NEXT Biometrics Group ASA — Earnings Release 2015

Aug 25, 2015

NEXT BIOMETRICS GROUP

Q2 -2015 CEO Tore Etholm-Idsøe / CFO Knut Stålen

• TIER 1 customer launch planned in 5-7 weeks.
• Great customer acceptance of second generation products *
• New Ultrathin sensors enabling highly competitive Smartphone designs
• Entering India and Korea by signing AqTronics and WPG as NEXT distributors
• Significant growth in NEXT-Enabled market prospects.

The Financials

Knut Stålen, CFO

Key Financial Figures

MNOK	Q2-15	Q1-15	Q1-14	Comments Q2-15
Revenue	0.3	2.4	0.0	Shipments for TIER 1 only
Total operating expenses	23.9	24.3	14.8	Includes ramp-up and production
Net operating earnings (EBIT)	-23.6	-21.9	-14.8	(see next slide)
Net profit (loss)	-24.5	-19.6	-14.9
Cash flow in Quarter	-22.8	-30.5	-25.5
Cash	76.0	98.7	44.3
Inventory	23.4	24.0	0.0	All components valid for new modules
Accounts receivables	3.3	4.4	0.0
Other receivables	6.7	19.8	6.5	Capitalized - Coating machine
Equity	118.7	142.0	49.1

Operating Expenses – Q2-15

Other operating expenses (including cogs)

Comments

• Payroll expenses increased to MNOK 10.3 in Q2-15 (MNOK 8.4 in Q1-15)
• Full impact of additional recruitments in R&D

• Currency impacts

• Other operating expenses reduced to MNOK 13.5 in Q2-15 (MNOK 15.9 in Q1-15)

• Increased activities in Research and Development (R&D)
• Ramp up of production including production costs
• Currency impacts
• No write-down of inventory
• No capitalization of R&D

P&L statement

Condensed consolidated interim P&L statement	Comments
Amounts in NOK 1 000	2015 Q2	2015 Q1	2015 H1	2014 H1	2014 YEAR	2013 YEAR	15 (NOK 2.4 million in Q1-15)
Operating revenue Other operating revenue	283 0	2 385 0	2 668 0	682 0	6 306 375	38 0
Total revenue Payroll expense	283 10 309	2 385 8 395	2 668 18 704	682 10 264	6 681 21 914	38 12 110
Other operating expenses	13 548	15 926	29 474	22 301	66 781	24 949
Total operating expenses	23 857	24 321	48 178	32 564	88 695	37 058	included in operating expenses.
EBITDA Depreciations and amortizations	-23 574 254	-21 936 235	488	-45 510 -31 882 40	-82 014 596	-37 021 577
EBIT Net financial items	-23 828 -698	-22 170 2 595	-45 999 1 897	-31 922 -55	-82 609 2 916	-37 598 -1 197
Net profit (loss) for the period	-24 527	-19 575	-44 102	-31 867	-79 691	-38 795

Operating revenue NOK 0.3 million in Q2- 15 (NOK 2.4 million in Q1-15)

Operating expenses of NOK 23.9 million in Q2-15 compared to NOK 24.3 mill in Q1-15.

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.

6

Balance sheet

Consolidated balance sheet	Comments
Amounts in NOK 1 000	30.06.2015	31.3.2015	31.12.2014	31.12.2013
Patents	7 053	7 134	7 215	7 538
Machinery and office					98.7 million by the end of Q1-15.
equipment	18 584	3 247	1 960	100
Financial assets	0	0	0	0
Total non-current assets	25 637	10 381	9 175	7 638
Inventory	23 394	23 968	17 154	0	modules.
Accounts receivables	3 278	4 356	3 770	5
Other receivables	6 690	19 813	19 568	2 339	with NOK 15.5 million.
Total receivables	9 968	24 169	23 338	2 345
Cash and cash equivalents	75 951	98 748	129 265	69 728
Total current assets	109 313	146 884	169 758	72 073
Total assets	134 949	157 265	178 933	79 711
Share capital	11 318	11 318	11 318	8 788
Share premium-reserve	268 155	268 155	268 155	104 326
Other paid-in capital	17 829	16 599	16 594	12 187
Retained earnings	-178 585	-154 066	-134 457	-62 147
Total equity	118 716	142 006	161 609	63 154
Other non-current provisions	7 255	7 195	7 147	7 350
Other non-current debt	0	0	0	0
Total non-current liabilities	7 255	7 195	7 147	7 350
Accounts payable	4 292	3 731	5 121	759
Public duties payable	421	241	465	139
Other current liabilities	4 277	4 092	4 590	8 309
Total current liabilities	8 990	8 064	10 177	9 207
Total liabilities	16 234	15 259	17 323	16 557
2015 figures are unaudited

Total equity and liabilities 134 949 157 265 178 933 79 711

Cash and cash equivalents of NOK 76.0 million by end of Q1-15 compared to NOK 98.7 million by the end of Q1-15.

Inventory of NOK 23.4 million in Q2-15, compared to NOK 24.0 million in Q1-15

All components in inventory are valid for new modules.

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

7

Cash Flow Statement

Condensed interim Cash Flow	Comments
Amounts in NOK 1 000	Q2- 2015	Q1-2015	Q4-2014	31.12.2014	31.12.2013
Profit (loss) before taxes	-24 527	-19 575	-33 385	-79 691	-38 795	million in Q1-15
Share based remuneration	1 229	5	1 409	4 407	4 972
Depr. and Amort.	254	235	353	596	577
Change in working capital	15 749	-9 708	-4 374	-37 382	3 371	million in Q1-15.
Net Cash from op. act.	-7 294	-29 043	-35 997	-112 070	-29 875
Purchase of tangible assets	-15 510	-1 441	-1 250	-2 133	-442	fixed assets instead of prepayments.
Net cash from inv. act.	-15 510	-1 441	-362	-2 133	-442
Proceeds non-current debt	0	0	-148	0	-2 364
Share issue net of expenses	0	0	3 213	173 845	102 015	million in Q1-15
Net cash financing	0	0	3 065	173 845	99 651
Translation differences	7	-33	-85	-105	-207
Net change in cash flow	-22 797	-30 517	-34 267	59 537	69 126
Opening cash balance	98 748	129 265	163 531	69 728	602
Closing cash balance	75 951	98 748	129 265	129 265	69 728

In Q2-15, NEXT consumed NOK 7.3 million in cash from operations compared to NOK 29.0 million in Q1-15

The working capital decreased by NOK 7.3 million in Q1-15.

The coating machine is 100% paid and operational. The machine is now booked as fixed assets instead of prepayments.

Total net change in cash-flow in Q2-15 was NOK -22.8 million compared to NOK -30.5 million in Q1-15

The NEXT Technology

Tore Etholm-Idsøe, CEO

2 Roadmap with 2015 transitions

2 Roadmap - Bezel less sensor modules..

RELEASE AUGUST 24th 2015

Bezel less designs enabling highly competitive smartphone sensor designs…

Meeting high level ESD requirements – in all mass markets

Further reducing sensor module costs

2 Roadmap with 2015 transitions

2 Roadmap with 2015 transitions

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.

"The Madrid Report"

A comparative analysis of size and quality in fingerprint sensors

FRR performance at 0,01% FAR..

High security setting – Targeting payments, corporate access, governmental appl.

FRR performance at 0,01% FAR..

High security setting – Targeting payments, corporate access, governmental appl.

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)

* FPC 12x12 cropped is actually 10.6x12 because original image is only 10.6x14. Therefore also little difference between 12x12 and 10x10. The pre-processed FPC images seem not to work well below a critical size and result in a significant drop in accuracy for 8x8.

4 strong and significant competitive advantages..

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

Business Outlook

The Fundamentals Tore Etholm-Idsøe, CEO

Outlook -> Traditional Markets..

Adressable Market ->	Competition ->	Products ->	Status
ene… Årstall n.a.	LARGE SENSORS ONLY NEXT DP/CROSSMATCH FPC OPTICALS (LARGE) n.a.	NB-1010 NB-1011 NB-1411 n.a.	LEADS August 24th 71 projects "DEL" = Realistic period of first mass deliveries Some customers represents n.a. several projects n.a. Lead times 3-12 months n.a.
THE TCS-1 13*18 mm 230 mm2 500 dpi Capacitive	FULL SIZE AVERAGE FRR 0,42% Principle		n.a.
n.a. THE NB-1010-U n.a. 12*17 mm 201 mm2 385 dpi Active Thermal	AVERAGE FRR 0,63% n.a. Principle	n.a.	n.a. n.a.
THE FPC-1011-F3 10.4*14 mm 148 mm2 363 dpi Capacitive	NEXT aims to be a leading provider in all "stronghold" AVERAGE FRR 1,54% Principle	&	segments

Notebook & Smartphone – Shift of focus…

…. to true mass market – population level - sensor system implementations

"In mass market implementation context a fingerprint 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

This level of quality / performance can not be achieved by sensor smaller than 144 mm2.

NEXT is today the only supplier able to ship larger area sensors at mass market acceptable price levels.

Outlook -> Notebooks & Tablets..

Outlook -> Smartphones..

Adressable Market ->		Competition ->	Products ->	Status
ene…	Årstall	SMALL SIZES LARGER SYNAPTICS NEXT	NB-1012	LEADS August 24th
		FPC		25 projects
		(APPLE)
		GOODIX		"DEL" = Realistic period of
		EGISTEC	NB-2011	first mass deliveries
		Idex
		6 New Chinese - Capacitive	All leads in this segment n.a.
		Qualcomm - Ultrasound		require custom built modules
n.a. ene…	Årstall	Vkansee - Optical Holtek - Optical		n.a. Lead times 12-24 months

security segments For players targeting high end applications APPLE

Higher

Sept 2013 & 2014 Tiny area sensor under home button

SAMSUNG

March - 2015 Tiny area sensor under home button

HUAWEI

NEXT aims to be a leading provider in all "stronghold" & segments 5 Sept 4th - 2014 Medium area sensor 92 mm2 sensing area Back side

NEXT APPROACH

Significantly better performance (144/92=1.52) Lower cost

2 Sales – Smartphones .. Placement trend..

Fast growing number of suppliers and end-users recognizing the advantages of backside fingerprint sensor integration..

2 Sales – Smartphones .. New & Attractive designs..

NEXT BIOMETRICS

2 Sales – Smartphones .. New & Attractive designs..

<<<<< NEXT BIOMETRICS

2 Sales – Smartphones .. New & Attractive designs..

NEXT BIOMETRICS

Outlook -> NEXT-Enabled..

n.a. n.a. Segments dependent of a combination of large area and low cost uniquely offered by NEXT Biometrics,

NEXT aims to be a leading provider in all "stronghold" & segments PER AUGUST 2015: Several brandname player high volume leads

Outlook -> Summation competitive situation

Traditional markets	Smartphones		Notebooks & Tablets		New NEXT-enabled markets
LARGE SENSORS ONLY NEXT DP/CROSSMATCH FPC	SMALL SIZES SYNAPTICS FPC (APPLE)	LARGER NEXT	SMALL SIZES SYNAPTICS FPC EGISTEC	LARGER NEXT	LARGE SENSORS ONLY NEXT n.a.
n.a. OPTICALS (LARGE) n.a. n.a.	GOODIX EGISTEC n.a. Silead Focaltech MD Chipone MicroArray Pixir. Qualcomm Idex	- - - -	n.a. Leading positioning in the Traditional Markets Leading positioning in Notebooks Strong positioning in Tablets Stronger positioning in Smartphones		n.a. n.a. H2-2015/2016 Product Portfolio grants NEXT … n.a. n.a.
	n.a. Vkansee Holtek NEXT aims to be a leading provider in all "stronghold"	- -	Unique positioning within NEXT-enabled markets n.a. In 2016 NEXT will have access to larger combined segments markets than any other player in our industry

On Track -> Expansion of capacity mass production..