SAFEGUARDING YOUR DATA ANYWHERE Q4

KEY HIGHLIGHTS

Hiddn Solutions ASA ("Hiddn") posted record top line growth, improved EBIT, a significantly reduced negative cash flow and a continued strong cost control, giving lower operating cost in the fourth quarter of 2018. Total revenues increased to NOK 8.2 million in the fourth quarter 2018, up from NOK 6.3 million in the corresponding period in 2017. Loss before tax was NOK 6.4 million, down from NOK 9.0 million in fourth quarter of 2017. The negative cash flow from operating activities was NOK – 3.5 million, improved from NOK -11.2 million in the corresponding quarter of 2017.

Key highlights of the quarter and subsequent events:

o Topline growth, improved EBIT, reduced cash burn rate and strong cost control
o All topline growth coming from encryption products. FCS sales are slightly down
o Opened new distribution channels and received first order from ALSO Holding AG (ALSO)
o Launched the first GDPR secure solution for multifunction printers with Office Management Group, Oslo
o Products available in 80% of Power stores in Norway, Denmark and Finland
o Finalized the design and pre-production process with Swissbit for the M.2 Hiddn Safedisk encryption product
o Appointed new SVP partner sales
o Entered into LOI with Tactilis
o Made cooperation agreement to use Tactilis technology to improve user attractiveness to Hiddn products
o Secured NOK 20 million in a private placement

The fourth quarter 2018 ended an eventful year for Hiddn. Hiddn delivered on its strategy to broaden the product offering and to establish new partnerships and distribution channels, leveraging on the increased attention for secure storage solutions. Hiddn has now built a strong foundation for increased sales and volume production as Hiddn aims to enter into an accelerated growth path to leverage on the position as a leading technology provider in the global encryption market. Hiddn's two factor encryption products will be officially launched to the US market at the RSA conference in San Francisco, in the beginning of March 2019.

HIDDN IN BRIEF

Hiddn Solutions ASA is listed on the Oslo Stock Exchange under the ticker HIDDN. The company is offering impenetrable proprietary hardware-based authentication and encryption products with a superior level of security as well as a wider product suite addressing all market segments looking for solutions to ensure that sensitive information stays confidential and unavailable to unauthorised access.

Based on Hiddn's unrivalled and proven position in the high-end encryption market, Hiddn is implementing a strategy of adapting the proprietary technology to the high-volume markets to take advantage of the growing global security challenges and the arising regulatory requirements.

Hiddn has established a product offering that addresses all market segments from the high-end security clients to the retail market, and established partnerships with some of the most important sales and distribution partners in Europe. Hiddn sees significant growth opportunities and rising demand from customers and is well on its way to solidify its leading position in the growing market for secure data storage. For more information, please visit: www.hiddn.no

HOW THE TECHNOLOGY WORKS

Hiddn has established a product offering that addresses all market segments from the high-end security clients to the retail market, based on Hiddn's competence in delivering impenetrable proprietary hardware-based authentication and encryption products.

Before using a Hiddn high-end two-factor authentication storage device, the encryption key needs to be transferred from the smart card following an authentication process. This process requires you to enter a pin code for the algorithm in the smart card to verify that the storage device requesting the key is the correct recipient. Upon verification, the key will be securely transferred thereafter.

Other encryption products involve storing of the encryption key either on the device and/or on the storage drive itself. The authentication process and the storage of the encryption key is therefore determining the safety level of the device and hence the protection of your data. Hiddn can offer products suitable for different protection levels. Our most sophisticated and high-end products are the only solutions on the market known to store the encryption key separated from the device.

Hiddn utilises hardware encryption and has developed a code that today is implemented on a field-programmable gate array (FPGA), a microchip designed to be configured after manufacturing. After implementing the source code on the FPGA, the chip is casted onto a hard drive controller card to prevent tampering. The key stored on the smart card (or other secure media) is transferred to the FPGA after a process of authentication and verification. The exact process is protected by Hiddn's patents, which represents the core of Hiddn's unique solution.

KEY DEVELOPMENTS

Hiddn has during fourth quarter of 2018 completed a year were Hiddn delivered on the 2018 targets of expanding the product offering and distribution capabilities, in the growing business and service markets in Europe and US/Canada.

Received initial order from ALSO

Hiddn received the first order from ALSO. ALSO is one of Europe's largest distributors of ICT (Information Communication Technology) products and services in Europe. The initial order covers Hiddn's KryptoDisk and other encryption products for the Scandinavian market. The products are now gradually available for purchase from ALSO. This first order confirms the demand for Hiddn's GDPR compliant secure data storage solutions in Scandinavia and is a stepping stone into launching the new range of products and services in both Scandinavia and the rest of Europe.

Hiddn has also been approved access to ALSO's configuration center outside of Copenhagen in Denmark, which opens up for integrating Hiddn's encrypted hard drives, SafeDisk, in PC's, notebooks and tablets – making Hiddn's proprietary technology available on major brands, distributed to European markets.

Launched first GDPR secure solution for multifunction printers

Hiddn entered into cooperation with Office Management Group AS to offer secure and GDPR-compliant encryption solutions for multifunction printers. Multifunction printers are today recognized as one of the weakest links in securing sensitive data from being compromised and stolen. These solutions are new to Hiddn and opening large and untapped markets. Office Management Group and Hiddn have just started to market these solutions to Office Management Group's customers in Norway and are working with several customer driven opportunities.

Office Management Group is a leading provider of office services in the Nordics and experiences an increased demand for safety solutions beyond the standardised solutions for multifunction printers. By implementing Hiddn's technology for safe management and authentication, Office Management Group will be able to offer a fully GDPR compliant multifunction printer product to protect data on the disc anywhere.

Products available in 80% of Power stores in Norway, Denmark and Finland

Hiddn is working closely with Power for the roll-out across Norway, Denmark and Finland and the products are now available in 80% of the Power stores in Norway, Denmark and Finland. Dedicated sales personnel are following up in-store activities and joint marketing campaigns are planned for 2019. Hiddn expects repeat orders from Power going forward.

Swissbit – volume production

Swissbit and Hiddn have previously entered into an agreement where Swissbit will assist Hiddn to re-engineer and develop the M.2 Hiddn Safedisk encryption product, with the target to improve the design and prepare the product for volume production. Following a period of close cooperation between Hiddn and Swissbit, the new M.2 design is now finished. Test production is expected to take place in 2. quarter 2019. The new design is planned to be launched to Hiddn customers together with the Hiddn upgraded firmware, to support a new secure chip with Common Criteria EAL5+ and FIPS 140-2 certificates. The new release will improve cost of material and reduce production cost pr. unit, as well as enhance customer functionality and user interface.

Hiddn has arranged for and passed credit approval by Swissbit. The first purchase order for 10.000 units, depending on a positive final product test, will be issued shortly and Hiddn is expecting production release in 2. quarter 2019. Shipment is expected to start and pick up from 3. quarter 2019.

Appointed SVP partner sales

Hiddn appointed Jørgen Waaler as SVP for partner sales as the company is entering the commercialisation stage of Hiddn's state-of-the-art encryption technology. Jørgen Waaler took up the position in Hiddn from 8 November 2018 after being the CEO of StrongPoint ASA for 13 years. StrongPoint is an Oslo Stock Exchange listed retail technology company operating in 12 countries. Waaler holds an MBA from the University of Wyoming. Waaler brings extensive experience from international sales and will leverage on the market momentum for Hiddn's new products and solutions.

Entered into LOI with Tactilis to create a leading global biometric smartcard company

Hiddn entered into a Letter of Intent (LOI) with Tactilis Pte Limited (Tactilis) with the ambition to join forces and create a fast-growing industry leader within biometric authentication, encryption and smartcards.

Tactilis has developed a unique technology allowing secure and convenient implementations of biometric authentication. The Tactilis biometric multifunction card, in combination with a card reader and carrier, enables replacement of pin-codes and passwords which today typically represents the weakest link in high-end security systems. Additionally, it adds multifunction card capabilities and a complete system enabling seamless downloading, maintenance and user operations of the defined applications. The Tactilis biometric multifunction card business is considered as a perfect platform for scaling the joint operations world-wide.

The proposed business combination is depending on a satisfactory due diligence and will take place as an acquisition of all shares of Tactilis for a consideration of new shares in Hiddn to the sellers (reference is made to the announcement made in December 2018). The completion of the proposed acquisition is also subject financing and shareholders approvals. Following the announcement with Tactilis, Hiddn has initiated both a technical, legal and financial due diligence ("DD"). The DD process is almost completed, but due to an earlier agreement Tactilis entered into before the announced LOI with Hiddn, Tactilis also had engaged into a process to merge their Malaysian daughter company with Global Invacom Group Limited (GI), a Singapore based listed company, and

through the merger obtain listing for their daughter company on the Singapore Stock Exchange. This agreement also makes provisions for future funding and includes convertible instruments. The overall arrangement with GI is considered to be attractive, but the structure adds complexity to the Hiddn LOI. This complexity has also influenced the speed and the progress with Hiddn. The timeline has subsequently been revised and final conclusions are not expected before earliest, late in the second quarter of 2019.

Following the technical due diligence, Tactilis and Hiddn have however agreed to enter into a cooperation agreement, where Hiddn will start implementing the Tactilis technology into the Hiddn solutions. Vice versa, Tactilis receive the opportunity to implement Hiddn's technology into their future roadmap. Hiddn targets to introduce new Tactilis functionality and user friendliness to Hiddn products in the second half of 2019.

Secured NOK 20 million in a private placement

In December 2018 Hiddn secured commitment from certain existing shareholders and new investors for a private placement of NOK 20 million. The subscription price in the private placement will be determined at the date of the Board's resolution to consummate the private placement and issue the new shares, and will be equal to the volume-weighted average price for the company's shares on the Oslo Stock Exchange during the five days prior to the date of the Board's resolution, less 20% of this price, however, maximum NOK 1.14. The maximum subscription price represents the volume-weighted average price for the company's shares on the Oslo Stock Exchange during the five days prior to and including 19 December 2018, less 20%. Please refer to separate announcement for further details. The private placement is expected to take place during the second quarter of 2018.

FINANCIAL REVIEW

KEY FINANCIAL FIGURES

	1.10-31.12	1.10-31.12	1.1-31.12	1.1-31.12
	2018	2017	2018	2017
(Amounts in NOK thousands, execpt EPS)	(unaudited)	(unaudited)	(unaudited)	(audited)
Revenue	8 154	6 338	22 464	13 859
Gross profit	3 260	1 902	8 894	2 169
Gross margin	40 %	30 %	40 %	16 %

Loss for the period	(6 364)	(8 998)	(39 216)	(47 977)
Basic and diluted earnings per share (EPS)	(0,07)	(0,13)	(0,45)	(0,76)

			Pr. 31.12	Pr. 31.12
			2018	2017

(Amounts in NOK thousands)	(unaudited)	(audited)
Cash balance*	1 310	12 005
Total assets	28 556	41 424
Total equity	5 919	16 539

*In addition, the secured commitment from existing shareholders and new investors for a private placement of NOK 20 million and the available overdraft facility of NOK 3.5 million should be added to the total financial flexibility of the company.

Gross profit and gross margin are alternative performance measures. Gross profit is calculated by deducting cost of goods sold from revenue. Gross margin is calculated by dividing gross profit by revenue. EBIT is equal to operating loss in the financial statements.

CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2018 (UNAUDITED)

Hiddn Solutions ASA is a public limited company headquartered in Oslo, Norway and listed on the Oslo Stock Exchange under the ticker HIDDN. The company's operating activities are reported through the subsidiaries Hiddn Security AS, Hiddn Solutions AS and Finn Clausen Sikkerhetssystemer AS (together named "Hiddn", "Group" or "Company"). The Board of Directors approved the report on 27 February 2019.

PROFIT OR LOSS STATEMENT

The Company completed the acquisition of Finn Clausen Sikkerhetssystemer AS ("FCS") on 16 May 2017. Hence, FCS is included from 1 June 2017 in the following financial discussion.

Revenues

Hiddn recorded operating revenues of NOK 8.2 million in the fourth quarter of 2018, up from NOK 6.3 million in the corresponding quarter of 2017.

The operating revenues in the fourth quarter of 2018 for Hiddn's encryption products were NOK 4.3 million compared to NOK 1.6 million in the corresponding quarter last year. The operating revenues in the fourth quarter of 2018 for FCS's archive, storage and security products were NOK 3.9 million compared to NOK 4.7 million in the corresponding quarter last year.

The gross profit increased with NOK 1.4 million, to NOK 3.3 million in the fourth quarter of 2018 compared to NOK 1.9 million during the same period of 2017. The gross profit was 40% in the fourth quarter 2018 compared to 30 % in the corresponding quarter last year.

Revenues for the twelve-month period ended 31 December 2018 was NOK 22.5 million compared to NOK 13.9 million in the comparable period in 2017; an increase of NOK 8.6 million. The increase is primarily due to a top line growth of 82% of Hiddn's encryption products and the acquisition of FCS.

In the fourth quarter of 2018 Hiddn recorded other income related to Skattefunn (tax credits) of NOK 3.1 million compared to NOK 3.8 million during the same period in 2017.

Cost of goods sold

Hiddn recorded cost of goods sold of NOK 4.9 million in the fourth quarter of 2018 compared to cost of goods sold of NOK 4.4 million in the corresponding quarter of 2017.

Cost of goods sold for the twelve-month period ended 31 December 2018 was NOK 13.6 million compared to NOK 11.7 million in the comparable period in 2017. The year to date 2017 included a charge of NOK 1.0 million related to purchase acquisition fair value of FCS inventory.

Payroll expenses

Payroll expenses were NOK 6.7 million in the fourth quarter of 2018 compared to NOK 7.1 million in the corresponding quarter of 2017. Included in the figures for the fourth quarter of 2018 is a share-based expense of NOK 0.2 million compared to NOK 0.3 million in the corresponding quarter of 2017.

Payroll expenses were NOK 27.8 million in the twelve-month period ended 31 December 2018 compared to NOK 19.3 million in the same period in 2017, an increase of NOK 8.5 million. The increase is due to a strengthening of the organisation where new employees have replaced the use of R&D and management for hire consultants. In total this has reduced the total expenses related to payroll and R&D and management consultants with NOK 3 million in 2018 compared to 2017.

Included in the year to date figures for 2018 is also a share-based expense of NOK 2.0 million compared to NOK 0.3 million in the comparable period in 2017.

Depreciation and amortisation

Depreciation and amortisation expenses amounted to NOK 178 thousand during the fourth quarter of 2018 compared to NOK 179 thousand in the same period in 2017.

Depreciation and amortisation expenses amounted to NOK 713 thousand in the twelve-month period ended 31 December 2018 compared to NOK 468 thousand in the same period of 2017.

Other operating expenses

Other operating expenses were NOK 5.5 million in the fourth quarter of 2018 compared to NOK 7.1 million in the corresponding quarter of 2017, a reduction of NOK 1.6 million. The reduction is primarily related to consultants being replaced by new employees.

Other operating expenses for the twelve-month period ended 31 December 2018 amounted to NOK 21.3 million compared to NOK 33.2 million in the twelve-month period ended 31 December 2017; a reduction of NOK 11.9 million. The reduction is primarily related to R&D consultants and management for hire consultants being replaced by new employees and listing related expenses expensed in 2017.

Net financial items

Net financial items were minus NOK 260 thousand in the fourth quarter of 2018 compared to minus NOK 311 thousand in the comparable period in 2017.

Net financial items were minus NOK 1.4 million in the twelve-month period ended 31 December 2018 compared to minus NOK 2.3 million in the comparable period in 2017; a decrease of NOK 0.9 million primarily due to lower average outstanding debt in the twelve-month period ended 31 December 2018 compared to the same period in 2017.

Net loss

Net loss in the fourth quarter of 2018 was NOK 6.4 million compared to a loss of NOK 9.0 million in the corresponding quarter of 2017.

Net loss in the twelve-month period ended 31 December 2018 was NOK 39.2 million compared to a loss of NOK 48.0 million in the same period of 2017.

BALANCE SHEET

Cash and cash equivalents amounted to NOK 1.3 million as per 31 December 2018. Secured commitment from existing shareholders and new investors for a private placement of NOK 20 million and an overdraft facility of NOK 3.5 million should be added to the total financial flexibility of the company. In January 2019 Hiddn entered into a credit facility agreement limited to NOK 12 million. The credit facility will be repaid upon completion of the private placement. Cash and cash equivalents amounted to NOK 12 million as per 31 December 2017.

As per 31 December 2018, the total assets were NOK 28.6 million compared to NOK 41.4 million at 31 December 2017. Total equity was positive and amounted to NOK 5.9 million at 31 December 2018 compared to NOK 16.5 million at 31 December 2017.

BUSINESS OUTLOOK

The Board of Directors believes that Hiddn is well positioned to benefit from the increased demand for reliable and secure storage solutions. Based on Hiddn's unrivalled and proven position in the high-end encryption market and the wider products and service range recently launched, Hiddn will take advantage of the growing global security challenges and the arising regulatory requirements.

Hiddn has established a product offering that addresses all market segments from the high-end security clients to the retail market. Hiddn has also established partnerships with some of the most important sales and distribution partners in Europe and entered into a distribution agreement targeting the high-end business market in North America.

Going forward, Hiddn will focus on sales and marketing efforts as well as optimising its set-up for volume production. As volumes increase, the company will work to reduce its sourcing and production cost to create future profitability. Deliveries from Swissbit is expected to commence late in the second quarter of 2019 and impact the revenues from the third quarter of 2019.

Oslo, 27 February 2019

Siw Ødegaard Øystein Tvenge chairman

Jan Christian Opsahl

Jeanette Dyhre Kvisvik Svein Willassen Carl Espen Wollebekk

CEO

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

	1.10-31.12	1.10-31.12	1.1-31.12	1.1-31.12.
	2018	2017	2018	2017
Amounts in NOK thousands NOTE	(unaudited)	(unaudited)	(unaudited)	(audited)

Revenues 2	8 154	6 338	22 464	13 859
Other income	3 081	3 776	3 081	3 776
Total revenue and other income	11 235	10 114	25 545	17 635

Cost of materials and services	(4 894)	(4 436)	(13 570)	(11 690)
Payroll expenses 3,4	(6 718)	(7 093)	(27 804)	(19 340)
Depreciation & amortization	(178)	(179)	(713)	(468)
Other operating expenses 4	(5 549)	(7 093)	(21 264)	(33 185)
Operating loss	(6 104)	(8 687)	(37 806)	(47 048)

Interest income	14	32	15	32
Other financial income	43	-	115	50
Interest expense	(219)	(191)	(945)	(1 207)
Other financial expenses	(98)	(152)	(595)	(1 175)
Net financial items	(260)	(311)	(1 410)	(2 300)

Loss before income tax	(6 364)	(8 998)	(39 216)	(49 348)

Income tax expense	-	-	-	1 371
Loss for the period	(6 364)	(8 998)	(39 216)	(47 977)

Profit/(loss) attributable to:
Equity holders of parent company	(6 364)	(8 998)	(39 216)	(47 485)
Non-controlling interest	-	-	-	(492)

Basic and diluted earnings per share	(0,07)	(0,13)	(0,45)	(0,76)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		1.10-31.12 2018	1.10-31.12 2017	1.1-31.12 2018	1.1-31.12. 2017
Amounts in NOK thousands	NOTE	(unaudited)	(unaudited)	(unaudited)	(audited)
Net profit/(loss) for the period		(6 364)	(8 998)	(39 216)	(47 977)
Other comprehensive income: Items that may be reclassified subsequently through profit or loss: Items that will not be reclassified		-		-	-
subsequently to profit or loss:		-		-	-
Other comprehensive income directly against equity		-		-	-
Total comprehensive income for the period		(6 364)	(8 998)	(39 216)	(47 977)
Total comprehensive income attributable to:
Equity holders of parent company Non-controlling interest		(6 364) -	(8 998) -	(39 216) -	(47 485) (492)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

2018 NOTES (unaudited) (audited) Amounts in NOK thousands ASSETS Non-current assets Property, plant, and equipment 153 Goodwill 7 771 7 771 Other intangible assets 3 739 4 325 Total non-current assets 11 663 12 375 Current assets Inventory 5 618 6 851 Accounts receivable 4 983 3 285 Other receivables 4 982 6 908		Pr. 31.12	Pr. 31.12
			2017




			279







	Cash and short-term deposits	1 310	12 005
Total current assets 16 893			29 049

TOTAL ASSETS 28 556			41 424
EQUITY AND LIABILITIES
Equity
Share capital 5 31 192			25 364
Additional paid-in capital 199 016			178 245
Other paid-in-capital 15 240			13 243
Accumulated losses (239 529)			(200 313)
Total equity 5 919			16 539
Non-current liabilities
Long-term debt -			900
Total non-current liabilities -			900

Current liabilities
Current portion of long-term debt 6 7 056			7 070
Overdraft facilities 2 644			-
Trade payables 5 620			9 301
Social security payable, etc. 1 140			1 093
Other short-term debt 6 177			6 521
Total current liabilities 22 637			23 985
Total liabilities 22 637			24 885
TOTAL EQUITY AND LIABILITIES 28 556			41 424

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

			Other-paid-in	Accumulated	Non-controlling	Total equity
Amounts in NOK thousands	Share capital	Share premium	capital	losses	interest	controlling interest
Equity 1 January 2017	12 162	81 820	12 904	(130 183)	(2 028)	(25 325)
Loss for period	-	-	-	(47 485)	(492)	(47 977)
Other comprehensive income	-	-	-	-	-	-
Total comprehensive income for the
period	-	-	-	(47 485)	(492)	(47 977)
Share-based compensation			339			339
Issue of shares	10 750	73 948				84 698
Transaction costs		(6 502)				(6 502)
Business combination	1 360	10 600				11 960
Repurchase of NCI - share issue	1 092	18 379		(21 759)	2 288	-
Repurchase of NCI - cash				(886)	232	(654)
Equity 31 December 2017	25 364	178 245	13 243	(200 313)	-	16 539
Equity 1 January 2018	25 364	178 245	13 243	(200 313)	-	16 539
Loss for period	-	-	-	(39 216)	-	(39 216)
Other comprehensive income	-	-	-	-	-	-
Total comprehensive income for the
period	-	-	-	(39 216)	-	(39 216)
Share-based compensation	-	-	1 997	-	-	1 997
Share issue	5 828	24 172	-	-	-	30 000
Transaction costs		(3 401)	-	-	-	(3 401)
Equity 31 December 2018	31 192	199 016	15 240	(239 529)	-	5 919

CONSOLIDATED STATEMENT OF CASH FLOWS

	1.1-31.12	1.1-31.12
	2018	2017
NOTE Amounts in NOK thousands	(unaudited)	(audited)

Cash flow from operating activities:
Net cash used in operating activites	(38 795)	(54 548)

Cash flow from investing activities:
Net cash used for business combination	-	(338)
Purchases of property, plant & equipment	-	(97)
Net cash from investing activities	-	(435)

Cash flow from financing activities:
Share issuance	30 000	84 698
Transaction cost related to share issue	(3 401)	(6 502)
Proceeds from short-term loans	10 000	-
Repayment of short-term loans	(10 000)	(12 025)
Repayment of government loans	(1 143)	(1 072)
Purchase of non-controlling interest		(654)
Repayment of convertible loans	-	(668)
Net cash from financing activities	25 456	63 777

Net change in cash and cash equivalents	(13 339)	8 794
Cash, cash equivalents and overdraft at beginning of period	12 005	3 211
Cash, cash equivalents and overdraft-end of period	(1 334)	12 005


Cash and cash equivalents	1 310	12 005
Overdraft	(2 644)
Net cash	(1 334)	12 005

NOTES TO FINANCIAL STATEMENTS

NOTE 1 – Corporate information & accounting policies

Corporate information

Hiddn Solutions ASA (the "Company") is a public limited company, listed on the Oslo Stock Exchange under the ticker HIDDN. The Company's operating activities are reported through the subsidiaries Hiddn Security AS, Hiddn Solutions AS and Finn Clausen Sikkerhetssystemer AS (together named "Hiddn" or the "Group"). The Company is headquartered in Nedre Vollgate 4, 0158 Oslo. The Board of Directors approved the report on 27 February 2019.

Hiddn iss offering impenetrable proprietary hardware-based authentication and encryption products with a superior level of security, as well as a wider product suite addressing all market segments looking for solutions to ensure that sensitive information stays confidential and unavailable to unauthorised access. The Group is also supplying secure cabinets and physical filing systems through Finn Clausen Sikkerhetssystemer AS ("FCS").

As of 31 December 2018, the Group had 27 employees.

Basis of preparation

These condensed consolidated interim financial statements have been prepared based on the principles of International Financial Reporting Standard (IFRS) IAS 34 Interim Financial Reporting as approved by EU. They do not include all the information required for full annual financial statements and should be read in conjunction with financial statements of the Group for the year ended 31 December 2017. These condensed consolidated interim financial statements are unaudited. The accounting policies applied by the Group in these condensed consolidated financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended 31 December 2017. New accounting standards IFRS 9, Financial Instruments, and IFRS 15, Revenue from contracts with customer are implemented from 1 January 2018. There have been no changes in equity or classifications from the implementation of the new standards.

NOTE 2 – Revenues and segment information

Geographical distribution of revenues

Amounts in NOK thousands	2018	2017
Norway	17 003	13 253
Middle-East region	3 622	-
Netherlands	1 208	579
Other	631	27
Total	22 464	13 859

Segment information

The following segment information is based on the reporting of the subsidiaries as reviewed by management currently based on the encryption products of Hiddn Security AS and the archives, storage, and security products of FCS. The segment result measure is operating profit / (loss). The chief operating decision maker of the Group (CODM) is the management team.

1.1-31.12.2018 Amounts in NOK thousands	Electronic encryption products	Archive, storage, and security products	Corporate costs, adjustments and eliminations	Consolidated
Operating revenues	8 449	14 015	-	22 464
Intersegment (expense)/revenue	-	-	-	-
Segment result (operating income/(loss)	(23 419)	(229)	(14 158)	(37 806)

1.1-31.12.2017 Amounts in NOK thousands	Electronic encryption products	Archive, storage, and security products	Corporate costs, adjustments and eliminations	Consolidated
Operating revenues	4 644	9 215	-	13 859
Intersegment (expense)/revenue	-	543	(543)	-
Segment result (operating income/(loss)	(23 896)	871	(24 023)	(47 048)

The comparative segment results for the twelve-month period ended 31 December 2017 has been changed to the operating loss for the period. Previously, the Group reported profit/(loss) before tax as its segment result.

NOTE 3 - Share based compensation

	Number of options	Weighted average exercise price
Outstanding 1 January 2018	4 440 000	2,00
Granted during the year	510 000	2,00
Cancelled during the year	(250 000)	2,00
Exercised during the year	-	-
Expired during the year	(90 000)	2,00
Outstanding 31 December 2018	4 610 000	2,00
Exercisable 31 December 2018	1 540 000	2,00

In June 2017, the Shareholder meeting in Hiddn Solutions ASA authorised issuance of up to 6,709,940 options to employees and others providing similar services. In November 2017, the Group granted 4,440,000 options to employees and two directors. In 2018, an additional 510,000 options have been granted to a new employee and a new Board member and 250,000 has been cancelled and 90,000 has expired during 2018.

The Group recognised a share-based expense of NOK 2.0 million for the twelve-month period ended 31 December 2018 compared to NOK 0.3 million in the corresponding period last year.

NOTE 4 – R&D related expenses

During fourth quarter of 2018, Hiddn has continued its product development and R&D efforts focusing on developing new products and solutions and updating Hiddn's product range to comply with new standards and conventions, improving accessibility and user experience. Total R&D related expenses amounted to NOK 4.4 million during fourth quarter of 2018 compared to NOK 6.3 million in the corresponding quarter of 2017. Total R&D related expenses for the twelve-month period ended 31 December 2018 was NOK 18.6 million compared to NOK 20.0 million for the corresponding period in 2017. The use of R&D consultants has to a large extent been replaced by new employees and thus reducing the total R&D expenses.

NOTE 5 – Equity

	Ordinary
Number of shares outstanding in thousands	Shares
2017:
Opening balance	35 771
Share issues to repurchase non-controlling interest	3 212
Share issues	31 616
Shares issued in business combination	4 000
31 December 2017	74 599

2018:
Opening balance	74 599
Share issuance - April	17 143
31 December 2018	91 742

On 6 April 2018, the Company completed a rights issue. A total of 17,142,857 new shares were issued securing net proceeds of NOK 26.6 million after deducting directly attributable transaction costs of NOK 3.4 million. After the rights issue, Hiddn Solutions ASA has 91,742 thousand outstanding shares and share capital of NOK 31,192 thousand.

On 21 December 2018, the Company announced that it had secured commitment from certain existing shareholders and new investors for a private placement of NOK 20 million scheduled for 2019.

NOTE 6 - Interest bearing debt

				Carrying amount
Amounts in NOK thousands	Interest	Principal	Final Maturity	Pr 31.12 2018	Pr 31.12 2017

Non-secured long-term loan	NIBOR+3%	1 060	March 2019	1 033	900
Low interest loan from the Govenment	4,95 %	6 286	March 2024	6 023	7 070
Total loans				7 056	7 970
Less current portion of debt				7 056	7 070
Non-current liabilities				-	900

Loan from Norwegian entity

The long-term government loan with a carrying amount of NOK 6.0 million (NOK 6.3 million principal) is classified as a current liability since the subsidiary Hiddn Security AS is in breach of the equity covenant. Innovation Norway has been informed of the breach, that originally occurred in 2016. Innovation Norway has not required any remedies as of the date of the financial statements

NOTE 7 – Events after the balance sheet date

Hiddn entered into a credit facility of NOK 12 million in January 2019. The credit facility will be repaid when the Company has completed the private placement of NOK 20 million that was secured by certain existing shareholders and new investors in December 2018.