SoftOx Solutions AS — Interim / Quarterly Report 2019

Dec 31, 2019

Report 3 rd quarter of 2019

1

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

SoftOx develops a well-tolerated 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 3rd quarter of 2019

• ➢ The First- in-human clinical trial of the wound rinsing product, SWIS, has been completed and the final results have been reported (see below for further details.)
• ➢ Signed distribution agreement with KiiltoCleanAS (former Antibac) for our hand disinfectant in the Scandinavian market, in September 2019.
• ➢ Signed distribution agreement with VESO, as a part of animal health line, in November 2019.
• ➢ The company has raised 75 million NOK (information regarding the placement has been published) The share issue

was approved by the general assembly the 20th of December 2019.

➢ The European Union's new regulation regarding approval of medical devices (MDR) will take effect May 2020. This is expected to affect the speed of SoftOx development of medical devices. (relevant information below.)

SoftOx was granted the tax incentive provision "Skattefunn" for research projects, for the upcoming three years. Skattefunn is under reconstruction from the Norwegian government, with rather unclear rules. However, the company finds it likely that it will fulfill the requirements for future and past payments from Skattefunn.

Key figures

Key figures (NOK 1,000)
	3Q19	3Q18	2018
SoftOx Solutions Group
Total revenue and other income	3 866	2 833	4 323
Total operating expenses	19 041	13 967	21 609
Operating result	-15 175	-11 134	-17 286
Net result before taxes	-15 137	-11 181	-17 466
Net proceeds from equity issues	17 894	600	600
Net cash flow	62	-13 845	-15 862
Cash and cash equivalents at end of period	1 299	3 253	1 237
Outstanding shares, beginning of the period	3 778 650	2 488 500	2 488 500
Outstanding shares, end of the period	4 626 000	3 758 650	3 778 650
Employees, end of the period	11	10	11
Operational review Product development	antimicrobial hand disinfectant, will market in 2020, as a part of the distribution agreement with KiiltoClean (Antibac). The formulation has shown no signs of inducing		enter the
The development of SoftOx Wound Irrigation Solution (SWIS) and SoftOx Biofilm Eradicator (SBE) is progressing according to plan. The intended use for SWIS is mechanical rinsing of acute wounds with ancillary antimicrobial	antimicrobial resistance and has recently been clinically tested in acute human wounds – showing excellent safety and tolerability, without impeding natural wound healing. Animal products-SoftOx has three product lines in development targeting specific needs in animals:
action to prevent infections in wounds, and for SBE to fight established biofilm infections. Both products are intended to be an
alternative to antibiotic treatment in skin related infections, specifically targeting chronic infections.	Wound Irrigation for small pets is a mild, but effective solution to use on wounds and scratches to clean the wound and prevent infections
SafeDesTM, our alcohol-free hand disinfectant – offering health care workers with sensitive and irritated skin a superior effective	Wound Irrigation for larger animals is intended for more severe acute wounds, typically on horse legs, to clean wounds and

Operational review

Product development

Wound Irrigation for larger animals is intended for more severe acute wounds, typically on horse legs, to clean wounds and prevent infections.

Wound Irrigation in infected wounds is the most effective solution in the product range. This product is intended for wounds that are hard to heal and/or infected.

SoftOx has established collaborations with commercial and scientific organizations and universities in the Scandinavian region including Copenhagen, Malmö, Lund, Trondheim and Oslo for the continued development of SoftOx' technology. This research is led by world leading experts on biofilm and antibiotic resistance both on animal and human health. SoftOx has also continued its ongoing clinical collaboration with Excite International Toronto, Canada. The company is a member of the World Health Organization' (WHO) project group for fighting Hospital Acquired Infections (HAI).

Major milestones

Clinical Study

The company's first-in-man pilot clinical trial (SWIS-01) with SWIS, has been completed and the study report was finalized mid-November 2019. The pilot study which was conducted at the Department of Dermatology and Copenhagen Wound Healing Center at Bispebjerg University Hospital was designed to explore and document safety and performance properties of SWIS in patients with split skin transplant donor sites, serving as a model for surgically inflicted acute wounds. The outcome of this pilot study demonstrated that SWIS is a safe and well tolerated wound irrigation solution for acute skin trauma and not associated with any major risks. Performance outcomes demonstrate antimicrobial properties with excellent wound healing

(epithelialization) observations. Overall usability aspects of SWIS handling were reported to be satisfactory. The collected data will serve as a basis for continued studies in clinically significant settings prior to CE marking. The full study results will subsequently be published in peer reviewed scientific journal.

In December 2018 a submission for SoftOx' disinfection product in accordance with the new 2019 Biocidal Products Regulations (BPR) for Scandinavian markets was filed. The Swedish Chemical Agency has confirmed the receipt of a completed application giving SoftOx a temporary approval to sell in Scandinavia until final approval, to be fulfilled within 12 months from receipt of complete application.

Signed distribution agreements

• ➢ As of third quarter 2019, the anticipated agreement with KiiltoClean AS (previously Antibac) has been signed. The commercialization of SoftOx' first product, a disinfecting hand sanitizer is currently being prepared for distribution.
• ➢ As of third quarter 2019 the first distribution agreement signed with VESO, a market leader in animal health.

The European Union's new regulations for approval of medical devices (MDR), will be implemented in May 2020 and will require new authorization of Notified Bodies to comply with MDR guidelines. It is unclear whether SoftOx' selected Notified Body (Presafe) will gain approval in due time. This may, in turn, effect the timing of the evaluation process and approval of SoftOx Wound Irrigation Solution (SWIS) in Europe.

Organizational information

The company (including daughter companies) has a total of twelve employees at the end of the third quarter.

Dag Vagnsnes has resigned as a member of the board of directors.

Upcoming risk next three months

The company has raised in 4th quarter 75 million NOK to continue required clinical studies for Biofilm Eradicator and SoftOx Wound Irrigation Solution, execute on the go to market strategy for hand disinfectant and the animal wound care products, and for general corporate purposes. The company considers the share issue to substantially lower the financial risk of the company. Main shareholder have also funded to company by short term loans.

Financial review

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

"Other operating revenue in the first three quarters of 2019 attribute mostly to accrued grants from the Norwegian Research Council under the BIA program and Skattefunn.

Personnel expenses increased to TNOK 8,044 in the first three quarters of 2019, compared to TNOK 5,514 in the same period of 2018, due to planned staff increase, both in the parent company and the Danish subsidiary.

"Other operating expenses increased to TNOK 10,169 compared to TNOK 7,839 for the first three quarters of 2018.

At the end of the third quarter the group had cash in the amount of KNOK 1,299.

Net results before taxes, at the end of third quarter 2019 were TNOK -15,137.

Tax calculations will be done on final audited full year figures.

At the end of third quarter 2019 the Group had other intangible assets ofTNOK 2,432, primarily attributable to capitalized patent expenses in the Swedish subsidiary.

In the first three quarters of 2019 the Group had a cash flow of TNOK 62, including net cash flow from share issues and other financing activities of TNOK 17,894.

Outlook

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

• ➢ Preparation and commencement of the confirmatory clinical investigation of SWIS medical device
• ➢ Commercialization and distribution of SoftOx-hand-disinfectant, following the signed agreement with KiiltoClean AS (previously Antibac)
• ➢ Completion of the preclinical repeated dose toxicity studies on SBE drug candidates
• ➢ Preparation of first-in-human drug study (phase I)
• ➢ Continued dialogue with European players for establishing a partnership for SoftOx hand disinfectant products outside the Nordic and Baltic countries.

Except from the share issue of 3,125,000 news share for a total of TNOK 75,000 there are no other substantial financial events affecting the company's financial position since end of third quarter 2019.

The opportunity

SafeDes Hand Disinfectant

The market for SafeDes, SoftOx' Premium nonalcoholic antimicrobial hand disinfection is valued at USD 20 bn in Europe and the US. Out of 18.8 million health care workers in the EU and the US, 13.3 million report irritated skin and eczema creating a large market opportunity.

In partnership with KiiltoClean Kiiltoclean (Antibac), market leader in the region (est. >50% market share), SoftOx will distribute its hand disinfection products to Nordics/Baltics in addition to seeking strong strategic partnerships for entry in the rest of Europe and the US.

Effect Vet

SoftOx will offer three variants of wound cleanser (see product development for details) The EU animal wound-treatment market is valued at USD 220 million with a CAGR of 6,5 %. The total market for disinfection and wound care in animals is NOK 100 million in Norway.

In partnership with VESO, market leader in the Norwegian market, SoftOx will distribute its wound cleansers for animals to the Norwegian market in addition to seeking strong strategic partnerships for entry in the rest of Europe and the US.

SoftOx Biofilm Eradicator

The market for Biofilm Eradicator for treatment of chronic infections in leg ulcers is estimated to USD 7,2 billion in Europe and the US and USD 4 billion R.O.W. To secure market adoption the company cooperates closely with EXCITE International on clinical development.

The market for SoftOx Wound Irrigation Solution for treatment for prevention of chronic infections is estimated to USD 2 billion in Europe and the US.

Declaration

We declare that to the best of our knowledge the accounts for the first three quarters of 2019 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, 30th of December 2019

SIGN

Lars Johan Frigstad, Chairman

SIGN

Kristian Almås, Director

SIGN

Olav Trygve Jarlsby, Director

SIGN

Kari Grønås, Director

SIGN

Geir Hermod Almås, CEO

Profit and loss statement
SoftOx Solutions Group
NOK 1,000	3Q19	3Q18	2018
Other operating revenues	3 866	2 833	4 323
Total operating revenues	3 866	2 833	4 323
Personnel expenses	8 044	5 514	8 183
Other operating expenses	10 169	7 839	12 311
Depreciation	828	614	1 115
Depreciation, goodwill	0	0	0
Total operating expenses	19 041	13 967	21 609
Operating result	-15 175	-11 134	-17 286
Net financial items	38	-47	-179
Net result before taxes	-15 137	-11 181	-17 466

of financial position Statement	3Q19	3Q18	2018
SoftOx Solutions Group
NOK 1,000
Other intangible assets	2 432	2 943	3 343
Deferred tax asset	12 264	7 669	12 305
Total intangible assets	14 696	10 612	15 648
Production equipment	246	334	327
Total fixed assets	246	334	327
Total non-current assets	14 942	10 946	15 975
Other receivables	8 672	5 440	6 182
Total receivables	8 672	5 440	6 182
Cash and cash equivalents	1 299	3 253	1 237
Current assets	9 971	8 693	7 419
Total assets	24 913	19 639	23 393
Share capital	93	76	76
Other paid in equity	35 647	48 051	17 771
Total paid in equity	35 740	48 127	17 846
Other equity	-18 502	-32 175	-3 438
Total equity	17 238	15 952	14 409
Public duties payable	995	1 348	706
Shareholder loans	21	0	2 000
Other current liabilities	5 342	994	1 868
Accounts payable	1 317	1 345	4 411
Total current liabilities	7 675	3 687	8 985
Total liabiities	7 675	3 687	8 985
Total equity and liabilities	24 913	19 639	23 393

Cash flow statement	3Q19	3Q18	2018
SoftOx Solutions Group
NOK 1,000
Cash flow from operating activities
Net result before taxes	-15 137	-11 181	-17 466
Tax paid	0	0	0
Depreciation	828	614	1 115
Change in current assets	-2 490	-2 643	-3 386
Change in current liabilities	690	-503	2 794
Net cash flow from operating activities	-16 109	-13 713	-16 943
Cash flow from investment activities
Investments in non-current assets	0	-809	-1 444
Net cash flow from investment activities	0	-809	-1 444
Cash flow from financing activities
Proceeds from equity issues	17 894	600	600
Other financing activities	-1 700	0	2 000
Translation differences	-22	77	-75
Net cash flow from financing activities	16 171	677	2 525
Net change in cash and cash equivalents	62	-13 845	-15 862
Cash and cash equivalents at begining of period	1 237	17 098	17 098
Cash and cash equivalents at end of period	1 299	3 253	1 237

of changes in equity Statement
--------------------------------------------

SoftOx Solutions Group
	Share	Other paid	Other	Total
NOK 1,000	capital	in equity	equity	equity
Balance at 01.01.2018	50	30 263	-3 466	26 846
Loss for the period		-12 929	-3	-12 932
Share issues	26	574		600
Other changes in equity		-137	32	-105
Balance at 31.12.2018	76	17 770	-3 437	14 409
				0
Balance at 01.01.2019	76	17 770	-3 437	14 409
Loss for the period			-11 181	-11 181
Share issues	17	17 877		17 894
Other changes in equity	0		39	39
Balance at 31.09.2019	93	35 647	-14 579	21 161

Notes to the Quarterly Financial Statement

Note 1 Accounting policies

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