launched its sales in the USA in early December 2013 with the products BalanceTest, BalanceOil and BalanceShake. To date, sales have already spread to 26 states, indicating great potential for continued geographic expansion and strong sales. The market was officially opened on 8 February 2014. This was celebrated with a “Launch Celebration Day” in Atlanta, Georgia. Approximately 200 enthusiastic American and European independent sellers were on hand to celebrate the opening, along with representatives from the company. OFFICE IN FLORIDA Zinzino has established both a sales office and a warehouse in the USA to be able to offer the market the best possible service and to handle the rapid growth that is already clearly evident. The sales office is located in Jupiter, Florida, where Zinzino's employees are well equipped to provide customer service and support to our American customers and independent sellers. At present, the office has two members of support staff and one chief operating officer. Zinzino Annual Report 20 WHAT IS DIRECT SELLING? “Membership in Direkthandels Förening is a seal of quality for Zinzino as a company” PERSONAL CONTACT Direct selling is all about personal contact outside the more traditional sales settings, such as stores. Perhaps the most common form of direct selling takes place via so-called home parties, in which the direct seller either invites the potential customer into their home or makes a visit to the customer so that the customer can try out their products. At Zinzino, direct sellers are called “independent partners”. In addition to recommending the product to potential customers, a partner in Zinzino can also build up their own sales organisation along with other direct sellers and thus build up their own business. For entrepreneurs, Zinzino also offers an exciting business opportunity centred on sales, marketing and personal development. Training in this work is organised by the network of independent partners in collaboration with the company. Zinzino also wants the independent partners who decide to accept this business offer to feel that they are working in a vibrant, friendly network where they are well cared for and receive support and guidance from experienced independent partners. The private network is the backbone of this type of business, but the Zinzino company is always behind it, providing support and driving it forward. Independent partners benefit from an established brand, advanced products and a system for training and marketing along with other independent partners in the network. The company gets dedicated marketers and our independent partners gain access to exclusive products of very high quality without needing to purchase large inventories. Zinzino offers business opportunities for different people with different lifestyles at different stages of their life. Zinzino independent partners enjoy great flexibility and choose their own working hours and intensity. Zinzino supplies the tools and the opportunities for independent partners to create their own success according to personal ambitions, lifestyle and goals. The possibilities are endless! Zinzino Annual Report ZINZINO – PROUD MEMBERS OF DIREKTHANDELNS FÖRENING (DF) Zinzino is a member of the Swedish national trade association of direct selling companies, Direkthandelns Förening (DF), and has worked actively for an open and honest direct selling industry for many years. Zinzino is a member of the national trade association of direct selling companies in Sweden, Norway, Finland, Denmark, Estonia, Latvia, Lithuania and the USA. Zinzino will apply for membership in trade association of direct selling companies in all new markets it enters. As one of few direct selling companies, Zinzino works with both traditional customer structures and with a sales network of independent partners who are interested in the business opportunities Zinzino offers. Zinzino stands for personal, close contacts between sellers and customers, and continually assesses and improves its offering to meet customer demands. Quality and fairness are at the heart of all Zinzino products. Membership in Direkthandels Förening (DF) is a seal of quality for Zinzino as a company. DF's primary task is to protect the consumer, to promote good business practices, and to foster a good reputation for direct selling as a distribution medium and for its practitioners. They also work to promote awareness and application of sector codes of conduct, and to ensure that sellers and distributors are well trained. DF is the consultative body for all legislation that affects direct selling. DIRECT SELLING ACCOUNTS FOR BILLIONS IN SALES The direct selling sector is strong both in Sweden and worldwide. Industry revenue in Sweden reached approximately SEK 3 billion in 2009 and has grown steadily since. DF is a member of FEDSA, the Federation of European Direct Selling Associations. EDSA represents 25 European national direct selling associations and – directly or indirectly – through its associated corporate members, more than 1,000 direct selling companies with a total annual revenue of more than EUR 20 billion and with more than seven million direct sellers. Of these, nearly six million are women. Global industry revenue in 2011 was as much as USD 153,727 million with over 91 million active direct sellers. 21 HEAD OFFICE IN GOTHENBURG A stimulating workplace The head office is located in Västra Frölunda outside of Gothenburg, Sweden. The bright and pleasant office on Hulda Lindgrens Gata is a hub of activity. Here, all of the employees work in different areas to together deliver the absolute best to our customers and sellers. It is a living work environment where every day is unique – a result of the company's booming growth. It is exciting to work at Zinzino's head office. It is a young, expansive and dynamic workplace that provides great space for fun challenges and personal development. Each employee is important, and we all help one another to continually maintain the high quality that permeates throughout our business. The office is currently home to about 50 employees and we have increased the number of employees by over 300 % in recent years. The average age of the employees is currently 33. In spring 2013, we outgrew the office space that we moved to in the winter of 2010 and therefore expanded to additional workspace one floor up. In August 2013, part of our staff moved up to the new workspace. The new workspace is at the top of the building and has windows facing two directions, making it very bright. In addition to the office space, it has a small kitchen, a handy conference room, and a “chat room” big enough for two. The head office is home to management and operational functions. Our biggest department is Support and Customer Service, which answers questions and provides support to our sellers and customers daily by phone and e-mail. The languages of each and every one of our markets is represented in Zinzino's Support and Customer Service, ensuring that we can always assist customers and sellers in the best possible manner. Our diverse origins also help create a very rewarding and interesting environment for colleagues to socialise and learn from each other's experiences and knowledge. “ “ Zinzino's head office is a fun workplace where my skills in language and communication are constantly evolving. It has an international environment with challenges and a fast pace that fills my days with a lot of adventure. Being part of Zinzino's journey is a huge honour for me. - Greta Simaityte, Lithuanian Support and Customer Service worker Support and Customer Service is the department most affected by growth. This has led to steady growth in the number of Support and Customer Service workers during the year. We also strengthened our Sales, Accounting and Marketing departments. We expect to continue hiring more employees as we expand into new markets in 2014. External provider of warehousing and logistics To handle the increased sales volumes, Zinzino has phased out its own house operations, which were previously handled in the same building. In July 2013, a cooperation began with an external provider who now handles both warehousing and logistics from its premises in Trollhättan, Sweden. We are very pleased with this cooperation, which is an important move for us to be able continue expanding at the pace we want. Zinzino Annual Report 22 BOARD OF DIRECTORS Hans Jacobsson Cecilia Halldner Staffan Hillberg Björn Flintberg Born: 1967 Chairman Born: 1951 Board Member Born: 1964 Board Member Born: 1972 Board Member MBA. CEO of Rootfruit Scandinavia AB. Formerly served as as Finance and Supply Chain Director for General Mills Scandinavia AB, Partner in CRT Ventures (venture capital company in Buresfären) and Investment Manager in Investment AB Bure. MBA. Cecilia has extensive experience in business development and launches for international corporate brands on the Nordic market, including Astra Zeneca, Beiersdorf, Ecco and BeO. Studied Electrical Engineering at Chalmers University of Technology and has an MBA from INSEAD. CEO of Wood Hill Investment AB and CEO of portfolio company Heliospectra AB. Has extensive experience from international operational positions and from the financial sector. B.A. in History with PolSci, Georgia College & State University. Serial entrepreneur in the IT sector. Has extensive experience in mergers and acquisitions, IPOs and structural transactions. Also has extensive expertise in food and consumer products. Hans Jacobsson has been a member of the Board of Directors since 2007 and has served as Chairman since 2009. Number of shares: 424,215 B-shares and 45,000 options, privately and through the company Cecilia also has many years of experience in operational management, including serving as CEO of the Orkla Group, and in entrepreneurship as CEO of European Last Minute Ticket AB, a mobile marketing company. Is currently Regional Manager for Sensus Study Association in the Östergötland/ Norra Småland region. Cecilia Halldner has been a member of the Board of Directors since 2007. Number of shares: 30,000 B-shares Formerly CEO of Yield AB and Scandinavian Financial Management AB, formerly Managing Partner in MVI, partner in CRT Ventures AB (venture capital company in Buresfären), CEO of AppGate AB, CEO of Bonnier Online, Head of Bonnier Medialab, Product Manager for Apple Computer Inc. in France and the USA. Formerly Marketing Manager at Seven Nox AB (now Zinzino Nordic AB). Has worked in marketing and communications in the IT sector and training sector for a number of years. Has extensive experience in business development at both management and production levels. Also has in-depth expertise and understanding of network sales. Björn Flintberg has been a member of the Board of Directors since 2009. Number of shares: 32,500 B-shares Staffan Hillberg has been a member of the Board of Directors since 2007. Number of shares: 250,000 B-shares and 45,000 options Zinzino Annual Report 23 MANAGEMENT DAG BERGHEIM PETTERSEN CEO Born: 1970 Senior positions at El-giganten and Alcatel, and served as Senior Vice President of TeliaSonera subsidiary NetCom. Dag has extensive experience in strategic leadership in growth companies and has served as CEO of Zinzino since 2012. NUMBER OF SHARES: 180,000 B-shares + 1,460,000 call options Henrik Schultz DIRECTOR OF PRODUCTS & LOGISTICS CARIN ANDERSSON CHIEF OPERATING OFFICER EUROPE Born: 1961 Born: 1975 Henrik Schultz has extensive experience in senior positions at a number of different international and commercial companies. Carin Andersson has solid, extensive experience in the direct selling sector and customer service spanning 13 years, providing her with great expertise in assisting customers and sellers in sector-related issues. He has an MBA and has held positions such as Sales Manager, Marketing Manager and CEO. Henrik joined Zinzino in 2007 from Libro Gruppen AB. NUMBER OF SHARES: 10,000 B-shares + 30,000 call options FREDRIK NIELSEN CFO She joined Zinzino in 2004, having previously worked at PGOne AB, which has since been acquired by the Zinzino Group. JAKOB SPIJKER BUSINESS DEVELOPMENT BORN: 1968 Fredrik Nielsen holds an MBA and has vast experience in senior positions in financial management. Came to Zinzino in 2009, and before that he was CFO for Gymnasium AB. Jakob Spijker has held various positions in logistics, transport and warehousing, both in Sweden and in the Netherlands. Came to Zinzino in 2012. Before this, he was Head of Logistics at Mediatec Solutions AB. Zinzino Annual Report Born: 1953 Michael Perry has extensive experience in senior positions at a number of different companies. He has an MBA and has served in positions such as Sales Manager, Chief Operating Officer and CEO. He has vast experience with direct selling. Michael joined Zinzino LLC in March 2013 as COO for the American market. Number of shares: 0 NUMBER OF SHARES: 21,082 B-shares BORN: 1977 NUMBER OF SHARES: 30,000 call options MICHAEL PERRY CHIEF OPERATING OFFICER USA NUMBER OF SHARES: 0 shares MIKAELA WAHLBRO MARKETING AND COMMUNICATIONS MANAGER BORN: 1984 Mikaela Wahlbro holds a B.A. in Media and Communications from Karlstad University and has also completed studies at Halmstad University and Stockholm University. Mikaela has been employed at Zinzino since 2010. NUMBER OF SHARES: 0 shares 24 ZINZINO SMOOTHIE MAKER Mix your own great-tasting smoothies using BalanceOil or BalanceShake together with your favourite ingredients! Zinzino Annual Report 25 FINANCIAL INFORMATION Zinzino Annual Report 18 26 DIRECTORS' REPORT The Board of Directors and CEO of Zinzino AB, 556733-1045, hereby submit this Annual Report and consolidated financial statements for financial year 1 January 2013 to 31 December 2013. OWNERSHIP AND HISTORY EVENTS DURING THE YEAR Business activities commenced in autumn 2007. The principal activity of the business is to own and develop companies in direct marketing and related businesses. Establishment in the USA In 2013, Zinzino established a limited liability company (LLC) in the USA. In 2009, Zinzino Nordic AB was acquired through both a directed issue in kind to shareholders in Zinzino Nordic AB and through the rights issue Zinzino Nordic conducted in December 2009. This gave Zinzino AB control over 97% of votes and 92% of capital in Zinzino Nordic AB. As of 31 December 2013, ownership in Zinzino Nordic totalled 93% of the capital and 97% of the votes. At an early stage of the establishment process, Zinzino chose to situate both the sales office and the warehouse in the USA to offer the market the best possible service and handle growth quickly. The sales office is located in Jupiter, Florida, where Zinzino's employees are well equipped to provide customer service and support to our American customers and independent sellers. Logistics for the entire country is handled via the same external partner as in Europe, with the warehouse located in Norfolk, Virginia. In addition to Zinzino Nordic AB, the following wholly-owned companies are part of the Group: Zinzino OÜ in Estonia, Zinzino UAB in Lithuania, SIA Zinzino in Latvia, Zinzino Ehf in Iceland, and the company established in 2013, Zinzino LLC in Jupiter, Florida, USA. In addition to this, Zinzino Nordic owns 100% of the companies Zinzino Sverige AB, Zinzino OY (Finland), Zinzino AS (Norway) and Zinzino ApS (Denmark), as well as the dormant Swedish subsidiaries PG Two AB, Poxian AB and 2Think AB. INFORMATION ON GROUP OPERATIONS Net sales for the Group totalled SEK 226.3 (161.7) million, with earnings after financial items totalling SEK 10.4 (5.3) million. This represents revenue growth of 40% and a 95% improvement in profit. Net sales are spread over two product lines – Zinzino Food and Zinzino Coffee. In 2013, sales of Zinzino Coffee were SEK 140.9 million and sales of Zinzino Food were SEK 85.4 million. Zinzino is a sales company that uses independent distributors who market and sell products via commission through direct selling. In 2013, Zinzino signed contracts with 10,363 (9,812) new distributors and 48,190 (26,193) new customers. The geographic breakdown of sales in 2013 is as follows: Norway 30%, Finland 18%, Denmark 13%, Estonia 11%, Sweden 10%, Iceland 8%, Lithuania 5%, Latvia 5 % and the USA 0.2%. Sales growth per market in 2013 compared with previous year: Iceland 220%., Latvia 176%, Lithuania 159%, Estonia 67%, Finland 41%, Denmark 26%, Norway 21%, Sweden 2%. Market analysis shows that Norway remains the strongest market, with total income of SEK 77.6 (62.1) million. The fastest growing, not counting the newly founded USA, is Iceland with SEK 19.2 (6.0) in sales and Latvia with SEK 11.5 (4.3) million in sales. Sweden had sales of SEK 25.5 (23.8) million, Denmark SEK 34.0 (25.8) million, Finland SEK 44.4 (31.0) million, Estonia SEK 28.7 (17.1) million and Lithuania SEK 13.1 (4.9) million. During the last month of the year, sales in the USA totalled SEK 0.5 million. Zinzino Annual Report Zinzino Food launched its sales in the USA in early December with the products BalanceTest, BalanceOil and BalanceShake. By year-end, sales had spread to 23 states, indicating great potential for continued geographic expansion and strong sales. In the first stage of establishment on the American market, Zinzino has chosen to focus on sales of the Zinzino Food product line. No decision has been made as yet regarding when the Zinzino Coffee product line will be launched on the American market. Transition to external logistics partner In 2013, Zinzino phased out its own warehouse operations and transitioned to an external logistics partner. This makes it possible to continue managing a high growth rate. The transition made it possible to increase capacity on short notice, which facilitates Zinzino's expansion. The transition process was extensive and required significant investments in appropriate IT technology. Logistics is running smoothly and Zinzino continues to reap huge benefits from the solution. Zinzino Food in focus During the year, Zinzino put major focus on the new product line, Zinzino Food. Together with partly-owned Bioactive Foods AS, the company worked actively with product development. As a result, Zinzino BalanceOil with vanilla flavour and BalanceShake were launched during the year. In the Zinzino Food product line, BalanceOil is the clear top seller on most of Zinzino's markets. BalanceShake includes BalanceOil in powder form. BalanceShake has been a strong contributor to sales growth in markets such as Iceland, which has grown to become Zinzino's third-largest market. Zinzino has also launched accessories in the product line, such as the Zinzino Smoothie Maker and Zinzino Shake Bottle. When 2013 is summed up, sales of the product line amount to SEK 85.4 million, representing 38% of total product sales. During the fourth quarter, Zinzino Food accounted for 50% of net sales. This trend continues in early 2014. In terms of earnings, the new product line increased gross profit in the company as the margins for Zinzino Food products are generally better than those of Zinzino Coffee. In 2013, Zinzino's total gross profit margin increased from 24% to 28%. 27 Sales of Zinzino Coffee remain stable Zinzino's home café concept, which previously was the Group's only product line, has been known as “Zinzino Coffee” since late 2012. The main products of the product line are quality espresso machines and associated espresso pods. Together with the other Zinzino Coffee products, such as milk frothers and confectionery, the customer can create a café experience right in his/her own kitchen. Today, Zinzino offers its customers seven different espresso machines in different price ranges and 25 different varieties of coffee and tea. The range also includes several Fairtradelabelled products, such as coffee, tea and sugar. The secret to Zinzino Coffee's success is both quality products and the unique concept of enabling customers to take out a coffee subscription. When a customer takes out a subscription, he/she can purchase an espresso machine at a discount price. The coffee is simply and conveniently delivered to the customer's home every other month. The stable growth in Zinzino Coffee will be maintained by continuously improving and developing the products and the range, and by continuing to build the Zinzino brand on the home café market. The continued increasing trend of home café in combination with Zinzino's concept creates opportunities to win significant market shares within the segment. Customer in focus In 2013, Zinzino maintained a strong focus on increasing customer satisfaction. Further initiatives have been implemented in the company's customer and sales support, through efforts such as increasing the number of employees in the relevant departments, and implementation of a new telephone system. This has resulted in a high level of service, which has generated more active customers and reduced the number of customers lost. The seller's bonus system also underwent an overhaul with the aim of generating more customers. The impact has been positive and the number of active customers is increasing steadily. BUSINESS MODEL AND MARKETING STRATEGY The core of Zinzino's business is marketing and sales. The company's network of independent sellers and sales teams markets the products and services to the consumer, while much of the company's own marketing is directed at developing attractive offers to customers and offering sellers the information and knowledge they need to be able to do their job out in the field. Marketing consists primarily of providing product information, promotional materials, basic training materials and an effective flow of information via the web, social media and e-mail. Company management maintains an active dialogue with the “leader council” made up of representatives from the sales network. This has proven to be highly appreciated and the dialogue is considered a recipe for success. Zinzino's Product and Sales department works continually with new and exciting projects in collaboration with the Rombouts & Malongo and BioActive Foods product development team. Zinzino Annual Report By keeping product development at the forefront, Zinzino strengthens its position. ORGANIZATION AND EFFICIENCY Zinzino has continued efforts to streamline its business systems and procedures to better handle the increased sales in a stable and satisfactory manner. The organisation has been strengthened with additional resources in practically all departments at the head office in Gothenburg. 2013 also saw the opening of a local sales office in Florida, USA, where Zinzino hired a COO for the American market and two support workers. As previously mentioned, Zinzino phased out its own warehousing during the year and has transitioned to an external logistics partner as part of its efforts to streamline future growth. Complaint and return management remains an internal process in the company. FINANCIAL POSITION By the end of 2013, the Group had equity of SEK 21.6 (12.4) million, liquid assets of SEK 10.9 (16.5) million and an equity/ assets ratio of 38% (26%). Capital tied up in inventory increased to SEK 28.4 (15.4) million. The increase is due to a seasonal increase in inventory of finished products of our own brand at Zinzino Food's supplier in connection with the launch of new products. Another contributing factor is entry into the American market with a local warehouse. The increase is considered temporary and the normal inventory level at the current size is estimated at about SEK 20 million. Most of the surplus inventory of espresso-related products was sold out during the year. The equity of the parent company Zinzino AB was SEK 21.5 million, representing an equity/assets ratio of 96%. Zinzino has a favourable tax situation with unutilised loss carry forward in the companies Zinzino Nordic AB and Zinzino AB in excess of SEK 100 million. Deferred tax assets have not been reported. RISKS AND EXTERNAL FACTORS AFFECTING GROWTH IN ZINZINO The Board continually discusses external risks for Zinzino's expansion. The greatest risks remain in the organisation's ability to manage costs during strong growth. The planning of purchases is a challenge during rapid expansion. Management is therefore actively working with purchase forecasts and inventory optimisation to meet the challenge effectively and avoid tying up capital in inventory unnecessarily. The prioritisation of IT resources is another challenge for Zinzino when the growth rate is high. The company is working actively to optimise and distribute resources in the best way possible. The ability to recruit the right personnel on short notice is also important. Innovations and product developments from competitors also pose risks for Zinzino. The Board believes, however, that access to the Rombouts & Malongo product range, as well as the new Zinzino Food/Balance product line enables the company to remain very competitive. 28 FUTURE FINANCIAL TARGETS The Zinzino Board of Directors hereby presents the financial targets and key figures the company intends to achieve in coming years: During the period 2014-2016, average sales growth shall be at least 25% and the net margin shall increase to > 6%. The dividend policy shall be 30% of net income, provided that liquidity and financial strength permit this. For 2014, we forecast that net sales shall exceed SEK 290 million, representing growth of at least 28%. The net margin is expected to exceed 4% in 2014. Zinzino Annual Report 29 & OWNERSHIP SHARE PERFORMANCE Since 20 September 2010, Zinzino AB has been listed on the Aktietorget stock exchange. In 2013, 4,583,656 (8,032,473) shares were traded, distributed over 3,674 (6,670) trades. The company currently has 969 (1,003) owners, excluding foreign custody account holders, distributed over 27,082,770 shares. SHARE CAPITAL Of the company's 27,082,770 total shares, 6,113,392 are A-shares. Only B-shares are listed for trade on the Aktietorget market, under ISIN code SE0002480442. Largest shareholdings as of 31 December 2013: Owner No. of A-shares No. of B-shares Percentage of votes Percentage of capital Örjan Saele via company and family 4,123,397 4,712,761 55.96% 32.63% Peter Sörensen via company 1,809,995 2,019,805 24.51% 14.14% 180,000 14,236,812 19.53% 53.23% 6,113,392 20,969,378 100.00% 100.00% Share Share 2013 2012 Örjan Saele ZZ A ZZ A 4,123,391 4,123,391 Örjan Saele ZZ B ZZ B 4,712,761 4,615,596 Staffan Hillberg ZZ B ZZ B 234,656 250,000 Staffan Hillberg ZZ KO ZZ KO 45,000 45,000 Hans Jacobsson ZZ B ZZ B 424,215 406,900 Hans Jacobsson ZZ KO ZZ KO 45,000 45,000 Henrik Schultz ZZ B ZZ B 10,000 10,000 Henrik Schultz ZZ KO ZZ KO 30,000 30,000 Cecilia Halldner ZZ B ZZ B 30,000 30,000 Carin Andersson ZZ B ZZ B 21,082 21,082 Björn Flintberg ZZ B ZZ B 32,500 32,500 Dag Pettersen ZZ B ZZ B 180,000 180,000 Dag Pettersen ZZ KO ZZ KO 1,460,000 1,460,000 Fredrik Nielsen ZZ KO ZZ KO 30,000 30,000 Other shareholders Total Reported insider holders at year-end: Name Zinzino Annual Report 30 SHARE PRICE DEVELOPMENT SINCE START OF TRADING In 2013, a total of 4,583,656 shares were traded in 3,674 trades. The first trade of the year was at SEK 6.70 and the last at SEK 6.40. The year's peak was on 16 January 2013 with a trade at SEK 10.10. The low of SEK 5.00 came on 19 April 2013. An average of 1,247 shares were traded per trade at an average price of SEK 7.25. OPTION PLAN Zinzino has issued warrants on two occasions: At the end of 2012, Zinzino implemented an option plan in which 2,100,000 warrants were issued to key people in Group management and the sales network. The reason for the deviation from the shareholder's preferential rights was that the company deemed it important to create lasting incentives for executives considered essential to the company's future growth. The Board determined that a plan for warrants that did not burden the company's liquidity would be the most beneficial for the company and the company's shareholders. Holders of call options after the aforementioned issue are entitled, between 1 August 2012 and 1 November 2016, to make cash purchases for new shares, each share with a quota value of SEK 0.1 according to a subscription price of SEK 2 per share. Zinzino has previously issued 2,500,000 options to Partner Rewards AB. Each option gives the holder the right to subscribe a new share in the company, each share with a quota value of SEK 0.1 under a subscription price of SEK 5 per share. Share subscription must take place between 1 August 2010 and 1 December 2014. The intention with the option plan is to give the owners of Partner Rewards AB a tool to reward successful sellers in the Zinzino sales network both inside and outside of Sweden. The share subscription period is 1 August 2010 to 1 December 2014. Partner Rewards is a company under the control of Örjan Saeles. Zinzino Annual Report 31 RESULTS AND FINANCIAL POSITION Parent company Group Amounts in SEK thousand 2013 2012 2013 2012 226,308 161,651 0 0 Total income 254,531 177,164 0 0 Profit/loss after financial items 10,377 5,317 -621 -693 Operating margin 4.1% 2.9% neg neg Profit margin 3.5% 2.6% neg neg Return on equity 41.8% 37.10% neg neg Balance sheet total 56,807 47,423 22,465 22,632 Equity/assets ratio 38.0% 26.11% 95.6% 97.8% Net sales DEFINITIONS OF KEY FIGURES: Operating margin Operating profit or loss/Total income Profit margin Net income/Total income Return on equity Net income/Equity Equity/assets ratio Equity/Balance sheet total PROPOSED ALLOCATION OF PROFITS (SEK) The Annual General Meeting has the following at its disposal: Zinzino AB Retained earnings Profit/loss for the year Total equity SEK 19,423,699 -621,122 18,802,577 The Board proposes that the retained earnings be utilised as follows: SEK SEK 0.10 per share distributed to the shareholders 2,708,277 Carried forward 16,094,300 Total 18,802,577 The Board believes that the proposed dividend will not prevent the company from meeting its obligations in the short and long term, or prevent it from making necessary investments. The proposed divided can thereby be justified with reference to that which is stated in Chapter 17 Section 3 § 2-3 of the Companies Act (precautionary principle). Regarding the company's reported results for the accounts, the status per closing day, financing and capital management during the year, refer to the accompanying financial statements. Zinzino Annual Report 32 INCOME STATEMENT Amounts in SEK thousand Parent company Group TYPE OF COST Note Net sales 1, 2 Other revenue 3 Total income 1 Jan 2013 1 Jan 2012 1 Jan 2013 1 Jan 2012 31 Dec 2013 31 Dec 2012 31 Dec 2013 31 Dec 2012 226,308 161,651 28,222 15,513 254,531 177,164 0 0 Operating expenses Merchandise 2 -69,999 -57,028 - - -113,577 -77,381 - - 4, 5 -35,166 -16,917 -621 -736 Direct costs relating to goods sold Other external expenses Personnel costs 6 -23,556 -19,384 - - Depreciation/amortisation 7 -735 -397 - - Other operating expenses 3 -1,028 -792 - - -244,060 -171,899 -621 -736 10,470 5,265 -621 -736 46 76 - 44 2 - - -1 -141 -24 - - -93 52 0 43 PROFIT/LOSS AFTER FINANCIAL ITEMS 10,377 5,317 -621 -693 PROFIT/LOSS BEFORE TAX 10,377 5,317 -621 -693 -554 -351 - - -796 -366 9,027 4,600 -621 -693 Total expenses OPERATING PROFIT/LOSS Profit/loss from financial investments Interest income Other financial income Interest expenses Total financial items Tax on profit/loss for the year Minority interest in profit/loss for the year PROFIT/LOSS FOR THE YEAR Zinzino Annual Report 8 33 BALANCE SHEET Parent company Group Amounts in SEK thousand Note 31 Dec 2013 31 Dec 2012 31 Dec 2013 31 Dec 2012 9 3,498 2,450 - - 3,498 2,450 - - 977 843 - - 977 843 - - 3,616 3,606 3,617 3,606 - - 18,768 18,512 Total financial assets 3,616 3,606 22,385 22,118 TOTAL FIXED ASSETS 8,091 6,899 22,385 22,118 24,638 14,044 - - 3,777 1,363 - - 28,415 15,407 - - 683 241 - - - - - 384 3,047 1,051 15 24 5,042 6,564 - 38 ASSETS FIXED ASSETS Intangible assets Intangible assets Total intangible assets Tangible assets Equipment, tools and installations 10 Total tangible assets Financial assets Other investments held as fixed assets Shares in subsidiaries 11 CURRENT ASSETS Inventories, etc. Finished goods and merchandise Advances to suppliers Total inventories Current receivables Accounts receivable Receivables from Group companies Other receivables Prepaid expenses and accrued income Tax assets 12 605 788 - - Total current receivables 9,377 8,644 15 446 Cash and bank balances 10,923 16,473 65 68 TOTAL CURRENT ASSETS 48,716 40,524 80 514 56,807 47,423 22,465 22,632 TOTAL ASSETS Zinzino Annual Report 34 BALANCE SHEET Amounts in SEK thousand Note EQUITY 13 Group 31 Dec 2013 31 Dec 2012 Parent company 31 Dec 2013 31 Dec 2012 Restricted equity Share capital 2,708 2,708 2,708 2,708 - - 2,708 2,708 Unrestricted reserves/retained earnings 9,878 5,076 19,424 20,117 Profit/loss for the year 9,027 4,600 -621 -693 - - 18,803 19,424 21,613 12,384 21,511 22,132 Minority interest 1,268 472 - - TOTAL MINORITY INTEREST 1,268 472 - - Other long-term liabilities 277 277 277 277 Total long-term liabilities 277 277 277 277 6,208 11,559 20 - - - 582 25 Total restricted equity Retained earnings Total retained earnings/accumulated loss TOTAL EQUITY MINORITY INTEREST LIABILITIES Long-term liabilities Current liabilities Accounts payable Liabilities to Group companies Bank overdraft facilities 14 400 - - - Other liabilities 15 18,539 14,475 36 36 Accrued expenses and deferred income 16 8,501 8,256 40 162 Total current liabilities 33,649 34,290 677 223 TOTAL LIABILITIES 34,926 34,567 954 500 56,807 47,423 22,465 22,632 TOTAL EQUITY, MINORITY AND LIABILITIES Pledged assets Contingent liabilities Zinzino Annual Report 17 6,500 3,400 NONE 3,000 NONE NONE NONE NONE 35 CASH FLOW STATEMENT Group Amounts in SEK thousand 1 Jan 2013 Parent company 1 Jan 2012 1 Jan 2013 1 Jan 2012 31 Dec 2013 31 Dec 2012 31 Dec 2013 31 Dec 2012 Operating activities Operating profit 10,470 5,265 -621 -736 735 397 - - 11,205 5,662 -621 -736 48 76 - 44 Interest paid -141 -24 - - Income tax paid -554 -351 - - 10,558 5,363 -621 -692 -13,008 -10,301 - - -809 -6,574 434 -331 Depreciation/amortisation and impairment Interest received Cash flow from operating activities before changes in working capital Cash flow from changes in working capital Increase(-) / Decrease(+) of inventories Increase(-) / Decrease(+) of current receivables Increase(+) / Decrease(-) of current liabilities Cash flow from operating activities -565 20,209 455 -59 -3,824 8,697 268 -1,082 -11 -3,779 - -3,805 -1,534 -1,310 -271 - -383 -422 - - -1,928 -5,511 -271 -3,805 - - - - Investment activities Investments in financial assets Investments in intangible assets Investments in tangible assets Cash flow from investment activities Financing activities Shareholder contributions Group contributions - - - - Option issue 0 4 0 4 Cash flow from financing activities 0 4 0 248 CASH FLOW FOR THE YEAR -5,752 3,190 -3 -4,883 Cash and cash equivalents at the start of the year 16,473 13,322 68 4,951 Exchange rate difference in cash and cash equivalents -202 39 - - Cash and cash equivalents at year-end 10,923 16,473 65 68 Change in cash and cash equivalents -5,752 3,190 -3 -4,883 Zinzino Annual Report 36 ADDITIONAL INFORMATION GENERAL INFORMATION ACCOUNTING AND VALUATION PRINCIPLES Applied accounting principles are consistent with the Annual Accounts Act and statements and general advice from the Swedish Accounting Standards Board. When general advice was not available from the Accounting Standards Board, guidance has been taken from the Swedish Financial Accounting Standards Council recommendations and, in applicable cases, from statements by FAR. In such cases, this is noted in specific order below. The accounting principles are unchanged from the previous year. CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements include the parent company, subsidiaries in which the parent company directly or indirectly owns shares corresponding to 50% of voting rights or through agreements has a controlling interest, and associated companies in which the parent company owns shares corresponding to at least 20% or in another way has significant influence without a subsidiary relationship. These consolidated financial statements have been prepared using the purchase method. This means that a subsidiary's assets and liabilities are recorded at acquisition value, which formed the basis for the determination of purchase price for the shares. The difference between purchase price and the acquired company's equity is recorded as goodwill. Group equity includes the parent company's equity and portions of subsidiary equity arising after the acquisition of these companies. Translation of foreign subsidiaries' income statements and balance sheets are prepared using the current rate method. This means that assets and liabilities are translated at the closing rate and that the income statements are translated at average exchange rates during the financial year. Items recorded under equity are translated to the prevailing rates at the time of acquisition. Any translation differences are recorded directly in consolidated equity. Inter-company profits are eliminated in full. REVENUE RECOGNITION Income from sales of goods and services is recognised at the date of delivery. Net sales comprise sales value less VAT and discounts. INTEREST Interest income is recognised as it is earned. LEASING The financial agreements within the Group are reported as operating leases, which means that leasing fees are reported as an expense in the income statement. INCOME TAX The Group's tax expenses or tax income comprise current tax, changes in deferred tax and tax attributable to share in profits in associated companies. Current tax is the tax payable on the taxable profit for a period in accordance with tax regulations in each country. Deferred tax is calculated based on taxable and deductible temporary differences between reported and tax values of assets and liabilities. Loss allowances are only taken into account to the extent that it is probable that the loss allowance can be utilised in the foreseeable future. Valuation of all tax liabilities/assets are measured at nominal amounts and in accordance with applicable tax regulations and tax rates. RECEIVABLES Receivables are recorded at the lowest nominal value and at the amount that is expected to be received. Receivables and liabilities in foreign currencies are valued at the closing rate. Exchange gains and losses on operating receivables and liabilities are included in operating profit. Gains and losses on financial receivables and liabilities are reported as financial items. INVENTORIES Inventories are valued according to the lowest value principle and FIFO (first in, first out) method. This means that inventories are stated at acquisition cost under the FIFO method or at fair value, whichever is lower. Deductions for real obsolescence have been made. FIXED ASSETS Fixed assets are valued at acquisition value less accumulated depreciation/amortisation. Depreciation/amortisation is applied systematically over an asset's expected useful life as listed below: Equipment, tools and installations Intangible assets 20% per year 20% per year CASH FLOW STATEMENT The cash flow statement is prepared using the indirect method.. The reported cash flow only includes transactions that involve cash payments. Zinzino Annual Report 37 NOTES TO INDIVIDUAL ITEMS Note 1 SEGMENT REPORTING Segmentation is based on the Group's internal reporting structure, which is based on sales per geographic area. Sales in the Nordic region comprise approx. 79% of total sales. The Directors' Report specifies the geographic distribution. Note 2 PURCHASES AND SALES BETWEEN GROUP COMPANIES Of the year's sales, SEK 0 (0) thousand concerns sales to other Group companies. Of the year's purchases, SEK 0 (0) thousand concerns purchases from other Group companies. Note 3 EXCHANGE RATE DIFFERENCES Parent company Group 2013 2012 2013 2012 Exchange rate gains 2,556 772 - - Exchange rate losses -1,028 -917 - - Total 1,528 -145 - - Note 4 LEASING During the year, the Group entered into two new leasing agreements for vehicles and one agreement for expanded switchboard services. Parent company Group 2013 2012 2013 2012 Due within one year 501 223 - - Due within five years 951 572 - - 1,452 795 - - 2013 2012 2013 2012 Leasing expenses paid during the year 452 96 - - Total 452 96 - - Total Parent company Group Zinzino Annual Report 38 Note 5 REMUNERATION TO AUDITORS Group Parent company 2013 2012 2013 2012 447 340 40 40 Audit assignment 72 56 - - Other services 19 - Audit assignment 10 10 - - Other services 48 48 - - 42 17 - - 6 1 626 472 40 40 PricewaterhouseCoopers AB Audit assignment PricewaterhouseCoopers AS (NO) PricewaterhouseCoopers Aps (DK) PricewaterhouseCoopers Oy (FI) Audit assignment PricewaterhouseCoopers Ehf (IS) Audit work outside of audit assignment Total NOTE 6 EMPLOYEES AND PERSONNEL COSTS Salaries and other remuneration Salaries and other remuneration - of which to Board and CEO - of which bonuses Parent company Group 2013 2012 2013 2012 17,541 14,253 - - 2,697 2,881 * * 624 870 - - 5,515 4,769 - - - of which to Board and CEO 499 846 - - Of which pension costs 946 699 - - - - - - - - Social security contributions in accordance with legislation and contractual agreements - of which to Board and CEO Total 23,056 by country 19,005 Group Salaries and other remuneration, distributed Parent company 2013 2012 2013 2012 17,016 13,895 - - 2,238 2,536 - - 17,016 13,895 - - Sweden Salaries and other remuneration - of which to Board and CEO Total for Sweden Norway Salaries and other remuneration 459 345 - - - of which to Board and CEO 459 345 - - Total for Norway 459 345 - - 52 - - - - - - - 52 - - - 15 13 - - - - - - 15 13 - - 17,541 14,253 - - USA Salaries and other remuneration - of which to Board and CEO Total for USA Lithuania Salaries and other remuneration - of which to Board and CEO Total for Lithuania Total Zinzino Annual Report 39 *TERMS FOR CEO The notice period from the company is six months. The notice period from the CEO is six months. Monthly salary is SEK 139,000 and pension terms are in accordance with general company terms. The CEO's bonus for 2013 was SEK 624,000. The CEO's salary is paid from Zinzino Nordic AB and Zinzino AS. Average number of employees Group Parent company 2013 2012 2013 2012 Women 38 23 - - Men 14 15 - - Average number of employees 52 38 - - During the year, 453 (445) private individuals in the sales force received remuneration in the form of wages in Sweden. Due to the fact that Zinzino has no ability to affect the design and scope of their working hours and any remuneration to them is only paid as commission on the sales they generate, a conversion to the full number of full-time employees is not possible. These individuals have been paid SEK 511,000 (683,000) within the Group. Gender distribution in senior management Parent company Group 2013 2012 2013 2012 24 22 4 4 1 1 1 1 23 21 3 3 CEOs 1 1 1 1 - of which women - - - - - of which men 1 1 1 1 Other senior executives 6 5 5 5 - of which women 2 2 2 2 - of which men 4 3 3 3 Total number of women 3 3 3 4 Total number of men 28 25 7 6 Total 31 28 10 10 Board members - of which women - of which men Zinzino Annual Report 40 Note 7 DEPRECIATIONS/AMORTISATIONS Parent company Group 2013 2012 2013 2012 Intangible assets 486 224 - - Equipment 249 173 - - Total 735 397 - - Note 8 TAX ON PROFIT/LOSS FOR THE YEAR Parent company Group 2013 2012 2013 2012 Current tax 554 351 - - Total 554 351 - - Note 9 INTANGIBLE ASSETS Group 2013 2012 Opening acquisition value 2,673 Acquisitions during year Closing acquisition value Parent company 2013 2012 1,364 - - 1,534 1,309 - - 4,207 2,673 - - -224 - - - - - - - Amortisation for the year -486 -224 - - Closing accumulated amortisation -710 -224 - - 3,498 2,450 - - Opening amortisation value Divestment for the year Closing residual value according to plan Note 10 EQUIPMENT, TOOLS AND INSTALLATIONS Parent company Group 2013 2012 2013 2012 2,988 2,566 - - Acquisitions during year 383 422 - - Divestment for the year 0 0 - - Closing accumulated acquisition value 3,371 2,988 - - Opening amortisation value -2,145 -1,972 - - 0 0 - - Opening acquisition value Divestment for the year Amortisation for the year Closing accumulated amortisation Closing residual value according to plan Zinzino Annual Report -249 -173 - - -2,394 -2,145 - - 977 843 - - 41 Note 11 SHARES IN SUBSIDIARIES Parent company Opening acquisition value Acquisition of shares in Zinzino Nordic Acquisition of Zinzino UAB Closing book value Name of subsidiary 2013 2012 18,512 18,313 257 173 - 26 18,768 18,512 Shares in % Votes in % CIN Domicile 93% 97% 556646-5893 Gothenburg Zinzino OÜ 100% 100% 302606327 Tallinn Zinzino UAB 100% 100% 12057494 Vilnius Zinzino SIA 100% 100% 40103529390 Riga Zinzino Ehf 100% 100% 580511-0660 Reykjavik Zinzino LLC 100% 100% 90-0992153 Jupiter, FL Zinzino Nordic AB Subsidiaries wholly owned by Zinzino Nordic AB: 2013 2012 Shareholding Votes Book Book in % in % value value Zinzino Sverige AB 100% 100% 100 100 Zinzino ApS 100% 100% 155 155 Zinzino AS 100% 100% 112 112 Zinzino Oy 100% 100% 77 77 Poxian AB 100% 100% 100 100 PGTwo AB 100% 100% 100 100 2 Think 100% 100% 93 93 737 737 Specification of subsidiary Total Name of subsidiary Zinzino Sverige AB CIN Domicile 556646-5869 Gothenburg Zinzino ApS 27266940 Copenhagen Zinzino AS 986028269 Oslo Zinzino Oy 1825505-2 Helsinki Poxian AB 556655-2658 Gothenburg PGTwo AB 556639-0513 Gothenburg 2 Think AB 556667-3983 Gothenburg Zinzino Annual Report 42 Note 12 PREPAID EXPENSES AND ACCRUED INCOME Parent company Group 2013 2012 2013 2012 512 414 - - - - - - Other prepaid costs 1,304 2,387 - 38 Debit card receivables 3,226 3,763 - - Total 5,042 6,564 - 38 Prepaid leasing costs Prepaid product costs Note 13 EQUITY CHANGE IN EQUITY IN PARENT COMPANY Parent company 2013 2012 Share capital Non-restricted reserves Total equity Share capital 2,708 19,424 22,132 2,708 -621 -621 18,803 21,511 Balance at start of year Profit/loss for the year Balance at end of year 2,708 Non-restricted Total equity reserves 2,708 20,117 22,825 -693 -693 19,424 22,132 SHARE CAPITAL Of the company's 27,082,770 total shares, 6,113,392 are A-shares. DEVELOPMENT IN SHARE CAPITAL Year Event Total number of shares Increase in shares Total share capital Quota share capital 2007 Company established 37,000,000 37,000,000 100,000 100,000 2007 New issue 37,803,188 74,803,187 102,069 202,069 2008 Bonus issue 0 0 545,963 748,032 2008 New issue 12,476,963 87,280,150 124,770 872,802 2009 New issue 135,022,681 222,302,831 1,350,227 2,223,029 2010 New issue 48,524,869 270,827,700 485,248 2,708,277 2010 Reverse split -243,744,930 27,082,770 0 2,708,277 27,082,770 2,708,277 CHANGE IN EQUITY FOR GROUP Group Balance at start of year 2013 SHARE CAPITAL Non-restricted reserves Total equity 2,708 9,676 12,384 Group contributions to equity Profit/loss for the year Balance at end of year Zinzino Annual Report 2012 2,708 SHARE Non-restricted CAPITAL reserves 2,708 5,283 Total equity 7,991 202 202 -207 -207 9,027 9,027 4,600 4600 18,905 21,613 9,676 12,384 2,708 43 NOTE 14 BANK OVERDRAFT FACILITIES The bank overdraft facilities granted for the Group amount to SEK 5 (3) million and for the parent company amount to SEK 0 (0). NOTE 15 OTHER LIABILITIES Group Tax liability Retaining withholding tax Compulsory social security contributions Commission liabilities NOTE 16 2013 2012 2013 2012 2,286 2,866 - - 351 317 - - 447 301 - - 13,482 9,465 - - 1,975 1,525 36 36 18,539 14,475 36 36 Other liabilities Total Parent company ACCRUED EXPENSES AND DEFERRED INCOME Parent company Group 2013 2012 2013 2012 Accrued payroll-related expenses 3,624 3,520 - - Accrued commission 2,390 1,832 - - Accrued audit 434 322 40 40 Accrued shipping expenses 337 613 - - Accrued product expenses 1,202 1,359 - - 515 610 - 122 8,501 8,256 40 162 Other accrued expenses Total NOTE 17 PLEDGED ASSETS The group has restricted cash amounting to SEK 500,000 (SEK 400,000) relating to bank guarantees to suppliers. Bank overdraft facilities amount to SEK 6 (3) million. Zinzino Annual Report 44 Gothenburg, 22 April 2014 Hans Jacobsson Chairman of the Board of Directors Björn Flintberg Board Member Staffan Hillberg Board Member Dag Bergheim Pettersen CEO Cecilia Halldner Board Member Our auditor's report was submitted on 25 April 2014. Öhrlings PricewaterhouseCoopers AB Magnus Götenfelt Certified Public Accountant Note: This report is published in Swedish and English. In the event of any difference between the English version and the Swedish original, the Swedish version shall prevail. Zinzino Annual Report 45 Zinzino Annual Report 47