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1 N N X X B I O M B I O M I C S I C G O U P S A S A... Q U A L Y P O Q XB I O M I C S. C O M

2 Q U A L Y P O Q > HIGHLIGHS... evenue of NOK 23.3 million vs NOK 24.7 million in Q417 Positive gross margin of 19%, up from negative 4% in Q417 aised NOK 12 million in gross proceeds to fund growth Passed 4 million sensors shipped Management team reorganized to strengthen manufacturing and scalability Successful testing of new contactless smart card solution (April) Shipping first samples of contactbased smart card module to customers (May) CO comment We continue to develop a range of products featuring our proprietary, large and costefficient flexible fingerprint sensors with a focus on driving profitable growth within our targeted markets of smart cards, government IDs, access control and notebooks. Achieving 19% gross margin in the first quarter is a confirmation of our progress. In addition, the progress our technical teams are making in contactless smart card solutions and our sampling of contactbased smart cards with customers, show that NX s fingerprint sensor technology is gaining traction in our most important market. itu Favre, the CO of NX Biometrics Group ASA. AMOUNS IN NOK MILLION (XCP P SHA DAA & GOSS MAGIN) otal revenue Gross margin % BIDA BIDA ex. Options arnings per share basic & diluted Closing cash balance1 1 Q1218 Q4217 Q3217 Q2217 Q % % % % % % Includes NOK 65.7 million in net proceeds from tranche 1, additional NOK 51.2 million in gross proceeds paid in April 2

3 Q U A L Y P O Q > OPAIONAL VIW: NX Biometrics (NX) reported its first positive gross margin in the first quarter of 218 on increased shipments of the next generation fingerprint module with the new ASIC. he gross margin was 19% on the back of sales of NOK 23.3 million. Additionally, the company reached 4 million sensors shipped in March. Both milestones were in line with the company s previosly stated targets. On March 21, NX successfully completed a private placement of new shares raising a gross amount of NOK 12 million. he proceeds from the placements will be used to further scale company activities within the target smart card and government ID segments. In total, 2,857,142 million new shares were issued at a subscription price of NOK 42 per share. Gross proceeds of NOK 68.8 million (tranche 1) of in total NOK 12 million were registered in March. he remaining gross proceeds of NOK 51.2 million (tranche 2) were registered in April. Achieving the 4 million sensors shipped figure in March, reflects NX s established position in the biometric ID market. Shipments of the next generation fingerprint module, the NB234S2, to the company s ier1 U.S. notebook customer continued through the quarter and was an important driver for improved gross margins. NX maintained focus on product development and marketing through the first quarter of 218 to expand the business within the targeted smart card and government ID markets. he total number of ongoing design prospects and engagements grew through the period. NX has experienced a steady increase in interest in its unique technology after establishing massproduction capabilities for flexible fingerprint sensors in 217 and the continued development of new technological advances. On April 25, NX announced it had achieved an important first step in meeting the key requirements necessary for commercialization of the company s fingerprint sensor technology for contactless smart cards. NX smart card modules successfully performed biometric functions powered only by an industry standard contactless card reader. he testing also showed NX s large area flexible sensors conducted these functions reliably and consistently. Meeting the necessary lowpower requirements for securely processing biometric data wirelessly is one of the key technical issues that must be successfully addressed to build systems based on contactless smart card technology. 3

4 Q U A L Y P O Q At the end of the quarter, NX reorganized the corporate management team to accelerate the transition to efficient manufacturing, improve yields, and negotiate worldclass pricing with all manufacturing partners. hese are all key elements in NX s strategy to scale its business and deliver high quality products in its target markets. Dan Cronin, formerly VP of ngineering, was appointed Chief Operating Officer, tasked with integrating the development and manufacturing of NX s fingerprint sensor technology into a single, streamlined unit. avi Jagannath, previously with chip maker Cirrus Logic, was hired as SVP of Operations. NX s Chief of Staff and H Officer, Zehira SitbonDadon, also assumed responsibility for Sales & Operations Planning. he capital raised during the quarter will be used for investments in product development, integration of sensors and surrounding technology in marketready products, and lowering power consumption all elements that are key to meeting demand in the smart card and government ID segments. NX has a detailed roadmap for executing these development projects, which are aligned with ongoing sales and marketing activity. Sampling the NB441 contactbased module for smart cards started in May, in line with the roadmap as previously communicated. 4

5 Q U A L Y P O Q > INIM CONDNSD FINANCIAL SAMNS AS OF 31 MACH 218 (UNAUDID) POFI & LOSS SAMN evenues Operating revenue in the first quarter of 218 was NOK 23.3 million, compared to NOK 24.7 million in the previous quarter and NOK 24.1 million in the first quarter of 217. Cost of goods sold and gross margin Cost of goods sold were NOK 18.8 million in the first quarter of 218, compared to NOK 25.6 million in the previous quarter and NOK 26.5 million in the first quarter of 217. he gross margin in the first quarter of quarter of 218 was for the first time positive with NOK 4.5 million (+19%), compared to negative NOK.9 million (4%) in the previous quarter and negative NOK 2.4 million (1%) in the first quarter of 217. Operating expenses Payroll expenses amounted to NOK 25.7 million in the first quarter of 218, compared to NOK 26. million in the previous quarter and NOK 19.2 million in the first quarter of 217. he decrease from the previous quarter of NOK.3 million was mainly due to decreased sharebased remuneration and social security cost of NOK 2.6 million. his was partly offset by other payroll expenses increased with NOK 2.2 million. Other operating expenses were NOK 17.6 million in the first quarter of 218, compared to NOK 14.8 million in the previous quarter and NOK 21.3 million in the first quarter of 217. he increase from previous quarter of NOK 2.8 million was mainly related to increased &D related operating expenses. he &D costs included in other operating expenses increased to NOK 11.2 million in the first quarter of 218, compared to NOK 7.1 million in the previous quarter and NOK 12.4 million in the first quarter of 217. he increase from the previous quarter of NOK 4.1 million was mainly related to the NOK 5. million reduction in the fourth quarter of 217 regarding granted public subsidies in connection with a Norwegian tax deduction scheme (SkatteFUNN). Depreciation, amortisation and investments Depreciation and amortisation amounted to NOK 2. million in the first quarter of 218 compared to NOK 1.7 million in previous quarter and NOK.8 million in the first quarter of 217. In the fourth quarter of 217 NX wrote down the value of its first coating machine from 214 by NOK 11.4 million to. Investments were NOK.3 million in the first quarter of 218, compared to NOK 9.5 million in the previous quarter and NOK.2 million in the first quarter of 217. he main investments in 217 were the coating machine in the second quarter and the cutting machine for flexible sensor production in the fourth quarter. Net financial items Net financial cost was NOK 1.5 million in the first quarter of 218, compared to a net financial income of NOK 3.1 million in the previous quarter and a cost of NOK.6 million in first quarter of 217. he increased cost from the previous quarter of NOK 4.6 million was mainly related to foreign exchange gains and losses. Net profit (loss) for the period Net loss in the first quarter of 218 was NOK 42.3 million, compared to a loss of NOK 53. million in the previous quarter and a loss of NOK 44.3 million in the first quarter of 217. he decreased loss from the previous quarter was mainly related to the write down effect of NOK 11.4 million in the fourth quarter of 217, improved gross margins and higher &D cost in the first quarter of 218. NX operated at a loss and did not incur deferred or payable income tax in the first quarter of 218. In 217, payable taxes of NOK 1.2 million related to foreign subsidiaries, were expensed in the fourth quarter. 5

6 Q U A L Y P O Q CASH FLOW AND BALANC SH Cash and cash equivalents Cash and cash equivalents amounted to NOK 18.6 million at the end of the first quarter of 218, compared to NOK 79.7 million at the end of 217. Cash flow from operating activities was negative with NOK 36.6 million in the first quarter of 218, compared to a negative amount of NOK 34.1 million in the previous quarter and a negative amount of NOK 37.3 million in the first quarter of 217. Net cash flow from financing activities was NOK 65.7 million in the first quarter of 218 following the private placement of 1,638, new shares (tranche 1), compared to NOK in the previous quarter and NOK million in the first quarter of 217 following a private placement of 1,167, new shares. ranche 2, following tranche 1 of the private placement, consists of NOK 51.2 million in gross proceeds and new shares. he issuance of the new shares in tranche 2, was approved at the extraordinary general meeting 13 April 218. here will be offered a repair issue of up to 2, new shares at a subscription price of NOK 42 early June, for those shareholders that were not qualified to participate in the private placement. At the end of the first quarter of 218, the Company s share capital was NOK 18,2,48, divided into 18,2,48 shares with a par value of NOK 1 per share. After completing tranche 2, on 13 April 218, the Company s share capital is NOK 19,239,672, divided into 19,239,672 shares with a par value of NOK 1 per share. quity quity amounted to NOK million at the end of the first quarter of 218, compared to NOK million at the end of 217. he increase of NOK 24.7 million was mainly related to the net proceeds of NOK 65.7 million from tranche 1 of the private placement of new shares, less the net loss of NOK 42.3 million in the first quarter. Outlook Continued progression for India certification Integration in multiple customer smart card projects Sample FAP2 (government grade) sensor in Q4 Oslo, May 14, 218 Board of directors NX Biometrics Group ASA 6

7 Q U A L Y P O Q NX BIOMICS GOUP ASA CONDNSD INIM SAMNS OF COMPHNSIV INCOM (UNAUDID) 31 MACH 218 AMOUNS IN NOK 1, POFI AND LOSS NOS Q1218 Q evenue Operating revenue otal revenue Cost of goods sold Gross margin Operating expenses Payroll expenses Other operating expenses otal operating expenses Profit (loss) before tax, depreciation and amortization Amortization of intangible assets Depreciation of tangible assets Writedowns on tangible assets Operating profit (loss) Net financial items Net profit (loss) before tax axes 1 29 Net profit (loss) for the period arnings per share basic and diluted Other comprehensive income Items that will be reclassified to profit and loss xchange rates differences otal other comprehensive income otal comprehensive income for the period otal comprehensive income for the period attributable from: Owners of the parent company otal

8 Q U A L Y P O Q NX BIOMICS GOUP ASA CONDNSD INIM SAMNS OF FINANCIAL POSIION (UNAUDID) 31 MACH 218 AMOUNS IN NOK 1, ASSS NOS 31 MA MA DC 217 Noncurrent assets Patens and other intangible assets Machinery and office equipment otal noncurrent assets Current assets Inventory eceivables Accounts receivable Other receivables Prepayments other investments otal receivables Cash and cash equivalents otal current assets otal assets QUIY AND LIABILIIS quity Share capital Share premium Other paid in capital etained earnings otal equity Liabilities Current liabilities Accounts payable Public duties payable Other current liabilities otal current liabilities otal liabilities otal equity and liabilities

9 Q U A L Y P O Q NX BIOMICS GOUP ASA CONDNSD INIM SAMNS OF CASH FLOW (UNAUDID) 31 MACH 218 AMOUNS IN NOK 1, CASH FLOWS FOM OPAING ACIVIIS NOS Q1218 Q Profit (loss) before taxes axes payable 1 29 Share based remuneration (equity part) Amortization of intangible assets Depreciation of tangible assets Writedown on tangible assets Change in prepayments Change in working capital items Net cash flows from operating activities Cash flows from investing activities Purchase of intangible assets Purchase of tangible assets Net cash flows from investing activities Cash flows from financing activities Share issue net of expenses Net cash flows from financing activities ranslation differences Net change in cash flows Opening cash balance Closing cash balance

10 Q U A L Y P O Q NX BIOMICS GOUP ASA CONDNSD INIM SAMNS OF CHANGS IN QUIY (UNAUDID) 31 MACH 218 AMOUNS IN NOK 1, NOS SHA CAPIAL SHA PMIUM OH PAIDIN CAPIAL AIND ANINGS OAL QUIY Balance 1 January Shares issue Share based compensation ranslation differences Net profit (loss) Balance 31 March Balance 1 January Shares issue Share based compensation ranslation differences Net profit (loss) Balance 31 March Balance 1 January Shares issue Share based compensation ranslation differences 7 7 Net profit (loss) Balance 31 December

11 Q U A L Y P O Q > NOS O H CONDNSD INIM FINANCIAL SAMNS 31 MACH 218 (UNAUDID) 1. General information NX Biometrics Group ASA ( NX ) is a public limited liability company incorporated and domiciled in Norway. NX Biometrics Group ASA is the parent company of the Group with headquarter in Oslo, Norway. Group operations are carried out by the operating subsidiaries. As at the end of the first quarter of 218, the Group had five wholly owned operating subsidiaries: NX Biometrics AS (Norway) and its subsidiaries NX Biometrics, Inc. (Seattle, USA), NX Biometrics China, Ltd. (Shanghai, China), NX Biometrics aiwan, Ltd. (aipei, aiwan) and NX Biometrics s.r.o (Prague, Czech epublic). NX s shares are listed at Oslo Stock xchange and is traded on the exchange s main list as part of the OSBX index. he purpose of the company as stated in the articles of association is to conduct research, development and commercialization of security products, as well as other activities that will naturally fall under this. 2. Basis of preparation, accounting policies his condensed interim financial report for first quarters of 218 has been prepared in accordance with IAS 34 Interim financial reporting. he condensed interim financial report should be read in conjunction with the annual financial statements for 217. he IFS accounting policies applied in this condensed interim financial report are consistent with those applied and described in the annual financial statements for 217. he going concern assumption has been applied when preparing this financial report. By the end of the first quarter of 218, NX earned revenue from commercial volumes with positive gross margins, but still at rather modest levels. In March 218, NX raised NOK 12 million in gross proceeds in a private placement. he private placement was divided into two tranches. ranche 1 consisted of NOK 68.8 million and was finalized under the current board authorisation. ranche 2 consisted of NOK 51.2 million. he issuance of the new shares in trance 2 was approved at the extraordinary general meeting 13 April 218. NX has adequate equity and liquidity for being a going concern for longer than 12 months from the date of this report. his interim financial report has not been subject to audit. he Board of Directors approved the report on 14 May evenue and segment reporting OPAING VNU P BUSINSS SGMN (AMOUNS IN NOK) YDQ1 YDQ1 217 Fingerprint sensor technology otal NX targets four markets for the technology; (i) (ii) (iii) (iv) Smart Cards Government ID Access Control Notebooks he available technology is generic into the four market segments. Since NX has limited revenues it is operating and reporting only in one business segment; Fingerprint sensor technology. 11

12 Q U A L Y P O Q Operating expenses PAYOLL XPNSS (AMOUNS IN NOK) 218 YDQ1 217 YDQ1 217 &D related payroll expenses Other payroll expenses Share based remuneration (salary part) Share based remuneration (employer s tax) otal OH OPAING XPNSS (AMOUNS IN NOK) 218 YDQ1 217 YDQ1 217 &D related operating expenses Other expenses Share based remuneration (operating part) otal otal Operating expenses Intangible assets Intangible assets consist of acquisition of right to use the patent and knowhow (IP) described as the Active hermal Sensing principle. he acquisition was recognized at net present value and included in the opening balance as of 1 January 212. In addition, intangible assets consist of the investments in new ASIC from 216, with with additional investments in 217. INANGIBL ASSS (AMOUNS IN NOK) YDQ1 YDQ1 217 Cost Opening balance Additions Disposals at cost Currency adjustments Cost Closing balance Accumulated depreciation Opening balance Depreciation Accumulated depreciation of disposed items Currency adjustments Accumulated depreciation Closing balance Book value Closing balance Depreciation period (straight line) years he patent is amortized over the patent life from recognizion in the opening balance 1 January 212. he investment in new ASIC is amortized over 3 years. 12

13 Q U A L Y P O Q angible assets MACHINY AND QUIPMN (AMOUNS IN NOK) YDQ1 YDQ1 217 Cost Opening balance Additions Disposals at cost Currency adjustments Cost Closing balance Accumulated depreciation Opening balance Depreciation Accumulated depreciation of disposed items Writedowns Currency adjustments Accumulated depreciation Closing balance Book value Closing balance Depreciation period (straight line) years he additions in 217, consisted of the coating machine in the second quarter and the cutting machine for flexible sensors in the fourth quarter. 7. Shares and incentive options NUMB OF SHAS OUSANDING YDQ1 YDQ1 217 Opening balance Share issue(s) xercised incentive options Closing balance In March 218, NX raised NOK 12 million in gross proceeds in a private placement. he private placement was divided into two tranches. ranche 1, finalized under the current board authorisation, consisted of new shares at subscription price of NOK 42. his corresponded to a total gross amount of NOK 68.8 million. xpenses and commission fee connected with tranche 1 of the placement amounted to NOK 3.1 million and net proceeds were NOK 65.7 million. ranche 2 consisted of new shares at a subscription price of NOK 42, corresponding to a total gross amount of NOK 51.2 million. he issuance of the new shares in trance 2 was approved at the extraordinary general meeting on 13 April 218. Share options he Company has entered into, and plan to continue to enter into, stock option agreements in order to attract talented, experienced and high value networked human resources. NX has three different option programs; unconditional longterm share options, milestone based share options and conditional longterm share options. In the first quarter of 218 no new share options were granted. In April 218, the following primary insider was allotted conditional share options: Dan Cronin (Chief Operating Officer) was allotted 1, conditional options at a strike price NOK After grant, Dan Cronin holds total 55, conditional options and shares. 13

14 Q U A L Y P O Q OPIONS YDQ1 YDQ1 217 Opening balance Grant of incentive options xercised incentive options Forfeited incentive options xpired incentive options Adjusted quantity Closing balance Adjusted quantity of 259,844 in 217 represents the adjustment for the probability of all conditions related to the granted share options being meet. SHAS WIGHD AVAG XCIS PIC SHAS WIGHD AVAG XCIS PIC SHAS WIGHD AVAG XCIS PIC OPIONS YDQ1 218 YDQ Outstanding Beginning of period Granted xercised Cancelled Forfeited xpired Adjusted quantity Modification / Dividends Outstanding nd of period Vested options nd of period SHAS WIGHD AVAG FAI VALU SHAS WIGHD AVAG FAI VALU SHAS WIGHD AVAG FAI VALU Granted Options During the period SHAS ININSIC VALU SHAS ININSIC VALU SHAS ININSIC VALU Outstanding options nd of the period Vested options nd of the period Profit (loss) per share When the period result is a loss, the loss per diluted number of shares shall not be reduced by the higher diluted number of shares but equals the result per basic number of shares. he diluted number of shares has been calculated by the treasury stock method. If the exercise price of incentive options exceeds the average price per share in the period, the incentive options are not counted as being dilutive YDQ1 YDQ1 217 Profit (loss) attributable to the shareholders (NOK) Number of ordinary shares issue at 31 December Weighted average basic number of shares Weighted average diluted number of shares Profit (loss) per share (NOK)

15 Q U A L Y P O Q elated party transactions At the Annual General Meeting in May 217, ore tholmidsøe was elected as chairman of the Board and in accordance with the nomination committee recommendation. he Annual General Meeting decided to approve the monthly consideration of NOK 18, to ore tholmidsøe (through his whollyowned company, urostores AS) pursuant to the consulting agreement between urostores AS and the Company that applies from the Annual General Meeting in 217 to 3 June isk management A description of risk factors can be found in Note 2 of NX Biometrics Group ASA s 217 annual report. 11. vents occurring after the balance sheet date In March 218, NX raised NOK 12 million in gross proceeds in a private placement. he private placement was divided into two tranches. ranche 1 consisted of NOK 68.8 million, with 1,638, new shares at a subscription price of NOK 42, and was finalized under the current board authorization by the end of the first quarter of 218. ranche 2 consisted of NOK 51.2 million, with 1,219,142 new shares at a subscription price of NOK 42. he issuance of the new shares in trance 2 was approved at the extraordinary general meeting 13 April 218. Between 31 March 218 and the resolution of these condensed consolidated interim financial statements, there has not been any other event which have had any noticeable impact on NX s result in the first quarter of 218 or the value of the Company s assets and liabilities at 31 March 218. Oslo, May Board of directors NX Biometrics Group ASA ore tholmidsøe Svennore Larsen Brita ilertsen Chairman Board member Board member mine Lundkvist manuel Lang itu Favre Board member Board member CO 15

16 N X B I Oslo ( HQ ) O M I C S Prague Shanghai Seattle aipei... Visit or contact us:... ABOU NX BIOMICS: NX provides secure easytouse fingerprint sensor technology for authentication in the smart card, government ID, access control and notebook markets. he company s patented NX Active hermal principle allows the development of large, high quality fingerprint sensors in both rigid and flexible formats. NX Biometrics Group ASA ( is headquartered in Oslo, with sales, support and development operations in Seattle, Silicon Valley, aipei, Prague and Shanghai. NX BIOMICS AS Universitetsgata 1, 164 Oslo, Norway. UOP, MIDDL AS AND AFICA: CHINA AND KOA: INDIA: +91 (982) 4223 JAPAN, AIWAN AND SOUH AS ASIA: AMICAS: SALS: sales@nextbiometrics.com INVSO LAIONS: nextinvestorrelations@nextbiometrics.com SUPPO: support@nextbiometrics.com HOMPAG: WI: LINKDIN: Copyright 218 NX BIOMICS GOUP ASA, all rights reserved. Specifications are subject to change without notice. he NX Biometrics logo and NX Active hermal are trademarks of NX BIOMICS GOUP ASA in Norway and other countries. All other brand and product names are trademarks or registered trademarks of their respective owners. XB I O M I C S. C O M