Zwipe AS — Interim / Quarterly Report 2020

Feb 25, 2021

Second Half-year

2020

Summary Second Half-year 2020

Financial development

• ⚫ Revenues of MNOK 1.0 (MNOK 1.2).
• ⚫ Operating expenditures reduced to MNOK 31.3 (MNOK 60.2). In constant currency, this represents a 49% reduction. The reduction is due to cost of MNOK 19 in H2 2019 related to the jointly funded development collaboration with Idemia, as well as savings as a result of the streamlining program announced in November 2019.
• ⚫ EBITDA improved to MNOK -29.1 (MNOK -56.6) mainly due to the implementation of the streamlining program.
• ⚫ Earnings per share of NOK -0.93 (NOK -3.69).
• ⚫ Cash flow from operations for the second half-year of MNOK -20.1 (MNOK -51).

Significant Events

• ⚫ During the second half of 2020, Zwipe expanded its growing network of industry partnerships with Publicenter, areeba, Inkript and VeriTech
• ⚫ Zwipe also partnered with Liveo Research, Smart Technology Services, Wisecard and CardMatix, expanding our ecosystem to enable cost-efficient mass-volume manufacturing of biometric payment cards based on Zwipe Pay ONE.
• ⚫ Zwipe and TietoEVRY joined forces with a landmark agreement to deliver biometric payment solutions on Zwipe Pay ONE solution to banks in the Nordic and Baltic regions. The agreement significantly increases our market reach as TietoEVRY is the leading provider of payment cards to issuers in these regions.
• ⚫ Zwipe successfully completed a private placement, followed by a subsequent repair offering, issuing 7,381,315 new shares in total, and raising approximately NOK 111 million in gross proceeds in total.
• ⚫ Zwipe placed an order for 300,000 units of Idex's next generation fingerprint sensors to support the rollout of Zwipe Pay ONE.
• ⚫ Zwipe conducted several cardholder insight studies including some with our partners. Insights from the Nordics, UK and the United States show strong consumer interest for safer and more secure payments.
• ⚫ In partnership with TietoEVRY, Zwipe secured the first pilot program on Zwipe Pay ONE with OP Financial Group, the largest Financial Services Group in Finland.

⚫ Zwipe's next-generation biometric card chip, in which Zwipe has coinvested with Idemia, obtained the ICCN security certification from EMVCo.

Significant Events after the period

• ⚫ Swedish fintech Vopy chose Zwipe's biometric payment platform, Zwipe Pay ONE, for its biometric payment cards. Vopy's partner network consists of telecom providers and financial institutions that reach millions of consumers.
• ⚫ Announced agreements with 4 new smart card manufacturers.

Financials Second Half-year 2020

The presented figures are a sub-set of the full-year 2020 audited financial accounts of Zwipe, prepared in accordance with Norwegian Generally Accepted Accounting Principles (NGAAP). All figures are presented on a consolidated basis for the Group. The half-year report has not been reviewed by Zwipe's auditors.

Revenues

Revenues for Zwipe in the second half of 2020 was MNOK 0.96. This is down from MNOK 1.2 in the previous year. 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 the 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.

After successfully executing on our streamlining program in November 2019, operating expenses were reduced by 48% (49% decrease in constant currency terms) to MNOK 31.3 (60.2).

Total payroll expenses decreased in H2 2020 to MNOK 12.1 (MNOK 13.3). The number of employees decreased in the last month of 2019, as Zwipe implemented a streamlining program. During the last quarter of 2020, Zwipe has increased the staff in preparation for piloting and deployment of our card payment solutions and services.

Cost of Goods Sold (COGS) in H2 2020 were MNOK 4.6 (MNOK 4.9) which is disproportionately high relative to the sales revenue. This is partly because the COGS include elements of a semi-fixed nature (manufacturing fee, logistics costs). Consequently, the contribution margin is not representative of volume manufacturing. Following the acceleration of Zwipe's technology roadmap, inventory related to bypassed versions of the payment inlay were written off by MNOK 2.9 in H2 2020. The same reason caused an impairment-driven write-down of fixed assets of MNOK 0.6 in the same period.

Other Operating Expenses in H2 2020 were MNOK 13.4 (MNOK 39.5), 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.

Results

EBITDA for H2 2020 ended at MNOK -29.1 (MNOK -56.6). The improved EBITDA largely reflects the streamlining program implemented in November 2019. Zwipe has repaid the majority of its loan commitments. At the end of 2020, Zwipe's loan commitment consists of a bank loan granted to Zwipe America, Inc. of \$248 000 through the US Paycheck Protection Program (PPP), at 1% interest rate. Total financial costs in H2 2020 are correspondingly reduced by MNOK 0.2 from H2 2019. Total result for the second halfyear was MNOK -30.4 (MNOK -58.9).

Financial position

In July, Zwipe received an additional MNOK 9.8 out of a total MNOK 23 grant awarded through EU's Horizon 2020 program. In October, Zwipe received a MNOK 5 grant from the Norwegian government in Q4 2020 as a result of the approval of Zwipe's grant application ("Skattefunn").

During 2020 Zwipe raised net MNOK 103 through a private placement in September and a subsequent repair offering in October, further strengthening the balance sheet. At the end of 2020, bank deposits and cash were MNOK 125.3 (23.2).

Total equity was MNOK 122.6 (MNOK 80.4), corresponding to an equity ratio of 89% (73%). Total liabilities were MNOK 14.7, whereof MNOK 0.9 are long term liabilities

related to the loan of \$248 000 that was granted to Zwipe America, Inc. in Q2 2020 through the US Paycheck Protection Program (PPP). The loan is at 1% interest rate, payable in two years. Zwipe may be eligible for partial or full loan forgiveness given fulfilment of a set of requirements. If the loan is not forgiven, downpayment starts in August 2021. The loan matures in April 2022. The short-term part of the loan is classified as other short-term liabilities.

Subsequent events

Zwipe America, Inc. was granted a second bank loan of \$248 285 in February 2021 through the second draw of the US Paycheck Protection Program (PPP). The loan is at 1% interest rate, payable in five years. Zwipe may be eligible for partial or full loan forgiveness given fulfilment of a set of requirements.

A share capital increase of 21 832 new shares in Zwipe AS was registered 18 February 2021. The new share capital is NOK 3 292 840.80, and the new number of shares and votes is 32 928 408.

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 2020.

Upcoming reporting days

Annual General Meeting, May 19, 2021 Interim Report January-June 2021, August 26 2021

Income Statement Second Half-year

	ELLAS SLAN
	H2 2020	2020	H2 2019	2019
Operating Income
Sales revenue	794	1 655	1 169	1 517
Other operating income	164	182	য	4
Operating income	957	1 837	1 174	1 522
Operating expenses
COGS	4 597	4 808	4 892	5 882
Payroll expenses	12 072	18 973	13 340	26 591
Depreciation, amortization & impairment	1 241	2 008	2 425	3 304
Other operating expenses	13 436	37 947	39 549	60 999
Operating expenses	31 346	63 736	60 206	96 776
Operating profit/loss	-30 389	-61 899	-59 033	-95 255
Financial income and expenses
Other interest income	122	148	287	295
Other financial income	-546	441	1 264	1 719
Other interest expenses	0	3	/	246
Other financial expenses	-463	569	1 324	1 458
Net financial income and expenses	38	17	221	310
Results before tax	-30 351	-61 882	-58 812	-94 944
Tax expense	132	191	14	210
Results for the year	-30 482	-62 073	-58 826	-95 154
Profit(+)/Loss(-) for the year attributable from:
Share premium reserve	-30 482	-62 073	-58 825	-95 154
Uncovered loss	0	0	0	0
TOTAL	-30 482	-62 073	-58 825	-95 154
Number of shares end of period	32 906 576	32 906 576	15 953 288	15 953 288
Average number of shares in the period before dilution	29 475 739	27 367 556	15 952 265	15 514 552
Average number of shares in the period after dilution	30 321 486	28 186 644	16 558 891	16 045 042
Profit pr. share before dilution	1.03 -	2.27	3.69	6.13
Profit pr. share after dilution	1.01 -	2.20	3.55	5.93

End of Year Balance Sheet – Assets

(Amounts in 1000 NOK)	Zwipe Group
	2020	2019
Assets
Long-term Assets
Intangible Assets
Research and Development Total Intangible Assets	7 359 7 359	7 147 7 147
Fixed Assets
Equipment, fixtures and fittings	2 568	2 536
Total Fixed Assets	2 568	2 536
Financial Assets
Investment in subsidiaries	0	O
Other financial receivables	436	439
Total Financial Assets	436	439
Total Long-term Assets	10 362	10 122
Current Assets
Inventories
Inventories	313	3 104
Total Inventories	313	3 104
Receivables
Accounts receivables	72	375
Other receivables	1 361	74 003
Total debtors	1 433	74 378
Cash
Bank deposits, cash	125 255	23 236
Total cash	125 255	23 236
Total Current Assets	127 001	100 718
Total Assets	137 363	110 840

End of Year Balance Sheet – Equity and Liabilities

(Amounts in 1000 NOK)	Zwipe Group
Equity and liabilities	2020	2019
Equity
Paid-up Equity Share capital Share premium reserve Uncovered losses Total restricted equity	3 291 119 309 0 122 599	1 595 78 830 0 80 426
Total equity	122 599	80 426
Liabilities
Long-term liabilities Other long term liabilities Total of other long term liabilities	942 942	0 0
Short-term Liabilities Accounts Payables	3 119	12 398
Public duties payable Tax payable Other short term liabilities	2 464 8 239	702 0 17 315
Total short-term liabilities	13 822	30 415
Total liabilities	14 764	30 415
Total equity and liabilities	137 363	110 840

Full Year Cash Flow Statement

(Amounts in 1000 NOK)	Zwipe Group
	2020	2019
Net Income / (Loss) before tax	-62 073	-95 154
Taxes paid	0	ਰੇਪੈ
(+) Option cost no cash effect	1 888	3 881
(+) Depreciation, amortisation & impairment	2 008	3 304
(-) Change in Inventory	2 791	-797
(-) Change in Accounts Receivable	255	1 915
(-) Change in Other Current Assets	4 967	-64
(+) Change in Accounts Payables	-7 549	2 864
(+) Change in Current Liabilities	-2 118	3 595
Net Cash use in Operating Activities	-59 831	-80 361
Cash Flows from Investing Activities
Intangible Assets and Capital Expenditures	-2 259	-4 636
Net Cash Provided by (used in) Investing Activities	-2 259	-4 636
Operational Cash Flow	-62 090	-84 997
Cash Flows from Financing Activities
Equity Issue	177 724	120 071
Unregistered capital increase	0	67 004
Financial receivable from capital increase	O	-67 004
Transaction cost not recognized over P&L	-16 313	-16 763
PPP Loan	2 334	0
Convertible loan	0	9370
Repayment of loan	730	-15 251
Net Cash Provided by Financing Activities	164 475	97 426
Effect of Foreign Currency Translation	-365	10
Net Increase / (Decrease) in Cash and Cash Equivalents	102 020	12 439
Cash and Cash Equivalents at Beginning of Period	23 236	10 797
Cash and Cash Equivalents at End of Period	125 255	23 236
Net cash flow	102 020	12 439

Statement of Changes in Equity

	Share capital	Share premium	Uncovered	Total equity
		reserve	055
Janary 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
ssue 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		14		14
January 1st 2020	1 595	78 830	0	80 426
Proceeds from issue of shares	1 695	109 024		110 720
ssue costs		-8 199		-8 199
Uncovered loss				0
Annual net profit/loss		-62 073		-62 073
Share based compensation		1 888		1 888
Other changes in equity				0
Currency effect		-163		-163
December 31st 2020	3 291	119 309	0	122 599

Zwipe AS

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, Norway

ir@zwipe.com

www.zwipe.com

Zwipe's Certified Adviser is FNCA AB, info@fnca.se, +46 8 528 00399