SoftOx Solutions AS — Interim / Quarterly Report 2018

Dec 11, 2018

Report 3 rd quarter 2018

SoftOx Solutions AS ("SoftQx") is a medtech company listed on the Merkur list, Oslo Stock Exchange with the ticker "SOFTOX-ME". SoftOx Solutions AS was founded in 2012 and is headquartered in Oslo, Norway, with subsidiaries in Malmö and Copenhagen.

SoftOx aims to develop a non-toxic and highly efficient antimicrobial technology, which eradicates and prevents biofilm infections, based on years of research and product development with leading Nordic research institutes.

Highlights for the 3 rd quarter 2018

• Approval from the Danish Competent authorities to start clinical study of SoftOx Wound Irrigation Solutions (SWIS) in humans at Bispebjerg Hospital/ Rigshospitalet København.
• The first part of the clinical study is performed to test if SoftOx is safe to be used in humans. The first patient is enrolled.
• SoftOx Composition Patent approval in the U.S.; Hypochlorous acid preparation with organic acids.
• Biocidal registration process initiated for SoftOx disinfection product family, for market approval in the Norwegian, Swedish and Danish market from 2019.

• Letter of intent signed with Antibac AS for negotiation of distribution and development agreement of SoftOx disinfection products in Norway, Sweden and Denmark.

Key figures

Key figures (NOK 1,000)

	9M18	9M17	2 017
SoftOx Solutions Group
Total revenue and other income	2 833	1	1
Total operating expenses	13 967	10 369	13 170
Operating result	-11 134	-10 368	-13 169
Net result before taxes	-11 181	-10 364	-13 172
Net proceeds from equity issues	600	7 247	33 707
Net cash flow	-13 845	135	16 796
Cash and cash equivalents at end of period	3 253	437	17 098
Outstanding share, beginning of the period	49 770	0	43 659
Outstanding share, end of the period (1, 2)	3 778 650	45 667	49 770
Employees, end of the period	10	6	6

Operational review

Clinical development

SoftOx has continued to develop SoftOx Wound Irrigation Solution (SWIS) and SoftOx Biofilm Eradicator (SBE). The intention of SWIS is to prevent or treat infections in acute wounds, and the intention of SBE is to fight established biofilm infections in chronic wounds. Both products are intended to either reduce or replace the use of antibiotic treatment on skin-related infections.

Major milestone

The Company has provided adequate preclinical documentation on SWIS in order to receive approval for the Company's first-in-man clinical investigation (SWIS-01). On October 30th, the Company received the approval for SWIS-01 by the Danish Competent Authorities, confirming the appropriateness of our preclinical documentation. The study was initiated at the Wound Healing Department at Bispebjerg University Hospital (Rigshospitalet) and has recently started to recruit patients. The study details can be found at www.clinicaltrials.gov .

SoftOx Disinfection

SoftOx Disinfection AS, a 100% owned subsidiary of SoftOx Solutions AS, is currently finalizing application for biocidal registration of SoftOx disinfection products for market approval in Norway, Sweden and Denmark, according to the new BPR regulations.

SoftOx Disinfection AS aims to launch hand disinfection products within this product family in cooperation with Antibac in the first half of 2019. A letter of intent to cooperate on developing and introducing SoftOx Hand Disinfectant in Sweden, Denmark and Norway was signed with Antibac/CCS Healthcare on October 26th 2018. The negotiation is ongoing.

Total income from SoftOx Hand Disinfectant is estimated to be NOK 5 million in 2019 in the Nordic market.

Organizational information

The Company, including daughter companies, has ten employees at the end of the third quarter (whereof two employees on part-time status), giving a total of 9 FTE's.

Upcoming risk next three months

The Company intends to raise NOK 15 million in new shareholder capital before year end. There is a risk that the share issue will not be successful. The use of proceeds for the share issue is expected to finance the Company through April 2019. The primary objective of the clinical study is to document the safety of SoftOx Wound Irrigation Solution. Conducting a clinical trial has inherent risks.

The Company is negotiating with CCS Healthcare regarding a distribution agreement for SoftOx Hand Disinfectant in Sweden, Denmark and Norway. Any negotiation comes with inherent risks.

Financial review

Financial figures in this report are unaudited figures for the SoftOx Solution Group.

Other operating revenue in the first nine months of 2018 mainly includes grants from the Norwegian Research Council under the BIA program.

Personnel expenses increased to KNOK 5,514 in the nine months of 2018, compared to KNOK 2,763 in the same period of 2017, due to the planned increase in staff.

Other operating expenses increased to KNOK 7,839 in the nine months of 2018, compared to KNOK 7,392 in the same period in 2017 due to general expansion of operations.

On 30.09.18 the Group had cash and cash equivalents of KNOK 3,253.

On 30.09.18 the Group had deferred tax assets of KNOK 7,669, which reflects the deferred tax assets at yearend 2017. Tax calculations will be done on full year figures.

On 30.09.18 the Group had other intangible assets of KNOK 2,943, mainly including the capitalized patent expenses in the Swedish subsidiary.

In the first nine months of 2018, the Group had a negative cash flow of KNOK -13,845. The difference between this net cash flow and KNOK -11,181 in net result before taxes is largely due to an increase in current assets of KNOK 2,643 (which mainly relates to an accrued Skattefunn-grant), and to a reduction in current liabilities of KNOK 503 (which is largely due to a reduction of accounts payable).

Outlook

The Company's plans for the upcoming twelve months include:

• ➢ Finalizing the first-in-man pilot study on SWIS and starting the final pivotal clinical investigation.

• ➢ Registration of SoftOx Hand Disinfectant

• ➢ Start sale of SoftOx Hand Disinfectant in the Nordic market

• ➢ Completing preclinical toxicology studies on SBE, aiming to develop and initiate the first clinical trial in hard-toheal wounds

Events after 30.09.18

There have not been any substantial financial events affecting the Company's P&L after 30.09.2018.

Declaration

We declare that to the best of our knowledge the accounts for the 3 rd quarter of 2018 have been prepared in accordance with current accounting standards for the Group and that the disclosures in the accounts provide a true and fair view of the Company's and the Group's assets, liabilities, financial position and results as a whole and that the quarterly report, including a description of the most important risk and uncertainty factors facing the Group, gives a true and fair view of the development, results and position of the entity and the Group.

Oslo, 10th of December 2018

SIGN

Lars Johan Frigstad, Chairman

SIGN

Kristian Almås, Director

SIGN

Olav Trygve Jarlsby, Director

SIGN

Kari Grønås, Director

SIGN

Dag Vangsnes, Director

SIGN

Geir Hermod Almås, CEO

Profit and loss statement
SoftOx Solutions Group
NOK 1,000	9M18	9M17	2017
Other operating revenues	2 833	1	1
Total operating revenues	2 833	1	1
Personnel expenses	5 514	2 763	4 079
Other operating expenses	7 839	7 392	8 121
Depreciation	614	121	846
Depreciation, goodwill	0	93	124
Total operating expenses	13 967	10 369	13 170
Operating result	-11 134	-10 368	-13 169
Net financial items	-47	3	-4
Net result before taxes	-11 181	-10 364	-13 172
Tax			3 764
Net result after tax			-9 408

Statement of financial position	9M18	9M17	2017
SoftOx Solutions Group
NOK 1,000
Other intangible assets	2 943	1 975	2 869
Deferred tax asset	7 669	4 038	7 802
Goodwill from acquisition of subsidiary	0	93	0
Total intangible assets	10 612	6 106	10 671
Production equipment	334	518	472
Total fixed assets	334	518	472
Total non-current assets	10 946	6 624	11 143
Other receivables	5 440	4 054	2 796
Total receivables	5 440	4 054	2 796
Cash and cash equivalents	3 253	437	17 098
Current assets	8 693	4 490	19 895
Total assets	19 639	11 114	31 037
Share capital	76	46	50
Other paid in equity	48 051	21 022	47 477
Total paid in equity	48 127	21 068	47 527
Other equity	-32 175	-21 739	-20 681
Total equity	15 952	-672	26 846
Shareholder loans		3 000
Other non-current liabilities	0	3 000
Public duties payable	1 348	561	233
Other current liabilities	994	3 109	760
Accounts payable	1 345	5 116	3 197
Total current liabilities	3 688	8 786	4 191
Total liabiities	3 688	11 786	4 191
Total equity and liabilities	19 639	11 114	31 037

Cash flow statement	9M18	9M17	2017
SoftOx Solutions Group
NOK 1,000
Cash flow from operating activities
Net result before taxes	-11 181	-10 364	-13 172
Tax paid	0	0	0
Depreciation	614	214	969
Change in current assets	-2 643	-2 208	-951
Change in current liabilities	-503	2 407	-2 188
Net cash flow from operating activities	-13 714	-9 952	-15 342
Cash flow from investment activities
Investments in non-current assets	-809	0	-1 486
Net cash flow from investment activities	-809	0	-1 486
Cash flow from financing activities
Proceeds from equity issues	600	7 247	33 707
Other financing activities	0	3 000	0
Translation differences	77	-161	-83
Net cash flow from financing activities	677	10 086	33 624
Net change in cash and cash equivalents	-13 845	135	16 796
Cash and cash equivalents at begining of period	17 098	302	302
Cash and cash equivalents at end of period	3 253	437	17 098

SoftOx Solutions Group
	Share	Other paid	Other	Total
NOK 1,000	capital	in equity	equity	equity
Balance at 01.01.2017	44	13 776	-11 339	2 481
Loss for the period			-9 408	-9 408
Share issues	6	33 701		33 707
Other changes in equity			67	67
Balance at 31.12.2017	50	47 477	-20 680	26 847
Balance at 01.01.2018	50	47 477	-20 680	26 847
Loss for the period			-11 181	-11 181
Share issue registration	25	-25		0
Other changes in equity	0	600	-314	286
Balance at 30.09.2018	75	48 051	-32 175	15 952

Notes to the Quarterly Financial Statement

Note 1 Accounting policies

The financial statements of SoftOx Solutions Group for 2017 and 2018 are presented in accordance with the Norwegian Accounting Act and generally accepted accounting principles for small-size companies.