Polight ASA — Investor Presentation 2019

Aug 16, 2019

Second quarter 2019

Earnings presentation 16 August 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 16 August 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

• the second quarter of 2019
• customer projects at various stages of maturity
• TLens and drivers shipped to support potential • Progress made on three projects which may lead to design-win in late 2019 or first half 2020 related to smartphone, wearable and barcode • First TLens purchase order received for Product
• Verification Testing (PVT) for a wearable device

First TLens order received for wearable PVT • Order for 33,320 units of TLens Silver and 30,000 ASIC

• Final testing phase before decision to launch product and award design-win/mass production
• drivers for a specific planned product
  • Will also cover need for initial mass production
• Follows successful POC and shipments of 1,540 TLens Silver and 2,380 drivers for EVT and DVT phase
• Order to be shipped by end of August, no significant revenue impact
• An important milestone towards award of a mass production contract
  • Project remains subject to potential changes for various technical and market related reasons

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
• 30 employees + consultants
• Headquartered in Horten, Norway, with offices in Finland, China, France 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 glasses independent to were the 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, video conferencing etc. are examples of potential new opportunities for poLight's technology

Operations and market review

Seeking to expand smartphone offering to facilitate market break-through

• Screen-size focus continues to impact adoption of AF solutions in front camera
• Developed compact camera module design concepts to minimize nose size and enable AF at minimum screen size impact • TLens is subject to interest from over 10 mobile
• New concepts started to be presented to potential customers
• Eco-system feedback indicates that 5G may give opportunities for TLens
• phone companies through eight camera module vendors
  • Varying degree of maturity

Continued progress on a smartphone project • One vendor continued evaluation of TLens for a • Shipped 4,775 TLens and 11,000 ASIC drivers for • Four (4) PoCs technically finalised and awaiting

• specific smartphone project
  • Engineering Verification Test (EVT)
  • Project delayed unrelated to TLens
• Overall good feedback from ongoing PoCs
• potential real project
• Two smartphone related OEM´s is planning potential PoC

Potential for diversification through multiple industrial and mass-market applications • Two barcode vendors consider TLens for a specific product • The reminder remain at the technology qualification stage

• Barcode

  - Five ongoing POCs with positive technical results

  -

• Augmented Reality (AR) / Wearable
  • Four ongoing POC/technical assessment processes
  • Two additional companies considering POCs
  • Two smartwatch POCs have delivered positive results
  • One of the projects progressed to PVT phase in Q3
• Other
  • Continued high inbound interest from various industries
• Five medical use-cases under development, two have bought eval. kits and three ongoing PoC/plan POC • One ongoing PoC and two under planning in other industrial
  • application areas

Market segment	# customers bought eval kit/TLens	Planning PoC	PoC	Design Win
Barcode	4		5
AR	5	2	4
Machine vision	1		1
Smartwatch/ wearable	2		2
Medical	2	2	1

Financial review

Key financials

Key financials Income statement				Balance sheet summary
(NOK million)	Q2 2019	Q2 2018	FY 2018
Revenue	0.5	0.1	1.0
Cost of sales	-0.4	-1.0	-1.5
Research and development expenses	-5.6	-7.8	-28.9
Sales and marketing expenses	-1.7	-1.7	-7.6
Administrative expenses	-3.5	-3.7	-35.8
Operational / supply chain expenses	-2.6	-0.7	-3.4
EBITDA	-13.3	-14.9	-76.1
• Q2 revenue from delivery of TLens evaluation kits to potential customers • Increase in revenue reflected projects progressing from PoC to EVT phase		samples, ASICs and		• Cash position of NOK 91.4 million, compared with NOK 127.4 million at year-end 2018
• 6,515 TLens units and 12,650 PDA50 drivers delivered in Q2 to potential customers
• EBITDA loss of NOK 13.3 million vs. loss of NOK 14.9 million in Q2 2018

• evaluation kits to potential customers
  • Increase in revenue reflected projects progressing from PoC to EVT phase
  • to potential customers
• EBITDA loss of NOK 13.3 million vs. loss of NOK 14.9 million in Q2 2018
  • Decrease in R&D expenses offset by higher supply chain expenses

(NOK million)	Q2 2019	Q2 2018	FY 2018
Intangible assets	77.0	71.9	75.8
Cash and cash equivalents	91.4	59.8	127.4
Total equity	175.4	122.3	201.5
Total current liabilities Total non-current liabilities	12.5 0.1	23.1 0.0	18.1 0.0

Funding in place to drive TLens commercialisation

• Q2 cash used in operations was NOK 14.4 million
• Q2 cash used in investing activities was NOK 0.8 million
• Net decrease in cash of NOK 16.1 million for the quarter

Q2 2019 cash flow development

Outlook

Outlook

• Steady interest from a wide range of industries and use-cases offer potential for diversified revenue base
• Shipped sizeable number of units to support EVT phase for one specific smartphone project
• potentially enable AF in front camera without impacting screen size
• Barcode opportunities progressing
• Sizable purchase order received 15th August related to PVT phase & initial MP for a wearable case

Next events: Q3-19 - 24 October 2019 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	Q2 2019	Q2 2018	YTD 2019	YTD 2018	FY 2018
Revenue	519	66	548	250	1 038
Cost of sales	-382	-967	-385	-1 005	-1 488
Research and development expenses	7 -5 565	-7 793	-11 166	-16 446	-28 918
Sales and marketing expenses	-1 717	-1 717	-4 094	-3 762	-7 586
Administrative expenses	-3 499	-3 735	-8 613	-7 000	-35 770
Operational / supply chain expenses	-2 624	-720	-3 891	-1 474	-3 384
Depreciation, amortisation and net impairment losses	-1 256	-283	-1 885	-540	-1 025
Operating profit	-14 524	-15 150	-29 486	-29 976	-77 133
Net financial items	6 317	-1	561	416	211
Profit before tax	-14 208	-15 151	-28 925	-29 561	-76 922
Income tax expense	0	-170	-2	-177	-243
Profit for the period	-14 208	-15 321	-28 928	-29 738	-77 165
Attributable to:
Equity holders of the parent	-14 208	-15 321	-28 928	-29 738	-77 165
Non-controlling interests	0	0	0	0	0
Earnings per share:
Basic, attributable to ordinary equity holders of the parent (NOK)	-1.75	-2.83	-3.56	-5.48	-12.66
Diluted, attributable to ordinary equity holders of the parent (NOK)	-1.75	-2.83	-3.56	-5.48	-12.66

Balance sheet (unaudited)

Balance sheet (unaudited)
NOK 000 ASSETS	Note	Q2 2019	Q2 2018	FY 2018
Property, plant and equipment		1 206	1 804	1 605
Right-of-use assets		1 315	0	0
Intangible assets Total non-current assets	8	77 024 79 545	71 851 73 655	75 829 77 434
Inventories Trade and other receivables		8 298 8 364	3 548 7 028	7 372 6 399
Other current assets		400	1 433	901
Cash and cash equivalents Total current assets		91 419 108 481	59 792 71 801	127 424 142 095
Total assets		188 026	145 456	219 529
EQUITY AND LIABILITIES
Issued capital Share premium		1 623 198 748	542 148 036	1 623 198 748
Other equity		-24 975	-26 257	1 085
Equity attributable to equity holders of the parent Non-controlling interests		175 397 0	122 321 0	201 456 0
Total equity		175 397	122 321	201 456
Lease liabilities		108	0	0
Total non-current liabilities		108	0	0
Trade and other payables		10 082	17 454	15 172
Interest-bearing loans and borrowings		0	1 200	600
Current lease liabilities Income tax payable		1 251 0	0 177	0 225
Provisions		1 189	4 304	2 076
Total current liabilities		12 522	23 135	18 073
Total liabilities		12 630	23 135	18 073
Total equity and liabilities		188 026	145 456	219 529

Cash flow (unaudited)

Cash flow (unaudited)
NOK 000 Operating activities	Note	Q2 2019	Q2 2018	YTD 2019	YTD 2018	FY 2018
Profit before tax		-14 208	-15 151	-28 925	-29 561	-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		393 863	274 9	1 012 873	521 18	966 59
Share option plan expense		1 488	1 062	2 989	2 171	4 719
Other items related to operating activities		14	-186	243	-96	-300
Net foreign exchange differences		-48	-122	-107	-64	-183
Movements in provisions and government grants Working capital adjustments:		1 546	-249	748	-667	-3 456
Increase (-) in trade and other receivables and prepayments		-552	-3 148	-869	-2 616	532
Decrease (+) in inventories		1 202	-1 659	-927	-1 767	-5 591
Decrease (-) in trade and other payables		-5 120	7 187	-7 546	3 806	57
Interest received	6	0	67	0	67	1 057
Interest paid Income tax paid	6	-15 0	-42 0	-15 -227	-42 -91	-740 -118
Net cash flows from operating activities		-14 437	-11 958	-32 751	-28 320	-79 919
Investing activities
Purchase of property, plant and equipment		0	-461	-10	-461	-749
Development capital expenditures	7	-764	-2 413	-2 068	-4 439	-10 433
Receipt of government grants Net cash flows used in investing activities		0 -764	0 -2 874	0 -2 079	0 -4 899	1 989 -9 193
Financing activities
Issue of share capital		0	0	0	0	134 689
Transaction costs on issue of shares		0	0	0	0	-10 709
Repayment of lease liabilities		-283	0	-562	0	0
Repayment of borrowings		-600	-600	-600	-600	-1 200
Net cash flows from/(used in) financing activities		-883	-600	-1 162	-600	122 780
Net increase in cash and cash equivalents		-16 084	-15 431	-35 992	-33 819	33 667
		32 107 470	-22 75 245	-13 127 424	-45 93 656	110 93 648
Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the start of the period			59 792