Polight ASA — Investor Presentation 2019

Oct 24, 2019

Third quarter 2019

Earnings presentation 24 October 2019

Disclaimer

This presentation (the "Presentation") has been produced by poLight ASA (the "Company") exclusively for information purposes. This Presentation has not been approved, reviewed or registered with any public authority or stock exchange. Further to the aforementioned, this presentation is the result of an effort of the Company to present certain information which the Company has deemed relevant in accessible format. This Presentation is not intended to contain an exhaustive overview of the Company's present or future financial condition and there are several other facts and circumstances relevant to the Company and its present and future financial condition that not been included in this Presentation. This Presentation may not be

disclosed, in whole or in part, or summarized or otherwise reproduced, distributed or referred to, in whole or in part, without prior written consent of the Company. This Presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates or intends to operate. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words "believes", expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. The forward-looking statements contained in this Presentation, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. None of the Company or any of its subsidiary undertakings or any such person's officers or employees provides any assurance that the assumptions underlying such forward-looking statements are free from errors nor does any of them accept any responsibility for the future accuracy of the opinions expressed in this Presentation or the actual occurrence of the forecasted developments. The Company assumes no obligation to update any forward-looking statements or to conform these forward-looking statements to our actual results. Furthermore, information about past performance given in this Presentation is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance. No representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, neither the Company nor any of its parent or subsidiary undertakings or any such person's officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this document. By reviewing this Presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the businesses of the Company. This Presentation must be read in conjunction with the recent financial reports of the Company and the disclosures therein. The distribution of this Presentation in certain jurisdictions may be restricted by law. Persons in possession of this Presentation are required to inform themselves about, and to observe, any such restrictions. No action has been taken or will be taken in any jurisdiction by the Company that would permit the possession or distribution of this Presentation in any country or jurisdiction where specific action for that purpose is required. No shares or other securities are being offered pursuant to this Presentation. This Presentation does not constitute an offer to sell or form part of, and should not be construed as, an offer or invitation for the sale or subscription of, or a solicitation of an offer to buy or subscribe for, any shares or other securities in any jurisdiction, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any offer, contract, commitment or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Company. By reviewing this Presentation you agree to be bound by the foregoing limitations. This Presentation speaks as of 24 October 2019. Neither the delivery of this Presentation nor any further discussions of the Company with any of the recipients shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since such date. The Company does not intend, and does not assume any obligation, to update or correct any information included in this Presentation. This Presentation shall be governed by Norwegian law, and any disputes relating to hereto is subject to the sole and exclusive jurisdiction of Norwegian courts, with Nordre Vestfold District Court as legal venue.

Today's agenda

• Key events
• Introduction to poLight
• Operations and markets review
• Financial review
• Outlook
• Q&A

Dr. Øyvind Isaksen

Chief Executive Officer

Presenting

Dr. Isaksen has been CEO in poLight since August 2014. He has previously held several CEO positions, most recently in the publicly listed company Q-Free ASA, which he left January 2014 after 7 years as CEO. Dr. Isaksen holds a Ph.D in Applied Physics.

Alf Henning Bekkevik

Chief Financial Officer

Bekkevik is a senior executive with a background from Arthur Andersen (E&Y), Wallendahl, Fjord Line, Grenland Group and lately from Wood Group Mustang as VP Finance. He holds a Master in Business & Economics (Siviløkonom) degree from NHH and is a state authorised public auditor & accountant.

Key events

• Several product-specific projects progressing related to wearables, smartphone and barcode applications
• Increased probability of a design-win in late 2019 or early 2020
• to a wearable device
• Additional purchase orders for the same project received in October

Progressing towards market launch for wearable device • Order for 33,320 units of TLens Silver and 30,000 ASIC 45,700 units of TLens and 48,000 ASIC drivers

• drivers received in Q3
• Two follow-up orders received in October totalling
• Lenses and drivers to be used in PVT* and to prepare for market launch
• PVT represents last stage before potential design-win and mass production
• Project remains subject to potential changes for various technical and market related reasons

*) EVT : engineering verification test, DVT : design verification test, PVT : product verification test

poLight at a glance

• the mobile, barcode, augmented reality and other markets
• Founded in 2005 and has since build state-of-the-art expertise in optics, polymers MEMS technology and image applications and processing
• 13 worldwide patents families, 9 pending applications and 3 registered trademarks
• 29 employees + consultants
• Headquartered in Horten, Norway, with offices in Finland, France and China, and representation in Taiwan and Korea

poLight enables unique use cases

poLight´s technology well suited for multiple applications Smartphone Barcode Augmented Reality (AR) / • TLens supporting several relevant

• Large addressable market, billions of cameras produced for the smartphone industry each year
• trends in the smartphone market:
  • Higher image and video quality
  • Front camera with autofocus (AF)
  • High-frame-rate video cameras
  • Biometric (3D, structured light, face ID)

• 5G

• Multi camera solutions

• Evolving from 1D laser to 2D imaging barcode readers
• Lasers replaced by camera systems. Autofocus will improve efficiency in scanning and portfolio
• Barcode technology spreading to new industries

Wearable Other

• Augmented reality and wearable represent potential mass-market applications
• AR technology depends on sharp image being projected onto the eye eye focus. Hence need for low power autofocus technology
• Wearable initially focused on growing smartwatch/ wristwear markets

• New opportunities emerging and may represent significant potential
• Machine vision, medical, drones, automobile, smartphone imagesensors and video conferencing etc. are examples of potential new opportunities for poLight's technology

Operations and market review

poLight involved in real project for smartphone • From PoC to real product project • Designed into front facing camera for next release • Currently at EVT stage (i.e. planned to be used) • EVT camera-modules shipped and to be tested at

-

• phone level
• Planned market release mid-2020

Smartphone market will need AF in selfie camera • poLight continues to promote new advanced

• Bezel-free screens likely to impose implementation challenges for all technologies
• Industry ratings (DXOMARK1 ) may balance bezelfree focus and camera score
• compact design
• trigger additional demand
• 5G likely to create new opportunities for TLens

1) DXOMARK is the leading source of independent audio and image quality measurements and ratings for smartphone, camera and lens

Summing up smartphone related activities • 5 PoCs technically finalised • Most PoCs completed with overall good feedback • Two new PoCs started in Q3

- One vendor in Engineering Verification Test (EVT) phase for a specific smartphone project

-

Market segment	PoC	Completed PoC	EVT/ DVT/ PVT	Design Win
Smartphone	8	5	1

poLight involved in real project for barcode • TLens designed into next generation long range scanner product to • Ordered 700 TLens samples

• improve AF performance
• Currently at EVT stage
• Planned market release mid-2020
• Product life time estimated to 5+ years

Potential diversification through multiple usages • Five ongoing PoCs with positive technical results

• Barcode

• One barcode maker started a real product project
• Two more considering real product projects
• Augmented Reality (AR) / Wearable
  • Four ongoing AR PoC. Progress unknown
  • Two additional companies considering PoCs
  • which one has matured to PVT
• Other
  • Five medical use-cases under development, two have bought eval. kits and three ongoing PoC/planned PoC
  • industrial application areas

Barcode • Five ongoing PoCs with positive technical results	Market segment	#bought TLens/Eval kit	Planning PoC	PoC	EVT/ DVT/ PVT	Design Win
• One barcode maker started a real product project • Two more considering real product projects	Barcode	4		5	1
Augmented Reality (AR) / Wearable • Four ongoing AR PoC. Progress unknown • Two additional companies considering PoCs	AR	5	2	4
• Two smartwatch PoCs have delivered positive results of which one has matured to PVT	Machine vision	1		1
Other Five medical use-cases under development, two have bought eval. kits and three ongoing PoC/planned PoC	Smartwatch/ wearable	2		1	1
• One ongoing PoC and two under planning in other industrial application areas	Medical/ other	2	1	2

Financial review

Key financials

Key financials
Income statement				Balance sheet summary
(NOK million)	Q3 2019	Q3 2018	FY 2018
Revenue	0.42	0.3	1.0
Cost of sales	-0.35	-0.4	-1.5
Research and development expenses	-5.05	-6.5	-28.9
Sales and marketing expenses	-2.11	-1.7	-7.6
Administrative expenses	-2.98	-22.5	-35.8
Operational / supply chain expenses	-1.64	-0.4	-3.4
EBITDA	-11.73	-31.2	-76.1
• Revenue from delivery of TLens, ASICs and evaluation kits to potential customers				• Cash position of NOK 79.9 million, compared with NOK 127.4 million at year-end 2018
• Order in Q3 related to a project progressing from PoC phase			to EVT
• 15,533 TLens units and 32,250 to potential customers		PDA50 drivers delivered in Q3
• EBITDA loss of NOK -11.7 million vs. loss of NOK -31.2 million in Q3 2018 •

• Revenue from delivery of TLens, ASICs and evaluation kits to potential customers
  • phase
  • to potential customers
• EBITDA loss of NOK -11.7 million vs. loss of NOK -31.2 million in Q3 2018
  • Decrease in R&D expenses
  • Comparable figures for the previous year distorted by VAT claim and IPO-related expenses

(NOK million)	Q3 2019	Q3 2018	FY 2018
Intangible assets	74.7	73.7	75.8
Cash and cash equivalents	79.9	167.6	127.4
Total equity	162.0	210.6	201.5
Total current liabilities	13.5	48.3	18.1
Total non-current liabilities Total equity and liabilities	1.1 176.5	0.0 258.9	0.0 219.5

Funded to drive TLens commercialisation

• Q3 cash used in operations was NOK 10.9 million
• Q3 cash used in investing activities was NOK 0.4 million
• Q3 net decrease in cash was NOK 11.6 million

Q3 2019 cash flow development

Outlook

Outlook

• Three projects related to wearables, smartphones and barcode progressing towards potential mass production
  • Two follow-up orders for a wearable project received
  • EVT camera shipped to customer for phone level test
  • Sample order for a barcode project in EVT phase received
• Increased probability of a design-win in late 2019 or early 2020
• In the near future less resources to be allocated to product development as the TLens technology has completed qualifications and become mass production ready • Focus shift towards manufacturing, delivery and customer
• support

Next events: Q4-19 - 14 February 2020

Appendix

•Appendix

Management Team

Dr. Øyvind Isaksen

Craen has more than 20 years experience in opto-mechanical system engineering. Prior to joining poLight, he managed product development teams at Varioptic, Barco and Motorola/Symbol. Craen holds a M.Sc. degree in optical engineering from Sup-Optic and a M.Sc. in Applied Physics. Bekkevik is a senior executive with a background from Arthur Andersen (E&Y), Wallendahl, Fjord Line, Grenland Group and lately from Wood Group Mustang as VP Finance. He holds a Master in Business & Economics (Siviløkonom) degree from NHH and is a state authorised public auditor & accountant. Chief Executive Officer Dr.Isaksen has been CEO in poLight since August 2014. He has previously held several CEO positions, most recently in the publicly listed company Q-Free ASA, which he left January 2014 after 7 years as CEO. Dr. Isaksen holds a Ph.D in Applied Physics.

Alf Henning Bekkevik

Chief Financial Officer

Pierre Craen

Chief Technology Officer

Marianne Sandal

Chief Operating Officer

Sandal is a senior executive with background from Tele-communications (Nera) and Road User Charging (Q-Free). She holds a BSc in Mechanical Engineering in addition to courses from Norwegian School of Management (BI). She has been responsible for world wide operations for more than 15 years.

Board of Directors

Eivind Bergsmyr - Chairman Mr. Bergsmyr is Partner in Viking Venture since 2009. Bergsmyr was previously CEO of the Norwegian start-up Nacre AS, sold in 2007 to Sperian Protection and recognized as the Nordic Venture Exit of the Year. Prior to this, Bergsmyr acquired some extensive industrial experience from Siemens Telecom and Siemens Electrical Heating. He holds a MSc from NTNU.

Ann-Tove Kongsnes - Deputy Chairman

Ms. Kongsnes is an Investment Director and Head of International Affairs at Investinor AS. Kongsnes has over her career gained extensive experience from investments, development, M&A, IPO's and exits of technology companies. Before this, she worked 7 years in international marketing, serving as Director of Marketing and Operations. Kongsnes has broad boardroom experience, and currently serves on the boards of Investinor's portfolio companies, Numascale AS, Vitux AS, Calliditas Therapeutics AB, Spinchip Diagnostics AS, Curida AS in addition to Polight AS. She holds an MSc in Economics and Business Administration from Bodø University College, and has completed the Advanced Program in Corporate Finance at Norwegian School of Economics (NHH).

Dr. Juha Alakarhu - Board member, independent Mr. Alakarhu is the VP of Imaging at Axon in Tampere, Finland. He runs the Axon R&D office in Finland and is responsible for the imaging system for Axon camera products. Juha's entire careerer has been about developing cameras. Before joining Axon in 2018, he worked in Nokia and Microsoft, and he developed several pioneering camera solutions, such as oversampling (the 41 megapixel camera), optical image stabilizer, and virtual reality technology. Juha holds a PhD from Tampere University of Technology. international experience in the semiconductor business, previously as Director for the Nordic region for Xilinx Inc. He has also been working at Philips Semiconductor. Grethe Viksaas - Board member, independent Ms. Viksaas has a long career from the Northern European managed service provider company Basefarm AS, both as CEO, and later as working chair of the board of directors. Prior to this, Viksaas served as CEO for SOL System AS and Infostream ASP. Viksaas has experience from numerous board positions, including Zenitel Group and ICT Norway. She is currently Chair of the Board in the foundation Norsk Regnesentral (Norwegian Computing Center) and non-executive Director in the boards of Telenor ASA and Crayon Group. She also serves as board member in various start-up companies. Ms. Viksaas has a master's degree in computer science from the University of Oslo.

Svenn-Tore Larsen - Board member, independent

Mr. Larsen is an Electronic Engineer from the University of Strathclyde, UK. He was appointed Chief Executive Officer of Nordic Semiconductor in February 2002. Mr. Larsen has broad

Interim consolidated statement of income (unaudited)

Interim consolidated statement of income				(unaudited)
NOK 000	Note Q3 2019	Q3 2018	YTD 2019	YTD 2018	FY 2018
Revenue	423	255	971	505	1 038
Cost of sales	-355	-404	-740	-1 409	-1 488
Gross profit	68	-149	231	-904	-450
Research and development expenses Sales and marketing expenses	7 -5 055 -2 112	-6 484 -1 705	-16 220 -6 206	-22 930 -5 467	-28 918 -7 586
Administrative expenses	-2 985	-22 468	-11 598	-29 468	-35 770
Operational / supply chain expenses	-1 642	-414	-5 533	-1 888	-3 384
Depreciation, amortisation and net impairment losses	8 -2 980	-251	-4 865	-791	-1 025
Operating profit	-14 705	-31 471	-44 191	-61 448	-77 133
Net financial items	6 249	-480	809	-65	211
Profit before tax	-14 456	-31 952	-43 382	-61 512	-76 922
Income tax expense	-72	22	-74	-155	-243
Profit for the period	-14 528	-31 930	-43 456	-61 667	-77 165
Attributable to: Equity holders of the parent	-14 528	-31 930	-43 456	-61 667	-77 165
Non-controlling interests	0	0	0	0	0
Earnings per share:
Basic. attributable to ordinary equity holders of the parent (NOK)	-1.79	-5.89	-5.35	-11.37	-13.28
Diluted. attributable to ordinary equity holders of the parent (NOK)	-1.78	-5.89	-5.35	-11.37	-13.28

Balance sheet (unaudited)

Balance sheet (unaudited)
NOK 000	Note	Q3 2019	Q3 2018	FY 2018
ASSETS
Property, plant and equipment Right-of-use assets		1 229 2 221	1 613 0	1 605 0
Intangible assets	8	74 697	73 670	75 829
Total non-current assets		78 148	75 283	77 434
Inventories		8 535	7 495	7 372
Trade and other receivables		9 655	8 021	6 399
Other current assets Cash and cash equivalents		290 79 907	521 167 611	901 127 424
Total current assets		98 388	183 647	142 095
Total assets		176 535	258 930	219 529
EQUITY AND LIABILITIES
Issued capital Share premium		1 623 198 748	1 605 266 265	1 623 198 748
Other equity		-38 411	-57 226	1 085
Equity attributable to equity holders of the parent		161 960	210 644	201 456
Non-controlling interests Total equity		0 161 960	0 210 644	0 201 456
Lease liabilities Total non-current liabilities		1 082 1 082	0 0	0 0
Trade and other payables		11 100	43 190	15 172
Interest-bearing loans and borrowings Current lease liabilities		0 1 204	1 200 0	600 0
Income tax payable		0	155	225
Provisions Total current liabilities		1 189 13 493	3 741 48 286	2 076 18 073
Total liabilities		14 575	48 286	18 073
Total equity and liabilities		176 535	258 930	219 529

Cash flow (unaudited)

(unaudited)
Cash flow
NOK 000 Operating activities	Note	Q3 2019	Q3 2018	YTD 2019	YTD 2018	FY 2018
Profit before tax		-14 456	-31 952	-43 382	-61 512	-76 922
Non-cash adjustment to reconcile profit before tax to net cash flows:
Depreciation and impairment of property, plant and equipment
Amortisation and impairment of intangible assets		409 2 571	242 9	1 422 3 443	763 27	966 59
Share option plan expense		1 025	1 028	4 014	3 199	4 719
Other items related to operating activities		-188	-146	56	-242	-300
Net foreign exchange differences		5	-33	-102	-97	-183
Movements in provisions and government grants		718	-1 671	1 466	-2 338	-3 456
Working capital adjustments: Decrease (+) in trade and other receivables and prepayments		78	1 028	-791	-1 588	532
Increase (-) in inventories		-237	-3 946	-1 164	-5 713	-5 591
Decrease (-) in trade and other payables		-959	25 714	-8 505	29 520	57
Interest received	6	257	204	257	271	1 057
Interest paid Income tax paid	6	-24 -106	0 0	-39 -333	-42 -91	-740 -118
Net cash flows from operating activities		-10 907	-9 524	-43 658	-37 844	-79 919
Investing activities
Purchase of property, plant and equipment		-128	-81	-138	-542	-749
Development capital expenditures Receipt of government grants	7	-245 0	-1 834 0	-2 313 0	-6 273 0	-10 433 1 989
Net cash flows used in investing activities		-373	-1 915	-2 451	-6 814	-9 193
Financing activities
Issue of share capital		0	130 000	0	130 000	134 689
Transaction costs on issue of shares		0	-10 709	0	-10 709	-10 709
Repayment of lease liabilities		-279	0	-841	0	0
Repayment of borrowings Net cash flows from/(used in) financing activities		0 -279	0 119 291	-600 -1 441	-600 118 691	-1 200 122 780
		-11 559	107 852	-47 551	74 033	33 667
Net increase in cash and cash equivalents		47 91 418	-33 59 792	34	-78	110
Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the start of the period				127 424	93 656	93 648