quarterly report q4 2016 2mb.cision.com/main/987/2201019/635502.pdf · quarterly report q4 2016 2...

Quarterly Report Q4 2016 2

About Hiddn Solutions ASA Hiddn Solutions ASA (the “Company”) is a public limited company situated in Oslo, Norway, listed on

the Oslo Stock Exchange under the ticker HIDDN. The Company’s operating activities are reported

through the subsidiaries Hiddn Security AS and Hiddn Solutions AS (together named “Hiddn” or the

“Group”).

Hiddn is supplying impenetrable proprietary hardware-based authentication and encryption products

to military, governmental, institutional, and corporate clients with further potential to scale into the

retail market by building on and benefiting from the experience and competence of the management

and employees in Hiddn.

At the end of the fourth quarter, Hiddn had 15 individuals in full time occupation.

Highlights from Q4 and subsequent events

Reversed de-listing and subsequent expansion into the hardware encryption market

On 14 November 2016, an extraordinary general meeting ("EGM") resolved to reverse the

liquidation and de-listing of the Company. On 25 November 2016, the Company entered an

agreement to acquire Hiddn Security AS by way of issuing consideration shares in the

Company. On 16 December 2016, another EGM approved the acquisition and on 29 December

2016, the acquisition of 90.5% of Hiddn Security AS was completed.

New Board of Directors, corporate management and additions to the group structure

Following the reversal of the de-listing, Hiddn Solutions ASA decided to recruit Cecilie Grue,

Ola Røthe and Hege Anfindsen to its Board of Directors to be better suited to handle the

acquisition and related matters. The Board was further strengthened with the recruitment of

its current Chairman, Øystein Tvenge, in January 2017. Hiddn also entered a management

agreement with SLM Partners AS for the services as inter alia Chief Executive Officer to ensure

sufficient competency in strategic management and operation of exchange listed companies.

As a part of the continuing process to commercialise Hiddn's product suite, the Company

established a new subsidiary, Hiddn Solutions AS, which will carry out activities relating to

marketing, sales and distribution of products and thereby seek to increase its market presence

through a significant ramp-up of sales and marketing activities.

Establishment of an advisory board with unique competency

The Company has established an advisory board consisting of individuals with broad

competency within digital espionage, economic crime, white collar crime as well as industrial

scaling and international commercialization of Norwegian technology. The advisory board will

serve as an advisory function to the Chief Executive Officer and the Board of Directors in

connection with the Group's business development, however, without any formal corporate

function in the Company per se.


Successful completion of rights issue

On 13 January 2017, an EGM resolved to carry out a rights issue of up to 20,761,245 shares.

The subscription period commenced upon approval of the Company's Prospectus by the

Norwegian Financial Authorities on 27 January 2017. The rights issue closed on 10 February

2017, oversubscribed by approximately 50%. Due to the high demand and based on an

authorisation granted by the EGM, the board decided to issue additional offer shares. In total

24,116,564 offer shares were issued yielding gross proceeds of NOK 69.7 million, providing the

Company with sufficient funds to follow an expansive business development plan focused on

growing efforts within sales and marketing as well as R&D.

Renewed certification of coCrypt from the Norwegian National Security Authority

Hiddn received renewed approval of the USB flash stick (coCrypt) at level Restricted and

continued to deliver the USB flash stick to the Norwegian military. The official approval

confirms that classified information can be stored, marked, and dealt with according to rules

and regulations when using Hiddn’s coCrypt, and that the coCrypt can be dealt with as

“unsecured” when powered off.

Certification of SafeDisk at level Confidential by the Dutch National Security Authority (NBV)

Hiddn has made significant progress in certification and approval processes with leading

national approval authorities in Europe and the US for its hardware products. In November

2016, a major milestone was met when Hiddn's SafeDisk was approved by the NBV allowing

relevant public organisations in the Netherlands to utilise the product at level Confidential.

Shortly after having received the Dutch approval, Hiddn completed the first delivery to the

Dutch Government.

Launch of new product line – encrypted USB Drive

Based on market feedback and enquiries from existing and prospective customers, Hiddn is in

the process of prototyping a new USB-enabled external hard drive with built-in hardware

encryption and the ability to operate with an independent operating system, allowing the user

to operate securely through any PC. The engineering design is based on Hiddn's existing

encryption technology. The USB drive will provide large storage capacities and fast transfer

rates coupled with a high degree of data security all in a small form factor cabinet. The

Company expects to complete delivery of the initial units during the second half of 2017.


Financial Review

Key Financial Figures

Consolidated financial statements as at 31 December 2016 (unaudited)

The Group was established on 29 December 2016, when Hiddn Security AS arranged to be acquired by

Hiddn Solutions ASA (former Agasti Holding ASA) in a reverse take-over. At the time of the merger,

Hiddn Solutions ASA was a non-operating company without substantial net liabilities. Prior to the

merger, Hiddn Security AS was a privately held company while Hiddn Solutions ASA remained listed on

the Oslo Stock Exchange after divesting its operations and net assets. The purpose of the transaction

was for Hiddn Security AS to obtain a listing indirectly through the merger with Hiddn Solutions ASA.

Profit and loss statement

Hiddn recorded operating revenues of NOK 1.5 million in the fourth quarter of 2016 compared to NOK

1.0 million in the corresponding quarter of 2015. For the full year 2016, operating revenue amounted

to NOK 3.8 million compared to NOK 3.2 million in 2015.

In fourth quarter 2016 Hiddn recorded other income related to Skattefunn (tax credits) of NOK 1.9

million compared to NOK 1.7 million during the same period in 2015. For the full year 2016, other

income amounted to NOK 2.7 million compared to NOK 1.7 million in 2015. Included in the figures for

2016, was a subsidy effect of NOK 0.5 million related to a loan from Innovation Norway and NOK 0.3

million as a government grant from Innovation Norway related to Hiddn’s research and development.

Payroll expenses were NOK 2.7 million in the fourth quarter 2016 compared to NOK 1.6 million during

the same period in 2015, and NOK 9.2 million for the full year 2016 compared to NOK 5.2 million in

2015. The increase was primarily attributable to hiring new employees within R&D and sales.

Other operating expenses for the fourth quarter 2016 amounted to NOK 26.0 million compared to NOK

3.8 million during the same period in 2015, and NOK 33.5 million during the full year 2016 compared

to NOK 15.6 million in 2015. Included in the figures for 2016 were merger and acquisition costs related

to the reversed acquisition of NOK 6.4 million in share-based payment and 12.4 in listing cost.

Depreciation and amortisation expenses amounted to NOK 0.1 million during fourth quarter of 2016

compared to NOK 0.04 million in 2015 and NOK 0.15 million for the full year 2016, the same amount

as in 2015.

Net financial expenses were NOK 1.2 million in fourth quarter of 2016 compared to NOK 0.1 million

during same period in 2015 and NOK 2.0 million for the full year 2016 compared to NOK 0.3 million in

(Amounts in NOK thousands, expect EPS) Note 2016 2015 2016 2015

Revenue - IFRS 1 513 994 3 801 3 244

Operating loss -IFRS (25 671) (3 433) (39 948) (18 195)

Adjusted operating loss (see page 16 for reconciliation) (6 806) (3 433) (21 083) (18 195)

Basic and diluted Earnings per share - IFRS (0,80) (0,11) (1,26) (0,63)

Cash balance 3 211 1 885

Total assets 9 927 5 689

Total equity (25 325) (86)

Q4 YTD


2015. The increase is primarily related to raising new financing through loans from DNB Norge ASA,

shareholder loans and loans from Innovation Norway.

Net loss in the fourth quarter of 2016 was NOK 26.9 million compared to a loss of NOK 3.5 million in

the corresponding quarter of 2015 and NOK 42.0 million for the full year 2016 compared to NOK 18.5

million in 2015.

Balance sheet

Cash and cash equivalents amounted to NOK 3.2 million as per 31 December 2016 compared to NOK

1.9 million as per 31 December 2015.

As per 31 December 2016, the total assets were NOK 9.9 million compared to NOK 5.7 million at the

end of 2015.

Total equity was negative and amounted to NOK 25.3 million at the end of 2016 compared to minus

NOK 0.1 million by the end of 2015.

The negative equity as of 31 December 2016, has been addressed by a rights issue completed in

February 2017 resulting in gross proceeds of NOK 69.7 million.

Business Outlook Hiddn has recently changed its line of business from financial asset management to development,

manufacturing and selling of hardware based encryption products. The underlying operations of its

new business has completed a full overhaul of its core technology, developed products for which there

is a confirmed market place and gained approval from customers with highly demanding certification

processes. Hence this is an opportune timing for the company to embark on a full commercial scaling

as well as allowing the company to take advantage of the current technology and cybersecurity trend

in the marketplace where the complex cybersecurity situation is pushing companies towards

encrypted data exchange.

The focus going forward is to capitalise on the significant time and money invested to-date by further

penetrating the governmental and military segments with its current product series, expand its

customer base by targeting institutions and large corporates with its current product series based on

the Proof of Concept (“PoC”) developed through military and governmental clients, and to further

develop and expand its product series for the purpose of targeting the more volume driven mass-

markets as well as to complement its product offering to military and governmental clients.

Oslo, 27 February 2017

Board of Directors

Hiddn Solutions ASA


Financial Statements

Consolidated statement of profit or loss (unaudited)

Consolidated statement of comprehensive income (unaudited)

2016 2015 2016 2015

(Amounts in NOK thousands) Note Unaudited Unaudited Unaudited Audited

Revenues 3 1 513 994 3 801 3 244

Other income 3 1 899 1 682 2 679 1 682

Total revenue and other income 3 412 2 676 6 480 4 926

Cost of materials and services (314) (635) (3 572) (2 217)

Payroll expenses 4 (2 660) (1 637) (9 231) (5 178)

Depreciation & amortization 5 (114) (37) (144) (145)

Other operating expenses 2,4,8 (25 995) (3 800) (33 481) (15 581)

Operating loss (25 671) (3 433) (39 948) (18 195)

Interest income 2 15 9 15

Other financial income 45 32 65 37

Interest expense 6,7 (409) (112) (1 195) (209)

Other financial expenses (887) (46) (912) (125)

Net financial items (1 249) (111) (2 033) (282)

Net profit/(loss) for the period (26 920) (3 544) (41 981) (18 477)

Basic and diluted earnings per share (0,80) (0,11) (1,26) (0,63)

Weighted-average number of shares 33 594 561 31 354 790 33 411 457 29 360 993

Q4 YTD

2016 2015 2016 2015

(Amounts in NOK thousands) Note Unaudited Unaudited Unaudited Audited

Net profit/(loss) for the period (26 920) (3 544) (41 981) (18 477)

Other comprehensive income:

Items that may be reclassified

subsequently through profit or loss: - - - -

Items that will not be reclassified

subsequently to profit or loss: - - - -

Other comprehensive income

directly against equity - - - -

Total comprehensive income for the

period (26 920) (3 544) (41 981) (18 477)

Q4 YTD


Consolidated statement of financial position (unaudited)

December 2016 December 2015

(Amounts in NOK thousands) Notes Unaudited Audited

ASSETS

Non-current assets

Property, plant, and equipment 5 141 53

Total non-current assets 141 53

Current assets

Inventory 1 465 1 234

Accounts receivable 1 008 252

Other receivables 3,6 4 102 2 265

Cash and short-term deposits 3 211 1 885

Total current assets 9 786 5 636

TOTAL ASSETS 9 927 5 689

EQUITY AND LIABILITIES

Equity

Share capital 8 12 162 11 342

Additional paid-in capital 8 81 820 66 116

Other paid-in-capital 8 12 904 12 780

Accumulated losses (130 183) (90 324)

Non-controlling interest 2,10 (2 028) -

Total equity (25 325) (86)

Non-current liabilities

Convertible debt 7,8 1 286 -

Total non-current liabilities 1 286 -

Current liabilities

Current portion of long-term debt 7,8 8 030 1 859

Short-term loans 7 11 095

Trade payables 8 053 1 849

Social security payable, etc. 844 322

Other short-term debt 5 944 1 745

Total current liabilities 33 966 5 775

Total liabilities 35 252 5 775

TOTAL EQUITY AND LIABILITIES 9 927 5 689


Consolidated statement of changes in equity (unaudited):

(Amounts in NOK thousands) Share capital Share premium

Other-paid-in

capital

Accumulated

losses

Non-controlling

interest

Total equity

controlling

interest

Equity 1 January 2015 8 774 46 611 12 750 (71 847) (3 712)

Total comprehensive income

for the period - - - (18 477) (18 477)

Share based payment - - 30 - 30

Share issue 2 568 19 655 - - 22 223 Transaction costs (150) - - (150)

Equity 31 December 2015 11 342 66 116 12 780 (90 324) (86)

Equity 1 January 2016 11 342 66 116 12 780 (90 324) - (86)

Total comprehensive income - - - (41 981) - (41 981)

Share-based payment - - 124 - - 124

Issue of warrants - 1 684 - - 1 684

Repurchase of warrants - - (1 684) 94 - (1 590)

Issue of shares 820 7 196 - - - 8 016

Fair value of reverse

acquisition - 8 508 - - - 8 508

Non-controlling interst - - - 2 028 (2 028) -

Equity 31 December 2016 12 162 81 820 12 904 (130 183) (2 028) (25 325)


Consolidated cash flow statements (unaudited)

December 2016 December 2015

(Amounts in NOK thousands) Note Unaudited Audited

Cash flow from operating activities

Loss before income tax (41 981) (18 477)

Depreciation 5 144 145

Non-cash amortization of interest/modification of debt 6,7 1 420 -

Other income 3 (480) -

Share-based expenses 4 6 549 30

Listing cost 2,4 12 440

Changes in assets and liabilities:

Inventory (231) (1 029)

Accounts receivable (756) (245)

Other receivables (1 201) (1 993)

Trade payables 3 089 740

Social security payable, etc. (19) 79

Other short-term debt 1 878 (759)

Net cash used in operating activites (19 148) (21 509)

Cash flow from investing activities

Purchases of property, plant & equipment 5 (231) -

Cash acquired in merger 2 1 642

Net cash used in investing activities 1 411 -

Cash flow from financing activities

Share issuance - 22 223

Transaction cost related to share issue - (150)

Proceeds fom Government loan 7 7 960 -

Proceeds from short-term loans 6,7 10 876 -

Proceeds from issuing convertible debt 7,8 1 727 -

Proceeds from loans from shareholders 1 860 -

Repayment of loans from shareholders (1 860)

Repayment of loans 7 (1 500) -

Net cash from financing activities 19 063 22 073

Net change in cash and cash equivalents 1 326 564

Cash, cash equivalents and overdraft at beginning of period 1 885 1 321

Cash, cash equivalents and overdraft-end of period 3 211 1 885

Non-cash transactions:

Conversion of debt to equity -

Net cash:

Cash and cash equivalents 3 211 1 885

Overdraft - -

Net cash 3 211 1 885


Notes to financial statements

NOTE 1 Corporate information & accounting policies

Corporate information

Hiddn Solutions ASA and its subsidiaries (the Group) develops, manufactures, and sells electronic

encryption components and systems, including software, for computers and portable communication

units. The customers are mainly public authorities, such as military, government entities and other

public agencies that handle sensitive information, as well as institutions and large corporations.

Hiddn Solutions ASA, the parent company, is a private limited company incorporated in Norway. The

Company’s offices are located in Cort Adelers gate 17, 0254 Oslo. The Board of Directors approved the

report on 27 February 2017.

Basis of preparation

These condensed consolidated interim financial statements have been prepared based on the

principles of International Financial Reporting Standard (IFRS) IAS 34 Interim Financial Reporting as

approved by the EU. They do not include all of the information required for full annual financial

statements, and should be read in conjunction with financial statements as applied by Hiddn Security

AS for the year ended 31 December 2015. These condensed consolidated interim financial statements

are unaudited.

NOTE 2 The formation of the Group

On 29 December, 2016, the merger between Hiddn Solutions ASA (formerly Agasti Holding ASA) and

Hiddn Security AS was completed. Hiddn Solutions ASA was a non-operating company with minimal

net assets listed on the Oslo Stock Exchange. Hiddn Security AS was a privately-owned company.

To achieve a listing on Oslo Stock Exchange, Hiddn Security AS arranged to be “acquired” by Agasti

Holding ASA (now Hiddn Solutions ASA), which in the 4th quarter was a non-operating company with

immaterial net assets. The transaction is scoped out of IFRS 3 “Business Combinations” since Hiddn

Solutions ASA did not meet the definition of a business at the acquisition date.

The relative fair values in the transaction, valued Hiddn Security AS at NOK 105 million and Hiddn

Solutions ASA at NOK 8.5 million. The fair values of each entity were prepared and appraised by an

external valuation expert.

The transaction is regarded as a deemed equity-settled, share-based transaction. Accordingly, the

Group accounted for the transactions under IFRS 2 Share-based payment and recorded a listing

expense of NOK 12.4 million. See Note 4 Share-based payment below for further discussion.

For the period before the completion of merger agreement, the notes to these consolidated interim

financial statements sometimes refer directly to Hiddn Security AS, one of two current subsidiaries.

Non-controlling interest

By 31 December 2016, 90.5% of the shareholders in Hiddn Security AS had accepted the offer of 1.83

Hiddn Solutions ASA shares in exchange for 1 Hiddn Security share. The remaining 9.5% interest in

Hiddn Security AS was classified as non-controlling interest in the Group, measured at its share of


equity at 31 December 2016. See Note 10 “Events after balance sheet date” for additional purchases

of non-controlling interests in 2017.

NOTE 3 Revenues and other income

Revenues

The Group has only reported one operating segment to management during the period.

Other income The Group recognised NOK 1 900 thousand related to tax related subsidies of R&D projects

(Skattefunn) in 2016.

The Group received a low interest loan from the Norwegian government (Innovation Norway) and

recorded a subsidy effect of NOK 480 thousand.

Additionally, the Group recorded other contribution from the government to its research and

development of NOK 300 thousand.

NOTE 4 Share-based compensation

Share-based compensation to employees

The Group recognised NOK 123 thousand in share-based expenses in 2016. The share-based expenses

for the comparable period in 2015, was NOK 30 thousand. There were no new grants of share-based

compensation in 2016.

All outstanding warrants were cancelled according to the merger & acquisition agreement between

Hiddn Solutions ASA and Hiddn Security AS.

A new share-based compensation program will be implemented in 2017.

Share-based payment for reverse take-over

Hiddn Security AS was considered the acquirer in the merger with Hiddn Solutions ASA. The fair value

of the shares considered “issued” by Hiddn Security AS is NOK 8.5 million, which corresponds with the

fair value estimate of Hiddn Solutions ASA (formerly Agasti Holding ASA) at the time of the merger.

The difference between the fair value of the share-based payment “issued” and the net liabilities

assumed in the transaction is considered a cost of listing on the Oslo Stock Exchange.

Geographical information:

(Amounts in NOK thousands) 2016 2015

Norway 2 044 3 007

Netherlands 1 738 237

Other 20 -

Total 3 802 3 244

(Amounts in NOK thousands) 2016

Fair value of share-based payment 8 508

Net liabilities assumed in the acquisition 3 932

Total - listing expense 12 440


As discussed above, the fair value of the consideration was estimated by external valuation experts as

is required by Norwegian law for acquisitions involving exchange of shares.

Shares issued to shareholders providing a guarantee for planned share issue

In December 2016, the Shareholders’ meeting approved the issuance of 1.1 million Hiddn Security AS

shares (equivalent to 1.9 million Hiddn Solutions ASA shares) to shareholders that provided a

guarantee in June/July 2016 of a minimum subscription amount of NOK 25 million for a planned equity

issue in Hiddn Security AS.

The original subscription terms included 1 warrant to purchase an additional share of Hiddn Security

AS at NOK 6 per share.

When Hiddn Security AS entered an agreement to merge with Hiddn Solutions ASA, the planned share

issue (rights issue) was changed to be completed by Hiddn Solutions ASA(the listed entity). The rights

issue was completed in February 2017 without attached warrants.

Hiddn Security AS (prior to completion of the merger) recognised an expense of NOK 6.4 million related

to the issuance of the shares to these shareholders. The expense was based on a valuation of NOK 6

per Hiddn Security share (pre-merger).

NOTE 5 Property, plant, & equipment

The Group invested 232 thousand in in security doors for server room and related cooling equipment

in 2016. NOK 96 thousand related to security rooms installed in the prior office of Hiddn Security AS

was written down when the subsidiary moved to its new offices in December 2016.

NOTE 6 Financial guarantee

The Group got a short-term loan of NOK 4.7 million from DNB in September 2016 (see note Interest-

bearing loans).

The bank required guarantees in order to provide the loan, and a group of shareholders (that included

several board members) provided a guarantee of the full amount in return for receiving 1 415 thousand

(pre-merger: 783 333) warrants to purchase shares in Hiddn Security AS at an exercise price of NOK

3.22 (pre-merger: NOK 6) per share. The warrants had a contractual life of 1 year at the time of the

grant.

The Group recognised a financial guarantee asset at the estimated fair value of the promised warrants.

The fair value of NOK 1.1 million were estimated using the Black Scholes model.

The carrying amount of the financial guarantee will be amortized of over the life of the related DNB

loan using the effective interest method.

The Group amortized NOK 885 thousand related to the financial guarantee in 2016. The amount in

included in other financial costs.

See Note 8 "Equity" for further discussion of the warrants issued in exchange for the financial

guarantee.


NOTE 7 Interest-bearing debt

Convertible debt

In March 2016, Hiddn Security AS issued convertible debt with a nominal amount of NOK 1.7 million.

The convertible debt matures in March 2019 and pays an interest of 3 month NIBOR plus 3%.

The investors in the convertible debt had an option to convert the bonds to 499 115 (pre-merger:

276 400) Hiddn Security AS shares at an exercise price of NOK 3.46 (pre-merger: NOK 6.25). The terms

stated that if the bonds were converted to shares, the investors would receive one warrant, for each

share, to purchase an additional share at an exercise price of NOK 3.46 (pre-merger: NOK 6.25).

See Note 8 Equity for further discussion of the equity component of the convertible debt.

Short-term loan from DNB

In September 2016, DNB provided a short-term loan of NOK 4.7 million that was originally due on 31

December 2016, but the loan agreement has been amended to extend the loan maturity until 31

March 2017. The debt carries a nominal interest of 6%. The loan included a change in control covenant

that was waived in December 2016.

The loan was guaranteed by a group of shareholders. See Note 6 Financial Guarantee.

Loan from Norwegian government entity

In May 2016, Innovation Norway provided NOK 8 million in a new 8-year loan. The first year the Group

only pays interest, then the principal is repaid evenly over the next 7 years. The interest on the loan is

4.95%. The loan includes covenants related to equity and working capital as well as change of control

clauses. The Group is in breach of the equity covenant as well as the change of control clause, but

received a waiver of the change of control covenant in December 2016. The Group remains in breach

of the equity covenant.

A group of shareholders has provided Innovation Norway with guarantees on the loan, however,

without being compensated by the Group. The guarantors include the private companies of several

former and current members of the board and executive management of Hiddn Security AS (Intelco

Concept, Nettverk AS, Arnfinn Tveit, Immob Holding, Holteøy AS, Silje VP AS, Tvedt Equity AS,

Tønnevold Venture & Invest AS).

Since the Group is in breach of the loan agreement at 31 December 2016, the entire loan is classified

as a current liability.

Carrying amount

(Amounts in NOK thousands) Interest Principal Final Maturity December 2016December 2015

Convertible debt NIBOR+3% - March 2019 1 286,23 -

Low interest loan from the Government 4,85 % 2 000 April 2017 482,00 1 859

Low interest loan from the Govenment 4,95 % 8 000 March 2024 7 548,00 -

DnB - short-term loan 6,00 % 4 700 Dec 2016 4 700,00 -

Non-secured short-term loan 15% fee/NIBOR +5% 7 325 May 2017 6 395,00

Total loans 20 411,23 1 859

Less current portion of debt 8 030,00 1 859

Less short-term debt (original maturity less than a year 11 095,00

Non-current liabilities 1 286,23 -


Unsecured short-term loan

In December 2016, Hiddn Security AS issued an unsecured loan of NOK 7.3 million less an upfront fee

of NOK 1.1 million (net proceeds of NOK 6.2 million) maturing on 31 May 2017. In addition to the 15%

upfront fee, the interest on the loan is NIBOR plus 5%. The loan was provided by 13 of the Company's

shareholders.

NOTE 8 Equity

Hiddn Solutions ASA has one class of shares outstanding with equal rights to dividends. The par value is NOK 0.34 per share.

At 31 December 2016, the total outstanding number of shares were 35 770 765. Number of shares and

share capital in previous periods has been changed to reflect Hiddn Security AS as the acquirer in the

transaction according to the ratio between outstanding shares in Hiddn Solutions ASA and Hiddn

Security AS.

Equity component in convertible debt

The convertible debt included equity components consisting of the conversion option to Hiddn

Security AS shares and the warrants to purchase further shares in Hiddn Security AS at an exercise

price of NOK 3.46 (NOK 6.25 pre-merger) per share. If the investors had converted the full amount to

shares, they would have received 499 thousand (pre-merger: 276 thousand) shares and 499 thousand

(pre-merger: 276 thousand) warrants to purchase additional shares.

The residual amount of NOK 566 thousand, after deducting the fair value of the debt from the

proceeds, was recorded as additional equity recorded to other paid-in-capital.

In December 2016, the 499 thousand (pre-merger: 276 thousand) outstanding warrants were

repurchased by issuing 125 thousand shares (pre-merger 69 thousand shares). The warrants were

valued at NOK 0.83 (pre-merger: NOK 1.5) per warrant while the shares were valued at NOK 3.22 (pre-

merger: NOK 6 per share).

The repurchase was accounted for as an equity transaction.

Warrants issued in exchange for financial guarantee

Hiddn Security AS provided 1 415 thousand (783 thousand) warrants to a group shareholders in

exchange for providing a financial guarantee as described in Note 6 Financial Guarantee.

In December 2016, Hiddn Security AS issued 354 thousand shares (pre-merger: 196 thousand) to

repurchase outstanding warrants issued in connection with the guarantee of the DNB loan and the

convertible debt.

The repurchase was accounted for as an equity transaction.

Compensation for shareholders participating in original guarantee of share issue

Hiddn Security AS issued 1 933 thousand (pre-merger: 1 071 thousand) shares to compensate the

shareholders in the 4th quarter as described in Note 4.


Note 9 Related party transactions

Innovation Norway guarantee

A group of shareholders has provided Innovation Norway with guarantees on the loan, however,

without being compensated by the Group. The guarantors include the private companies of several

former and current members of the board and executive management of Hiddn Security AS (Intelco

Concept, Nettverk AS, Arnfinn Tveit, Immob Holding, Holteøy AS, Silje VP AS, Tvedt Equity AS,

Tønnevold Venture & Invest AS).

DNB guarantee

The amount of compensation to the shareholders in the table above was NOK 1.1 million as described

in Note 6.

Convertible debt

The 16 investors in the convertible loan were also shareholders in Hiddn Security AS at the time the

convertible loan was issued in March 2016. See discussion in note 7 and note 8 related to convertible

loans.

Guarantee of subscription amount in planned share issue in Hiddn Security

Shares with a fair value of NOK 6.4 million was awarded to shareholders in December 2016 prior to

the completion of the merger with Hiddn Solutions ASA. See discussion note 4 and note 8. This included

417 thousand shares to Intelco Concept AS (Øystein Tvenge) valued at NOK 2.5 million, 33 thousand

shares to Tvedt Equity AS (Torje Tvedt) valued at NOK 0.2 million and 21 thousand shares to Arnfinn

Tveit valued at NOK 0.125 million, all board members in Hiddn Security AS.

Unsecured loan

In December 2016, Hiddn Security AS procured a loan from a group of shareholders as described in

note 7.

New office lease agreement

The Group has entered a new office lease agreement with one of the shareholders, Jaco Invest AS. The

lease period started in December 2016 and ends on 31 December 2019. There is no rent payment in

December 2016, but in January 2017 the monthly rent starts at NOK 474 thousand (subject to annual

adjustments related to changes in the consumer price index).

Participating shareholders

Guarantee

amount

Number of

warrants

Replacement

shares issued

Restated to

Hidden

Solutions

shares

Chamar AS 350 58 333 14 583 26 334

Intelco Concept AS (Board member Øystein Tvenge) 2 050 341 667 85 417 154 243

Jaco Invest AS 350 58 333 14 583 26 334

Elihia AS 500 83 333 20 833 37 620

Immob Holding AS 750 125 000 31 250 56 430

Tvedt Equity AS (Board member Torje Tvedt) 700 116 667 29 167 52 668

Total 4 700 783 333 195 833 353 630


Note 10 Events after balance sheet date

Purchase of non-controlling interest

In January 2017, Hiddn Solutions ASA acquired additional 1.3 million of the shares in Hiddn Security AS

by issuing 2.4 million new shares. Hiddn Solutions ASA ownership share is now 97.1%.

Rights issue

On 13 February 2017, Hiddn Solutions ASA completed a rights issue that was oversubscribed by

approximately 50%. Due to the high demand of offer shares in the rights issue, the board decided to

issue additional offer shares based on the board authorization granted by the Company’s extraordinary

shareholder meeting. In total 24,116,564 offer shares were issued securing NOK 69.7 million in gross

proceeds.

Reconciliation of Alternative Performance Measure (APM):

(1) Hiddn Solutions ASA’s takeover of Hiddn Security AS was accounted for as a reverse take-over

whereby Hiddn Security was the acquirer for accounting purposes. Hiddn Solutions ASA was a

non-operating company at the time of the merger and it had a negative working capital. Hiddn

Solutions ASA did not meet the definition of a business, so the transaction was accounted for

under IFRS 2 whereby the difference between the fair value of the shares considered “issued”

by Hiddn Security AS and the net liabilities in Hiddn Solutions ASA was recognised as a listing

expense. Management considers this to be an unusual item and have adjusted operating loss

in the table above.

(2) When the original planned share issue in Hiddn Security AS was cancelled, and replaced by a

rights issue in Hiddn Solutions ASA, the shareholders that had guaranteed the original share

issue was compensated for warrants that they would have received if the original share issue

would have been completed. The shareholders received Hiddn Security shares in December

2016 with a fair value of NOK 6.4 million. The amount was recognised in the statement of profit

and loss and was classified as other operating expenses. Management considers this an

unusual item and has adjusted operating loss as shown in the table above.

(Amounts in NOK thousands) Note 2016 2015 2016 2015

Operating loss (IFRS) (25 671) (3 433) (39 948) (18 195)

Adjustments:

Merger & acquisition related costs:

IFRS 2 cost - reverse acquistion 1 12 440 - 12 440 -

Issue of warrants on guarantee of cancelled

share issuance in Hiddn Security 2 6 425 - 6 425 -

Adjusted operating loss (Non-IFRS) (6 806) (3 433) (21 083) (18 195)

YTDQ4

quarterly report q4 2016 2mb.cision.com/main/987/2201019/635502.pdf · quarterly report q4 2016 2...

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