LOWER SALES DUE TO FEWER CUSTOMER PROJECTS

Interim report July-September 2017Published November 14, 2017

Precise BioMatch™ Embedded was integrated in the world’s first contactless biometric payment card from AirPlus

Enables convenient and secure verification of transactions for travelers

INTEGRATED IN THE WORLD´S FIRST BIOMETRIC CONTACTLESS CARD

NEW LICENSE AGREEMENTS

License agreement with O-Film, one of the major module houses in the telecommunications industry

License agreement with Asian supplier of display solutions

30 license agreements for distribution of our fingerprint software - Global reach, covering both the mobile and embedded market

License agreements

0

5

10

15

20

25

30

35

Q1 15

Q2 15

Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Q3 17

MAIN EVENTS AFTER THE THIRD QUARTER

Precise BioMatch Embedded was integrated in a biometric card reference design from CardLab -part of EU Commission’s Horizon 2020 program

Announced a powerful and efficient upgrade of Precise BioMatch Embedded – supporting even smaller sensors and constrained MCU´s

In accordance with IFRS 5, from June 2017 the business area Mobile Smart Card Solutions (MSCS) is shown as a business held for sale

MSCS is reported as a discontinued operation

Net profit generated from MSCS is shown as ”result from discontinued operation” and details are disclosed in the note

Previously reported figures have been converted to improve comparability

Reported revenues and operating profit, EBITDA, only reflects the remaining operation, Fingerprint Technology

REPORTING IMPACT FROM DIVESTMENT OF MOBILE SMART CARD SOLUTIONS

NET SALES & GROSS MARGIN

(MSEK)

REMAINING OPERATION

Gross marginNet salesNet sales

0

5

10

15

20

25

Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1'17 Q2'17 Q3'170%

20%

40%

60%

80%

100%Net sales of 10.1 MSEK (23.0)

Accrual of 3.3 MSEK related to correction of earlier reported royalty

Gross margin 90.5% (98.2) impacted by

Accrual for royaltyAmortization of acquired intangible assets 0.2 MSEK

-8

-6

-4

-2

0

2

4

6

8

10

-8

-6

-4

-2

0

2

4

6

8

10

OPERATING PROFIT

Q4’15 Q1’16 Q2’16 Q3’16 Q4’16 Q2’17

EBITDAOperating profitOperating profit

(MSEK) (MSEK)

REMAINING OPERATION

Q1’17 Q3’17

Operating profit of -6.5 MSEK (8.6) due to

Low sales in combination with higher operational costs

Workforce of 46 (36) employees & consultants

EBITDA of -5.6 MSEK (9.1)

OPERATING CASH FLOW

(MSEK)

Cash in Bank Cash flow Cash flow

TOTAL OPERATIONS

-5

0

5

10

15

20

Q4’15 Q1’16 Q2’16 Q3’16 Q4’16 Q1’17 Q3’17

Q2’17

(MSEK)

0

40

80

120

160Operating cash flow totaled 3.9 MSEK (8.4)

Operating cash flow Q1-Q3 totaled 19.7 MSEK (25.9)

Available cash 116.7 MSEK (75.0)

Payment of 31.4 MSEK for the acquisition of NexID Biometrics was made in Q1 2017

CHALLENGING MARKET IN CAPACITIVE SENSOR SPACE

Weak sales development due to strong competition in the capacitive sensor market

Market dominated by a few vendors that were early to enter the market

OEM requirements have made it hard for us and our customers to break current market dominance

Competing for large projects at some of the leading OEMs

EDGE-TO-EDGE DISPLAYS OPEN UP FOR NEW SENSOR TECHNOLOGIES

Smartphones with edge-to-edge displays a priority for smartphone manufacturers

Increased interest in ultrasound and optical sensors, which enable fingerprint sensing in and under-display

Ultrasonic and optical sensors will open new opportunities for us and our customers

We are engaged in several projects - Initial product launches expected in the first half of 2018

FURTHER OPPORTUNITIES IN MOBILE BIOMETRICS

The mobile device will include all our important documents - Increased risk for fraud attacks

Precise BioLive enhances security by protecting the fingerprint sensor against fake fingers

Evaluating how to further develop our offering through complementary biometric modalities and solutions

Biometric solutions are the safest way to protect devices, users and transactions against fraud

GROWING INTEREST IN BIOMETRIC SMART CARDS

Consumer acceptance of fingerprint technology will drive integration into new product areas

Fingerprint technology is the natural choice for authentication in a wide range of products

Successful trials generate commercial interest with payment providers to deploy biometric payment cards

We are involved in several biometric card projects and have discussions with many players in the card industry

R&D investments in existing and new sensor technologies, new product areas and local customer support

Precise BioMatch Embedded upgrade meets industry performance requirements and provides cost effectiveness

Significant biometric performance improvements of Precise BioMatch Mobile

Strong cost control and balanced investments that allow continued innovation

CONTINUED INNOVATION OF BIOMETRIC SOLUTIONS

Positive outlook despite revenue decline during the quarter

New sensor technologies open up new possibilities already next year

Interest in biometric cards is becoming more concrete and we are well positioned in this area

Biometrics will continue to replace passwords. We intend to drive and be part of this development in the future

Full-year revenues for the remaining operation are expected to be in the range of SEK 60-70 Million

Operating loss for 2017 as a consequence of lower sales

SUMMARY & OUTLOOK

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