NEXT Biometrics Group ASA — Earnings Release 2015

Nov 24, 2015

NEXT BIOMETRICS GROUP ASA Q3-2015 CEO Tore Etholm-Idsøe / CFO Knut Stålen

NEXT ....

NEXT ...

• Completion of new ultrathin, design-friendly sensor generation
• Implementation of new sensors in all modules
• Final preparations leading to the first Dell announcement
• Negotiations leading to NOK 120 mill private placement by Greenbridge Partners
• Negotiations leading to termination of inventor royalty agreement
• Preparations for listing at Oslo Børs The main list

The Financials Knut Stålen, CFO

MNOK	Q3-15	Q2-15	Q1-15	Comments Q3-15
Revenue	0.2	0.3	2.4
Total operating expenses	29.8	23.9	24.3
Net operating earnings (EBIT)	-29.6	-23.6	-21.9
Net profit (loss)	-29.9	-24.5	-19.64
Cash flow in Quarter	-30.7	-22.8	-30.5
Cash	45.3	76.0	98.7	Not including new funds from capital increase MNOK 127.5
Inventory	23.6	23.4	24.0
Accounts receivables	0.9	3.3	4.4
Other receivables	10.3	6.7	19.8
Equity	90.1	118.7	142.0

Operating Expenses – Q3-15

Other operating expenses (including cogs)

Comments

• Payroll expenses increased from NOK 10.3 million in Q2-15 to NOK 14.4 million in Q3-15.
• Main effects are new employees R&D, subsidiaries in Taiwan and Czech, options expenses and increased USD exchange rate.

• Share based remuneration MNOK 1.7 in Quarter

• Other operating expenses increased to MNOK 15.5 in Q3-15 (MNOK 13.5 in Q2-15)

• Continued increased activities in Research and Development (R&D). New sensor formats.

P&L statement

Condensed consolidated interim P&L statement							Comments
Amounts in NOK 1 000	2015 Q3	2015 Q2	2015 Q1	2015 YTD-Q3	2014 YTD-Q3	2014 YEAR
Operating revenue	199	283	2 385	2 867	1 925	6 306	sensors shipped YTD.)
Other operating revenue	0	0	0	0	375	375
Total revenue	199	283	2 385	2 867	2 300	6 681
Payroll expense	14 372	10 309	8 395	33 077	15 506	21 914
Other operating expenses	15 470	13 548	15 926	44 944	33 215	66 781
Total operating expenses	29 853	23 857	24 321	78 021	48 721	88 695	rate.
EBITDA	-29 644	-23 574	-21 936		-75 154 -46 421	-82 014
Depreciations and amortizations	692	254	235	1 180	242	596
EBIT	-30 336	-23 828	-22 170	-76 334	-46 663	-82 609
Net financial items	468	-698	2 595	2 365	357	2 916	included in operating expenses.
Net profit (loss) for the period	-29 868	-24 527	-19 575	-73 970	-46 306	-79 691

Operating revenue NOK 0.2 million in Q3- 15 from delivering of 5K sensors (61K sensors shipped YTD.)

Operating expenses of NOK 29.9 million in Q3-15 compared to NOK 23.9 mill in Q2-15.

Payroll expenses increased from NOK 10.3 million in Q2-15 to NOK 14.4 million in Q3- 15. Main effects are new employees R&D, subsidiaries in Taiwan and Czech, options expenses and increased USD exchange rate.

NEXT continues to invest in the production ramp-up and cost down. Increased engineering activities for new module designs in collaboration with customers.

Costs of goods sold, ramp-up expenses are included in operating expenses.

Balance sheet

Consolidated balance sheet	Comments
Amounts in NOK 1 000	30.09.2015	30.06.2015	31.3.2015	31.12.2014
Patents	6 972	7 053	7 134	7 215
Machinery and office equipment	18 820	18 584	3 247	1 960	76.0 7 million by the end of Q2-15.
Financial assets	0	0	0	0
Total non-current assets	25 792	25 637	10 381	9 175
Inventory	23 570	23 394	23 968	17 154	exercise of NOK 127.5 million.
Accounts receivables	865	3 278	4 356	3 770
Other receivables	10 281	6 690	19 813	19 568
Total receivables	11 146	9 968	24 169	23 338	with NOK 15.5 million.
Cash and cash equivalents	45 282	75 951	98 748	129 265
Total current assets	79 998	109 313	146 884	169 758
Total assets	105 791	134 949	157 265	178 933
Share capital	11 318	11 318	11 318	11 318	"skattefunn"
Share premium-reserve	268 155	268 155	268 155	275 641
Other paid-in capital	19 136	17 829	16 599	16 594
Retained earnings	-208 525	-178 585	-154 066	-141 944
Total equity	90 083	118 716	161 609	161 609
Other non-current provisions	7 292	7 255	7 195	7 147
Other non-current debt		0	0	0
Total non-current liabilities	7 292	7 255	7 195	7 147
Accounts payable	4 076	4 292	3 731	5 121
Public duties payable	153	421	241	465
Other current liabilities	4 187	4 277	4 092	4 590
Total current liabilities	8 415	8 990	8 064	10 177
Total liabilities	15 707	16 234	15 259	17 323

Total equity and liabilities 105 791 134 949 157 265 178 933

Cash and cash equivalents of NOK NOK 45.3 million by end of Q3-15 compared to NOK 76.0 7 million by the end of Q2-15.

The Cash balance do not include the funds from the private placement and warrant exercise of NOK 127.5 million.

Inventory of NOK 23.6 million in Q3-15, compared to NOK 23.4 million in Q2-15.

Coating machine is included in Fixed assets with NOK 15.5 million.

The main part of the increase in other receivables from NOK 7.0 million in Q2 to NOK 10.3 million in Q3 are prepayments for the new ASIC project, and grants from "skattefunn"

2015 figures are unaudited

Cash Flow Statement

Condensed interim Cash Flow	Comments
Amounts in NOK 1 000	Q3-2015	Q2- 2015	Q1-2015	31.12.2014	31.12.2013
Profit (loss) before taxes Share based remuneration Depr. and Amort. Change in working capital	-29 868 1 308 692 -1 881	-24 527 1 229 254 15 749	-19 575 5 235 -9 708	-79 691 4 407 596 -37 382	-38 795 4 972 577 3 371	in Q2-15 million in Q3-15.
Net Cash from op. act. Purchase of tangible assets	-29 750 -847	-7 294 -15 510	-29 043 -1 441	-112 070 -2 133	-29 875 -442
Net cash from inv. act.	-847	-15 510	-1 441	-2 133	-442	exercise of NOK 127.5 million.
Proceeds non-current debt Share issue net of expenses Net cash financing	0 0 0	0 0 0	0 0 0	0 173 845 173 845	-2 364 102 015 99 651
Translation differences	-72	7	-33	-105	-207
Net change in cash flow	-30 669	-22 797	-30 517	59 537	69 126
Opening cash balance Closing cash balance	75 951 45 282	98 748 75 951	129 265 98 748	69 728 129 265	602 69 728

In Q3-15, NEXT had a negative cash flow of NOK 30.7 million compared to NOK 22.8 million in Q2-15

The working capital increased by NOK 1.9 million in Q3-15.

The Cash balance do not include the funds from the private placement and warrant exercise of NOK 127.5 million.

10

The NEXT Technology

The core technology

Unique access to game changing cost efficiency

Protected by patents and trade secrets at sensor and ASIC level..

The Active Thermal Principle, patented and owned by NEXT, is based on transfer of heat from sensor into finger ridges and valleys

The unique simplicity of the NEXT Active Thermal pixel designs allows for mass production in standard high quality display fabs.

Facilitating mass production at a fraction of comparable competitors costs.

Significantly lower pricing • 70-80% cheaper than same size silicon area sensors • 20-35% lower cost than small competitive area sensors • Polysilicon technology allows robust sizes at low cost • Company not forced to reduce size to stay price competitive • NEXT owns and controls the "Active Thermal Principle" • No close competitors – No overlap with others.. • The NEXT module design allows low cost and fast adoptions to customer integration needs at module level Uncompromised security & convenience Clean IP Flexibility of integration

Product - 2015..

Tore Etholm-Idsøe, CEO

2 A Product -> Roadmap with 2015 transitions

2 A Product -> Roadmap with 2015 transitions

2 A Product -> Roadmap with 2015 transitions

Focus - 2016.. Tore Etholm-Idsøe, CEO

NEXT Focus 2016 -> Quality critical Markets ..

NEXT Focus 2016 -> Quality critical Markets…

In present market smartphones and most notebooks the sensor system only need to work coveniently for a moderate %-age of the end users..

At failure, immediate access to traditional pincodes or passwords is offered.

The sensor systems does not add security beyond simple pin-code and password systems.

NEXT Focus 2016 -> Quality critical Markets…

When a pin-code or password based «plan B» is not possible or not accepted..

"In such quality critical markets -a sensor system must work:

• Securely (FAR 1/10 000 or 1/ 100 000)
• Coveniently (FRR < 1%)
• Everyday (over the lifetime of the device)
• Everywhere (indoor, outdoor, in dry, in humid conditions..) for - 98% + of any given population

beyond simple pin-code and password systems.

coveniently for a moderate %-age of the end

At failure, immediate access to traditional pin-

The sensor systems does not add security

codes or passwords is offered.

22

users..

Fingerprint industry -> Performance documentation needed

population..

NEXT Focus --> High quality documentation of performance..

KEY "MADRID" CONCLUSIONS :

• 1) The Active Thermal principle performs in line with significantly more expensive same sized capacitive sensors
• 2) Sensor size is the dominant factor determining sensor system performance
• <<<<< 3) At acceptable FAR levels, reduced size comes with a dramatic effect on FRR levels (false rejection of genuine user)

NEXT Focus 2016 -> Company Strongholds only

NEXT Focus 2016 -> Smartcards …

Summation Published Information

• NEXT production process – polysilicon is well positioned to create flexible sensors

• NEXT product director Dr Robert Muller is editor of the ISO committee defining the system-on-card standard

Status

• Neither NEXT nor any other player has yet proven or demonstrated a flexible sensor meeting all requirements of smartcard implementations

NEXT Stand – «Cartes 2015»

• NEXT do not publish new products before it has been proven that they meet all mandatory requirements and that are mass producibility has been proven.
• NEXT will not make further comments on this issue.

Sales -> Outlook Competitive situation

Traditional markets	Smartphones	Notebooks & Tablets	New NEXT-enabled markets
LARGE SENSORS ONLY NEXT DP/CROSSMATCH FPC	SMALL SIZES LARGER SYNAPTICS NEXT FPC (APPLE)	SMALL SIZES LARGER SYNAPTICS NEXT FPC EGISTEC	LARGE SENSORS ONLY NEXT n.a.
n.a. OPTICALS (LARGE) n.a.	GOODIX EGISTEC n.a. Silead Focaltech MD Chipone MicroArray Pixir.	n.a. NO SIGNIFICANT CHANGE IN NEXT-FOCUSED MARKETS	n.a. n.a. n.a.
n.a.	Qualcomm Idex n.a. Vkansee Holtek	n.a.	n.a. n.a.
NEXT is positioned for market leadership in the Traditional markets Source: Company market view and intelligence	Crowded, small area NEXT aims to be a leading provider in all "stronghold" market segment NEXT to focus on higher value applications	& NEXT is positioned to play a leading role in 5 Notebooks & Tablets Competitiveness: = very good	segments There is a significant potential in the NEXT enabled segments = good = medium = poor

On Track -> Expansion of capacity mass production..

• New generation modules to generate orders
• Further expansions within the Notebook & Tablet markets
• "NEXT-Enabled Markets" to generate high volume / long term business
• Increased focus on SmartCard projects