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Zwipe AS Annual Report 2019
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Annual Report
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Annual Report 2019
Making Convenience Secure
Zwipe AS is a fintech company providing solutions that enable battery-less biometric authentication. Zwipe's key focus is to develop and sell secure biometric payment solutions, to be embedded in smartcards and wearables. Zwipe's technology platform is purchased by card manufacturers, who build biometric payment cards that are subsequently sold to banks and issued to cardholders.
Zwipe has built competence, industry partnerships and proprietary hardware and software solutions for space-constrained biometric authentication applications, and Zwipe's platform for biometric payment cards is now the most widely piloted platform in the market. These achievements have enabled Zwipe to enter an exclusive partnership to co-invest in the development of the next generation biometric payment card platform with Idemia, the global leader in Augmented Identity and one of the world's largest manufacturer of payment cards. Through this initiative and technology, Idemia and Zwipe aim to enable mass volume market take-off and long-term growth for biometric payment cards.
Contactless payment has seen strong, global growth in the last years, as banks, retail and consumers embrace the benefits of faster, frictionless payment. With more contactless usage, pressure has increased to address inherent concerns over security, and thus transaction caps were introduced, limiting convenience for users. Replacing the PIN with biometrics, Zwipe's technology addresses the security concerns inherent to contactless payments and eliminates the need for transaction caps and PIN codes. Due to the planned radical unit cost reduction and best in class performance, the cooperation between Idemia and Zwipe aims to change the market trajectory and accelerate the pace in adapting battery-less biometric authentication functionality to payment cards and wearables.
Together with an ecosystem of global partners within technology and financial services, Zwipe is making convenience secure for banks, merchants and consumers.
Zwipe is headquartered in Oslo, Norway, has offices in Munich, Germany, and Colorado Springs, USA, and presence in the UK, France, Italy, Lithuania, Israel and Taiwan/Singapore. The company's shares are listed on Merkur Market at Oslo Stock Exchange and on Nasdaq First North Growth Market in Stockholm, Sweden.
Table of content 04
| 2019 in Brief | |
|---|---|
| 05 | Message from the CEO |
| 06 - 09 | The Emerging Market for Biometric Payment Cards |
| 10 - 13 | Pursuit of a Biometric Strategy |
| 14 - 18 | Board of Directors and Management |
| 19 - 22 | Statutory Board of Directors' Report |
| 23 | Assurance by the Board of Directors |
| 24 - 39 | Statements of Financial Position |
| 40 - 43 | Audit Report |
| 44 - 45 | Glossary |
2019 in Brief
Financials
- Revenues of MNOK 1.5 (MNOK 2.3), of which payment MNOK 1.3 (MNOK 0.8) and access control MNOK 0.2 (MNOK 1.5)
- EBITDA MNOK -92.0 (MNOK -60.3) including joint technology investments with Idemia of MNOK 19.0 (50% of the total commitment) and restructuring costs of MNOK 5.4
- Earnings per share of NOK -5.98 (NOK -7.86)
- Cash flow from operations before financing of MNOK -85.0 (-56.7)
Significant Events
- Zwipe started the year by raising MNOK 120 in new equity and listing on Merkur Market at Oslo Børs in January. An additional MNOK 67 was raised through a rights issue in December 2019
- During Q4 2019, Zwipe made preparations for dual listing on Nasdaq First North Growth Market in Stockholm. The listing process was completed on 28 January 2020
- Through the year, Zwipe expanded the number of partnerships with leading smart-card manufacturers with the intent of developing biometric payment card offerings. New customer partnerships in 2019 included TAG Systems, TGS do Brasil, Inkript, GoldPac, XH Smart and dz card
- In August Zwipe entered into a co-investment partnership with industry leader Idemia, securing global exclusivity for a cost-leading new generation biometric authentication platform, as well as execution and industrialization capability
- Zwipe was selected by Giesecke+Devrient (G+D), one of the world's leading digital security providers, to develop a biometric wearable payment device with the intent to pilot the technology with leading European banks
- Zwipe's first customer order of biometric card inlays was delivered
- The prototype Z5 chip, a dedicated energy harvesting and power management chip, was launched in October
- Zwipe unveiled the "Zwipe Experience" a bundle of products and services to assist customers to move from concept to mass market – at the Trustech convention in November
- The joint technology collaboration with Idemia enabled a major streamlining program, leapfrogging several previously planned stages of the technology development roadmap. Implemented activities resulted in annual savings in excess of MNOK 40 from January 2020
- Dr. Robert Müller was appointed Group CTO early in the year, and Lars Kristian Solheim was appointed new CFO of Zwipe commencing March 2020
Message from the CEO
A year of establishing competitive advantage
2019 was an exciting year for Zwipe, where we experienced progress, learnings – and most importantly set a strengthened course toward a commercialized market-leading technology offering.
We saw strong progress in expanding our customer partnerships and application competence, following up on pilots and developing our in-house technology. We successfully manufactured and launched our Z5 chip for energy harvesting and power management, and we forged important partnerships with complementing technology suppliers. Over the last two years, we have been the first and most active technology player to trial live biometric payment cards, and we have the most widely piloted technology platform for biometric payment cards.
We observed that biometric authentication continued to gain acceptance and commitment and that large players in the industry prepared for the market to materialize, making substantial supply chain and technology investments. We believe we have come to a point where there is industry-consensus that biometric authentication is the natural next step in the evolution of payment cards.
At the same time, it also became clear that the time for market take-off was lagging by one to two years compared to earlier expectations. A demand for significantly reduced cost levels of biometric payment cards crystallized quicker than most players expected. It has become increasingly evident that unit cost reduction, along with ecosystem readiness and more widespread availability of competing solutions, are prerequisites for a viable high-volume commercial market.
Discussions with Idemia were initiated while Zwipe was developing its technology roadmap. Idemia's proposed single-chip solution stood out as a superior solution,
offering dramatic cost reduction, best-in-class performance and a significant timing advantage. On this basis, we were thrilled to conclude the collaboration agreement to co-invest in this new technology platform, securing Zwipe global exclusivity to offer such new technology to all smart card manufacturers other than Idemia. The new single-chip solution will combine with Zwipe's own products and services and is planned to be completed during the second half of 2020. At the same time Zwipe aims to employ the new platform in pilots and small-scale commercial launches. With the introduction of this technology, we will achieve a highly competitive cost structure, enabling our customers to reach the price level that is expected to trigger mass volume.
An integral part of bringing forward biometric payment cards for commercial launch is the card manufacturers' certification of their complete cards, in accordance with the specifications of the payment networks. During the summer of 2019, we were proud to see third-party confirmation that our technology satisfied all requirements for component certification, both in terms of security, biometric performance, and interoperability. However, as a result of our cooperation with Idemia, Zwipe will – as previously communicated – resume its certification efforts towards the new offering, once the development is completed.
The leading cost-efficiency of the new technology platform, combined with Idemia's established development track record and industrialization capability – and Zwipe's application competence, surrounding products and wide network of partners – makes me confident that Zwipe is better positioned than ever to drive and participate in the rollout of biometric payment solutions and to create long-term value for our shareholders.
Oslo, 25 February 2020 André Løvestam, CEO
THE EMERGING MARKET FOR BIOMETRIC PAYMENT CARDS
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Zwipe Annual Report 2019
Payment cards have undergone a substantial and continuous stepwise evolution, developing from the first plastic cards with magnetic stripes, through integrated EMV chips with PIN and then contactless (dual interface) payment cards. Over time, these developments have gradually become mainstream. Biometric authentication is the next natural step of this evolution, expected to become as commonplace as the preceding innovations. The move into biometrics is supported by all major innovators and suppliers in the industry, consumers are signaling widespread acceptance and demand for biometrics, and the card issuers (banks) are expected to embrace high-volume commercial deployment when cards have become cost effective.
The industry is driven by the ability to execute secure and rapid transactions; throughput is key for retailers at the point of sale, and a higher transaction volume is desirable for banks and payment schemes like VISA and MasterCard. Replacing current transaction limits and PIN codes for dual interface cards with rapid and secure biometric authentication carries benefits for banks, payment schemes and consumers alike.
The belief in the future of biometric authentication embedded in payment cards has been Zwipe's vision since 2009. While the market has taken longer to materialize than many players – including Zwipe – expected, there are clear signs that the final hurdles of widespread availability, the possibility for multi-sourcing and competitive cost levels are about to be passed, enabling market take-off.
Continued volume growth of payment cards
The market expectations are that dual-interface payment card volumes will grow at an average rate of 15-16 percent over the period 2017 – 2025.¹ The growth is driven especially by developing markets, where governments and issuers are pushing for financial inclusion, and the migration from cash to electronic-based payments. Industry mandates requiring all payment terminals in Europe to accept contactless payments by January 2020 and similar efforts in other regions are also driving adoption.
As a result, dual-interface cards are expected to reach 80 percent of the total annual volume of cards issued by 2021 and virtually 100 percent by 2023. Contactless technology is quickly becoming a dominant form of electronic payment; with annual volumes of dual interface cards expected to reach four billion by 2023, and the total number of dual-interface payment cards in circulation expected to climb to 15 billion by 2027². Particularly, European countries are shifting their consumer behaviour to embrace contactless technology with countries such as the UK, Poland and the Czech Republic leading the way.
The addressable market, and achievable penetration rates for biometric payment cards as a share of the total dual interface card market, are difficult to assess and will likely be closely related to achieved cost levels of finished biometric payment cards. Various assessments display a range of expectations. Sceptics argue that it will be challenging to introduce biometrics in certain geographies and increased card cost will limit the addressable market to less than 20 percent of dual interface cards by 2025. On the other hand, optimists look to the rapid market adoption of dual interface cards. In the UK, it took 10 years for such cards to grow from zero to 81 percent penetration, even though contactless were initially introduced at about 5 times higher card cost levels than pre-existing contact-based cards and, in addition, required significant infrastructure investments at the Point of Sale. With the clear path to sub \$10 costs of biometric payment cards, it is not evident why the market adoption of biometric cards should be any less than that of contactless card in the past decade. Market research by Edgar Dunn³ suggests a potential in excess of six billion biometric cards in circulation by 2027, although this market estimate was based on a take-off that is likely to be delayed by 1-2 years.
Regardless of the degree of conservatism one chooses to apply to the estimates, Zwipe expects the addressable market for biometric payment cards to become substantial.
1 Eurosmart estimates and Zwipe projections
2 Edgar Dunn 2018
3 Edgar Dunn 2018
Enablers of a commercial biometric card market
Biometrics has become a staple of everyday life, as consumers have become accustomed to using such authentication as a natural element of smartphones, PCs and other devices. The concepts of fingerprint and facial recognition are by now familiar and do not pose a hurdle to acceptance. On the contrary, consumers have generally embraced the use of biometrics for secure and convenient user verification.
In parallel, contactless technology has emerged as the most convenient means of conducting payment transactions. However, the contactless solution has an inherent lack of security, real and perceived, which has prompted the introduction of transaction limits and consumer concerns. The rationale for combining the convenience of contactless with the accepted security of biometrics appears compelling.
The perceived readiness to embrace biometric payment cards from a consumer/trade point of view is already high. Consumer surveys confirm that while the adoption rate of contactless is increasing sharply, about half of end-users are concerned about the lack of security when making a transaction with contactless payment cards.4 In a different survey commissioned by VISA5, end users demonstrated their perception of biometrics as delivering superior security for payments. The same view is consistently supported by consumers participating in biometric card pilots conducted by Zwipe and its customers.
4 Fingerprints Cards research 2018, Kantar TNS 2018 5 VISA ready for biometrics report, AYTM Market Research 2018
Biometrics perceived by end users as delivering superior security
From the issuer and point-of-sale (POS) perspectives, no incremental infrastructure investments are needed to enable usage of biometric payment cards, as biometric card solutions are compatible with existing legacy infrastructure at point of sales around the world.
The question then becomes what the remaining necessary enablers of a biometric market take-off are, and when they may be expected to materialize. Key players in the market largely agree that remaining hurdles that must be passed before the market for biometric payment cards will gain momentum and grow to commercially attractive volumes include the possibility for multi-source procurement and reduction of cost of cards.
Multi-source procurement implies that alternative supplies of viable components and biometric solutions must be established at each step in the value chain before smart card manufacturers as well as issuers are ready to financially commit to commercial volumes of significance. Consequently, the availability of a minimum number of competing biometric offerings will strengthen the market potential and increase the likelihood of commercial success for the market as a whole and for each individual supplier. The market is now approaching this stage, where we – in addition to Zwipe's offering – observe emerging solutions from dedicated component or technology providers, as well as solutions developed in-house at the larger card manufacturers. At the same time, new alliances are forming, and key players are making investments in supply chain and manufacturing capability. Semiconductor manufacturers have begun the development of dedicated offerings for this emerging market, and the entire supporting value chain has started moving more aggressively.
During 2019 we have seen increased efforts from leading providers of biometric components and solutions to support a broader network of card manufacturers and issuers with pilots, preparing for commercialization. Zwipe believes this development is positive and necessary for the industry. Multi-sourcing is consequently becoming a realistic possibility in the near future, which signals the viability of a commercial market for biometric payment cards.
The enabler for a functioning volume market that we believe is most important is a substantial reduction of the total payment card cost as delivered to the issuers (banks). Today the cost of a biometric payment card as applied in pilots is over USD 20, which is considered a prohibitive premium for large-scale commercial rollout, compared to basic dual interface cards costing approximately USD 3-4. Market consensus is that the cost of biometric payment cards must be reduced by at least 50 percent, to below USD 10, before issuers will commit to deploying commercial volumes of significance.
The various players in the biometric payment card field are all pursuing various approaches to cut costs. Through the latest ongoing technology developments and the collaboration with Idemia, Zwipe believes it is at the forefront of this development, and consequently very well positioned to be a cost leader in this field.
PURSUIT OF A BIOMETRIC STRATEGY
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Zwipe Annual Report 2019
From Zwipe's inception, its business idea has been to combine the superior authentication properties of biometrics with the speed and convenience of contactless transactions. At the outset, the company and its founders received recognition and several awards for innovation and business potential for the new and innovative approaches to the application of biometric authentication.
While the idea was compelling, the path from an interesting concept in 2009 until today – when Zwipe is at the final stages of completing a truly industrialized and competitive solution – has been filled with challenges and progression. Challenges to be overcome have ranged from slower than expected market adoption to moving targets for certification, a rapidly escalating pressure for cost reduction, major technological advances and the realization that a fintech frontrunner is dependent on the availability of competing offerings before the market is willing to adopt a new product in large volumes. A common theme for all large-scale industry developments where the addressable market in units amount to one or several billion units, such as payment cards, is that true mass market will be enabled once the complete value chain can be served in a cost-effective way through multiple channels. Biometric payment cards are now at the final stages of completing this development cycle.
Today, through the diligent pursuit of a biometric strategy, Zwipe and Idemia are finalizing what is expected to become the solution which will open doors to commercialization and volume scale-up of biometric smart cards.
Certification of biometric payment cards
Over Zwipe's first five years of operation, core technology and IP were developed, up to the point in 2014 where Zwipe, MasterCard and Eika Bank conducted the world's first biometric payment card trials, successfully using biometric authentication to complete contactless transactions. In 2017 Zwipe displayed the world's first biometric inlay for dual interface payment cards, and by the end of 2018, Zwipe's biometric inlay was the most widely piloted biometric payment solution in the industry.
Prior to the card issuers' broad-scale commercial launch of any new payment card technology, such as biometric payment cards, the cards must be certified in accordance with specifications defined by the payment schemes (VISA, Mastercard). During 2019, simultaneous with continued development and pilots, initial targets were set for payment scheme certification of a card incorporating Zwipe's
biometric inlay in cooperation with Zwipe's customers. Third-party laboratories confirmed that Zwipe's present solution comfortably fulfilled security, interoperability and biometric performance requirements for certification.
Meanwhile, there has been a growing understanding that broad-scale commercial launch of biometric payment cards is dependent on a substantial reduction in the manufacturing cost of the cards. At the same time, finalization of certification requirements by several payment schemes has been delayed. This has significantly reduced the commercial opportunities for high-cost certified cards available now. Consequently, Zwipe is focusing its efforts on the new low-cost platform developed together with Idemia, and the certification of this platform will benefit from Idemia's extensive experience in certification of payment cards.
With Idemia towards cost leadership and high commercial ambitions
The single-most important achievement during 2019 for Zwipe was the agreement with Idemia to jointly bring forward a new technology and platform for biometric payment cards.
The target technology will represent a major leap as well as a logical continuation along Zwipe's development path. The new product platform resulting from the co-investment collaboration will combine the functionality of a Secure Element, an MCU and more than thirty previously Printed Circuit Board-mounted components into a single chip. The platform is designed to satisfy all requirements for increased performance at extremely low energy levels, while at the same time creating entirely new levels of cost efficiency, thereby outperforming all other known current developments.
Moreover, Idemia's proven track record and financial strength enable credible industrialization of the highly specialized chip, including availability of a competent and efficient supply chain. The same applies to the certification of the complete platform and resulting payment card. Zwipe will combine the chip with its existing products and services, leveraging its in-house expertise and existing partnerships.
Zwipe expects that this step will represent the final strategic move required before commercial large-scale deployment. As a side benefit, the accelerated development enables Zwipe to leapfrog several steps of its planned inhouse development process, thereby realizing annual savings in the magnitude of NOK 40 million from 2020. Zwipe's ambition is to continue piloting on its current second-generation biometric platform in 2020, phasing in engineering samples of the new platform for testing and piloting as it becomes available in the second half of 2020, and thereafter build capability for commercial rollout from 2021 onwards.
Beyond the strategic efforts to deploy a disruptive, cost-leading biometric payment solution, Zwipe is preparing to utilize its authentication technology for other emerging areas. One of the currently most promising fields is payment solutions embedded into personal objects such as wristbands, watch straps and key fobs – the so called "wearables" segment. The interest in and relevance of this segment has increased markedly along with the evolution of biometric authentication technology.
Zwipe is actively pursuing the opportunities in the wearables segment, and was engaged in a development project by Giesecke+Devrient (G+D) for the development and piloting of a solution with biometric payment capability built into a wearable. This project is progressing well and on schedule, with strong levels of interest and commitment from our partners. Zwipe is confident to see the solution piloted with the major European bank engaged in the project.
For the longer term, Zwipe will be exploring further fields of applications within Access Control, government ID and secure authentication.
Zwipe has built an extensive portfolio of patents relating to hardware and software aspects of biometric authentication. Several of the patents have substantial potential for application and licensing beyond Zwipe's own utilization of the technology, and this can represent an upside to the company's planned ordinary business income.
The patents are widely granted. Initially, Zwipe will leverage its patents in support of its customers – offering peace of mind through operating within protected and granted IP boundaries. Furthermore, Zwipe will prepare for monetizing on its IP through third-party licensing, which is expected to be applicable through large parts of the biometric payment card industry.
More on Zwipe's products, history and strategy can be found in the prospectus developed for the rights issue in December 2019. The prospectus is available at Zwipe's home page www.zwipe.com.
Zwipe Products
During 2019, Zwipe has branched its product portfolio into the following product lines:
● Zwipe Pay Gen-3 is a biometric card inlay, enabling biometric payment card construction with industry standard production processes. Zwipe Pay Gen-3 enables hot lamination and post placement (embedding the ISO contact plate module and fingerprint sensor as a final production step). Zwipe Pay Gen-3 is based on the Java Card operating system and intended to support biometric payment pilots throughout 2020.
● Zwipe Flex Wearable is a contactless, biometric, wearable payment device, at first in the form of a wristband, developed in co-operation with G+D. Zwipe Flex will pilot in 2020 with leading European banks.
● Zwipe Pay ONE is a single-chip biometric payment card solution comprising a packaged single-chip secure element, an optional passive inlay (very similar to standard dual interface card inlays), as well as algorithm and payment applet (software). The fingerprint sensor will be supplied directly from the sensor supplier. The packaged secure element and the fingerprint sensor can be post-placed into the card body after lamination. There is no longer a need to have active electronics on the smart card inlay, greatly reducing technology and lamination cost, as well as yield, and increasing reliability and sturdiness throughout the card's life. Zwipe Pay ONE is in development and is planned to be ready to pilot in the second half of 2020. It is initially planned to be based on a Java Card operating system.
● Zwipe Z5 is an application-specific integrated circuit (ASIC) which consolidates functionality for energy harvesting and power management in a single chip. The Z5 chip will be supplied as a stand-alone component and integrated in Zwipe's own solutions.
Around these product lines, Zwipe offers complementing payment applets, solutions for enrolment and supports customers' pilots.
Employees and Locations
The Group had an average number of 29 employees including contractors during 2019. The employees were spread across Zwipe's three main locations as well as individual working locations in Europe and Asia.
BOARD OF DIRECTORS AND MANAGEMENT
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Zwipe Annual Report 2019
Zwipe's Board of Directors and senior management represent substantial experience from biometrics and payment industries, as well as related and complementing skill sets.
Board of Directors
Jörgen Lantto, Chairman of the board
Previously CEO of Fingerprint Cards AB, Mr. Lantto held the position during a period of unprecedented global growth. Prior to being appointed CEO, he was Executive Vice President, CTO and Head of Strategy and Product Development. Before his time at Fingerprint Cards he held a wide range of senior executive positions at the ICT Company Ericsson.
Board assignments: Board member Bromma tech Consulting AB, Dirac Research AB, Wirepas Oy and Tobii AB
Mr. Lantto joined Zwipe's Board of Directors in 2016 and holds 533 333 shares and 90 000 options. He is an independent director in relation to the company and its main shareholders.
Lars Windfeldt
Mr. Windfeldt is the founder & Managing Director at Winta Eiendom. He is an investor specializing in real estate development, with considerable experience in consumer technology. He previously held positions as Chairman at Tele1 Europe and NetConnect Systems and holds an MBA from Harvard Business School.
A number of board assignments in real estate projects as well as Winta Eiendom AS; and Funky Frozen Yogurt AS
Mr Windfeldt joined the Board of Directors in 2011 and holds 1 359 195 shares and 30 000 options. He is an independent director in relation to the company and its main shareholders.
Mr. Tøndel is a partner at Simonsen Vogt Wiig, a leading corporate law firm with offices in the largest cities in Norway as well as an office in Singapore. His main field of expertise are telecom, IT and IPR, including M&A. He also advises start-ups within the technology industry with a special focus on FinTech.
Highlighted as a leading lawyer by Norwegian financial daily publication Finansavisen, Chambers Europe and Legal500 within the technology/IP area.
Board assignments: Chair Quintilis AS
Mr. Tøndel joined the Zwipe Board of Directors in 2012 and holds 45 638 shares and 50 000 options. He is a Partner of the law firm Simonsen Vogt Wiig AS, who acts as legal counsel for Zwipe. He is an independent director in relation to the company's main shareholders.
Mr. Jones recently retired as the Chief Operating Officer of TSYS Issuer Solutions, a US-based global payment processing company, and until December 2017, the Chairman of Paysafe PLC, a UK-based FTSE 250 global payments company.
He has extensive experience in the fintech, payments and payment processing sectors, having held Executive/Board roles in the UK as Chairman of MasterCard UK Ltd and various Executive roles with RBS and NatWest; and in the US as a Director, President and Chief Executive Officer of RBS National Bank, as a Non-Executive Director of Argus Information Services Inc, and as a Non-Executive Director of Kroger Personal Finance. Also worked in China as an Executive Director of the RBS/Bank of China Credit Card JV.
Mr. Jones joined Zwipe's Board of Directors in 2018 and holds 62 500 shares and 40 000 options. He is an independent director in relation to the company and its main shareholders.
Johan Biehl
Mr. Biehl is a private investor; the last eight years he has devoted to managing his personal investments. He is a board member and Investment manager at Feat Invest AB since 2016. Mr. Biehl is focused on small and micro caps and today has some ten investments in listed and unlisted companies in a variety of industries with a predominance in tech companies.
Before going into the financial industry, he held several positions in B2B sales and sales management. He has studied economics and business and holds a degree in finance from Stockholm University.
Board assignments: Board member Feat Invest AB, Biehl Invest AB, Nitro Games Oy
Mr. Biehl joined the Board of Directors in 2018 and hold 200 714 shares and 40 000 options. He is an independent director in relation to the company and its main shareholders.
Samuel Chester
A financial advisor and APAC markets expert, Mr. Chester manages funds for international technology investors and serves on the board of early stage technology companies. He previously worked in the finance and aerospace industry in China, Israel and the Arab Gulf.
Mr. Chester holds degrees in economics and international relations from Johns Hopkins University.
Board assignments: None at the moment
Mr. Chester joined the Board of Directors in 2019 and holds 20 000 options. He is an independent director in relation to the company and its main shareholders.
Dorian Barak
Mr. Barak is a private equity investor and fund manager. Mr. Barak is CEO of Indigo Global, a capital advisory firm, and serves on the boards of directors of companies active in the technology, natural resources and aviation sectors. He is an Executive Director of Kuang-Chi Science Limited (HK: 00439) and chairs its international activities. He was formerly MD and Head of International M&A at Israel's largest financial group; Attorney with Skadden, Arps in New York; and Consultant with The Boston Consulting Group (BCG) in the USA.
Mr. Barak holds a J.D. from Yale Law School, an M.A. from Oxford University and B.A. from UCLA.
Board assignments: CEO of Indigo Global; Executive Director of Kuang-Chi Science Limited; Board member of Eyesight Technologies Ltd, Alufer Mining Limited, Agent Video Intelligence Ltd, Austin Bridgeport Limited
Mr. Barak joined the Board of Directors in 2019 and holds 20 000 options. He is an independent director in relation to the company and its main shareholders.
Zwipe Management
André Løvestam, CEO
Leading Zwipe on its mission to make convenience secure, Mr. Løvestam joined Zwipe as CEO in March 2018 and has led the company through a milestone period, including a successful MUSD 14 fund raising and public listing on the Oslo Stock Exchange, Merkur Market, and Nasdaq First North Growth Market in Stockholm, as well as forging the partnership with Idemia to position Zwipe for cost leadership and growth.
Prior to Zwipe his career features several chief executive officer positions at prominent Nordic ICT and FMCG companies.
Board assignments: Chairman, Share Your Business Sweden AB and Energetic AS
Mr Løvestam joined Zwipe in March 2018 and holds 151 111 shares and 440 000 options.
Márcio Stervid, CCO
Based in the UK, Mr. Stervid has a wealth of experience in various senior sales and business development roles working for strong global brands across the financial services, ICT and banking industries. Most notably Verifone, Gemalto and Bank of America. His proven track record in a career spanning 28 years leading commercial initiatives will play a pivotal role in helping Zwipe commercialize its technology platform.
Board assignments: Director PX Innovation Consulting Ltd.
Mr. Stervid joined Zwipe in August 2018 and holds 90 000 options.
Lars Myren, Interim CFO
Based in Oslo, Norway Mr. Myren is an experienced CFO and strategy advisor with proven international leadership experience within the technology, manufacturing and energy sectors, to name a few. Past experience includes positions as CFO of Broadnet, the Elopak Group and Eltel Sønnico, and a series of interim top management roles. Mr. Myren has also served as Chairman of the Board for a range of privately held companies.
Board assignments: Chair Radiocrafts AS, Lund Gruppen AS, Fibber AS, Dialog Eiendom AS, Sahara Forest Project Foundation, and Praevians AS.
Mr. Myren joined Zwipe in August 2019. He does not hold any shares.
Dr. Robert Müller, CTO
Dr. Müller has a track record over 20 years in senior technical development positions focusing on biometrics and smart card technology at leading companies such as Siemens, Giesecke+Devrient and BMW. His most recent role was serving as Chief Technology Officer at Next Biometrics.
He is leading the company's technical development overseeing the US based Research and Development Center and the European Tech Hub where he sits in Munich, Germany. Board assignments: None
Dr. Müller joined Zwipe in April 2019 and holds 28 572 shares and 90 000 options.
Eric Mercer, CEO Zwipe America
Leading Zwipe's Research and Development Center in Colorado Springs, CO, USA Mr. Mercer is a senior business executive with a focused background in supply chain management and advanced product development. Bringing a wealth of experience across both technical and administrative disciplines Mr. Mercer joined Zwipe in April 2018 to support its Generation NxT supply chain readiness and scaling initiatives. In addition to being head of Zwipe America Inc, he is also Vice President of Supply Chain and Program Management
Prior to Zwipe he has held multiple management positions, notably at Cobham Semiconductor Solutions (formerly Aeroflex) and Intel Corporation.
Board assignments: None
Mr. Mercer joined Zwipe: April 2018 and holds 60 000 options.
STATUTORY BOARD OF DIRECTORS' REPORT
Zwipe Annual Report 2019
19 Zwipe 2019
The Board of Directors' report for Zwipe in 2019 is based on Zwipe's consolidated financial accounts for 2019 and 2018, prepared in accordance with Norwegian Generally Accepted Accounting Principles (NGAAP).
All figures are presented on a consolidated basis for the Group, unless explicitly attributed to the parent company Zwipe AS. The main impact of the consolidation of financial statements for Zwipe AS and Zwipe America Inc. is the reclassification of other operating expenses in Zwipe AS to payroll expense. Tax paid by Zwipe America Inc. impacts the consolidated statements, as Zwipe AS has not yet paid taxes. Other balance sheet effects include adjustments to financial fixed assets, total cash balance, equity and accounts payable.
Revenue
Total reported revenue for Zwipe in 2019 was MNOK 1.5. This is down from MNOK 2.3 in the previous year but reflects an underlying increase in payment-related customer revenues. Sales of access control products were MNOK 1.5m in 2018, including de-stocking sale due to temporary discontinuation of the product line when Zwipe chose to focus on the segment for biometric payment authentication. Payment-related customer revenues grew from MNOK 0.8 in 2018 to MNOK 1.3 in 2019. The revenues relate to sale of biometric inlays in limited volumes and NREs (non-recurring engineering revenues). Sales revenues are marginal at this time, as regular commercial deployment of Zwipe's products is not yet initiated.
Operating expenses
Zwipe's operating expenses mainly consist of people cost (employees and contractors) and professional services from third parties contributing to Zwipe's development projects and supply chain preparations.
Total expenses related to employee payroll were stable from 2018 to 2019, at MNOK 26.6 (MNOK 26.7). The number of employees decreased in the last month of 2019, as Zwipe implemented a streamlining program where a number of planned activities were bypassed and staffing correspondingly reduced. The reported payroll expenses for 2019 include MNOK 2.4 in redundancy provisions. Several of Zwipe's employees hold stock options as part of their overall compensation package. The cost of the stock option compensation is somewhat volatile as it will vary over time due to grants, cancellations and vesting periods of each grant. In 2019 the cost of this remuneration program was MNOK 3.9, down from MNOK 7.0 in 2018.
Cost of Goods Sold (COGS) was MNOK 5.9 (MNOK 5.1) and is unproportionately high relative to the sales revenue. This is partly because the COGS includes elements of a semi-fixed nature (manufacturing fee, logistics costs) and the contribution margin is not representative of volume manufacturing. In addition, the COGS include a write-down of inventories of MNOK 2.8 related to components impacted by the streamlining program and subsequent by-passing of certain planned product generations. The same decision caused impairment-driven write-down of intangible assets of MNOK 1.3.
Other Operating Expenses were MNOK 61 (MNOK 30.8), and comprise expenditures related to R&D, office equipment, leasing of office space, IT infrastructure, consultants, travel, marketing and others. Expenses related to the management of Zwipe's IP are also included in operating expenses and comprise external costs of obtaining and maintaining patents as well as incurred license fees. The main driver of the increase in 2019 is the inclusion of MNOK 19.0 related to the jointly funded development collaboration with Idemia. This represents 50% of the total committed co-investment with Idemia that is payable by Zwipe, the remainder is planned to be paid in 2020 and 2021. In addition, the increase reflects a generally high activity level and costs related to the use of consultants and third-party contractors. Lastly, one-time costs of professional services in connection with the listing processes at Merkur Market at Oslo Børs as well as Nasdaq First North Growth Market are included as part of other operating expenses.
Results
Consolidated EBITDA for 2019 was MNOK -92.0 (MNOK -60.3). The decrease largely reflects expenses of the new joint technology platform development with Idemia, costs relating to two listing processes and structural one-off costs of the streamlining program. Zwipe has repaid the majority of its loan commitments, and total financial costs are correspondingly reduced by MNOK 4 from 2018. Total result for the year was MNOK -95.2 (MNOK -72.7).
Research and Development
R&D spendings amounted to a total of MNOK 38.8 in 2019, whereof NOK 3.1 million was activated as intangible assets and the remainder expensed over the Income Statement. R&D expenses include purchased materials and components as well as external project costs for design, manufacturing (production trials and pilot production runs), testing and other work conducted by various companies and institutions. MNOK 19 of the R&D cost in 2019 is related to the co-investment agreement for development of the single-chip platform with Idemia. Another major component was the development and prototyping of Zwipe's Z5 chip for energy harvesting and power management.
An impairment of MNOK 1.3 was applied to intangible assets, as the streamlining program concluded in November 2019 made an intermediate generation development superfluous.
Financial position
During 2019 Zwipe raised MNOK 120 in connection with the admission to Merkur Market in January and further strengthened its balance sheet through a preferential rights issue of gross MNOK 67 in December. In consequence, Zwipe was able to satisfy the requirement of in excess of twelve months' working capital prior to the planned listing at Nasdaq First North Growth Market in January 2020.
At the end of 2019, cash and cash equivalents were MNOK 90.2, including the receivable relating to the capital increase which was subscribed but not yet registered on 31 December 2019. The capital increase was registered on 6 January 2020. The cash reserves were up from MNOK 10.8 at the end of 2018.
Total equity was MNOK 80.4 (MNOK -8.1), corresponding to an equity ratio of 73% (-27%). Total liabilities were MNOK 30.4, all of which various short-term items. During 2019 Zwipe settled a convertible loan by issuing 520 543 new shares and repaid a shareholder loan by MNOK 14.8. Zwipe did not have long-term interest-bearing debt at the end of 2019.
Parent company
Revenue in the parent company, Zwipe AS, was MNOK 1.5 in 2019, compared with MNOK 2.3 in 2018. All external revenues are invoiced from the parent company. Operating expenses were MNOK 97.6 (MNOK 72.6), and the net result for Zwipe AS was a loss of MNOK 95.7 compared to a loss of MNOK 74.1 in 2018.
Total assets were MNOK 107.1 and cash and cash equivalents were MNOK 86.5, including financial receivable related to the subscribed share issue. Zwipe AS had MNOK 0.1 in interest-bearing debt at the end of 2019.
Share capital and shares
During 2019, the share capital was increased on four separate occasions. In January a debt conversion took place whereby 520 543 new shares were issued at a subscription price of NOK 18. At the same time a private placement with retail tranche was subscribed at NOK 20, and 6 000 000 new shares were issued. A minor exercise of options at NOK 10 was done in May, and 7 083 shares were issued. Finally, at the preferential rights issue in December, 9 571 973 new shares were issued at NOK 7. The December issue was subscribed in 2019, but registered on 6 January 2020.
The number of outstanding shares at the end of 2019 was 15 953 288 formally registered, and a grand total number of 25 525 261 including the subscribed shares registered on 6 January 2020.
At the end of 2019, the formal share capital of Zwipe was NOK 1 595 328.80 (NOK 942 566.20). Including the share capital pending for registration on 6 January, the grand total was NOK 2 552 526,10.
Zwipe's shares were listed at Merkur Market on January 28, 2019, under the ticker ZWIPE-ME. At the time of listing, the 15 946 205 shares were priced at NOK 20. Through 2019 the share price fell by 73.5 percent to NOK 5.30. At the end of 2019, Zwipe's market cap (including subscribed, unregistered shares) was MNOK 135.3.
The Swedish equity analyst firm, Redeye, published an initiation report on 19 Feb 2020 and will cover Zwipe.
Dividend
Zwipe's dividend policy is that no dividend shall be paid until the company is in an established cash positive position with predictable positive business results. Consequently, the Board of Directors proposes that no dividend be paid for 2019.
Subsequent events
At the end of 2019, Zwipe had conducted a preferential rights issue with gross proceeds of MNOK 67. On 31 December the shares had been subscribed and settled in escrow, but were not yet registered. The final registration of the new shares took place on 6 January 2020, at the same time as release of the new equity to the company.
Through the fourth quarter of 2019, Zwipe was preparing for dual listing at Stockholm's Nasdaq First North Growth Market. The listing was completed in accordance with plan, and Zwipe was admitted to trading under the ticker ZWIPE, on 28 January, 2020. No additional shares were issued in connection with the listing.
The company appointed a new permanent CFO who will replace interim CFO Lars Myren. The new CFO, Lars Kristian Solheim, will commence on 1 March 2020.
Risks and Uncertainty Factors
Zwipe is exposed to various types of market-, operationaland financial risks. Zwipe continuously monitors risk factors at a corporate and subsidiary level and take appropriate action when needed to eliminate or mitigate any potential negative impact on operational and financial performance. Please refer to the prospectus dated 4 December 2019 for a comprehensive discussion of risk factors. The prospectus is available at www.zwipe.com.
Zwipe is operating within the unpredictable and rapidly evolving contactless payment and biometric authentication market and value chain together with market leading manufacturers and payment networks. As such, it is difficult to predict important market trends, including how large this market will be or when and which products will be adopted, as well as timing of significant market events such as commercial launch of biometric payment cards to consumers. Zwipe's operational and financial performance will depend on the timely and successful commercialisation of existing and new technologies and enhancements to such technologies. Certification, customer roll-out and/or market adoption might take longer, or the market penetration may not be as strong as Zwipe plans for.
The markets in which the company operates are highly competitive, fragmented and rapidly changing and the Group expects to continue to experience competition from new- and incumbent market players. The introduction of new technologies could cause existing products to be less attractive and Zwipe must therefore be able to successfully anticipate or adapt to changing technologies or customer requirements on a timely basis.
Going Concern
The Board of Directors confirms that Zwipe will continue to operate under the assumption of going concern, and that the financial statements for 2019 are prepared under this assumption. While costs are expected to continue to exceed revenue for several more quarters, the board considers that the company has sufficient access to capital while preparing for a cash-generating commercial business.
External Environment
Zwipe's operations has limited impact on the environment. The company operates in compliance with all applicable environmental legislation, without any requirement for waivers or exemptions.
Working environment
At the beginning of 2019, Zwipe had a total staff of 31, including engaged consultants. In November 2019, a streamlining program and reorganization was resolved by the Board of Directors and enacted by management, resulting in a reduction to 22 people at the end of December.
Following the streamlining, the business was organized in a simplified department structure with clarified accountabilities. Zwipe now consists of the main areas Commercial, R&D, Supply Chain and Administration.
Zwipe strives to be an equal opportunity workplace and the working environment is considered good. Out of its 22 people, one manager is female. There are no women in Zwipe's Board of Directors. Zwipe considers the gender balance unsatisfactory, and seeks to increase the share of women in its workforce.
Excluding consultants, the number of employees in the Norwegian parent company was four at the end of 2019. The total sick leave in the parent company was 0.7% in 2019. This level is considered satisfactory and no targeted measures are implemented to further address the sick leave level. There have been no material injuries or work-related accidents in 2019.
Other
The Board of Directors is not aware of any matters of importance for the assessment of the company's position and performance, which is not reflected by the financial statement and balance sheet with notes. Subsequent to 31 December 2019, there has not, in the Board of Directors' view, occurred any matter which will affect the annual accounts.
Outlook
Zwipe observes that card issuers and consumers are getting ready to embrace the global shift towards more secure and convenient contactless payments, and the key players and surrounding ecosystem have prepared for introduction of biometric authentication as the next development of payment cards.
Through the customer developments and technology partnerships established in 2019, Zwipe's ambition is to play an important role in commercial market deployment and to secure a strong market position both in the medium and long term.
Through the recent capital raise and the implementation of streamlining actions, Zwipe has the capability to continue to develop its offering and prepare for commercial high-volume market deployment of biometric authentication solutions for payment and beyond.
Zwipe's revenue growth going forward is dependent on the market development of biometric payment cards, as well as Zwipe's ability to capture a sufficient share of the market. Zwipe believes that the timing and speed of market adoption will be closely linked to the availability of technology that enables significant cost reductions of biometric payment cards relative to current levels – in line with the ambitions of Zwipe's co-funded development program with Idemia. There is widespread consensus that the market potential is substantial.
In addition to revenues from payment applications, Zwipe sees additional upside potential from product offerings within wearables and digital authentication, as well as through leveraging and monetizing its substantial IP portfolio.
Assurance by the Board of Directors
We confirm, to the best of our knowledge, that the annual report and financial statements for the period of 1 January to 31 December 2019 have been prepared in accordance with the Norwegian Accounting Act and accounting standards generally accepted in Norway (NGAAP) and give a true and fair view of the Zwipe Group's assets, liabilities, financial position and results for the period.
We also confirm, to the best of our knowledge, that the Board of Directors' report includes a fair review of important events that have occurred during the financial year and their impact on the financial statements, any major related parties' transactions, and a description of the principal risks and uncertainties for the operations.
The Board of Directors of Zwipe AS, Oslo 25 February 2019
JÖRGEN LANTTO (sign.) CHAIRMAN OF THE BOARD
LARS WINDFELDT (sign.) BOARD MEMBER
ESPEN TØNDEL (sign.) BOARD MEMBER
DENNIS JONES (sign.) BOARD MEMBER
DORIAN BARAK (sign.) BOARD MEMBER
JOHAN BIEHL (sign.) BOARD MEMBER
SAMUEL CHESTER (sign.) BOARD MEMBER
ANDRÉ LØVESTAM (sign.) CEO
STATEMENTS OF FINANCIAL POSITION
24 Zwipe 2019
Zwipe Annual Report 2019
Income Statement
(Amounts in 1000 NOK)
| Zwipe Group | Zwipe AS | ||||
|---|---|---|---|---|---|
| 2019 | 2018 | Note | 2 019 | 2018 | |
| Operating Income | |||||
| 1 517 | 2 276 | 1 | Sales revenue | 1 517 | 2 276 |
| 4 | 0 | Other operating income | 0 | 0 | |
| 1 522 | 2 276 | Operating income | 1 517 | 2 276 | |
| Operating expenses | |||||
| 5 882 | 5 088 | COGS | 5 882 | 5 088 | |
| 26 591 | 26 650 | 2, 3, 14 | Payroll expenses | 14 072 | 16 063 |
| 3 304 | 8 033 | 4,5 | Depreciation, amortization & impairment | 3 304 | 8 027 |
| 60 999 | 30 794 | 2, 16 | Other operating expenses | 74 328 | 43 443 |
| 96 776 | 70 565 | Operating expenses | 97 587 | 72 622 | |
| -95 255 | -68 289 | Operating profit/loss | -96 069 | -70 346 | |
| Financial income and expenses | |||||
| 295 | 43 | Other interest income | 293 | 43 | |
| 1 719 | 405 | Other financial income | 1 715 | 405 | |
| 246 | 2 225 | Other interest expenses | 246 | 2 223 | |
| 1 458 | 1 977 | Other financial expenses | 1 458 | 1 980 | |
| 310 | -3 754 | Net financial income and expenses | 305 | -3 754 | |
| -94 944 | -72 042 | Results before tax | -95 764 | -74 100 | |
| 210 | 657 | 10 | Tax expense | 0 | 0 |
| -95 154 | -72 700 | Results for the year | -95 764 | -74 100 | |
| Profit(+)/Loss(-) for the year attributable from: | |||||
| -95 154 | -57 855 | Share premium reserve | -95 764 | -55 561 | |
| 0 | -14 844 | Uncovered loss | 0 | -18 539 | |
| -95 154 | -72 700 | TOTAL | -95 764 | -74 100 | |
| Balance Sheet | |||||
|---|---|---|---|---|---|
| Zwipe Group | (Amounts in 1000 NOK) | Zwipe AS | |||
| 2019 | 2018 | Note | 2 019 | 2018 | |
| Assets | |||||
| Long-term Assets | |||||
| Intangible Assets | |||||
| 7 147 | 6 018 | 5 | Research and Development | 7 147 | 6 018 |
| 0 | 0 | 5 | Licenses and patents | 0 | 0 |
| 7 147 | 6 018 | Total Intangible Assets | 7 147 | 6 018 | |
| Fixed Assets | |||||
| 2 536 | 2 335 | 4 | Equipment, fixtures and fittings | 2 536 | 2 335 |
| 2 536 | 2 335 | Total Fixed Assets | 2 536 | 2 335 | |
| 0 | 0 | 6 | Financial Assets Investment in subsidiaries |
386 | 386 |
| 439 | 1 166 | Other financial receivables | 439 | 1 166 | |
| 439 | 1 166 | Total Financial Assets | 825 | 1 552 | |
| 10 122 | 9 519 | Total Long-term Assets | 10 508 | 9 905 | |
| Current Assets | |||||
| Inventories | |||||
| 3 104 | 2 307 | 7, 11 | Inventories | 3 104 | 2 307 |
| 3 104 | 2 307 | Total Inventories | 3 104 | 2 307 | |
| Receivables | |||||
| 375 | 639 | 11 | Accounts receivables | 375 | 639 |
| 74 003 | 6 209 | 8, 15 | Other receivables | 73 554 | 6 143 |
| 74 378 | 6 848 | Total debtors | 73 929 | 6 782 | |
| Cash | |||||
| 23 236 23 236 |
10 797 10 797 |
9 | Bank deposits, cash Total cash |
19 554 19 554 |
9 302 9 302 |
| 100 718 | 19 951 | Total Current Assets | 96 587 | 18 390 | |
| 110 840 | 29 470 | Total Assets | 107 095 | 28 295 | |
| Balance Sheet | |||||
|---|---|---|---|---|---|
| Zwipe Group | (Amounts in 1000 NOK) | Zwipe AS | |||
| 2019 | 2018 | Note | 2 019 | 2018 | |
| Equity and liabilities | |||||
| Equity | |||||
| Paid-up Equity | |||||
| 1 595 | 943 | 12 | Share capital | 1 595 | 943 |
| 78 830 | 0 | Share premium reserve | 74 366 | 0 | |
| 0 | -9 042 | Uncovered losses | 0 | -12 737 | |
| 80 426 | -8 100 | Total restricted equity | 75 961 | -11 795 | |
| 80 426 | -8 100 | Total equity | 75 961 | -11 795 | |
| Liabilities | |||||
| Long-term liabilities | |||||
| 0 | 475 | Other long term liabilities | 0 | 475 | |
| 0 | 475 | Total of other long term liabilities | 0 | 475 | |
| Short-term Liabilities | |||||
| 12 398 | 6 902 | Accounts Payables | 12 318 | 9 471 | |
| 702 | 1 914 | 14 | Public duties payable | 702 | 1 914 |
| 0 | 0 | 10 | Tax payable | 0 | 0 |
| 17 315 | 28 278 | 11,13, 17 | Other short term liabilities | 18 114 | 28 230 |
| 30 415 | 37 094 | Total short-term liabilities | 31 134 | 39 615 | |
| 30 415 | 37 569 | Total liabilities | 31 134 | 40 090 | |
| 110 840 | 29 470 | Total equity and liabilities | 107 095 | 28 295 |
Oslo, 25.02.2020
Jörgen Lantto Espen Tøndel Chairman of the Board Board Member
Board Member Board Member
Johan Biehl Dennis Jones Board Member Board Member
Samuel Jonathan Chester André Løvestam Board Member CEO
Lars Windfeldt Dorian Moshe Barak
Cash Flow Statement
| Zwipe Group | (Amounts in 1000 NOK) | Zwipe AS | |||
|---|---|---|---|---|---|
| 2019 | 2018 | Note | 2019 | 2018 | |
| -95 154 | -72 042 | Net Income / (Loss) before tax | -95 764 | -74 100 | |
| 94 | -657 | 10 | Taxes paid | 0 | 0 |
| 3 881 | 5 802 | 2 | (+) Option cost no cash effect | 3 839 | 5 802 |
| 0 | 30 | (+/-) Gain/Loss of fix assets | 0 | 0 | |
| 3 304 | 8 033 | 4,5 | (+) Depreciation, amortisation & impairment | 3 304 | 8 027 |
| -797 | 2 834 | (-) Change in Inventory | -797 | 2 835 | |
| 1 915 | -1 833 | (-) Change in Accounts Receivable | 264 | -532 | |
| -64 | -650 | (-) Change in Other Current Assets | 320 | -658 | |
| 2 864 | 4 275 | (+) Change in Accounts Payables | 2 847 | 4 318 | |
| 3 595 | 3 837 | (+) Change in Current Liabilities | 3 449 | 3 843 | |
| -80 361 | -50 370 | Net Cash use in Operating Activities | -82 538 | -50 465 | |
| Cash Flows from Investing Activities | |||||
| -4 636 | -6 355 | 4,5 | Intangible Assets and Capital Expenditures | -4 636 | -6 384 |
| -4 636 | -6 355 | Net Cash Provided by (used in) Investing Activities | -4 636 | -6 384 | |
| -84 997 | -56 725 | Operational Cash Flow | -87 174 | -56 849 | |
| Cash Flows from Financing Activities | |||||
| 0 | 2 148 | Loan Adjustment (PIK interst no cash effect) | 0 | 2 148 | |
| 120 071 | 20 000 | Equity Issue | 120 071 | 20 000 | |
| 67 004 | 0 | Unregistered capital increase | 67 004 | 0 | |
| -67 004 | 0 | Financial receivable from capital increase | -67 004 | 0 | |
| -16 763 | 0 | Transaction cost not recognized over P&L | -16 763 | 0 | |
| 9 370 | 8 846 | Convertible loan | 9 370 | 8 846 | |
| -15 251 | -12 478 | Repayment of loan | -15 251 | -12 478 | |
| 97 426 | 18 516 | Net Cash Provided by Financing Activities | 97 426 | 18 516 | |
| 10 | -257 | Effect of Foreign Currency Translation | |||
| 12 439 | -38 466 | Net Increase / (Decrease) in Cash and Cash Equivalents | 10 252 | -38 333 | |
| 10 797 | 49 263 | Cash and Cash Equivalents at Beginning of Period | 9 302 | 47 635 | |
| 23 236 | 10 797 | Cash and Cash Equivalents at End of Period | 19 554 | 9 302 | |
| 12 439 | -38 466 | Net cash flow | 10 252 | -38 333 |
Statement of changes in equity (Amounts in 1000 NOK)
| Zwipe Group | ||||
|---|---|---|---|---|
| Share capital | Share premium | Uncovered | Total equity | |
| reserve | loss | |||
| Janary 1st 2018 | 743 | 37 854 | 0 | 38 597 |
| Proceeds from issue of shares | 200 | 19 800 | 20 000 | |
| Annual net profit/loss | -57 654 | -15 046 | -72 700 | |
| Share based compensation | 5 802 | 5 802 | ||
| Currency effect | 201 | 201 | ||
| January 1st 2019 | 943 | 0 | -9 042 | -8 100 |
| Proceeds from issue of shares | 653 | 128 788 | 129 441 | |
| Unregistered capital increase/decrease | 67 004 | 67 004 | ||
| Issue costs | -16 764 | -16 764 | ||
| Uncovered loss | -9 042 | 9 042 | 0 | |
| Annual net profit/loss | -95 154 | -95 154 | ||
| Share based compensation | 3 267 | 3 267 | ||
| Other changes in equity | 657 | 657 | ||
| Currency effect | 74 | 74 | ||
| December 31st 2019 | 1 595 | 78 830 | 0 | 80 426 |
Zwipe AS
| Share capital | Share premium | Uncovered | Total equity | |
|---|---|---|---|---|
| reserve | loss | |||
| Janary 1st 2018 | 743 | 35 761 | 36 504 | |
| Proceeds from issue of shares | 200 | 19 800 | 20 000 | |
| Annual net profit/loss | -55 561 | -18 539 | -74 100 | |
| Share based compensation | 5 802 | 5 802 | ||
| Currency effect | 0 | |||
| January 1st 2019 | 943 | 0 | -12 737 | -11 794 |
| Proceeds from issue of shares | 653 | 128 788 | 129 441 | |
| Unregistered capital increase/decrease | 67 004 | 67 004 | ||
| Issuance cost | -16 764 | -16 764 | ||
| Uncovered loss | -12 737 | 12 737 | 0 | |
| Annual net profit/loss | -95 764 | -95 764 | ||
| Share based compensation | 3 267 | 3 267 | ||
| Other changes in equity | 572 | 572 | ||
| December 31st 2019 | 1 595 | 74 366 | 0 | 75 961 |
* Other changes in equity of NOK 572k is related to a reversal of 2018 social security tax accrual on shared based compensation.
NOTES
Zwipe Annual Report 2019
30 Zwipe 2019
Accounting policies
Zwipe Group and Zwipe AS
The financial statements have been prepared in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway.
Consolidation
The Group's accounts include the parent company Zwipe AS and its 100% owned US subsidiary Zwipe America Inc (hereafter referred to as the Group). The parent company has controlling influence as it owns more than 50% of the shares in the subsidiary and the Group is in a position to exercise actual control over the company. Transactions and receivables between companies in the group have been eliminated. The Group accounts have been prepared applying uniform principles, in that the subsidiary follows the same accounting principles as the parent company.
The consolidated financial statements are presented in NOK. Zwipe AS is reporting in NOK and Zwipe America Inc is reporting in USD. The balance sheet has been translated from USD at the exhange rate at the end of the reporting period. The profit and loss statement has been translated at the average exchange rate for 2019. Translation differences are presented as part of the equity.
Use of estimates
The preparation of financial statements in compliance with the Norwegian Accounting Act requires the use of estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies.
Revenue
Income from sale of goods and services are recognised at fair value, net after deduction of VAT, returns, discounts and reductions. Income from sale of goods is recognised in the income statement when both risk and control have passed on to the buyer, the risk being the asset's profit and loss potential, whilst control is defined as having both the decision-making rights as well as the jurisdiction. Historical data are applied to estimate and make provisions for quantity discount and returns at the date of sales.
Classification and assessment of balance sheet items
Assets intended for long-term (3 years or more) ownership or use have been classified as fixed assets. Assets relating to the operating cycle have been classified as current assets. Other receivables are classified as current assets if they are to be repaid within one year of the transaction date. Similar criteria apply to liabilities. First year's instalment on long term liabilities and long term receivables are, however, not classified as short term liabilities and current assets.
Intangible assets
An intangible asset is capitalized only when the Group can reliably measure the expenditure and a future financial benefit relating to the asset can be identified. Otherwise, such expenditure is expensed as and when incurred. Capitalised costs are amortised linearly over the asset's expected useful life.
Fixed assets
Tangible fixed assets are capitalised and depreciated linearly down to the residual value over the expected useful economic life of the assets. When the depreciation plan is changed, the effect is distributed over the remaining depreciation period. Maintenance of operating equipment is expensed on an ongoing basis. Upgrades or improvements are added to the acquisition cost of the asset and depreciated in line with the asset. The difference between maintenance and upgrade / improvement is assessed based on the condition of the asset when purchased. Plots and land are not depreciated.
Impairment of fixed assets
Impairment tests are carried out if there is indication that the carrying amount of an asset exceeds the estimated recoverable amount. The test is performed on the lowest level of fixed assets at which independent ingoing cashflows can be identified. If the carrying amount is higher than both the fair value less cost to sell and the value in use (net present value of future use/ownership), the asset is written down to the highest of fair value less cost to sell and the value in use.
Investments in other companies
The cost method is applied to investments in Zwipe America Inc. Investments are written down to fair value if the fair value is lower than the carrying amount.
The inventory of purchased goods is valued at the lower of cost according to the FIFO principle and net realisable value. Finished goods of own production and work in
Accounts receivable and other receivables are recorded in the balance sheet at nominal value after deduction of provisions for expected loss. Provisions for losses are
For the Norwegian parent company a defined contribution plan is implemented where the company pays contributions to an insurance company. The contribution is recognised as payroll expenses in the period to which the contribution relates. No
made on the basis of individual assessments of the individual receivables.
progress inventories are valued at variable cost of production.
pension contribution is covered for employees in the US.
Inventory
Pensions
Investments in other companies
fair value less cost to sell and the value in use.
Classification and assessment of balance sheet items
amortised linearly over the asset's expected useful life.
as short term liabilities and current assets.
the same accounting principles as the parent company.
Translation differences are presented as part of the equity.
judgment in applying the Group's accounting policies.
Impairment of fixed assets
Accounting policies Zwipe Group and Zwipe AS
The financial statements have been prepared in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway.
The Group's accounts include the parent company Zwipe AS and its 100% owned US subsidiary Zwipe America Inc (hereafter referred to as the Group). The parent company has controlling influence as it owns more than 50% of the shares in the subsidiary and the Group is in a position to exercise actual control over the company. Transactions and receivables between companies in the group have been eliminated. The Group accounts have been prepared applying uniform principles, in that the subsidiary follows
The consolidated financial statements are presented in NOK. Zwipe AS is reporting in NOK and Zwipe America Inc is reporting in USD. The balance sheet has been translated from USD at the exhange rate at the end of the reporting period. The profit and loss statement has been translated at the average exchange rate for 2019.
The preparation of financial statements in compliance with the Norwegian Accounting Act requires the use of estimates. It also requires Group management to exercise
Income from sale of goods and services are recognised at fair value, net after deduction of VAT, returns, discounts and reductions. Income from sale of goods is recognised in the income statement when both risk and control have passed on to the buyer, the risk being the asset's profit and loss potential, whilst control is defined as having both the decision-making rights as well as the jurisdiction. Historical data are applied to estimate and make provisions for quantity discount and returns at the date of
Consolidation
Use of estimates
Intangible assets
Fixed assets
depreciated.
Revenue
sales.
Inventory
The inventory of purchased goods is valued at the lower of cost according to the FIFO principle and net realisable value. Finished goods of own production and work in progress inventories are valued at variable cost of production.
Impairment tests are carried out if there is indication that the carrying amount of an asset exceeds the estimated recoverable amount. The test is performed on the lowest level of fixed assets at which independent ingoing cashflows can be identified. If the carrying amount is higher than both the fair value less cost to sell and the value in use (net present value of future use/ownership), the asset is written down to the highest of
An intangible asset is capitalized only when the Group can reliably measure the expenditure and a future financial benefit relating to the asset can be identified. Otherwise, such expenditure is expensed as and when incurred. Capitalised costs are
Assets intended for long-term (3 years or more) ownership or use have been classified as fixed assets. Assets relating to the operating cycle have been classified as current assets. Other receivables are classified as current assets if they are to be repaid within one year of the transaction date. Similar criteria apply to liabilities. First year's instalment on long term liabilities and long term receivables are, however, not classified
Tangible fixed assets are capitalised and depreciated linearly down to the residual value over the expected useful economic life of the assets. When the depreciation plan
is changed, the effect is distributed over the remaining depreciation period. Maintenance of operating equipment is expensed on an ongoing basis. Upgrades or improvements are added to the acquisition cost of the asset and depreciated in line with the asset. The difference between maintenance and upgrade / improvement is assessed based on the condition of the asset when purchased. Plots and land are not
Receivables
Accounts receivable and other receivables are recorded in the balance sheet at nominal value after deduction of provisions for expected loss. Provisions for losses are made on the basis of individual assessments of the individual receivables.
Pensions
For the Norwegian parent company a defined contribution plan is implemented where the company pays contributions to an insurance company. The contribution is recognised as payroll expenses in the period to which the contribution relates. No pension contribution is covered for employees in the US.
Tax
The tax charge in the income statement consists of tax payable and changes in deferred tax. Deferred tax is calculated at 22% on the basis of the temporary differences that exist between accounting and tax values, as well as any possible taxable loss carried forwards at the end of the accounting year. Tax enhancing or tax reducing temporary differences which are reversed, or may be reversed in the same period, have been offset and netted.
The net deferred tax receivable is entered on the balance sheet to the extent that it is likely that it can be utilised. As a precaution, net deferred tax is not booked in the balance sheet.
Cash flow statement
The cash flow statement has been prepared using the indirect method. Cash and cash equivalents consist of cash, bank deposits and other short-term, liquid investments.
Changes in accounting policies
There has not been any accounting policy change in 2019.
NOTES
All amounts are presented in 1000 NOK
Note 1 Revenues
| Zwipe AS & Group | |||
|---|---|---|---|
| Revenues from sale of goods and services | 2019 | 2018 | |
| Payment | 1 338 | 771 | |
| Access control | 179 | 1 505 | |
| Total | 1 517 | 2 276 | |
| Zwipe AS & Group | |||
| Geographical distribution | 2019 | 2018 | |
| Norway | - | 25 | |
| Other countries | 1 517 | 2 251 | |
| Total | 1 517 | 2 276 |
Note 2 Personnel expenses, number of employees, remuneration
| Zwipe AS | Group | |||
|---|---|---|---|---|
| Personel expenses | 2019 | 2018 | 2019 | 2018 |
| Salaries/wages | 8 538 | 7 609 | 21 057 | 18 196 |
| Social security fees | 1 829 | 1 276 | 1 829 | 1 276 |
| Pension expenses | 164 | 161 | 164 | 161 |
| Other remuneration | 882 | 35 | 882 | 35 |
| Share based remuneration (salary part) | 3 267 | 5 802 | 3 267 | 5 802 |
| Share based remuneration (employer's tax ) | -608 | 1 180 | -608 | 1 180 |
| Total personel expenses | 14 072 | 16 063 | 26 591 | 26 650 |
| Average number of employees | 7 | 8 | 29* | 29 |
Remuneration CEO Board CEO Board Salaries/wages* 2 602 0 2 050 0 Pension expenses 23 0 21 0 Other remuneration 9 538 9 288 Share based remuneration 0 125 3 683 733 Total remuneration 2 633 662 5 763 1 021
2019 2018
Management/employees Granted Vested Unvested
André Løvestam 440 000 440 000 0 3 968 Marcio Stervid 90 000 25 000 65 000 833 Robert Mueller 90 000 15 000 75 000 393 Eric Mercer 60 000 13 333 46 667 395 Total value of options granted to other employees 345 450 104 447 241 003 1 785
Espen Tøndel 50 000 30 000 20 000 48 Lars Windfeldt 30 000 15 000 15 000 44 Jörgen Lantto 90 000 50 000 40 000 103 Dennis Jones 40 000 20 000 20 000 51 Dorian Moshe Barak 20 000 5 000 15 000 42 Johan Biehl 40 000 20 000 20 000 51 Sam Chester 20 000 5 000 15 000 42 Total share based remuneration 290 000 145 000 145 000 381
Magnus Berner 35 000 13 750 21 250 141 Paal Raaholt 35 000 13 750 21 250 141 Total share based remuneration 70 000 27 500 42 500 282 Total share based remuneration 1 385 450 770 280 615 170 8 036
Value of options granted
*The Group had an average number of 29 employees including contractors in 2019.
OTP (Statutory occupational pension)
Note 3 Management and Board remuneration
includes bonus earned in 2018 and paid out in 2019.
The company is required to have a pension scheme in accordance with the Norwegian law on mandatory occupational pension ("lov om obligatorisk tjenestepensjon"). The company's pension scheme meets the minimum requirement of this law with a contribution of 2% of salary.
| Zwipe AS & Group | |||
|---|---|---|---|
| Expensed audit fee | 2 019 | 2 018 | |
| Statutory Audit | 282 | 185 | |
| Other audit assistance | 224 | 49 | |
| Other servics | 354 | 632 | |
| Total audit fees | 860 | 866 |
*Salaries in 2019 for CEO includes 13 payrolls, as the company in 2018 changed payment routines from arrears pay to payment in the same month, in addition it
Guidelines for determining the remuneration of senior executives The Compensation Committee, appointed by the Board of Directors, proposes remuneration for the CEO to the Board of Directors. The CEO proposes and discusses senior executive remuneration with the Compensation Committee. The Compensation Committee develops the share-based incentive program in collaboration with the CEO
Members of the Board
Nomination Committee
Share based remuneration
and CFO.
contribution of 2% of salary.
OTP (Statutory occupational pension)
NOTES
Note 1 Revenues
All amounts are presented in 1000 NOK
Revenues from sale of goods and services 2019 2018 Payment 1 338 771 Access control 179 1 505 Total 1 517 2 276
Geographical distribution 2019 2018 Norway - 25 Other countries 1 517 2 251 Total 1 517 2 276
Note 2 Personnel expenses, number of employees, remuneration
*The Group had an average number of 29 employees including contractors in 2019.
The company is required to have a pension scheme in accordance with the Norwegian law on mandatory occupational pension ("lov om obligatorisk tjenestepensjon"). The company's pension scheme meets the minimum requirement of this law with a
Expensed audit fee 2 019 2 018 Statutory Audit 282 185 Other audit assistance 224 49 Other servics 354 632 Total audit fees 860 866
Note 3 Management and Board remuneration
| Remuneration | 2019 | 2018 | ||
|---|---|---|---|---|
| CEO | Board | CEO | Board | |
| Salaries/wages* | 2 602 | 0 | 2 050 | 0 |
| Pension expenses | 23 | 0 | 21 | 0 |
| Other remuneration | 9 | 538 | 9 | 288 |
| Share based remuneration | 0 | 125 | 3 683 | 733 |
| Total remuneration | 2 633 | 662 | 5 763 | 1 021 |
Zwipe AS & Group
Personel expenses 2019 2018 2019 2018 Salaries/wages 8 538 7 609 21 057 18 196 Social security fees 1 829 1 276 1 829 1 276 Pension expenses 164 161 164 161 Other remuneration 882 35 882 35 Share based remuneration (salary part) 3 267 5 802 3 267 5 802 Share based remuneration (employer's tax ) -608 1 180 -608 1 180 Total personel expenses 14 072 16 063 26 591 26 650 Average number of employees 7 8 29* 29
Zwipe AS & Group
Zwipe AS & Group
Zwipe AS
Group
*Salaries in 2019 for CEO includes 13 payrolls, as the company in 2018 changed payment routines from arrears pay to payment in the same month, in addition it includes bonus earned in 2018 and paid out in 2019.
Guidelines for determining the remuneration of senior executives
The Compensation Committee, appointed by the Board of Directors, proposes remuneration for the CEO to the Board of Directors. The CEO proposes and discusses senior executive remuneration with the Compensation Committee. The Compensation Committee develops the share-based incentive program in collaboration with the CEO and CFO.
Share based remuneration
| Management/employees | Granted | Vested | Unvested | Value of options granted |
|---|---|---|---|---|
| André Løvestam | 440 000 | 440 000 | 0 | 3 968 |
| Marcio Stervid | 90 000 | 25 000 | 65 000 | 833 |
| Robert Mueller | 90 000 | 15 000 | 75 000 | 393 |
| Eric Mercer | 60 000 | 13 333 | 46 667 | 395 |
| Total value of options granted to other employees | 345 450 | 104 447 | 241 003 | 1 785 |
| Total share based remuneration | 1 025 450 | 597 780 | 427 670 | 7 373 |
| Members of the Board | ||||
| Espen Tøndel | 50 000 | 30 000 | 20 000 | 48 |
| Lars Windfeldt | 30 000 | 15 000 | 15 000 | 44 |
| Jörgen Lantto | 90 000 | 50 000 | 40 000 | 103 |
| Dennis Jones | 40 000 | 20 000 | 20 000 | 51 |
| Dorian Moshe Barak | 20 000 | 5 000 | 15 000 | 42 |
| Johan Biehl | 40 000 | 20 000 | 20 000 | 51 |
| Sam Chester | 20 000 | 5 000 | 15 000 | 42 |
| Total share based remuneration | 290 000 | 145 000 | 145 000 | 381 |
| Nomination Committee | ||||
| Magnus Berner | 35 000 | 13 750 | 21 250 | 141 |
| Paal Raaholt | 35 000 | 13 750 | 21 250 | 141 |
| Total share based remuneration | 70 000 | 27 500 | 42 500 | 282 |
| Total share based remuneration | 1 385 450 | 770 280 | 615 170 | 8 036 |
Note 4 Fixed assets
| Zwipe AS & Group | ||||
|---|---|---|---|---|
| Office machinery |
Tools | Machinery and plant in progress |
Total | |
| Acquisition cost 01.01.2019 | 256 | 4 484 | 0 | 4 740 |
| Adjustment acquisition cost | 81 | -81 | 0 | 0 |
| Additions | 50 | 1 192 | 670 | 1 912 |
| Skattefunn/Horizon 2020 | 0 | -311 | -108 | -419 |
| Disposals | 0 | 0 | 0 | 0 |
| Acquisition cost 31.12.2019 | 387 | 5 284 | 561 | 6 232 |
| Accumulated depreciation/ impairment 31.12.2019 | 237 | 3 459 | 0 | 3 696 |
| Adjustment acc. depreciation/impairment 31.12.2019 | 61 | -61 | 0 | |
| Book value 31.12.2019 | 89 | 1 886 | 561 | 2 536 |
| Depreciation in the year | 93 | 1 188 | 0 | 1 282 |
| Impairment in the year | 0 | 9 | 0 | 9 |
| Total Depreciation/impairment in the year | 93 | 1 197 | 0 | 1 290 |
| Depreciation plan | Linear | Linear | ||
| Economic useful life | 3 year | 5 year |
Research and development
Adjustment acquisition cost 3 825 -3 473 -452 -100 Additions 0 0 7 852 7 852 Skattefunn/Horizon 2020 0 0 -4 709 -4 709 Disposals 0 0 0 0 Acquisition cost 31.12.2019 14 180 4 108 7 062 25 351 Accumulated amotization/ impairment 31.12.2019 10 685 7 581 38 18 303 Adjustment acc. amortization/impairment 31.12.2019 3 373 -3 473 0 -100 Book value 31.12.2019 122 0 7 024 7 147 Amortization in the year 594 0 0 594 Impairment in the year 1 382 0 38 1 420 Total Depreciation and amortization in the year 1 976 0 38 2 014
Amortization plan Linear Linear Economic useful life 5 year 5 year
Note 6 Investment in subsidiaries and associates and joint ventures
The US subsidiary provide various services to the parent company, mainly within
technical development and supply-chain activities.
versions of the payment inlay were written off.
Zwipe AS Location Investment
Raw materials 5 350 3 017 Goods in production 106 643 Finished goods 1 765 967 Write-off -4 117 -2 320 Total inventory 3 104 2 307
Following the decision to implement a streamlining program at the end of 2019, and subsequent accelaration of Zwipe's technology roadmap, inventory related to bypassed
Other current receivables 2019 2018 Loan to employees 748 731 Unregistered capital increase 67 004 0 Other current term receivables 6 252 6 209 Total other current receivables 74 003 6 940
Zwipe has issued loans in favour of two previous employees. The purpose of the loans was to finance purchase of shares in Zwipe. The total outstanding amount to employees is NOK 748k (including accumulated interests) . The loans carry an interest equal to the prescribed interest rate (Norwegian: "normrente") for loans to employees as applicable from time to time. The loan was classified as long-term receivable at end
No loans/sureties have been granted to the CEO, Chairman of the Board or other
A capital increase of NOK 67 million was completed in December 2019. The capital increase was registered in January 2020 and is booked as an unregistered capital
A grant of NOK 5 million for 2019 to fund R&D projects approved by the Research Council of Norway (Governmental grant: SkatteFunn), is expected to be received second half of 2020. The grant is subject to final approval by the tax authorities. The
Zwipe America Inc. Colorado 386 101 100 %
Concessions, patents etc.
2019 2018
Zwipe AS & Group
Zwipe AS & Group
Research and development
Zwipe AS & Group
in progress Total
Ownership/ voting rights
Note 7 Inventories
Note 8 Receivables
of year 2018.
related parties.
increase in the financial statement of 2019.
corresponding received amount for 2018 was NOK 5 million.
Note 5 Intangible assets
Note 4 Fixed assets
Note 5 Intangible assets
| Zwipe AS & Group | ||||
|---|---|---|---|---|
| Research and development |
Concessions, patents etc. |
Research and development in progress |
Total | |
| Acquisition cost 01.01.2019 | 10 355 | 7 581 | 4 371 | 22 307 |
| Adjustment acquisition cost | 3 825 | -3 473 | -452 | -100 |
| Additions | 0 | 0 | 7 852 | 7 852 |
| Skattefunn/Horizon 2020 | 0 | 0 | -4 709 | -4 709 |
| Disposals | 0 | 0 | 0 | 0 |
| Acquisition cost 31.12.2019 | 14 180 | 4 108 | 7 062 | 25 351 |
| Accumulated amotization/ impairment 31.12.2019 | 10 685 | 7 581 | 38 | 18 303 |
| Adjustment acc. amortization/impairment 31.12.2019 | 3 373 | -3 473 | 0 | -100 |
| Book value 31.12.2019 | 122 | 0 | 7 024 | 7 147 |
| Amortization in the year | 594 | 0 | 0 | 594 |
| Impairment in the year | 1 382 | 0 | 38 | 1 420 |
| Total Depreciation and amortization in the year | 1 976 | 0 | 38 | 2 014 |
| Amortization plan | Linear | Linear | ||
| Economic useful life | 5 year | 5 year |
Office
Acquisition cost 01.01.2019 256 4 484 0 4 740 Adjustment acquisition cost 81 -81 0 0 Additions 50 1 192 670 1 912 Skattefunn/Horizon 2020 0 -311 -108 -419 Disposals 0 0 0 0 Acquisition cost 31.12.2019 387 5 284 561 6 232 Accumulated depreciation/ impairment 31.12.2019 237 3 459 0 3 696 Adjustment acc. depreciation/impairment 31.12.2019 61 -61 0 Book value 31.12.2019 89 1 886 561 2 536 Depreciation in the year 93 1 188 0 1 282 Impairment in the year 0 9 0 9 Total Depreciation/impairment in the year 93 1 197 0 1 290
machinery Tools
Machinery and plant in
Zwipe AS & Group
progress Total
Note 6 Investment in subsidiaries and associates and joint ventures
Depreciation plan Linear Linear Economic useful life 3 year 5 year
The US subsidiary provide various services to the parent company, mainly within technical development and supply-chain activities.
| Zwipe AS | Location | Investment | Ownership/ voting rights |
|---|---|---|---|
| Zwipe America Inc. | Colorado | 386 101 | 100 % |
Note 7 Inventories
| Zwipe AS & Group | ||||
|---|---|---|---|---|
| 2019 | 2018 | |||
| Raw materials | 5 350 | 3 017 | ||
| Goods in production | 106 | 643 | ||
| Finished goods | 1 765 | 967 | ||
| Write-off | -4 117 | -2 320 | ||
| Total inventory | 3 104 | 2 307 |
Following the decision to implement a streamlining program at the end of 2019, and subsequent accelaration of Zwipe's technology roadmap, inventory related to bypassed versions of the payment inlay were written off.
Note 8 Receivables
| Other current receivables | Zwipe AS & Group | ||
|---|---|---|---|
| 2019 | 2018 | ||
| Loan to employees | 748 | 731 | |
| Unregistered capital increase | 67 004 | 0 | |
| Other current term receivables | 6 252 | 6 209 | |
| Total other current receivables | 74 003 | 6 940 |
Zwipe has issued loans in favour of two previous employees. The purpose of the loans was to finance purchase of shares in Zwipe. The total outstanding amount to employees is NOK 748k (including accumulated interests) . The loans carry an interest equal to the prescribed interest rate (Norwegian: "normrente") for loans to employees as applicable from time to time. The loan was classified as long-term receivable at end of year 2018.
No loans/sureties have been granted to the CEO, Chairman of the Board or other related parties.
A capital increase of NOK 67 million was completed in December 2019. The capital increase was registered in January 2020 and is booked as an unregistered capital increase in the financial statement of 2019.
A grant of NOK 5 million for 2019 to fund R&D projects approved by the Research Council of Norway (Governmental grant: SkatteFunn), is expected to be received second half of 2020. The grant is subject to final approval by the tax authorities. The corresponding received amount for 2018 was NOK 5 million.
Note 9 Restricted bank deposits
| Zwipe AS & Group | |||
|---|---|---|---|
| 2019 | 2018 | ||
| Restricted funds deposited for tax withholdings | 386 | 847 |
In January 2020, SEK 200k was placed on a restricted bank account as collateral for bank guarantee issued to Euroclear Sweden AB.
Note 10 Tax
The tax charge in the income statement consists of tax payable and changes in deferred tax. Deferred tax is calculated at 22% on the basis of the temporary differences that exist between accounting and tax values, as well as any possible taxable loss carried forwards at the end of the accounting year. Tax enhancing or tax reducing temporary differences, which are reversed or may be reversed in the same period, have been offset and netted.
| Zwipe AS | Group | |||
|---|---|---|---|---|
| This year's tax expense | 2019 | 2018 | 2019 | 2018 |
| Entered tax on ordinary profit/loss: | ||||
| Income tax | 0 | 0 | 210 | 657 |
| Payable tax | 0 | 0 | 0 | 0 |
| Changes in deferred tax advantage | 0 | 0 | 0 | 0 |
| Tax expense on ordinary profit/loss | 0 | 0 | 210 | 657 |
| Taxable income: | ||||
| Ordinary profit/loss before tax | -95 764 | -74 100 | -95 154 | -72 700 |
| Permanent differences | -21 716 | -4 875 | -21 716 | -4 875 |
| Changes temporary differences | 212 | 5 368 | 212 | 5 368 |
| Taxable income | -117 268 | -73 607 | -116 658 | -72 207 |
| Total payable tax in the balance | 0 | 0 | 0 | 0 |
The tax effect of temporary differences and losses carried forward that has formed the basis for deferred tax and deferred tax advantages, specified on type of temporary differences:
| Zwipe AS | |||
|---|---|---|---|
| 2019 | 2018 | Temporary Difference |
|
| Tangible fixed assets | -4 698 | -6 275 | -1 577 |
| Inventories | -4 117 | -2 320 | 1 797 |
| Accounts receivable | 11 | 2 | -9 |
| Total | -8 805 | -8 593 | 212 |
| Accumulated loss to be brought forward | -326 344 | -209 076 | 117 268 |
| Not included in the deferred tax calculation | 2 499 | 2 384 | -116 |
| Basis for calculation of deferred tax | -332 650 | -215 286 | 117 364 |
| Deferred tax (22 % ) | -73 183 | -47 363 | 25 820 |
As a precaution, deferred tax is not booked to the balance sheet.
Note 11 Debtors, liabilities, pledged assets and guarantees etc.
| Zwipe AS & Group | |||
|---|---|---|---|
| Liabilities secured by mortgage | 2019 | 2018 | |
| Liabilities to credit institution | 125 | 475 | |
| Short term liabilities | 0 | 14 901 | |
| Total | 125 | 15 376 | |
| Zwipe AS & Group | |||
|---|---|---|---|
| Balance sheet value of assets placed as security | 2019 | 2018 | |
| Inventory, Accounts Receivable and IP | 3 479 | 2 946 |
Zwipe has historically been granted 2 loans by Innovation Norway with a total of NOK 2.5 million. The remaining balance on the loan end of year 2019 is NOK 125k. Innovation Norway has the first priority pledge in chattels. The first loan was repaid in 2019. The second loan matures in June 2020.
Note 12 Share capital and shareholder information
| Zwipe AS & Group | |||
|---|---|---|---|
| Share capital | Holding | Nominal value | Book value |
| Ordinary Shares | 15 953 288 | 0,1 | 1 595 329 |
As of 31 December 2019, Zwipe had issued 9 571 973 new subscribed shares, not yet registered. In the consolidated accounts the new equity is reflected as "Unregistered capital increase", with a corresponding receivable. As of 6 January 2020 the shares were registered and settled, and the total number of shares is subsequently 25 525 261.
The company has one class of shares and all shares come with full voting rights.
The share capital is owned by the following shareholders as per 31.12.2019
| Shareholders | Holding | Stake |
|---|---|---|
| Avanza Bank AB | 3 000 264 | 18,81 % Nominee account |
| Skandinaviska Enskilda Banken AB | 1 437 200 | 9,01 % Nominee account |
| Nordnet Bank AB | 1 412 569 | 8,85 % Nominee account |
| Lars Windfeldt (Zwipe board member) | 1 359 195 | 8,52 % |
| Photon Future Ltd | 915 869 | 5,74 % |
| Launch AS (Zwipe founder Kim Humborstad) | 820 298 | 5,14 % |
| Concito AS | 535 610 | 3,36 % |
| Telecom AS | 340 000 | 2,13 % |
| Sundt AS | 295 609 | 1,85 % |
| Advisum AS | 264 276 | 1,66 % |
| Union Bancaire Privee, UBP SA | 258 346 | 1,62 % Nominee account |
| DNB Bank ASA | 251 806 | 1,58 % Nominee account |
| Prog Seed AS | 241 338 | 1,51 % |
| Prinvest AS | 226 501 | 1,42 % |
| Patri Invest & Trading AS | 226 500 | 1,42 % |
| LJM AS | 198 666 | 1,25 % |
| Svenska Handelsbanken AS | 195 421 | 1,22 % Nominee account |
| MP Pensjon PK | 170 000 | 1,07 % |
| Harald Berge | 150 000 | 0,94 % |
| Energetic AS (Zwipe CEO André Løvestam) | 140 000 | 0,88 % |
| Other shares | 3 513 820 | 22,03 % |
Management and board holdings through the above nominee accounts
| Name | Holding | Stake | |
|---|---|---|---|
| Jörgen Lantto* | 320 000 | 2,01 % | |
| Feat Invest AB** | 301 500 | 1,89 % | |
| Johan Biehl*** | 190 000 | 1,19 % |
*Zwipe chairman of the board. Holdings through SEB AB
**Johan Biehl is a board member of Feat Invest. Holdings through DNB Bank and Avanza ***Zwipe board member. Holdings through SEB AB
| Management and board holdings | Holding | Stake |
|---|---|---|
| André Løvestam (CEO) | 140 000 | 0,88 % |
| Lars Windfeldt* | 1 359 195 | 8,52 % |
| Jörgen Lantto (Chair) | 320 000 | 2,01 % |
| Johan Biehl | 190 000 | 1,19 % |
| Dennis Jones | 37 500 | 0,24 % |
| Espen Tøndel | 31 352 | 0,20 % |
*Lars Windfeldt owns shares through various companies and is also represented by family members.
Note 13 Intercompany
There is a Service Agreement between Zwipe AS and Zwipe America Inc in place. Under this agreement, Zwipe AS retains Zwipe America Inc. to provide development services and supply chain services to Zwipe AS. In return for receiving the services, Zwipe AS pays Zwipe America Inc. an amount equal to Zwipe America Inc's total operating costs connected to such services plus a mark-up. At the end of 2019, the intercompany balance was NOK 1 million. At the end of 2018, the intercompany balance was NOK 2.6 million.
Note 14 Share based payments
The company has a share-based option programme covering certain employees in senior positions, members of the board and nomination committee members. Each option gives the holder the right to acquire one share from the company at a strike price defined in the individual share option agreement. All options are conditional that the grantee remains employed. All vested options may be exercised in any period prior to the expiry date. The options vest every 6 months from grant date and may be exercised at vesting. As of 31.12.2019, 25 persons were included in the option programme.
The fair value of the options is set on the grant date and expensed over the vesting period. The fair value of options awarded is estimated using the Black-Scholes option pricing model. NOK 3.3 million have been expensed in 2019.
| Strike price | Options | Weighted Average remaining contractual life Outstanding Instruments |
Weighted Average Strike Price |
Vested options 31.12.2019 Vested Instruments |
Weighted Average Strike Price |
|---|---|---|---|---|---|
| 6,54 | 205 000 | 4,50 | 6,54 | 0 | 0,00 |
| 10,00 | 650 450 | 2,27 | 10,00 | 569 447 | 10,00 |
| 16,20 | 170 000 | 3,50 | 16,20 | 28 333 | 16,20 |
| 25,00 | 360 000 | 2,75 | 25,00 | 172 500 | 25,00 |
| 1 385 450 | 770 280 |
| g | ||
|---|---|---|
| Overview of outstanding options | Options | Average Strike |
| Outstanding opening balance (01.01.2019) | 1 149 500 | 14,08 |
| Granted | 480 000 | 14,00 |
| Exercised | -7 083 | 10,00 |
| Forfeited | -236 967 | 13,64 |
| Expired | 0 - |
|
| Outstanding closing balance (31.12.2019 | 1 385 450 | 14,15 |
| Vested closing balance | 770 280 | 13,59 |
Granted instruments 2019
| Parameters connected to instruments granted in 2019 | ||
|---|---|---|
| Quantity 31.12.2019 | 480 000 | |
| Contractual life* | 4,34 | |
| Strike price* | 14,00 | |
| Share price* | 10,61 | |
| Expected lifetime* | 2,76 | |
| Volatility* | 53,74 % | |
| Interest rate* | 1,30 % | |
| Dividend* | 0,00 % | |
| FV per instrument* | 2,74 | |
| Vesting conditions | Tranches vest semi annually | |
*Weighted average parameters at measurement date of instrument value
The calculations are based on the following assumptions:
Share price on the grant date
The share price used in the model is the last available closing price of Zwipe at grant date.
The strike price per option
For options granted before 2019:
The strike price is set to NOK 25 or NOK 10 depending on the contract.
For options granted from 2019:
The Exercise Price of the share options is equal to the average volume-weighted market price of the shares over the ten last trading days prior to the date of grant, plus 10% for grants made to employees. For grants to board members and nomination committee members the strike is fixed at 25 NOK.
Volatility
As the Company has not been listed on a stock exchange long enough to have a sufficient share price history to calculate the shares' volatility, comparable firms and peer groups have been used to estimate the Company's volatility.
The term of the option
For options granted before 2019:
It was assumed that 50 % of the employees will exercise the options once they are exercisable for options granted in 2018.
For options granted from 2019:
The term of the option is calculated using the shortest period of either 1 year after vesting, or expiry, as estimated lifetime on the options granted in 2019.
Risk-free interest rate
The risk-free interest rate is set equal to the interest rate on government bonds.
Grants during the year 2019 2018 SkatteFunn (recognized as cost reduction) 4 720 4 246 SkatteFunn (capitalized as reduction of acquisition 280 754 Horizon 2020 10 123 0 Total Grants 15 123 5 000
Zwipe AS & Group
In late 2018, Zwipe was awarded a EUR 2.3 million grant from Horizon 2020, the European Union Research and Innovation program. The company received NOK 10.1
SkatteFunn grants for research and development projects are contingent on preapproved project applications and approved completion reports to the Research Council of Norway, as well as auditor's confirmation of costs. The recognised amount in 2019 represents Zwipe's claim based on the cost of the approved project applications.
million in April 19. Of the grant received, NOK 7.1 is recognized in 2019.
For options granted from 2019:
exercisable for options granted in 2018.
Note 14 Share based payments
Strike price Options
The company has a share-based option programme covering certain employees in senior positions, members of the board and nomination committee members. Each option gives the holder the right to acquire one share from the company at a strike price defined in the individual share option agreement. All options are conditional that the grantee remains employed. All vested options may be exercised in any period prior to the expiry date. The options vest every 6 months from grant date and may be exercised at vesting. As of 31.12.2019, 25 persons were included in the option programme.
The fair value of the options is set on the grant date and expensed over the vesting period. The fair value of options awarded is estimated using the Black-Scholes option
Outstanding opening balance (01.01.2019) 1 149 500 14,08 Granted 480 000 14,00 Exercised -7 083 10,00 Forfeited -236 967 13,64 Expired 0 - Outstanding closing balance (31.12.2019 1 385 450 14,15 Vested closing balance 770 280 13,59
Parameters connected to instruments granted in 2019
Overview of outstanding options Options
pricing model. NOK 3.3 million have been expensed in 2019.
*Weighted average parameters at measurement date of instrument value
The strike price is set to NOK 25 or NOK 10 depending on the contract.
peer groups have been used to estimate the Company's volatility.
The Exercise Price of the share options is equal to the average volume-weighted market price of the shares over the ten last trading days prior to the date of grant, plus 10% for grants made to employees. For grants to board members and nomination
The share price used in the model is the last available closing price of Zwipe at grant
As the Company has not been listed on a stock exchange long enough to have a sufficient share price history to calculate the shares' volatility, comparable firms and
The calculations are based on the following assumptions:
Granted instruments 2019
Share price on the grant date
The strike price per option For options granted before 2019:
Volatility
date.
The term of the option For options granted before 2019:
For options granted from 2019:
committee members the strike is fixed at 25 NOK.
Quantity 31.12.2019 Contractual life* Strike price* Share price* Expected lifetime* Volatility* Interest rate* Dividend* FV per instrument* Vesting conditions
Weighted Average remaining contractual life
Outstanding Instruments
g Average Strike
Tranches vest semi annually
53,74 % 1,30 % 0,00 %
2,74
2,76
10,61
480 000 4,34 14,00
Weighted Average Strike Price
6,54 205 000 4,50 6,54 0 0,00 10,00 650 450 2,27 10,00 569 447 10,00 16,20 170 000 3,50 16,20 28 333 16,20 25,00 360 000 2,75 25,00 172 500 25,00 1 385 450 770 280
Vested options 31.12.2019
Vested Instruments
Weighted Average Strike Price
Note 15 Grants
Risk-free interest rate
| Zwipe AS & Group | ||
|---|---|---|
| Grants during the year | 2019 | 2018 |
| SkatteFunn (recognized as cost reduction) | 4 720 | 4 246 |
| SkatteFunn (capitalized as reduction of acquisition | 280 | 754 |
| Horizon 2020 | 10 123 | 0 |
| Total Grants | 15 123 | 5 000 |
The risk-free interest rate is set equal to the interest rate on government bonds.
It was assumed that 50 % of the employees will exercise the options once they are
The term of the option is calculated using the shortest period of either 1 year after vesting, or expiry, as estimated lifetime on the options granted in 2019.
In late 2018, Zwipe was awarded a EUR 2.3 million grant from Horizon 2020, the European Union Research and Innovation program. The company received NOK 10.1 million in April 19. Of the grant received, NOK 7.1 is recognized in 2019.
SkatteFunn grants for research and development projects are contingent on preapproved project applications and approved completion reports to the Research Council of Norway, as well as auditor's confirmation of costs. The recognised amount in 2019 represents Zwipe's claim based on the cost of the approved project applications.
Note 16 R&D Expenses
In 2019, R&D spendings amount to a total of NOK 38.8 million, whereof net NOK 3.1 million are capitalized. R&D expenses include purchased materials and components as well as external project costs for design, manufacturing (production trials and pilot production runs), testing and other work conducted by various companies and institutions. The major part of the R&D expenses in 2019 is related to development of the biometric inlay and continued optimization of Zwipe's technology platform.
Note 17 Other short term liabilities
Other short term liabilities are accruals for salaries in notice period, earned holiday pay, short-term loan, received grant not yet recognized and accruals for goods and services received not yet invoiced.
Note 18 Going Concern
The Board of Directors confirms that the going concern assumption is present, and that the financial statements for 2019 is prepared under this assumption. Costs are expected to continue to exceed revenue in several more quarters, however, the board considers that the company has access to capital. The company's financial position and financing is in accordance to the Board's expectations and the necessary activities for future financing of the company's growth strategy are progressing according to plan.
Note 19 Subsequent Events
A capital increase of NOK 67 million was completed in December 2019. The capital increase was registered in January 2020 and is booked as an unregistered capital increase in the financial statement of 2019. At the end of January 2020, the company listed on Nasdaq First Growth Market in Stockholm, Sweden. The company has appointed a new CFO, Lars Kristian Solheim, who will join the company 1st of March 2020.
AUDIT REPORT
40 Zwipe 2019
Zwipe Annual Report 2019
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GLOSSARY
Zwipe Annual Report 2019
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Authentication
Control process for a particular entity; in conjunction with logging on, for example. The word is synonymous with verification
Biometric algorithm
Extraction and matching algorithms that when combined enable a biometric system to recognize an individual by his or her anatomical/behavioural traits
Biometric payment card
Payment card with a fully embedded fingerprint sensor and on-card extraction and matching system enabling fingerprint authentication as an alternative to PIN or signature
Dual Interface payment cards
Payment card with an embedded chip and antenna enabling both contact transactions (inserted or swiped at payment terminals) and contactless transactions (waved, "tapped" at payment terminals)
Enrolment solution
Solution allowing the initial fingerprint data to be registered on the payment card
Payment Card
Plastic payment cards which are issued by issuers/ banks to customers enabling the cardholder to access funds and make payments
Zwipe core technology
Differentiating technologies specifically fit for constrained and ultra-low power environments. Zwipe core technology comprise hardware and firmware for biometric authentication, as well as surrounding components, application competence and services
The parent company Zwipe AS is a private limited liability company incorporated and existing under the laws of Norway. Zwipe AS has one wholly owned subsidiary, Zwipe America Inc., a corporation incorporated under the laws of the State of Delaware in the United States. The company has no other ownership positions.
Contact Information
Zwipe AS Rådhusgata 23 0151 Oslo, Norge
www.zwipe.com
Zwipe's Certified Adviser is FNCA AB, [email protected], +46 8 528 00399