Arribatec Group ASA — Interim / Quarterly Report 2017

May 30, 2017

Highlights from first quarter and subsequent events

Successful completion of rights issue

At the beginning of 2017, Hiddn successfully completed a rights issue which was oversubscribed by approximately 50 %. A total of 24,116,564 new shares were issued yielding gross proceeds of NOK 69.7 million. The rights issue provided the Company with sufficient funds to pursue an expansive business development plan focused on growing Hiddn's capabilities within sales and marketing as well as to further its R&D efforts.

Capitalising on R&D efforts ‐ launch of encrypted USB drive product

Hiddn is currently prototyping an external USB hard drive with built‐in hardware encryption. This USB drive will offer large storage capacity and fast transfer rates coupled with a high degree of data security delivered in a small form factor cabinet. The USB drive will be bootable; i.e. allow for an independent operating system to be installed on the drive itself, allowing the unit to operate independently of the operating system in the computer it is connected to. Hiddn expects to complete delivery of the initial units during the second half of 2017.

Expanding sales platform by acquisition of Finn Clausen Sikkerhetssystemer AS

As communicated in investor presentations and prospectus/information memorandum, Hiddn is focused on expanding its direct sales and distribution platform. On 16 May 2017 the Company's general meeting approved the acquisition of Finn Clausen Sikkerhetssystemer AS ("FCS"). This acquisition represents a significant expansion of Hiddn's direct sale capabilities as well as existing commercial relationships with relevant customers, especially within the defence, government, and public authority segments.

New CEO appointed ‐ Carl Espen Wollebekk

Carl Espen Wollebekk has been appointed as the new CEO of Hiddn Solutions ASA effective from June 1st, 2017. Mr. Wollebekk brings operating and leadership experience from the ICT industry, expertise in financial management and global business perspective to Hiddn. His experience base will allow Hiddn to pursue broader strategic opportunities going forward.

About Hiddn Solutions ASA

Hiddn Solutions ASA (the "Company") is a public limited company situated in Oslo, Norway, listed on the Oslo Stock Exchange under the ticker HIDDN. The Company's operating activities are reported through the subsidiaries Hiddn Security AS and Hiddn Solutions AS (together named "Hiddn" or the "Group").

Hiddn develops, manufactures and sells proprietary hardware‐based authentication and encryption products, targeted toward military, governmental, institutional, and corporate clients, with further potential to scale into the retail market and a broader commercial setting within the internet of things by building on and benefiting from the experience and competence of the management and employees in Hiddn.

At the end of the first quarter 2017, Hiddn had 17 individuals in full time occupation.

FINANCIAL REVIEW

Key Financial Figures

(Amounts in NOK thousands, except EPS)	1.1-31.3.2017 (unaudited)	1.1-31.3.2016 (unaudited)
Revenue	858	608
Operating loss	(12294)	(4986)
Basic and diluted earnings per share (EPS)	(0, 29)	(0, 15)
	31.03.2017	31.12.2016
(Amounts in NOK thousands, except EPS)	(unaudited)	(audited)
Cash balance	39 179	3 2 1 1
Total assets	47031	9927
Total equity	24 793	(25 325)

Consolidated financial statements as of 31 March 2017 (unaudited)

The Group was established on 29 December 2016, when Hiddn Security AS arranged to be acquired by Hiddn Solutions ASA (formerly Agasti Holding ASA) in a reverse takeover. At the time of the merger, Hiddn Solutions ASA was a non‐operating company without substantial net liabilities. Prior to the merger, Hiddn Security AS was a privately held company while Hiddn Solutions ASA remained listed on the Oslo Stock Exchange after divesting its operations and net assets. The purpose of the transaction was for Hiddn Security AS to obtain a listing indirectly through the merger with Hiddn Solutions ASA.

Profit and loss statement

Hiddn recorded operating revenues of NOK 0.86 million in the first quarter of 2017 compared to NOK 0.3 million in the corresponding quarter of 2016. Revenue from the recently acquired FCS is not consolidated into the figures for first quarter 2017. In the first quarter of 2016 Hiddn also recorded other income of NOK 0.3 million in government grants related to research and development.

Payroll expenses were NOK 2.7 million in the first quarter 2017 compared to NOK 2.5 million during the same period in 2016. The increase was primarily attributable to hiring new employees within R&D and sales.

Other operating expenses for the first quarter 2017 amounted to NOK 9.0 million compared to NOK 2.4 million during the same period in 2016. The increase was primarily attributable to the transaction costs of indirect listing on Oslo Stock Exchange by the reverse takeover of Hiddn Solutions ASA, continued R&D and expanding the direct sales and distribution platform. The reporting requirements and fees of being listed on the Oslo Stock Exchange have also increased operating expenses on a continuing basis.

Depreciation and amortisation expenses amounted to NOK 17 thousand during first quarter of 2017 compared to NOK 10 thousand in the same period in 2016.

Net financial expenses were NOK 1.8 million in first quarter of 2017 compared to NOK 51 thousand during same period in 2016. The increase is primarily related to raising new financing and settlement of loans.

Net loss in the first quarter of 2017 was NOK 14.1 million compared to a loss of NOK 5.0 million in the corresponding quarter of 2016.

Balance sheet

Cash and cash equivalents amounted to NOK 39.2 million as per 31 March 2017 compared to NOK 3.2 million as per 31 March 2016.

As per 31 March 2017, the total assets were NOK 47.0 million compared to NOK 9.9 million at 31 March 2016. Total equity was positive and amounted to NOK 24.8 million at 31 March 2017 compared to minus NOK 25.3 million at 31 March 2016.

BUSINESS OUTLOOK

Hiddn has recently changed its line of business from financial asset management to development, manufacturing and selling of proprietary hardware based encryption products. The underlying operations of its new business has completed a full overhaul of its core technology, developed products for which there is a confirmed market place and gained approval from customers with highly demanding certification processes. Hence this is an opportune timing for the Company to embark on a full commercial scaling by targeting institutions and large corporates with its current product series based on the Proof of Concept ("PoC") developed through military and governmental clients, and to further develop and expand its product series for the purpose of targeting the more volume driven mass‐markets as well as to complement its product offering to military and governmental clients.

Going forward, Hiddn will capitalise on the significant time and money invested to‐date as well as taking advantage of the current technology and cybersecurity trend in the marketplace where the complex cybersecurity situation is pushing companies towards encrypted data storage and exchange.

In accordance with this strategy Hiddn focuses on expanding its sales and distribution platform. The recent acquisition of Finn Clausen Sikkerhetssystemer AS represents a significant expansion of the direct sale capabilities and Hiddn will continue to look for further strategic and organic growth opportunities.

Oslo, 29 May 2017 Board of Directors Hiddn Solutions ASA

FINANCIAL STATEMENTS

Consolidated statement of profit or loss (unaudited)

(Amounts in NOK thousands)	Note	01.01-31.03.2017 (unaudited)	01.01-31.03.2016 (unaudited)
Revenues	$\overline{2}$	858	308
Other income	$\overline{2}$		300
Total revenue and other income		858	608
Cost of materials and services		(1521)	(684)
Payroll expenses		(2658)	(2 539)
Depreciation & amortization		(17)	(10)
Other operating expenses	3	(8956)	(2361)
Operating loss		(12294)	(4986)
Interest income
Other financial income		(5)	2
Interest expense		(779)	(51)
Other financial expenses	5	(982)	(2)
Net financial items		(1766)	(51)
Loss before income tax		(14060)	(5037)
Income tax
Loss for the period		(14060)	(5037)
Profit/(loss) attributable to
Equity holders of parent company		(13625)	(5037)
Non-controlling interest		(435)
Basic and diluted earnings per share		(0, 29)	(0, 15)

Consolidated statement of comprehensive income (unaudited)

(Amounts in NOK thousands)	Note	01.01-31.03.2017 (unaudited)	01.01-31.03.2016 (unaudited)
Net profit/(loss) for the period		(14060)	(5 037)
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		(14060)	(5 037)
Total comprehensive income attributable to:
Equity holders of parent company		(13625)	(5 037)
Non-controlling interest		(435)

Consolidated statement of financial position (unaudited)

		31.03.2017	31.12.2016
(Amounts in NOK thousands)	Notes	(unaudited)	(audited)
ASSETS
Non-current assets
Property, plant, and equipment		177	141
Total non-current assets		177	141
Current assets
Inventory		1486	1465
Accounts receivable		744	1008
Other receivables		5445	4 1 0 2
Cash and short-term deposits		39 179	3 2 1 1
Total current assets		46854	9786
TOTAL ASSETS		47 031	9 9 2 7
EQUITY AND LIABILITIES
Equity
Share capital	4	21 1 7 3	12 16 2
Additional paid-in capital	4	154 147	81820
Other paid-in-capital		12 904	12 904
Accumulated losses	4	(162536)	(130183)
Non-controlling interest	4	(895)	(2028)
Total equity		24 793	(25325)
Non-current liabilities
Long-term debt	5,6	872	1 2 8 6
Total non-current liabilities		872	1 2 8 6
Current liabilities
Current portion of long-term debt	5	8635	8030
Short-term loans			11095
Trade payables		8 2 5 8	8053
Social security payable, etc.		240	844
Other short-term debt		4 2 3 3	5 944
Total current liabilities		21 3 6 6	33 966
Total liabilities		22 238	35 25 2
TOTAL EQUITY AND LIABILITIES		47 031	9927

Consolidated statement of changes in equity (unaudited):

				Other		Other-paid-in comprehensive Accumulated Non-controlling	Total equity controlling
(Amounts in NOK thousands)		Share capital Share premium	capital	income	losses	interest	interest
Equity 1 January 2016	51725	25 7 33	12780		(90324)		(86)
Loss for period					(5037)		(5037)
Other comprehensive income			٠		٠	٠	٠
Total comprehensive income for
the period			$\blacksquare$	۰	(5037)		(5037)
Share based payment			31				31
Equity component in convertible
debt			241				241
Equity 31 March 2016	51725	25 7 33	13052	÷	(95361)	÷	(4851)
Equity 1 January 2017	12 16 2	81820	12 904		(130183)	(2028)	(25325)
Loss for period					(13625)	(435)	(14060)
Other comprehensive income	ä,		٠		۰	٠	٠
Total comprehensive income for
the period	٠				(13625)	(435)	(14060)
Issue of shares	8 2 0 0	61498					69 698
Share issue transaction costs	۰	(5520)					(5520)
Repurchase of NCI	811	16 34 9	$\overline{\phantom{a}}$		(18728)	1568	۰

Consolidated statement of cash flows (unaudited)

		01.01-31.03.2017	01.01-31.03.2016
(Amounts in NOK thousands)	Note	(unaudited)	(unaudited)
Cash flow from operating activities
Net cash used in operating activites		(16 102)	(2858)
Cash flow from investing activities
Purchases of property, plant & equipment		(53)	(96)
Net cash from investing activities		(53)	(96)
Cash flow from financing activities
Share issuance		69 698
Transaction cost related to share issue		(5520)
Repayment of short-term loans		(12025)
Proceeds from issuing convertible debt			735
Repayment of convertible loans		(30)
Net cash from financing activities		52 1 23	735
Net change in cash and cash equivalents		35 968	(2 219)
Cash, cash equivalents and overdraft at beginning of period		3 2 1 1	1885
Cash, cash equivalents and overdraft-end of period		39 179	(334)
Net cash:
Cash and cash equivalents	39 179
Overdraft			(334)
Net cash		39 179	(334)

NOTES TO FINANCIAL STATEMENTS

NOTE 1 Corporate information & accounting policies

Corporate information

Hiddn Solutions ASA and its subsidiaries (the Group) develops, manufactures and sells electronic encryption components and systems, including software, for computers and portable communication units. The customers are mainly government agencies, such as military organisations, police, and other public agencies that handles sensitive information, and large corporations. Hiddn Solutions ASA, the parent company, is a public limited company incorporated in Norway. The Company's offices are located in Nedre Vollgate 4, 0158 Oslo. The board of directors approved the report on 29 May 2017.

Basis of preparation

These condensed consolidated quarterly 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 of the information required for full annual financial statements, and should be read in conjunction with financial statements of the Company for the year ended 31 December 2016. These condensed consolidated interim financial statements are unaudited.

The accounting policies applied by the Group in these condensed consolidated quarterly financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended 31 December 2016.

NOTE 2 Revenues and other income

Revenues

(Amounts in NOK thousands)	Q1 2017	Q1 2016
Norway	852	303
Other
Total	858	308

Other income

2016:

In Q1 2016, the Group received NOK 300 thousand in Government grants for research & development.

NOTE 3 Other operating expenses

(Amounts in NOK thousands)	Q1 2017	Q1 2016
R&D consultants	2 3 3 0	626
Stock exchange fees/share registration	1485
Legal fees	537
Accounting/Audit/IFRS	888	36
Management-for-hire	1 1 6 9	486
Other consultants	1040	610
Other	1506	603
Total	8955	2361

Increases in costs in 1 quarter 2017 compared to 1 quarter 2016 are related to stock exchange fees and share registration, legal fees, and accounting & audit fees which were primarily due to the transaction costs of indirect listing on Oslo Stock Exchange by the reverse take‐over of Hiddn Solutions ASA, continued R&D and expanding the sales and distribution platform. The reporting requirements and fees of being a listed on the Oslo Stock Exchange have also increased operating expenses on a continuing basis.

NOTE 4 Equity

Number of shares outstanding in thousands	Ordinary Shares
2016:
Opening balance	33 359
Share issuance
31 March 2016	33 359
2017:
Opening balance	35 771
Share issue to repurchase non-controlling interest	2 3 8 7
Rights issue	24 116
31 March 2017	62 274

Rights issue

In February 2017, Hiddn Solutions ASA completed a rights issue that was oversubscribed by approximately 50%. Due to the high demand of offer shares in the rights issue, the board decided to issue additional offer shares based on the board authorisation granted by the Company's extraordinary shareholder meeting. In total 24,116 thousand shares were issued securing NOK 69.7 million in gross proceeds. After deducting directly attributable transaction costs of NOK 5.5 million the net proceeds were NOK 64.2 million.

Share issued in exchange for non‐controlling interest

In January 2017, Hiddn Solutions ASA acquired additional 1.3 million of shares in Hiddn Security AS by issuing 2.4 million new shares. At 31 March 2017, Hiddn Solutions ASA's ownership share was above 97%.

NOTE 5 Interest‐bearing debt

(Amounts in NOK thousands)	Interest	Principal	Final Maturity	Carrying amount Pr 31.03 2017	Pr 31.12 2016
Non-secured long-term loan	$NIBOR+3%$	1698	March 2019	1434	1 2 8 6
Low interest loan from the Government	4,85%	500	April 2017	500	482
Low interest loan from the Govenment	4,95%	8000	March 2024	7573	7548
DnB - short-term loan	6,00%	4 700	Dec 2016	$\sim$	4700
Non-secured short-term loan	15% fee/NIBOR +5%	7325	May 2017	۰	6395
Total loans				9507	20411
Less current portion of debt				8635	8030
Less short-term debt (original maturity less than a year				$\overline{\phantom{a}}$	11095
Non-current liabilities				872	1 2 8 6

In May 2016, Innovation Norway provided NOK 8 million in a new 8‐year loan to Hiddn Security AS. The loan includes covenants related to equity and working capital. Hiddn Security AS is in breach of the equity covenant and the entire loan is hence classified as a current liability.

Repayment of interest‐bearing debt

In March 2017, the Group repaid the outstanding nominal amount of the unsecured NOK 7.3 million loan that was incurred in December 2016 and the short‐term debt of NOK 4.7 million to DnB.

Note 6 Events after the balance sheet date

Business acquisition

On 3 April 2017, the Group entered into an agreement to acquire 100% of the outstanding shares of Finn Clausen Sikkerhetssystemer AS ("FCS") at a purchase price of NOK 12.5 million. The purchase price will be settled partly by issuance of 4 million Hiddn Solutions ASA shares that were valued at the closing price of NOK 2.99 on 16 May 2017. The Group also paid 491 thousand in cash to settle net working capital.

FCS has since its origin in 1996 been a reputable supplier with archiving, storage and security products and has a significant share of the market for secure physical filing and storage systems in Norway.

The acquisition was approved by the Company's general meeting and completed on 16 May 2017.

The table below provides the preliminary allocation of the purchase price based on estimates of net equity in FCS.

(Amounts in NOK thousands)	FCS AS
Hiddn Solutions ASA shares (4 million)	11960
Cash	491
Total consideration	12451
Net equity in FCS AS (IFRS)	589
Customer relationships	4692
Inventory	910
Deferred tax liability on fair value adjustment	(1 345)
Total identifiable assets and liabilities	4846
Goodwill	7605

For further information please refer to the Information Memorandum published on the Company's website 10 May 2017.

Repayment of loans

In April 2017, the Group repaid the final instalment of NOK 500 thousand on a government loan originally incurred in 2007 and repaid NOK 563 thousand of the non‐secured long‐term loan.

Issue of shares in exchange for non‐controlling interest

In April 2017, Hiddn Solutions ASA issued additional 825 thousand shares to acquire 451 thousand shares in Hiddn Security AS. The Group now owns more than 99% of the outstanding shares in Hiddn Security AS.