SoftOx Solutions AS — Interim / Quarterly Report 2019

Oct 1, 2019

Report 1 st half year 2019

1

SoftOx Solutions AS ("SoftQx") 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 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 1 st half year including some relevant information from the 3rd quarter of 2019

• ➢ The enrolment of patients of the Firstin-human clinical trial of the wound rinsing product, SWIS, is completed. The data is under analysis and will be publicly announced in 4 th quarter of 2019. The full study results will be published in peer reviewed scientific journal.
• ➢ Signed distribution agreement with KiiltoClean AS (former Antibac) for our hand disinfectant in the Scandinavian market.
• ➢ The European Union's new regulations for approval of medical devices, which shall be implemented from 1st of May 2020, require new approval of Notified Body. Our Notified Body has not yet been approved as Notified Body under the new regulations and delays may be expected in the registration process of

SoftOx Wound Irrigation Solution (in Europe.)

➢ The company is planning a share issue in the 4 th quarter of 2019. The company has, with assistance from the largest shareholders, established a short-term bank credit facility to bridge this share issue.

Key figures

Key figures (NOK 1,000)

	2Q19	2Q18	2018
SoftOx Solutions Group
Total revenue and other income	2 557	0	4 323
Total operating expenses	11 728	9 374	21 609
Operating result	-9 171	-9 374	-17 286
Net result before taxes	-9 134	-9 416	-17 466
Net proceeds from equity issues	17 894	0	600
Net cash flow	1 624	-11 074	-15 862
Cash and cash equivalents at end of period	2 861	6 024	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	9	11

Operational review

Product development

The development of the SoftOx Wound Irrigation Solution (SWIS) and SoftOx Biofilm Eradicator (SBE) is progressing according to plan, with a slight delay in preclinical animal studies for SoftOx Biofilm Eradicator. The intended use for SWIS is mechanical rinsing of acute wounds with ancillary antimicrobial action to prevent infections in wounds, and for SBE to fight established biofilm infections. Both products are intended to either reduce or replace the use of antibiotic treatment on skinrelated infections.

To secure future development of new products based on our technology, SoftOx has signed an agreement with CR Competence AB and Skåne

University, to scientifically explore the possibilities of using the SoftOx technology to establish a product line for prevention and treatment of periodontitis.

SoftOx has established a collaboration between scientific organizations and several universities in the Scandinavian region including Copenhagen, Malmö, Lund, Trondheim and Oslo for the continued development of SoftOx' technology. This research is headlined by world leading experts on biofilm and antibiotic resistance. SoftOx has also continued its ongoing clinical collaboration with Excite International Toronto, Canada and World Health Organization (WHO) regarding the development of new and improved solutions for fighting Hospital Acquired Infections.

Major milestones

The company's first-in-man clinical trial (SWIS-01) with its wound rinsing product, abbreviated SWIS, has been completed. The pilot study which was conducted at the Department of Dermatology and Copenhagen Wound Healing Center at Bispebjerg University Hospital was designed to establish safety and performance properties of SWIS in patients with split skin transplant donor sites, serving as a model for surgically inflicted acute wounds. The data is under processing and will be publicly announced in 4 th quarter of 2019. The full study results will subsequently be published in peer reviewed scientific journal.

Late December 2018 an application was submitted for SoftOx- disinfection- productfamily in accordance with the new 2019 Biocidal Products Regulations (BPR) for market approval in the Norwegian, Swedish and Danish markets. The Swedish Chemical Agency has confirmed the receipt of a completed application with all necessary information, giving SoftOx a temporary approval to sell these products in the Norwegian, Danish and Swedish market until final approval has been granted, which is estimated to be fulfilled within 12 months.

As of Q3-19, the anticipated agreement with KiiltoClean AS (previously Antibac) has been signed. The commercialization of our first product, a disinfecting hand sanitizer is currently being prepared for distribution.

The European Union's new regulation regarding approval of medical devices (MDR) will be implemented from 24th of May 2020.

SoftOx' current notified body has not yet been designated to receive applications according to the new MDR guidelines and does not accept new applications according to the present Medical Device Directive (MDD). This regulatory delay may affect the timing of filing and CE-mark designation for SWIS, although it is too early to confirm this.

Organizational information

The company (including daughter companies) has a total of eleven employees at the end of the second quarter, including a new manager for Quality assurance, Elisabeth Ahlmann-Ohlsen. Elisabeth has an M.Sc. in pharmaceutical engineering from Technical University of Denmark (DTU).

Upcoming risk next three months

The company plans to have a share issue in the 4 th quarter of 2019.

Financial review

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

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

Personnel expenses increased to KNOK 5,064 in the first half of 2019, compared to KNOK 2,231 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 KNOK 6,834 in the first half of 2019, compared to KNOK 6,327 in the same period of 2018.

On 31.06.19 the Group had cash and cash equivalents of KNOK 2,856.

On 31.06.19 the Group had deferred tax assets of KNOK 12,264, which reflects the deferred tax assets at year end 2018. Tax calculations will be done on final audited full year figures. On 31.06.19 the Group had other intangible assets of KNOK 2,711, primarily attributable to capitalized patent expenses in the Swedish subsidiary.

In the first half of 2019 the Group had cash flow of KNOK 1,624, including net cash flow from share issues and other financing activities of KNOK 17,894.

Outlook

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

• ➢ Start the confirmatory clinical investigation of SWIS
• ➢ Commercialization and distribution of SoftOx- Hand -Disinfectant, following the signed agreement with KiiltoClean AS (previously Antibac)
• ➢ Completing the preclinical repeated dose toxicity studies on SBE drug candidates and starting the phase 1 studies.
• ➢ Continued dialogue with European players for establishing a partnership for SoftOx hand disinfectant products outside the Nordic and Baltic countries.
• ➢ Share issue autumn 2019.
• ➢ Increased funding opportunities, in line with successful completion of various criteria and achieved milestones.

The company established a short-term credit line facility of KNOK 4.300 in August 2019. There are no other substantial financial events affecting the company's financial position since 31.06.2018.

Declaration

We declare that to the best of our knowledge the accounts for the first half the year 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 September 2019

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	2Q19	2Q18	2018
Other operating revenues	2 557	0	4 323
Total operating revenues	2 557	0	4 323
Personnel expenses	4 956	2 580	8 183
Other operating expenses	6 216	6 381	12 311
Depreciation	555	413	1 115
Depreciation, goodwill	0	0	0
Total operating expenses	11 728	9 374	21 609
Operating result	-9 171	-9 374	-17 286
Net financial items	37	-42	-179
Net result before taxes	-9 134	-9 416	-17 466

Statement of financial position	2Q19	2Q18	2018
SoftOx Solutions Group
NOK 1,000
Other intangible assets	2 711	2 364	3 343
Deferred tax asset	12 264	7 745	12 305
Total intangible assets	14 975	10 109	15 648
Production equipment	246	377	327
Total fixed assets	246	377	327
Total non-current assets	15 221	10 486	15 975
Other receivables	8 074	3 514	6 182
Total receivables	8 074	3 514	6 182
Cash and cash equivalents	2 856	10 626	1 237
Current assets	10 930	14 140	7 419
Total assets	26 151	24 626	23 393
Share capital	93	75	76
Other paid in equity	35 647	47 452	17 771
Total paid in equity	35 740	47 527	17 846
Other equity	-12 814	-25 742	-3 438
Total equity	22 926	21 785	14 409
Public duties payable	831	109	706
Shareholder loans	0	0	2 000
Other current liabilities	819	659	1 868
Accounts payable	1 575	2 073	4 411
Total current liabilities	3 225	2 841	8 985
Total liabiities	3 225	2 841	8 985
Total equity and liabilities	26 151	24 626	23 393

Cash flow statement	2Q19	2Q18	2018
SoftOx Solutions Group
NOK 1,000
Cash flow from operating activities
Net result before taxes	-9 134	-9 416	-17 466
Tax paid	0	0	0
Depreciation	555	413	1 115
Change in current assets	-1 892	-717	-3 386
Change in current liabilities	-3 760	-1 350	2 794
Net cash flow from operating activities	-14 230	-11 071	-16 943
Cash flow from investment activities
Investments in non-current assets	0	0	-1 444
Net cash flow from investment activities	0	0	-1 444
Cash flow from financing activities
Proceeds from equity issues	17 894	0	600
Other financing activities	-2 000	0	2 000
Translation differences	-39	-3	-75
Net cash flow from financing activities	15 854	-3	2 525
Net change in cash and cash equivalents	1 624	-11 074	-15 862
Cash and cash equivalents at begining of period	1 237	17 098	17 098
Cash and cash equivalents at end of period	2 861	6 024	1 237

Statement of changes in equity
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			-9 416	-9 416
Share issues	17	17 877		17 894
Other changes in equity	0		39	39
Balance at 31.06.2019	93	35 647	-12 814	22 926

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.