BIRDSTEP TECHNOLOGY ASA INTERIM REPORT. Revenue was NOK 8.7 (8.2) million, representing an increase of 7% over the same period last year.

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1 Q BIRDSTEP TECHNOLOGY ASA INTERIM REPORT JULY - SEPTEMBER 2012 Revenue was NOK 8.7 (8.2) million, representing an increase of 7% over the same period last year. EBITDA ended at NOK 7.7 (-11.6) million, representing a reduced loss of NOK 3.9 million over the same period last year. Continuing operating earnings per share amounted to NOK 0.07 (-0.17). Total cash flow amounted to NOK 4.9 (-12.0) million. Cash balance was NOK 8.9 (45.1) million. JANUARY SEPT 2012 Revenue was NOK 30.7 (42.3) million, representing a decrease of 27% over the same period last year. EBITDA ended at NOK (-23.8) million, representing a reduced loss of NOK 3.9 million over the same period last year. Continuing operating earnings per share amounted to NOK (-0.42). Total cash flow amounted to NOK (19.4) million. SIGNIFICANT EVENTS AFTER THE PERIOD Shareholders decided at the EGM to launch a private placement of NOK 20 million at 1 NOK per share to three existing large shareholders. Also, a repair issue of a maximum total of NOK 5 million was resolved. At the same meeting the shareholders elected Lonnie Schilling onto the Board of Directors.

2 CEO UPDATE Birdstep continues to execute on the new strategy and to focus our resources on the new products. Our current EasySmart roll out is progressing well and we expect to make further progress in Q4. Significant milestones in Q3 included the signing of several new resellers for our Secure Mobility products, with business already coming through. We signed a new and exciting agreement for our new Portable Security product with a Finnish government agency. For Smart Mobile Data, we signed yet another new agreement with a US based Tier-1 operator. We also continued to roll out large volumes of EasySmart clients to our existing customers. Our Q3 revenue was NOK 8.7 (8.2) million which represented a 7% growth as compared to the same period last year. The Q3 revenue was negatively impacted by a change in the commercial agreement with a large Smart Mobile Data customer. Our legacy business grew this quarter but is expected to decline going forward, which is consistent with our product strategy. The underlying trends with our other products remain as previously stated. Secure Mobility remains stable and the Smart Mobile Data business continues to expand. Operating expenses in Q3 were NOK 15.4 (18.2) million, which was in line with our expectations. A significant event for Birdstep in Q3 was our initiation of a private placement of NOK 20 million, which was successfully closed in October. The private placement was subscribed to by three large existing shareholders, thus underlining confidence in Birdstep s strategy and ability to execute. Lonnie Schilling was elected as a Non-Executive Director. Lonnie brings many years of experience from the telecom industry, most recently in an executive position at Cisco. Anders Harrysson CEO, Birdstep Technology

3 BUSINESS FOCUS Continuous expansion with EasySmart in North America Birdstep further strengthened its position in North America in the third quarter by signing a new contract for a large scale deployment of its intelligent data off-load client, EasySmart, with another leading North American operator. With a positive outcome from the first phase, the signed contract will allow for a full-scale commercial deployment. The company also successfully continues its roll out for the leading operator mentioned in the second quarter report. Birdstep has several EasySmart trials in progress for Tier one, two and three operators in the US, as well as with leading Telco vendors in North America, Europe and Asia. New customers Birdstep won three new strategically important customer deals in the third quarter. One was for Smart Mobile Data with a leading North American operator as mentioned and two for Secure Mobility. The first win for Secure Mobility was with SatCom Direct in the US. SatCom is working in the business aviation area developing its own Mobile Router product. Their product will now be equipped with Birdstep s Mobile IP technology, which will run the SafeMove Mobile IP service for mobile routers. The second win was the company s first SafeMove Mobile VPN and SafeMove Mobile access trial order from Malaysia. The order was made through Haynik. The Haynik reseller agreement was signed in Q1, and this is the first actual customer case in the region. Milestones Birdstep has received the first order for its SafeMove Portable Security product from a Finnish customer. The interest for this product is high and the order proves the product strategy for this area. The company also received a SafeMove license order from the Ministry of Social Affairs in Finland. Internationally Secure Mobility made progress through a professional services order from Wipro/Thameswater in the UK. This order will allow users to access public networks through SafeMove Mobile VPN. The company also received EasyConnect license orders from three European Mobile Operators during the quarter. The orders for Smart Mobile Data and Secure Mobility confirm customers satisfaction with Birdstep and its products. In addition to the strategic wins mentioned, Birdstep continued to develop its partner programme by signing two new reselling and partnering agreements. One is with Leadent Solutions in the UK, which provides software and services to utility organizations in the US. The second is with Four Systems, which is operating in the telecom sector in Saudi Arabia.

4 STRATEGY & MARKETS Firstly, Birdstep s strategy is based on the great increase in data traffic created by smartphones and other connected devices such as tablet computers. This is paired with the need for more mobile workforces and the continuous demand for end user services in the mobile broadband area. Smartphones and tablet computer sales grew with over 60% in 2011, while the H1 numbers for 2012 had already shown a growth of almost 40% by early June. The explosion of smartphones and tablets in combination with the continued growth of mobile broadband has led to an upsurge in data traffic in mobile operator networks. Unfortunately for the mobile operators, the ARPU is not growing at the same pace as this traffic. In fact, research by Tellabs1 and Analysis Mason shows that operators need to change their business models in order to be able to increase the demand for off-load and analytics, which in turn may play in Birdstep s favour. Birdstep focuses on the continuously rising amounts of data and increased network expansion costs with its data offload solutions. Another vital facility required to make good decisions is that of access to network analytics. This is a must across all devices, and it is also a must in order to get the best possible performance out of the mobile network. Birdstep focuses strategically on working in this area to enable its customers to capture detailed analytics statistics in their networks. Birdstep knows how important it is for operators to reduce their rising support costs, and how crucial a good support experience is for the overall user experience. Strategically this is a natural focus for Birdstep, which combines the knowledge the Company has in mobile broadband and the need for data on network and usage behaviour. Secondly, the great success of new mobile data devices such as laptops, smartphones and tablets has also led to an increasing need for mobile solutions that keep a company s secure mobility strategy on track. Enterprises are going mobile and equipping their workforce with mobility and connectivity tools that will increase productivity and the workforce efficiency. Naturally, major hardware and software vendors will address this need to provide best solutions and products. Mobile operators will most likely seek partners that understand and have good experience of providing enterprises with security software and mobility solutions, as well as the necessary partnerships to deliver large scale deployments and support. In order to leverage the increasing demands from the enterprise segment, therefore, this means that Birdstep needs to continue to develop its security product portfolio and enterprise competence base. Birdstep even anticipates a major trend whereby workers who are not provided with the latest devices simply bring their own device to work. Birdstep can provide good solutions for many of these scenarios when it comes to the safety and security of the company network, and in the year to come will continue to work on its plans to really cover the needs of the modern enterprise.

5 RESULTS OF OPERATIONS Third quarter Third quarter revenue was NOK 8.7 (8.2) million, which represents an increase in revenue of 7% over the same quarter last year. Other operating expenses for the quarter was NOK 5.3 (7.4) million. The decrease is a result of the overall cost reduction program started in Q Salaries and wages were NOK 10.1 (11.1) million. Number of employees ending was 62. The quarterly Other financial items, net of 4.1 NOK consists of the earn-out provision from the Orbyte transaction and was received in August 1 st As a result of the above factors, a net loss of NOK 4.9 (10.5) million was recorded in the quarter. Nine Month Period Revenue for the first nine months 2012 was NOK 30.7 (42.3) million and represents a decrease in revenue of 27% over the same period last year. Salaries and wages for the first nine months were NOK 29.5 (37.3) million Other operating expenses for the first nine months was NOK 17.7 (23.0) million. The decrease is a result of the overall cost reduction program started in Q As a result of the above factors, a net loss of NOK 21.9 (5.0) million was recorded in the quarter. Last year number included the gain of the divestment of Aptilo of NOK 24.8 million. EBITDA ended at NOK (-23.8) million which represents a decreased loss of NOK 3.9 million from the same quarter last year CASH FLOW Third quarter Cash flow for the third quarter was negative and our net cash balance decreased with NOK 4.9 million to NOK 8.9 million. Nine Month Period Cash flow for the first nine months was negative and our net cash balance decreased with NOK 25.9 million to NOK 8.9 million.

6 FINANCIAL STATEMENTS Condensed Consolidated Statements of Operations (In thousands of NOK, except share and per share data) For the three For the nine For the full year ended OPERATING REVENUES Cost of revenues (1.038) (1.497) (3.524) (4.635) (6.162) OPERATING EXPENSES Salaries and wages (10.075) (11.137) (29.453) (37.252) (46.965) Share-based compensation (0) 260 (16) (1.157) (819) Other operating expenses (5.314) (7.359) (17.671) (23.049) (32.748) TOTAL OPERATING EXPENSES (15.389) (18.236) (47.140) (61.458) (80.532) EBITDA (7.710) (11.565) (19.936) (23.820) (35.442) Depreciation and amortization (1.392) (933) (6.106) (7.026) (26.936) EBIT (9.102) (12.498) (26.042) (30.846) (62.378) OTHER INCOME (EXPENSE) Share of gains(losses) in affiliated company Interest income, net Other financial items, net (833) OTHER INCOME, NET INCOME(LOSS) FROM CONTINUING OPERATIONS OPERATIONS BEFORE TAXES (4.897) (11.740) (21.888) (29.741) (62.337) Income taxes INCOME(LOSS) FROM CONTINUING OPERATIONS (4.897) (11.740) (21.888) (29.741) (62.337) Gain/loss on disposal of discontinued operation NET INCOME(LOSS) (4.897) (10.518) (21.888) (4.975) (37.571) Earnings and diluted earnings per share (NOK) Continuing operations (0,07) (0,17) (0,31) (0,42) (0,87) Discontinued operations - 0,02-0,35 0,35 Total (0,07) (0,15) (0,31) (0,07) (0,53) Condensed Consolidation Statements of Comprehensive Income (In thousands of NOK, except share and per share date) For the three For the nine Full year ended Net income (loss) for the period (4.897) (10.518) (21.888) (4.975) (37.571) OTHER COMPREHENSIVE INCOME Currency translation effect (1.398) (588) (2.289) (1.047) (727) TOTAL COMPREHENSIVE INCOME (6.295) (11.106) (24.177) (6.022) (38.298) Attributable to: Equity holder of the parent company (6.295) (11.106) (24.177) (6.022) (38.298) Minority interests TOTAL COMPREHENSIVE INCOME (6.295) (11.106) (24.177) (6.022) (38.298)

7 Condensed Consolidation Balance Sheets (In thousands of NOK, except share and per share date) As of ASSETS Non-current assets: Intangible assets Property and equipment Investment in affiliated company Other non-current assets Total non-current assets Current assets: Accounts receivable Other current assets Assets held for sale Restricted cash Cash & cash equivalents Total current assets Total assets Liabilities Shareholders equity: Share capital Share premium fund Other equity, including translation reserves Total shareholders equity Non-current liabilities: Accrued pension costs Other liabilities Total non-current liabilities Current liabilities: Accounts payable Deferred revenue Liabilities held for sale Accrued expenses and other liabilities Total current liabilities Total Liabilities and Shareholders Equity

8 Condensed Consolidated Statements of Cash Flows (In thousands of NOK) For the three For the nine For the full year ended Cash flow from operating activities Net income (loss) (4.897) (10.518) (21.888) (5.381) (37.571) Depreciation and amortization Write down and impairment of intangible assets Share based compensation - (260) Share of earnings in affiliated company Gain/loss on disposal of discountinued operations - (1.222) - (24.766) (24.766) Change in working capital (2.121) Net cash from operating activities (3.464) (10.282) (17.887) (14.780) (29.561) Cash flows from investing activities Purchase of fixed and intangible assets (1.061) (2.848) (7.340) (8.946) (11.551) Sale of Service Factory - net proceedes (costs) Change in restricted cash balances (6.921) - Change in loan balance with affiliated company Net cash provided by (used in) investing activities (1.061) (1.626) (7.340) Effect of foreign exchange rate changes (343) (124) (638) (96) 232 Net cash flow (4.868) (12.032) (25.864) Cash at beginning of period Cash at end of period Condensed Consolidated Statement of Changes in Shareholders Equity (In thousands of NOK, except share and per share data) Share capital Share premium Other paid equity Other equity Translation reserves Total equity Equity as at 31 December Net income (loss) - - (21.887) - (21.887) Other comprehensive income for the period Foreign currency exchange (2.289) (2.289) Total comprehensive income (21.887) (2.289) (24.176) Transactions with shareholders: Issue of share capital Additional paid in capital Reduction in share capital and transfer of share premium Sale of treasury shares Recognition of share-based payments Total transactions with shareholders Equity as at 30 Sept (21.887) * Number of shares issued is 71,364,796 with par value of NOK 0,10 per share and includes treasury shares as of September 30, 2012.

9 NOTES Accounting policies The accompanying consolidated financial statements are prepared under International Financial Reporting Standards (IFRS). Our fiscal year runs from January 1 to December 31. The accompanying condensed consolidated statements of operations and cash flows cover the nine months to the end of 2012, and the related information on Birdstep included in these notes to the financial statements is unaudited. In the opinion of management, such interim statements include all adjustments, which consist only of the normally recurring adjustments necessary for a fair presentation of the consolidated results of operations, financial position and cash flows for each period presented. The interim consolidated results are not necessarily indicative of results for the full year. The same accounting policies and methods of computation are followed in the interim financial statements as those of the most recent annual financial statements. functional currency of Birdstep s foreign operations is the currency of the country in which the operations are conducted. The accounts of Birdstep are translated into the reporting currency, NOK, using exchange rates in effect at period-end for assets and liabilities, and at average exchange rates during the period for the results of operations. EBITDA is equivalent to operating income (loss) excluding both discontinued operations and non-cash charges, such as depreciation and amortization. Income per share is calculated by dividing net income available to common shareholders for the period by the weighted average number of common shares outstanding during the period. As of September 30, 2011, the Company has 71,364,796 shares issued and 71,343,741 shares outstanding, the difference of 21,055 representing treasury shares. These interim financial statements are presented in Norwegian kroner (NOK). The Segment Reporting The Company is divided into two separate operating segments (Smart Mobile Data and Secure Mobility). For the three For the nine For the full Year MNOK Smart Mobile Data * Operating Revenues Operating Income (loss) (6.540) (13.128) (18.713) (21.876) (48.914) Secure Mobility ** Operating Revenues Operating Income (loss) (2.561) (5.626) (7.328) (9.376) (13.463) * The products in Smart Mobile Data is: EasyConnect, Easy Smart and EasyHelp. ** The products in Secure Mobility is: SafeMove, Embedded Mobile IP, SafeMove Mobile Access, SafeMove Clientless SSL VP, SafeMove Mobile Router, SafeMove Portable Security *** In Q a write down of intangible assets of NOK 17.5 million was made in EasyConnect. *** In 2012 the company changed the way of presenting Operating Income (loss) per segment which explains why differences from previous quarterly reports will occur.

10 Risks This report contains statements regarding the future in connection with the company s growth expectations, general and specific market outlook and objectives. All statements about the future are subject to inherent risks and uncertainties, and many factors can lead to actual profits and developments deviating substantially from that which has been expressed or implied in such statements. Birdstep Technology is exposed to various forms of market, operational and financial risk. After closing the sales of Raima, Orbyte and Aptilo, the overall risk of operational and financial losses has been reduced, while the focus on core businesses where the company possesses particular expertise may increase. Financial instruments that potentially subject Birdstep to concentrations of credit risk consist primarily of cash and accounts receivable. Birdstep performs ongoing evaluations of customers financial condition to determine if any reserve for potential uncollectible amounts is needed. As of September 30, 2012, no potential uncollectible amounts had been made. Outlook Birdstep s business continues to make solid progress. The pipeline for prospects is strong and we are increasing our focus and resource on the North American markets as this geography represents the single largest marketplace for our Smart Mobile Data suite of products. That said, the overall mood of the market remains cautious with operators taking longer to make decisions and slipping projects between quarters. This general trend makes it challenging to forecast not only in the respect of revenues but also in respect of costs and cash flow.