UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM
20-F

(Mark One)

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report                

Commission File Number
001-39810

IDEX Biometrics ASA

(Exact name of Registrant as specified in its charter and translation of Registrant’s name into English)

Kingdom of Norway

(Jurisdiction of incorporation or organization)

Dronning Eufemias gate 16

NO-0191
Oslo

Norway

(Address of principal executive offices)

Vincent Graziani

Chief Executive Officer

IDEX Biometrics ASA

Dronning Eufemias gate 16

NO-0191
Oslo

Norway

Tel: +47 6783 9119

mailbox@idexbiometrics.com

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class

 

Trading
Symbol(s)

 

Name of each exchange

on which registered

American Depositary Shares, each representing 75 ordinary shares,Ordinary Shares, nominal value NOK 0.15 per share
 
IDBA
 
The Nasdaq Capital MarketMarket
Ordinary shares,Shares, nominal value NOK 0.15 per share*
 
*
 
The Nasdaq Capital Market*Market*

*

Not for trading, but only in connection with the registration of the American Depositary Shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act. None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Ordinary shares: 832,146,748
S
hares: 1,010,388,454 shares outstanding as of December 31, 2020

2021

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ☐  Yes    ☒  No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    
☐  Yes    ☒  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes    ☒  
No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files)
.     ☒  
Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.

Large accelerated filer  ☐   Accelerated filer  ☐  Non-accelerated filer 
  
  Emerging growth company 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ☐

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  ☐         International Financial Reporting Standards as issued   Other  ☐
         by the International Accounting Standards Board ☒   

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    ☐  Item 17    ☐  Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    ☐  Yes    ☒  No


Table of Contents

TABLE OF CONTENTS

        
Page
 

1
2
   3 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Item 1.
    4

PART I

5

Item 1.

   53 

Item 2.

    

   53 

Item 3.

    

   53 

Item 4.

    

   3139 

Item 4A.

    

   4861 

Item 5.

    

   4861 

Item 6.

    

   6075 

Item 7.

    

   7388 

Item 8.

    

   7994 

Item 9.

    

   8096 

Item 10.

    

   8096 

Item 11.

    

   90104 

Item 12.

    

   91105 

   II-1108 

Item 13.

    

   II-1108 

Item 14.

    

   II-1108 

Item 15.

    

   II-1108 

Item 16A.

    

   II-1109 

Item 16B.

    

   II-2109 

Item 16C.

    

   II-2109 

Item 16D.

    

   II-2110 

Item 16E.

    

   II-2110 

Item 16F.

    

   II-2110 

Item 16G.

    

   II-2110 

Item 16H.

    

   II-3110 

Item 16I.
   III-1110 

Item 17.

   III-1111 

Item 18.

17.
    

   III-1111 

Item 19.

18.
    

   III-1111 

Item 19.
   III-3111 

113
   
F-1
 

   
F-2
 


INTRODUCTION

Unless otherwise indicated, “IDEX,” “IDEX Biometrics,” “IDEX Biometrics ASA,” “the company,Company,” “our company,Company,” “we,” “us” and “our”“our,” when used throughout this Annual Report on Form
20-F
(the “Annual Report”), refer to IDEX Biometrics ASA.

ASA, inclusive of its wholly-owned subsidiaries in the United States, IDEX Biometrics Holding Company Inc. and IDEX Biometrics America Inc. (“IDEX America”), the United Kingdom, IDEX Biometrics UK Ltd. (“IDEX UK”), and the People’s Republic of China, IDEX Electronics (Shanghai) Co., Ltd. (“IDEX China”).

The wordmarks “IDEX” and “TrustedBio, “TrustedBio” and the IDEX logo, and other trademarks or service marks of IDEX Biometrics ASA appearing in this Annual Report on Form 20-F are the property of IDEX Biometrics ASA. Solely for convenience, the trademarks, service marks, and trade names referred to in this annual reportAnnual Report are listed without the
®
and
symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their right thereto. All other trademarks, trade names, and service marks appearing in this annual reportAnnual Report are the property of their respective owners. We do not intend to use or display other companies’ trademarks and trade names to imply any relationship with, or endorsement or sponsorship of us by, any other companies.

Our audited consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB, and IFRS as adopted by the European Union. Our financial statements included in this annual reportAnnual Report are presented in U.S. dollarsDollars and, unless otherwise specified, all monetary amounts are in U.S. dollars.Dollars. All references in this annual reportAnnual Report to “$,” “US$,“U.S. Dollars,“U.S.$,” “U.S. dollars,” “dollars”“Dollars” and “USD” mean U.S. dollarsDollars and all references to “NOK” mean Norwegian krone,Krone, the currency of our home country.
Throughout this annual report,Annual Report, references to “ADSs” mean the Company’s American Depositary Shares, or ADSs, or ordinaryissued by our “Depositary,” The Bank of New York Mellon, and listed for trading on The Nasdaq Capital Market (“Nasdaq”). Each ADS represents 75 of the Company’s “Ordinary Shares,” our single class of outstanding shares, representedheld by such ADSs,the Depositary. Our Ordinary Shares are listed for trading on the “Oslo Børs,” a unit of EURONEXT N.V.
Also, throughout this Annual Report, references to the “Securities Act” mean the Securities Act of 1933, as amended, references to the case may be.

“Exchange Act” mean the Securities Exchange Act of 1934, as amended, and references to the “SEC” mean the U.S. Securities and Exchange Commission.

1

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form
20-F,
or annual report,Annual Report, contains forward-looking statements within the meaning of Section 27A of the Securities Act, of 1933, as amended, and Section 21E of the Securities Exchange Act, of 1934, as amended, that are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than present and historical facts and conditions contained in this annual report,Annual Report, including statements regarding our future results of operations and financial positions, business strategy, plans, and our objectives for future operations, are forward-looking statements. When used in this annual report,Annual Report, the words “anticipate,” “believe,” “can,” “could,” “estimate,” “expect,” “intend,” “is designed to,” “may,” “might,” “plan,” “potential,” “predict,” “objective,” “should,” or the negative of these and similar expressions identify forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

our expectations regarding our revenue, expenses, and other operating results;

our ability to achieve or maintain market acceptableacceptance for our biometric technology and products;

our ability to generate revenue and/revenue;
our ability to respond to ongoing constraints and uncertainties within the semiconductor supply chain;
our ability to achieve profitability or, achieve oronce doing so, sustain profitability;

our estimates, and those of others, regarding our current and future capital requirements;
our ability to compete effectively with existing competitors and any new market entrants;
our assessment of the growth rates of the market segments and geographies in which we compete;
the impact of the
COVID-19
pandemic on our growth trends and the macroeconomic environment of COVID-19;

performance;

future investments in our business, our anticipated capital expenditures and our estimates regarding our capital requirements;

our reliance on key personnel and our ability to identify, recruit, and retain skilled personnel;

our ability to effectively manage our growth, including any additional international expansion;

our ability to protect our intellectual property rights and any costs associated therewith;

our ability to compete effectively with existing competitors and new market entrants;

the growth rates of the markets in which we compete;

regulatory developments in Norway, the United States, the United Kingdom, China, and other jurisdictions; and

other risks and uncertainties, including those listed in this annual report under the caption “Risk Factors.”

Annual Report.

You should refer in this Annual Report to the section of this annual report titledPart I., “Item 3.D-Risk3. Section D. Risk Factors”, for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the
forward-looking
statements in this annual reportAnnual Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, thesuch inaccuracy may be material. In lightBecause of the significant uncertainties inassociated with these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans, whether in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

You should read this annual reportAnnual Report and the documents that we reference in this annual reportreferenced herein and have filed as exhibits to this annual reporthereto completely and with the understanding that our actual future results may be materially different from whatthose we currently expect. WeAccordingly, we qualify all of our forward-looking statements by these cautionary statements.

This annual reportAnnual Report contains market data and industry forecasts that were obtained from industry publications.publications and related sources we consider credible. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates.estimates, given the pace at which industry conditions and market circumstances may change. We have not independently verified any third-party information.information presented herein. While we believe the market position, market opportunitystatistics and market sizerelated information included inare accurate as of the date of this annual report is generally reliable,Annual Report, you are cautioned that such information is subject to change and, as such, inherently imprecise.

2

PART I

Item 1.

Identity of Director, Senior Management and Advisers.

Not applicable.

Item 2.

Offer Statistics and Expected Timetable.

Not applicable.

Item 3.

Key Information.

A.     Selected Financial Data

We have elected to voluntarily comply with Item 3.A., as effective February 10, 2021 and are omitting this disclosure in reliance thereon.

[Reserved]

B.     Capitalization and Indebtedness

Not applicable.

C.     Reasons for the Offer and Use of Proceeds

Not applicable.

D.     Risk Factors

Our business faces significant risks. YouInvestors should carefully consider all of the information set forth in this annual report and in our other filings with the United States Securities and Exchange Commission, or the SEC, including the following risk factors which we face and which are faced by our industry. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. This report also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements, as a result of certain factors including the risks described below, andin addition to the other information set forth elsewhere in this annual reportAnnual Report on Form
20-F
(the “Annual Report”), including our consolidated financial statements and the related notes beginning on page
F-1.
If we were to encounter the risks described, our other SEC filings. See “Special Note Regarding Forward-Looking Statements” above. These important risks include, but are not limited to,business, operational performance and financial position could be harmed, potentially with materially adverse consequences. In that event, the following summary risk factors:

Our largest potential market, the biometric payment card market, is an undeveloped and emerging market and it is difficult to predict how large this market could be;

Our biometric technology has not yet gained, and may never gain, widespread market acceptance;

If the estimates and assumptions we have used to calculate the sizequoted prices of our target markets are inaccurate, our future growth rate may be limited.

Ordinary Shares and American Depositary Shares could decline.

We

In summary, these risks are:
we have a history of operating losses and may not achieve or sustain profitability in the future;

profitability;

We will require additional funding to finance our operations, and

if we are unable to raise capital if and when needed, we could be forced to delay, reduce, or terminate certain of our development activities or undertake other operations;

cost-reduction steps, including termination of employees, either of which could reduce our ability to execute our strategy, with potential harm to our business, operational performance, and financial position;

We

our biometric technologies have not yet achieved, and may never achieve, widespread customer acceptance in the market segments we are targeting;
if the estimates and assumptions we have used to calculate the pace of development and ultimate size of our targeted market segments are inaccurate, future revenue growth may take longer than anticipated and reaching the operational scale we believe necessary for sustained profitability may not be achieved;
if we fail to innovate in response to changing customer needs, new technologies, and other evolving competitive requirements, our business, operational performance, and financial position could be harmed;
we are exposed to risks associated with customer concentration and reliance on a limited number of suppliers, and the disruption to a significant customer or supplier could harm our business, operational performance, and financial position;
3

we expect fluctuations in our quarterly financial results, making it difficult to project future results, and, if we fail to meet the expectations of securities analysts or investors with respect to our resultsperformance, the quoted prices of operations, our stock priceequity securities could decline;

The markets in which

because the market segments we operatetarget are highly competitive, the landscape of competitors, strategic partners, and market participants can change quickly, and because customer demand is difficult to accurately predict, our business, operational performance, and financial position could be harmed if we do not compete effectively,maintain our business, financial condition, and results of operations could be harmed; and

If we fail to innovatecompetitive advantages in response to changing customer needsunexpected developments in the market segments we target;

we are vulnerable to adverse economic conditions, whether the result of business cycles or exogenous disruptions, and new technologiesmay not be able to respond quickly or effectively to unanticipated events or trends, such as a sudden or prolonged decline in business confidence and other market requirements,economic activities, which could harm our business, operational performance, and financial condition,position and resultslimit our ability to access the capital markets;
because we depend on the contributions of operationsvery skilled employees across engineering and business disciplines, if these employees were to leave the Company, we may not be able to attract and hire replacements with the same skills in a timely fashion, if at all, which could be harmed;

harm our business, operational performance, and financial position;

Even though

although we have not experienced significant delays in development activities or product deliveries to date, the ongoing
COVID-19 pandemic
could have an adverse impact on our business, operations,the Company and the markets and communities in which we, our customers, our vendors, and our partners operate;
because we are domiciled in Norway, we are subject to Norwegian corporate and customers operate.

securities laws, and, pursuant to certain exemptions under the laws and regulations in the United States, as well as the rules defining the listing requirements of Nasdaq, we are allowed to follow certain Norwegian standards for governance, which may be different from such standards in the United States and, as such, may not provide the same level of investor protections and shareholder rights;

because we list our Ordinary Shares on the Oslo Børs and list our American Depositary Shares (“ADSs”) on Nasdaq, we are subject to two complex sets of corporate and securities laws, which increases the costs and burdens of compliance, while increasing the risk that we may fail to comply with such laws;
failure or perceived failure to comply with existing or future laws, regulations, contracts,
self-regulatory
schemes, standards, and other obligations related to data privacy and security (including security incidents) could harm our business, and compliance or the actual or perceived failure to comply with such obligations could increase the costs of our products and services, limit their use or adoption, and otherwise negatively affect our operating results and business; and
the provisions of the contractual agreements associated with our ADSs are complex, and, pursuant to those agreements, holders of ADSs are afforded fewer rights and protections than holders of our Ordinary Shares, are subject to transfer and related restrictions, and are required to pay various administrative fees, all of which may reduce investor interest in our ADSs.
Risks Related to Our Financial Condition,Strategy and Business and Industry

Since our inception, we have only generated limited revenue and we have incurred significant operating losses and negative cash flows.

We have only generated limited revenue and have incurred significant operating losseslosses. We cannot offer any assurances regarding whether or when we will generate sufficient operational cash flow to offset our costs and negative cash flows sinceaccelerate the expansion our inception.business, or whether or when we will generate sufficient revenue to achieve or maintain profitability.

Our efforts to execute our strategy successfully may cost more and take longer than we anticipate. We generated revenue of $2.8 million and recorded a net lossesloss of $32.6 million for the year ended December 31, 2021. We generated revenue of $1.1 million and recorded a net loss of $26.8 million $32.4 million and $30.2 million for the yearsyear ended December 31, 2020, 2019 and 2018, respectively. As2020.
4

Table of December 31, 2020, we had an accumulated deficit of $14.7 million. Contents
We are not certain whether or when we will obtain a high enough volumegenerate sufficient cash flow to fully fund our costs and accelerate the expansion of sales in the future to generate significant revenue, grow our business, or whether or when we will generate sufficient revenue to achieve or maintain profitability. Although we have established customer relationships with innovators and early adopters sharing our vision for the potential of fingerprint authentication in smart card applications, our forecasts of when we will generate revenue and cash flow sufficient to meet its funding requirements are based on complex assumptions regarding demand, products, costs, and other considerations that are subject to rapid change. As stated, these assumptions involve uncertainties and evolving circumstances, many of which are outside of our influence or control.
Our customers primarily are manufacturers of smart cards, although a critical element of demand for our solutions originates with these manufacturers’ own customers (e.g., the demand for financial payment cards with fingerprint authentication originates with a bank issuer interested in offering such cards). As such, we focus our marketing and sales efforts on smart card manufacturers, as well as their customers and other influential participants in the smart card industry (e.g., payment card networks).
Fingerprint authentication applications in the market segments we target are in the early stages of development. Because of this, we have experienced uncertain and lengthy sales cycles, as potential customers and other influential participants in the smart card industry have required, and likely will continue to require, exposure to, and education about, fingerprint authentication technologies, our solutions, and our value proposition. To address this, we expanded our marketing and sales staff in 2021 and our marketing budget for 2022. We alsoexpect our enhanced demand creation efforts will shorten sales cycles, but we cannot offer any assurances regarding the success of these efforts or the amounts and timing of customer orders.
Given recent inflationary pressures, primarily in the semiconductor supply chain, we expect our costs and expenses to increase, in future periods, which could negatively affect our future results of operationsinfluence cash flow and profitability, even if we are able to significantly increase our revenue. In particular,As a “fabless” developer of semiconductor-based products, our manufacturing costs for the products we currently sell are most influenced by the discounts our vendors offer for sustained, high-volume production orders. We may not achieve the necessary volume of production orders to obtain advantageous pricing for the manufacture of our current products. If we are not able to pass on increased costs to customers by increasing the prices of our products, our profitability could decline, harming our business, operational performance, and financial position.
We believe our advances in fingerprint authentication technologies are an important competitive differentiator. As such, we intend to maintain research and development spending at current levels. While we intend to continue to expend significant funds to develop future generationsdevelopment of our products and software solutions, including by introducing new products, andwith improved performance, greater functionality, and broadened applications, with lower costs, we cannot accurately predict whether or when these new products will be introduced or the level of customer acceptance they will achieve in the market segments we target.
Our operating cost structure is largely fixed, reflecting our business model and strategic focus on development of highly differentiated biometric technologies. Variable costs are associated primarily with production volumes. Accordingly, we anticipate our profitability could improve as revenue increases, as our forecasts for operating expenses are based on our assumed ability to expand use cases and integrations. We will also face increased compliance costsincrease revenue without proportional increases in our operating cost structure. However, because of the uncertainties associated with growth, the expansionaccurately forecasting revenue levels and achieving operational economies of scale, we cannot offer any assurances regarding our customer base, and as a result of the fact that we are publicly listed in both Norway and the United States. Our effortsability to, grow our business may be costlier than we expect, or the ratetiming of our growth in revenue may be slower thanwhen we expect, and we may not be able to increase our revenue enough to offset our operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described herein, and unforeseen expenses, difficulties, complications or delays, and other unknown events. If we are unable to generate significant revenue and/ormight, achieve and sustain profitability, the value of our business and ordinary shares may significantly decrease.

We will require additional funding to finance our operations. profitability.

If we are unable to raise capital if and when needed, we may be unable to maintain or expand our revenue, which could be forced to delay, reduceharm our business, operational results, and financial position, and the value of an investment in our equity securities could decline.
We are not certain whether or terminate certain of our development activities or other operations.

We cannot be certain when or if, our operationswe will generate sufficient operational cash flow to fully fundoffset our ongoing operations orcosts and accelerate the growthexpansion of our business. Webusiness, nor whether or when we will generate sufficient revenue to achieve or

5

Table of Contents
maintain profitability. Because we intend to continue pursuing our strategy of
re-investing
in our business in order to make investmentsachieve expect revenue growth, we anticipate that additional capital will be required to fund such revenue growth (e.g., funding of increased working capital requirements). However, if we do not meet our current performance forecast, we likely will require additional funding to support future operating losses. Our forecasts of when we will generate revenue and cash flow sufficient to meet its funding requirements are based on complex assumptions that are subject to rapid change. These assumptions involve uncertainties and evolving circumstances, many of which are outside of our business, which may require us to engage in equityinfluence or debt financings to secure additional funds. We continue to review all strategic options to fund ongoing operations, research and development projects and working capital needs. control.
While we previously have been able to raise funds in the pastcapital through private placements of our shares,Ordinary Shares, additional financing in any form may not be available on terms favorable to us, if at all. If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities,maintain or expand our revenue, which could harm our business, operatingoperational results, and financial condition. Becauseposition, and, in turn, the value of an investment in our decision to issueequity securities in thecould decline. We continuously review all alternatives, financial and strategic, for meeting our future capital requirements. However, because our future funding decisions will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuancesfunding from investors, lenders, or strategic partners.
Our fingerprint authentication solutions are targeted at three emerging applications within the smart card market, financial payments, cyber authentication, and digital currency storage, all of debt or equity securities, and if wewhich are unable to raise sufficient funds we may be unable to maintain or expand our operations.

Our largest potential market is the biometric payment card market. The market for biometric payment cards is an undeveloped and emerging market andin early stages of development. As such, it is difficult to predict the varying pace at which these applications will develop into defined market segments, how large the market segments could be, and to what extent we will successfully penetrate any such market segment, if at all.

We are a developer of fingerprint authentication solutions and focus on use cases based on smart cards. The specific applications we are targeting with our fingerprint authentication solutions are in the early stages of their development and are characterized by the extended and unpredictable sales cycles associated with new, innovative technologies, a limited number of early adopting customers, immature supply chains, and evolving application requirements and industry-specific standards.
Financial Payments
Currently, our primary focus is on developing the financial payments market segment. We introduced the first flexible touch sensor for ISO
ID-1
form factor requirements in 2015 and, later that year, entered into a strategic partnership with Mastercard to develop the biometric payment card opportunity. However, approximately five years passed before we announced significant customer engagements (e.g., IDEMIA France SAS), as:
potential issuers of biometric payment cards (e.g., banks) have required, and continue to require, extensive education regarding fingerprint authentication, addressing their uncertainties associated with costs, card deployment, user enrolment, reliability, security, and infrastructure requirements, contributing to our extended and unpredictable sales cycles;
our primary customers, the manufacturers of smart cards for financial payment applications, have required, and continue to require, extensive education regarding the opportunity and our differentiated value proposition, frequently followed by an extended period of sales and engineering support necessary for the development and qualification of a biometric payment card that a manufacturer can market to its customers, contributing to our extended and unpredictable sales cycles, resource allocation challenges, and high
pre-sale
customer engagement costs;
design, development, and qualification of a biometric payment card incorporating fingerprint authentication to a customer’s specifications has required, and may continue to require, customers, which may be resource-constrained or lack the appropriate engineering expertise, to coordinate multiple suppliers of complex components that must be integrated in a timely and cost-efficient manner, a process that has, and may continue to be, a source of delays in customer development of biometric payment cards;
6

all financial payment cards require approvals from the global operators of payment processing platforms, notably Mastercard, VISA, and China UnionPay, certifying that a new financial payment card meets platform-specific security, reliability, performance, and interoperability requirements, and obtaining such certification has been, and may continue to be, delayed due to challenges card manufacturers have experienced with completing development of biometric payment cards and scheduling their certification with the payment processing platforms and the testing laboratories on which they rely; and
because the added cost of incorporating fingerprint authentication in a financial payment card historically has been economically unjustifiable for many high-volume applications, we, since introducing the ISO
ID-1
design in 2015, have aggressively addressed materials and manufacturing costs and, by 2021, with the introduction of our TrustedBio module, achieved a cost profile compelling to manufacturers of smart cards, and we continue our efforts to lower the costs of current and future solutions, although we cannot offer any assurances regarding our ability to so, or the timing thereof.
Because of these and other challenges encountered in developing opportunities in the financial payment market segment, accurately forecasting demand within the market segment has been, and likely will continue to be, difficult, with forecasts based on complex assumptions that have been, and likely will continue to be, subject to rapid change. These assumptions involve uncertainties and evolving circumstances, many of which are outside of our influence or control.
Cyber Authentication
We believe high
value-add
cyber authentication applications across the access control market segment represent promising opportunities for our fingerprint authentication solutions. While this market segment shares the characteristics and challenges associated with the financial payments market segment, the competitive landscape for user authentication in access control applications is broader and more complex, with various alternative authentication methods available, delivered in numerous form factors across diverse applications. While we achieved FIDO (Fast Identity Online) Alliance certification for a fingerprint authentication solution in 2016, our penetration of this market segment to date has been limited. We attribute our slower than expected penetration of the access control market segment to:
the degree to which
low-cost,
low value-added, legacy solutions, based on minimal security requirements, continue to dominate the enterprise market, particularly within physical access control applications;
the slower than expected pace at which physical access control and network user identity authentication are converging into unified, enterprise-wide security solutions;
a relatively concentrated group of global and dominant regional vendors of IAM (Identity and Access Management) platforms and related access control solutions, split between those based on proprietary architectures and components and those integrating
best-of-breed
elements and standards-based protocols, both requiring extensive education regarding our products, technologies, and value proposition; and
a highly-fragmented range of single- and multi-factor authentication solutions, including various biometric solutions, contributing to price competition and, for less demanding applications, commoditization, thereby potentially limiting opportunities for differentiating our solutions based on performance, total cost of ownership, and other elements of our value proposition.
Digital Currency Storage and Related Applications
We believe the opportunity for us in our third targeted market segment, digital currency storage, also referred to as digital wallets, holds great promise, given the applicability of our fingerprint authentication solutions. However, this market segment is the least developed of the three we are targeting.
7

Our diverse activities in the emerging digital currency storage market segment include providing fingerprint authentication for two Chinese banks piloting digital wallets for the
e-CNY
initiative of the People’s Bank of China and collaborating with developers of innovations for emerging crypto-wallet and cybersecurity applications. We have not generated significant revenue within this market segment, as the diverse range of opportunities we have identified are in early stages of development and require disproportionate allocations of our time and resources to establish viable customer- and application-specific solutions. Such engagements have been characterized, to date, by long periods of product prototyping, as well as uncertainties associated with the performance requirements, scope, and timing of potential customer deployments. As such, accurately forecasting demand for digital wallet applications is difficult and based on complex assumptions, notably regarding solution definition and regulatory considerations, that are subject to rapid change. These assumptions involve uncertainties and evolving circumstances, many of which are outside of our influence or control.
The timing of and the rate of demand growth in each market segment we target are difficult to accurately predict, as the drivers of demand differ. Competitive conditions and solution requirements also differ, contributing to difficulty in accurately predicting revenue, profitability, and the timing thereof. Accordingly, we offer no assurances regarding whether or when our revenue growth will accelerate in any of the three targeted segments, nor can we offer assurances regarding whether or when we will reach profitability, if at all, in any such segment.
Our future success is dependent upon our ability to develop, communicate, and deliver a compelling value proposition to customers. If we do not do so, our business, operational results, and financial position could be. In addition,be harmed, and, in turn, the value of an investment in our equity securities could decline.
Our value proposition is based on the highly-differentiated functionality and performance of our fingerprint authentication solutions and our comprehensive approach to offering integrated solutions addressing multiple customer needs. These customer needs may vary among the market segments we target, but generally are associated with the creation of cost-effective competitive advantages for our customers (e.g., highly-differentiated end products).
We believe the primary customer requirement across the market segments we target is a compelling economic rationale for implementing fingerprint authentication in a smart card. We believe the absence of such a rationale, largely the consequence of the historically high costs associated with manufacturing and deploying such smart cards, has inhibited demand to date and, if we cannot further reduce these costs, likely will continue to inhibit demand and, in turn, harm our business, operational performance, and financial position.
Our strategy, reflected in our value proposition, has been focused on reducing these historically high costs. Our TrustedBio module, integrating a
low-cost
polymer sensor and advanced biometric technologyprocessing circuitry, has been designed to be cost-competitive with alternative solutions, while delivering superior performance and reliability. We have developed a reference design integrating our TrustedBio module with the SLC38 security controller from Infineon Technologies AG, thereby allowing our manufacturing customers to minimize their own integration costs, while accelerating
time-to-market.
We have developed an optimized card inlay, consisting of a card antenna and connective circuits, which reduces customer design and procurement costs. We are developing a proprietary card operating system for this reference design, which can be installed on the SLC38 prior to shipment to a card manufacturer, further reducing costs and process steps. We have collaborated with vendors of the capital equipment used for card manufacturing to optimize machine tooling and process management software, thereby increasing card production throughput, while lowering yield losses.
Our objective for solution design is to integrate the active components necessary to produce a smart card incorporating fingerprint authentication, creating a comprehensive, single package, solution design and bill of materials that should significantly reduce development and manufacturing costs for our customers. Our
longer-term
vision involves the integration of the functions currently performed by separate semiconductor devices into one such device, which, when packaged with our fingerprint sensor, could enable a customer to deliver a smart card with fingerprint authentication at a cost comparable to that associated with a basic, dual-interface smart card. However, we cannot predict whether or when we might complete such lower-cost, higher-functionality solutions or whether such solutions will achieve widespread acceptance.
8

A significant cost incurred by the
end-customers
of our manufacturing customers is associated with user enrolment (i.e., the process of imaging and storing a user’s fingerprint, in the form of a template, within the memory of the smart card, thereby enabling its use). We have licensed to customers a proprietary enrolment solution consisting of a disposable, sleeve-like electronic device, with a small battery, allowing for the capture of a user fingerprint and the activation of the smart card for that user. This convenient process allows the user to enroll wherever and whenever he or she might choose, but it adds costs to the deployment of smart cards incorporating fingerprint authentication. To address these costs and to further improve user experience, we are developing software-based enrolment solutions, for which we have protected intellectual property, to allow for enrolment over the user’s mobile phone or, specifically for enrolment of financial payment card users, through a
point-of-sale
terminal. However, we cannot predict whether or when we might complete such software-based enrolment solutions or whether such solutions will achieve widespread acceptance.
While our efforts have significantly reduced the difference between the costs of manufacturing and deploying smart cards incorporating fingerprint authentication and those associated with manufacturing and deploying less complex smart cards, this cost difference remains an obstacle to widespread adoption. We may not be able to achieve our objectives for additional cost reductions through further component integration and through development of software-based enrolment solutions, as the engineering challenges associated with both are substantial and characterized by uncertainties.
If we are not able to achieve additional cost reductions in support of our value proposition, our fingerprint authentication solutions may not achieve widespread adoption and our opportunities may be constrained, thereby harming our business, operational performance, and financial position.
Card-based fingerprint authentication solutions have not yet gained,achieved, and may never gain,achieve, widespread market acceptance.

We primarily market and sell biometric products and software solutions to the paymentacceptance by card and access control markets. The market for biometric payment cards is an undeveloped and emerging market and it is difficult to predict how large this market could be. Our technology representsissuers, card manufacturers, or card users.

Fingerprint authentication integrated into a smart card remains a novel solution for enhancing security. In addition to addressing costs and supporting the economic rationale for customer use of our fingerprint authentication solutions, we must address the other uncertainties and concerns of potential customers and users if our solutions are to achieve widespread acceptance. Although recently escalating concerns about fraud losses, identify theft, data breaches, and other security solution and we have not yet generated significant sales. Although recent security concerns relating to identification of

individuals and appearance of biometric readers on popular consumer products, including the smart phones,risks have increased interest in biometrics generally, it remains an undeveloped and emerging market. Biometric based solutions compete with more traditional security methods including keys, cards, personal identification numbers and security personnel. In addition, our biometric technology has not yet gained, and may never gain, widespread market acceptance. Acceptancegeneral awareness of biometrics and our technology as an alternative to such traditional methods depends upon a number of factors including:

national or international events, such as the ongoing COVID-19 pandemic, which may affect the need for improved electronic security systems and data protection procedures, and fingerprint authentication has achieved widespread acceptance among manufacturers and users of smart phones, widespread acceptance of fingerprint authentication in smart cards, if it occurs, likely will depend on a wide range of variables and outcomes, including:

our ability to further streamline the user enrolment process for issuers, reducing costs and complexity, while enhancing the user experience;
our ability to collaborate with multiple, often competing, organizations and industry bodies on the development of industry- or interestcustomer-specific software applets, modification of card operating systems for customer purposes, or obtaining necessary industry or regulatory certifications;
our ability to influence the standardization and simplification of the manner in biometric solutions;

which fingerprint authentication is integrated into transaction processing systems;

the performance and reliability of biometric solutions;

marketing efforts and publicity regarding these solutions;

our ability to address public perceptionperceptions regarding privacy concerns;

costs involved in adopting and integratingthe potential exposure of personal biometric solutions;

information; and

our ability, on a worldwide basis, to address proposed or enacted legislation related to information privacy or the collection and storage of information; and

biometric information.

competition from non-biometric technologies that provide more affordable, but less robust, authentication.

9

Table of Contents
For these reasons, we are uncertain whether our biometric technologyor when fingerprint authentication in smart cards will gainachieve widespread acceptance in any commercial markets or that demand for our solutions will be sufficient to create a market large enough to produce significant revenue or earnings. Our future success depends,If widespread acceptance is not achieved, our business, operational performance, and financial position may be harmed, and the value of an investment in part, upon businessour securities may decline.
The extended and unpredictable sales cycles which we have encountered, and may continue to encounter, may involve commitments of engineering support, requiring valuable time and resources. If our customer development activities are not successful, we will not meet our revenue forecasts and will absorb potentially significant customer- or application-specific costs.
As fingerprint authentication in smart cards has not yet been widely adopted in the market segments we target, our engagement with potential customers adopting biometrics generally,frequently begins with an extensive education process regarding our products and technologies, which may be followed by an extended period of
pre-sale
engineering support for customer development of a smart card incorporating our products and technologies. During a customer’s product development process, we face the risk that our solutions specifically.

will fail to meet the customer’s technical, performance, or cost requirements, or that our product will be replaced by a competitor’s product or an alternative authentication solution based on different technologies. Although we may complete a customer’s product development process successfully, the customer subsequently may delay or terminate its product development efforts due to factors and considerations outside of our influence or control.

Until the advantages and benefits of fingerprint authentication in smart cards are well-known in the market segments we target, supported by compelling use cases and volume deployments of our solutions, we are likely to continue to experience extended and unpredictable sales cycles, resource allocation challenges, and high
pre-sale
customer engagement costs.
If the estimates and assumptions we have used to calculate the sizesizes and growth rates of our target marketstargeted market segments are inaccurate, our future growth ratebusiness, operational performance, and financial position may be limited.

harmed.

Our projections,forecasts, based on assumptions and estimates, of future opportunities within our target markets are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described herein. We utilize third-party data sources and analysis, which we generally do not independently verify, in this report.our business planning and the development of our forecasts. Inaccuracies or errors in such third-party information likely could contribute to inaccuracies or errors in our business planning and forecasting. We also collect our own market data and competitive information, from which we develop certain assumptions and estimates used in our business plans and forecasts. If third-party or internally generated data prove to be inaccurate or we make errors in developing the assumptions and estimates used in our business plans and forecasts, or the assumptions based on that data,are inaccurate due to rapidly changing circumstances, our future growth rate may be limited. In addition, these inaccuracies or errors may cause us to misallocate capital and other business resources, which could harm our business. Even if our target markets meet our size estimates and experiences the forecasted growth,limited, as we may not growincorrectly allocate resources and capital, potentially harming our business, operating performance, and financial position.
If the size of one or more of our targeted market segments expands as we have estimated, our revenue may not expand at a similar rates, orrate, if at all. Our growthGrowth of our revenue is subject to many risk factors, including our success in implementing our business strategy, which is subject to many risksthose described herein. Accordingly, forward-looking statements regarding expected or forecast demand levels, market segment size, market shares, revenue levels, and uncertainties. Accordingly, the expectations of market growth rates included in this reportAnnual Report or in other disclosures should not be taken as indicative of our future growth.

We areconsidered estimates, characterized by uncertainty and subject to lengthy development periods and product acceptance cycles, which can result in development and engineering costs without any future revenue.

We provide fingerprint sensors and related software solutions that are incorporated by card manufacturers into the products they sell. They make the determination during their product development programs whether to incorporate our solutions or pursue other alternatives. This process requires us to make significant investments of time and resources in the design of fingerprint sensors and related software solutions for our products well before our customers introduce their products incorporating our solutions into the market, and before we can be sure that we will generate any significant sales to our customers or even recover our investment. During a customer’s entire product development process, we face the risk that our solutions will fail to meet our customer’s technical, performance, or cost requirements, or that our products will be replaced by competitive products or alternative technological solutions. Even if we complete our design process in a manner satisfactory to our customer, the customer may delay or terminate its product development efforts. The occurrence of any of these events could cause sales to not materialize, be deferred, or be cancelled, which could adversely affect our operating results.

change.

A significant portion of our sales comes from one or more largerevenue is associated with a limited number of customers, and the loss of whichsuch a customer, or a meaningful decline in revenue associated with such a customer, could harm our business, operating performance, and financial condition, and operating results.

position.

We have historically generated limited total revenue, and most of ourthat revenue we have generated has come frombeen associated with a limited number of customers. During 2021, 2020, and 2019, one customer a leading global provider of financial news and services, accounted for approximately 88% of our revenue. During 2019, two customers accounted for approximately 69%85%, 81%, and 10%72% of our revenue, respectively. During 2018, three customers accounted for approximately 39%, 36% and 13%
10

Table of our revenue, respectively. Contents
While we work topursue new customers and business opportunities as we maintain our relationships with our current customers, and seek out new business, we may continue to face challengeshave had limited success in diversifying our customer base. Excessive customer concentration, now and in the future, could cause any fluctuations in revenue and profitability to be more severe and could contribute to greater difficulty in resource allocation, inventory planning, and revenue forecasting. The loss of a major customers, or acustomer, an unanticipated decrease in demand for our products by these customers withinfrom a short period of time, could adversely affectmajor customer, or our current and future revenue, financial condition and business. The adverse effect could be more substantial if our other customers do not increase their orders or if we are unsuccessful in generating orders for our solutions with new customers. Many of these card manufacturers sellfailure to the same card issuers, and therefore we may be reliant on certain card manufacturers. Concentration indiversify our customer base could harm our business, operational performance, and partner relationship, now and in the future, may make fluctuations in revenue and earnings more severe and make business planning more difficult.

financial position.

If we are unable to attract new customers and to retain our existing customers or attract new customers, our growth prospects will be adversely affected.

Our ability to growaffected and our business, operating performance, and financial position could be harmed.

The success of our business depends on retaining current customers, while expanding and expandingdiversifying our customer base. We must convince prospective customers of the benefits ofbase, and relies on our servicesability to develop, communicate, and deliver a compelling value proposition to our existing customers of the continuing value of our services.customers. Our ability to attract new customers and retain existing customers depends in large part on our ability to continuebe collaborative, responsive, and flexible in the timely delivery of fingerprint authentication solutions to offer competitivecustomers, meeting their current and future needs. As enabling technologies evolve, manufacturing processes and products. As consumer preferencesrequirements change and technological changesdemand drivers shift within market dynamics,segments, we will needare required to enhance andcontinually improve our existing products and introduce new, innovative products, and maintainthereby maintaining our competitive position with additional technological advances.as a leading developer of highly-differentiated fingerprint authentication solutions. If we fail to keep pace withanticipate technological advances, or fail to offerdevelop high-performance, lower-cost products incorporating those advances, and fail to deliver compelling, product offerings to meet consumer demands,highly-differentiated solutions meeting customer requirements, our ability to grow or sustain the reach ofcompetitive position likely will suffer, harming our services, attractbusiness, operational performance, and retain customers may be adversely affected.

financial position.

Our productshardware and software solutions may contain defects, which will make it more difficult for us to establish and maintain customers.

customer relationships.

Although we have completed the development of multiple generations of our core biometric technology, it has onlyfingerprint authentication solutions, they have not yet been used by a limited number of business customers.deployed in high volumes. Despite extensive testing during development and third-party certifications, by third-party testing facilities, our products and software solutions may contain undetected design faultsflaws, coding errors, and errorsmaterial or manufacturing defects that are discovered only after it has been installedhigh volume deployment and used by a greater number of customers.extensive use. Any such flaw, error, or defect in current or error in new or existing products or software solutions could cause product release delays, in delivering our technology or require design modifications. Thesemodifications, customer delays, and product recalls, any of which could adversely affectbe costly and disruptive, with potentially adverse effects on customer relationships and our competitive position and, cause us to lose potential customers or opportunities. Errors or defects in our software or products could lead to mismatches in fingerprint scans. Since our technologies are intended to be utilized to secure payments and physical and electronic information access, the effect of any such bugs or delays will likely have a detrimental impact on us. In addition, given that biometric technology generally, and our biometric technology specifically, to certain extent, has yet to gain widespread market acceptance, any delays would likely have a more detrimental impact onturn, harm our business, than if we were a more established company.

Potentialoperational performance, and financial position.

Our strategic alliances and collaborations may not achieve their objectives in a timely manner, if at all, and thetheir failure to do so could impedeinhibit our growth.

ability to pursue opportunities in targeted market segments.

An important element of our strategy is collaboration with well-positioned partners, leveraging their expertise and resources. We have entered, and we anticipate that we will continue to enter, into strategic alliances.alliances and collaborations. We continually exploreevaluate strategic alliancespartnership opportunities designed to enhance or complement our technology or to work in conjunction with our technology;technologies, to provide necessary know-how,expertise, components, or supplies, to facilitate and accelerate our access to customers and geographies, and to develop, introduce, and distribute solutions integrating our products utilizing our technology.and intellectual property with those of the partner. Certain strategic alliances may not achieve their intended objectives, and parties to our strategic alliances may not perform as contemplated.we expect. The failure of these alliances to achieve their objectives may impede our ability to introduce new products and enter new markets.

markets, meeting our growth and performance expectations. Furthermore, our partners may possess, obtain, or retain rights in intellectual property they developed independently or as part of an alliance. In the event of a dispute with a partner, the partner may attempt to withhold or assert rights in intellectual property that we developed or sought access to for the purpose of enhancing or complementing our technologies.

11

We face intense competition.

We compete with both established companies and startup enterprises that provide biometricearly-stage businesses providing identification and authorization solutions, as well as larger providers of broader, more traditional security methods. Our competitors include, among others, Fingerprint Cards AB and NEXT Biometrics ASA.solutions. Some of our competitors have substantially greater financial, engineering, marketing, customer support and marketingmanufacturing resources than we do,us, and may independently develop superior technologies and solutions, which may result in our technologytechnologies and solutions becoming less competitive or obsolete.
In some circumstances, competitors may be able to aggressively compete on price in a manner we may not. Current and potential competitors also may have greater name recognition, more extensive market presence, larger installed bases, and long, established relationships with many of their customers and partners.
In the market segments we target, authentication solutions utilizing powered mobile devices (e.g., smart phones) are achieving broadening acceptance and represent a significant competitive threat. We believe the demonstrable vulnerabilities of such alternative solutions, most notably to hacking (i.e., the unauthorized access to and misuse, for fraudulent or criminal purposes, of private information stored on a networked electronic device), afford us a meaningful competitive advantage. However, we may not be able to successfully communicate this and other competitive advantages to those potential customers for which a networked, mobile device, albeit vulnerable to security risks, might be an acceptable alternative solution.
If we are unable to develop new applications or enhance our existing technologytechnologies or develop new technologies in a timely manner in response to technological and marketplace changes, we will be unableour ability to compete in our chosen markets. Our actual and potential competitors may also have greater name recognition and more extensive customer bases.targeted market segments likely will suffer. In addition, if one or more other biometric technologies, such as voice, face, iris, hand geometry, or blood vessel recognition offered by competitors, are widely adopted, it would significantly reduce the potential marketopportunities for our fingerprint identification technology in certain industries.

authentication solutions could be reduced.

Our ability to compete successfully depends on a number of competitive factors, which may be outside our influence or control. These competitive factors include the following:

our success in designing and introducing new fingerprint sensors and related software solutions, including those implementing new technologies;

our ability to design, introduce, and implement compelling new technologies, products, and solutions in a timely manner;
our ability to accurately predict and adapt to the evolving needs of our customers and to assist them in incorporating our technologies into their new and existing products;

targeted market segments;

our ability to anticipate and meet our customers’ price and performance requirements, as well as their requirements for product ease of use, reliability, and durability;

our ability to meet our customers’ price and performance requirements;

the quality of ourprovide responsive, high-quality customer service and support;

and

the rate at which customers incorporate

our fingerprint sensorsability to anticipate and related software solutions into their own products;

respond to competitors’ product orand pricing moves, new product and technology introductions by our competitors;development, marketing initiatives, strategic partnering, and

other competitive actions.

currency fluctuations, which may cause a competitor’s products to be priced significantly lower than our products.

Moreover, additional

Additional competitors may enter the biometrics market segments we have targeted, with fingerprint authentication solutions or solutions based on other technologies or approaches, increasing competition and become significant long-term competitors. Inincreasing risks to our business, operational performance, and financial position.
Early-stage markets are susceptible to consolidation of participants and entry into the future, we may encounter competition from othermarket by larger, well-established and well-financed entitiesestablished companies that may continue to acquire invest in or form joint ventures with providers of fingerprint recognition technology, and existing providers may elect to consolidate.participants. Our position in the existing marketsmarket segments we target could be eroded rapidlyharmed if the competitive landscape were to change due to consolidation or entry by producta company with substantial resources through a merger, acquisition, or technology enhancements or the developmentjoint venture with a competitor. Increased competition within any of new, superior products and technology by competitors. Increased competitionour targeted market segments could result in price reductions, fewer customer orders, reduced gross margins, and lower market priceslost opportunities, potentially harming our business, operational performance, and financial position.
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Table of Contents
We are exposed to potentially significant supply chain risks, as we currently rely on one semiconductor manufacturer and a limited number of providers of assembly and test services for outsourced production of our ordinary shares.

products.

We currently rely on Taiwan Semiconductor Manufacturing Company, Limited (“TSMC”), the leading producer of semiconductor wafers, for production of our proprietary application specific integrated circuit (“ASIC”) designs. We also rely on a limited number of providers of assembly and test services, including Amkor Technology, Inc. and Silicon Precision Industries Limited (a unit of ASE Technology Holding Co., Ltd.), both of which are leaders in outsourced semiconductor assembly and test services.
We enjoy collaborative, supportive relationships with these suppliers. While we have experienced lengthened delivery lead times, we have not experienced significant delays in delivery of wafers or completed products. However, broader supply chain uncertainties have contributed to, and likely will continue to contribute to, difficulties in accurately planning capacity utilization, inventory provisioning, and inventory levels.
We also have experienced increased costs and expect further cost increases if supply chain conditions remain for a prolonged period, which we anticipate. Numerous industries dependent on the semiconductor and electronics supply chains have experienced supply shortages and delays, contributing to lower production, higher costs, and reduced efficiencies. We expect, based on the research of industry analysts and information from our suppliers, uncertainties associated with capacity utilization, lead times, delivery schedules, and costs will continue through 2022 and, possibly, into 2023. However, we cannot accurately predict when conditions in our supply chains will normalize or what the consequences for our business might be if such normalization does not occur when expected.
The TSMC facility producing our semiconductor wafers is located in China, which exposes us to risks associated with international trade policy, tariffs, and related policy matters, all of which are outside of our influence or control. While TSMC facilities in other countries offer the fabrication processes we require, transition of production of our wafers to such a facility would require significant effort, time, and costs, which could harm our business, operational performance, and financial position.
Because we depend on the contributions of very skilled staff across critical engineering and business disciplines, if these individuals were to leave us, we may not be able to attract and hire replacements with the same skills in a timely fashion, if at all, which could harm our business, operational performance, and financial position.
Our ability to successfully execute our growth strategy depends on our ability to attract, motivate, and retain our personnel. Competition for well-qualified employees across critical disciplines, is intense. Our continued ability to compete effectively depends on our ability to attract new, well-qualified candidates and to retain and motivate existing staff. If we do not succeed in attracting well-qualified candidates or retaining and motivating existing staff, our business, operational performance, and financial position could be adversely affected.
We believe our success has depended, and will continues to depend, on the talents and efforts of our executives and our highly skilled staff, including our engineering, sales, and administrative personnel. We believe we provide compensation, in the form of salaries, benefits, and share-based awards, consistent with comparable technology companies of our size, development stage, and industry focus. We also maintain a yearly performance-based, variable compensation plan, in which all full-time employees participate, directly tied to company-wide, departmental, and individual performance goals. However, total variable compensation paid for the last three years has not been a significant portion of cash compensation, representing, in aggregate, approximately 5%, 4%, and 10% of employee salaries paid for the years ended December 31, 2021, 2020, and 2019. Until we achieve certain levels of sustained revenue and profitability, such amounts of variable compensation likely will not be a significant portion of total compensation. As such, our variable compensation plan may not have the intended effects associated with motivating and retaining our employees.
13

As of December 31, 2021, all of our full-time staff (i.e., employees and global epidemics, includingpermanent individual contractors) held subscription rights for the recent purchase of our Ordinary Shares. Our executives and other key contributors receive a significant portion of their total annual compensation in the form of subscription rights awards or, from time to time, other forms of share-based compensation. If the quoted price of our Ordinary Shares does not appreciate from the prices per share associated with the subscription rights outstanding, the value, if any, of those subscription rights, if and when exercised, may not be meaningful to holders of those subscription rights. If the quoted price of our Ordinary Shares does not increase, the holder’s perception of the potential value of his or her subscription rights may be insufficient to retain that holder as an employee or contractor. The loss of one or more important contributors, due to the perception that the current or future value of subscription rights awards is not sufficiently compelling to remain with us, could adversely affect our ability to execute our strategy, and we may not be able to find adequate replacements in a timely manner. Accordingly, we can provide no assurances that we will be able to retain the services of our executives or key contributors.
The
COVID-19 pandemic
could have an adverse impact on our business, operations, andoperational performance, financial position, as well as the markets and communities in which we operate.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. Our business and operations could be adversely affected by national and global epidemics, including the ongoing COVID-19 pandemic, impacting the markets and communities in which we operate.

In response to
the COVID-19 pandemic,
many state, local, and national governments have put in place and others in the future may put in place, quarantines, executive
orders, shelter-in-place orders,
and similar government orders and restrictions in order to control the spread of the disease. Although there have not been significant delays in our development activities to date, such orders or restrictions, orvirus. At the perception that such orders or restrictions could occur, have resulted in business closures, work stoppages, slowdowns and delays, work-from-home policies, and travel restrictions, among other effects that could negatively impact productivity

and disrupt our operations. We haveonset of the pandemic, we implemented a flexible work-from-home policy for employees and are evaluating hybrid working models for our operations on a go-forward basis.restricted travel. We will continue to monitor federal, state, and localapplicable regulations and the recommendations of public health professionals as we determine which actions are in the best interests of us and our employeesemployees.

We have experienced extended lead times across our supply chain, which were associated, in part, with supply chain disruptions caused by the pandemic. Although such extended lead times have contributed to an increased level of inventory planning and shareholders.

In addition, whilescheduling uncertainty, we have not experienced, to date, interruptions in our development activities or delays in meeting customer commitments that had a material influence on our results. The

COVID-19
pandemic has caused instability and uncertainty, particularly within the potentialsemiconductor and electronics supply chains, which are concentrated in Asia and, notably, China, which continues to experience a health emergency. Numerous industries dependent on the semiconductor and electronics supply chains have experienced supply shortages and delays, contributing to lower production, higher costs, and reduced efficiencies. We expect, based on the research of industry analysts and information from our suppliers, uncertainties associated with capacity utilization, lead times, delivery schedules, and costs will continue through 2022 and, possibly, into 2023. However, we cannot accurately predict when conditions in our supply chains will normalize or what the consequences for our business might be if such normalization does not occur when expected.
While the ultimate impact and duration of
the COVID-19 pandemic
on the global economy, our targeted market segments, and our business in particular may beis difficult to assess or predict, the pandemic has resulted in, and may continue toagain result in, significantthe disruption of global financial markets, potentially reducing our ability to access capital, which could incapital.
Additionally, the future negatively affect our liquidity. The COVID-19 pandemic also could reduce the demand for our customers’ products and services, which could negatively impact the performance of our customers’ willingness to renewcustomers, which could cause reduced orders from them or enterdelays in renewing or entering into contracts with us orus. We believe the pandemic has had an adverse influence on the timing of activities of smart card manufacturers and issuers, including delaying product development and the initiation of trials and pilots involving smart cards incorporating our ability to collectfingerprint authentication solutions. Such negative impact on the performance of our customers could slow the collection of accounts receivable on a timely basis,or expose us to inventory obsolescence, either of which, if significant, could materially and adversely affectharm our business, results of operations,operational performance, and financial condition. For example, while many of our business partners in Asia impacted by the COVID-19 pandemic in the first quarter of 2020 have since returned to operations, there is considerable uncertainty surrounding the timing, duration, or impact of any future disruptions.

position.

The global pandemic of COVID-19 continues to rapidly evolve, and we will continue to monitor the COVID-19 situationcircumstances closely. While the pandemic may
increase end-user awareness
of the hygienic benefits of contactless payment solutions, such as the ones we offer, andthose enabled by our fingerprint authentication solutions, therefore may increase thepossibly increasing demand for our products,such solutions, the ultimatefull impact ofthe 
COVID-19 pandemic
(or a similar health epidemicemergency) is difficult to predict, highly uncertain, with assumptions and estimates subject to change. We do not yet know the full extent
14

Table of potential delays or impacts on ourContents
Our business, operations, or the global economy asoperational performance, and financial position are subject to a whole, which makes our future results difficult to predict.

Unfavorablerange of exogenous risks. A sustained period of unfavorable conditions in the global economy or in the vertical marketsmarket segments we serve could limit our ability to grow our business and negatively affect our operating results.

General worldwide economic conditions have experienced significant instability due to the global economic uncertainty and financial market conditions caused by the COVID-19 pandemic. These conditions make it extremely difficult for customers and us to accurately forecast and plan future business activities and could cause customers to reduce or delay their spending. At this time, the potential impact on customer spend from the COVID-19 pandemic is difficult to predict and, therefore, it is not possible to fully determine the impact on our future results. Historically, economic downturns have resulted in overall reductions in spending. If macroeconomic conditions deteriorate or are characterized by uncertainty or volatility, customers may curtail or freeze spending in general and for biometric products such as ours specifically, whichtarget could have an adverse impact on our business, operational performance, financial condition, and operating results.

We target generating revenue from customers in the payment cards and access control verticals. While these verticals were not affected as severely by weak economic conditions caused by COVID-19 as the retail, hospitality, and entertainment industries, we cannot assure these verticals will not suffer more severe losses in the future as they are in turn impacted by consumer demand and the performance of the retail, hospitality and entertainment industries. Furthermore, we cannot predict the timing, strength, or duration of any economic slowdown or recovery. In addition, even if the overall economy is robust, we cannot assure the market for services such as ours will experience growth or that we will experience growth. Additionally, the increased use of digital payments and virtual credit cards by consumers could pose an obstacle to the growth of our business.

position. War, terrorism, other acts of violence, or natural or manmade disasters, could have an immediate and sustained impact on business and investor confidence, leading to reduced economic activities, potentially harming our business, operational performance, and financial position.

Because we sell an innovative technology solution for emerging applications in market segments in early stages of development, we are particularly vulnerable to a sustained decline in economic conditions, which likely would be accompanied by a decline in confidence within our targeted market segments. Heightened risk aversion within our targeted market segments could inhibit demand for our solutions, which have yet to achieve wide adoption.
We believe global economic conditions are subject to the following short- and long-term exogenous risks, individually and with combined effect:
the
COVID-19
pandemic does not abate, or new variants of the virus are identified, causing governments to prolong current, or impose new, restrictions on activities, potentially contributing to inflationary and recessionary pressures across the global economy;
supply chain constraints and related uncertainties continue indefinitely across industries, or conditions deteriorate, with the potential consequence of increasing inflationary and recessionary pressures in specific geographies or market segments or across the global economy;
the relationships between China and western trading partners, notably the United States, do not improve or deteriorate further, possibly contributing to further trade restrictions, leading to inflationary and recessionary pressures in China and across the global economy; and
the war between Russia and Ukraine and the risk of escalation into a broader conflict does not abate, causing prolonged trade sanctions and other economic restrictions on Russia, potentially contributing to inflationary and recessionary pressures across the global economy.
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These and other risks to economic activity could make it difficult for our customers and other market participants to accurately forecast and plan business activities, leading to lower confidence and the possibility of reduced or delayed on new initiatives, such as a global pandemic may affect the markets in which we operate, our customers, our deliverydeployment of products and customer service, andincorporating our fingerprint authentication solutions. If economic conditions deteriorate or are characterized by greater uncertainty or volatility, we may not meet our revenue forecasts or our expectations for when profitability will be achieved may be delayed, which could have a materialan adverse impact on our business, results of operations, oroperational performance, and financial condition.

Our business may be adversely affected by instability, disruption or destructionposition.

Additionally, if economic conditions were to deteriorate, valuations in a geographic region in which we operate, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest, and natural or manmade disasters, including famine, food, fire, earthquake, storm or pandemic events, including COVID-19.

Such events may cause customers to suspend or delay their decisions on using our products and services, make it difficult or impossible to access somethe capital markets likely would decline, independent of our inventory, and give rise to sudden significant changesperformance or disclosed outlook, potentially resulting in regional and global economic conditions and cycles that could interfere with purchases of goods or services. These events also pose significant risks tolower quoted market prices for our personnel and to physical facilities, which could materially adversely affect our financial results.

We rely on the performance of highly skilled personnel, including senior management and our engineering, professional services, sales and technology professionals; if we are unable to retain or motivate key personnel or hire, retain and motivate qualified personnel, our business would be harmed.

We believe our success has depended, and continues to depend, on the efforts and talents of our senior management team and our highly skilled team members, including our sales personnel, engineering and support personnel. From time to time, there may be changes in our senior management team resulting from the termination or departure of our executive officers and key employees. Our senior management and key employees are employed on an at-will basis, which means that they could terminate their employment with us at any time. Many of our executive officers and key employees receive equity compensation as a portion of their overall compensation package. A substantial decrease in the market price of our ordinary shares would effectively reduce the compensation ofsecurities. As such, persons and could increase the risk that they depart from our company. The loss of any of our senior management or key employees could adversely affect our ability to build onaccess additional capital through the efforts they have undertaken and to execute our business plan, and we may notcapital markets could be able to find adequate replacements. We cannot ensure that we will be able to retain the services of any members of our senior managementdiminished or other key employees.

significantly delayed.

Our ability to successfully pursue our growth strategy also depends on our ability to attract, motivate and retain our personnel. Competition for well-qualified employees in all aspects of our business, including sales personnel, professional services personnel, and engineering and support personnel, is intense. Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate existing employees. If we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business would be adversely affected.

Because many rapidly growing markets for our products are international, our business is susceptible to risks associated with international operations.

Biometric products including ours

We market our solutions worldwide. Our global marketing and sales personnel are often marketed and sold globally. We currently haveassigned to offices in Norway,the United Kingdom, the United States, the UK and China, whichand focus on sellingdemand creation and implementingcustomer support. We also have sales and marketing personnel residing across Europe, North America, and Asia, addressing opportunities across our fingerprint sensors and related software solutionsthree targeted markets in those regions. In the future, we may expand within these countries orEmploying and managing personnel across disparate international domiciles, with differing employment and tax laws, has been, and likely will continue to other international locations. Thisbe, a source of organizational complexities and costs that have been, and likely will continue to be, disproportionally high for a company of our size and stage of development.
We currently do not have personnel or customers in Russia, Ukraine, or the neighboring countries.
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Our reliance on international marketing and sales and marketingactivities subjects us to the risks of conducting business internationally, including risks associated with political and economic instability, global health conditions,including trade restrictions, sanctions, and import/export regulations, currency controls and exchange rate fluctuations, and changes in import/export regulations, and tariff and freight rates. For example,duty rates, and travel and trade restrictions related to health emergencies (e.g., the political
COVID-19
pandemic). Such instabilities or economic instabilityuncertainties associated with these risks may negatively impact the performance of our customers in a given region may have an adverseone or more regions of the world, which could cause reduced orders from them or delays in renewing or entering into contracts with us, negatively affecting our business, operational performance, and financial position. Such negative impact on the financial positionperformance of end usersour customers in one or more regions of the region,world could slow the collection of accounts receivable from such customers or expose us to inventory obsolescence due to delayed or cancelled orders, either of which, if significant, could affect future orders and harm our results of operations. business, operational performance, and financial position.
Our international sales operations involveactivities may expose us to a number of other risks including, but not limited to:

difficulties in staffing and managing international operations;
potentially longer sales and payment cycles;

collection cycles, due to currency restrictions or other limitations on customer remittances;

unexpected challenges within or changes to countries’ banking and credit requirements;

systems;

unexpected changes in government regulatory requirements;

sales,

managing complex value added tax, sales, or other indirect tax requirements, regulations, and treaties, which can be burdensome, and potential changes in tax and trade regulations and treaties in the Kingdom ofand among Norway, the United States, the United Kingdom, China, and in and betweenamong countries in which we marketoperate or sell our products;

different, complex and changing laws governing intellectual property rights, which in certain countries sometimes afford reduced protection of intellectual property rights;

conduct business;

any

unexpected changes in international trade policies, including potential adoption and expansion of trade restrictions, higher tariffs or crosscross- border taxation that might impact overall customer demand fortaxation;
potentially longer inventory cycles, in the event our productssupply chain partners, which primarily are based in China, Taiwan, and South Korea, experience operational disruptions or affect our ability to manufacture and/are negatively affected by changes in trade policies or sell our products overseas;

taxation;

changes to economic, social,

different, complex, and evolving laws governing intellectual property rights, which in certain countries provide uncertain or political conditions in countries where we have significant operations;

reduced protection of intellectual property rights; and

operating in countries with a higher incidence of corruption and fraudulent business practices;

practices.

challenges

These and other risks associated international activities could contribute to reduced demand from, or disruptions of our relationships with, international customers operating in providing solutions across a significant distance in different languages and among different cultures;

the burdensany of complyingour three targeted markets, with a variety of various country laws in which we operate;

difficulties in staffing and managing international operations; and

rapid changes in government, economic and political policies and conditions, political or civil unrest or instability, terrorism or pandemics (including but not limited to the COVID-19 pandemic) and other similar outbreaks or events.

We cannot guarantee that any potential future expansion efforts that we may undertake will be successful. If we invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner,potentially adverse influence on our business, operational performance, and operating results will suffer.

financial position.

If currency exchange rates fluctuate substantially in the future, our financial results, which are reportedpresented in U.S. Dollars, could be adversely affected.

We priceinfluenced by potentially large gains or losses experienced in the translation of amounts denominated in foreign currencies.

Our terms and conditions of sale provide for pricing our products and bill virtually all ofinvoicing our customer revenuecustomers in U.S. Dollars, and our suppliers of outsourced product manufacturing is priced and billedassembly and test services invoice us in U.S. Dollars. However, we incur expenses for employee compensation, property leases, and other operating expenses in the local currencies of the jurisdictionscountries in which we operate. Fluctuations in the exchange rates between the U.S. Dollar and other currencies may impact expenses as well as revenue, and consequently have an impact on margin and the reported operating results. This could have a negative impact on our reported operating results. To date, we have not engaged in any currency hedging strategies, and any such strategies, such as forward contracts, currency options, and foreign exchange swaps, related to transaction exposures that we may implement to mitigate this risk may not eliminate, or may increase, our exposure to foreign exchange fluctuations.

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Product errors or defects could expose us to costs and liabilities, harm our reputation, and reduce our ability to compete effectively.
Semiconductor-based products such as those we develop and sell may contain errors or defects, especially when first introduced, when new versions are released, or when first integrated with other technologies, either by us or our customers. Product errors, including those resulting from third-party suppliers, could affect the performance or interoperability of our products, could delay the development or release of enhanced or new products and solutions, with potentially adverse consequences for our reputation, market acceptance of our products and solutions, and our ability to compete. Any errors or delays in releasing enhanced or new products and solutions could cause us to lose customers, subject us to liability for damages, and divert our resources from other tasks, any one of which could materially and adversely affect our business, operational performance, and financial position. Although we have insurance to cover product liability claims, the amount of coverage may not be sufficient.
If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to: regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.
In the ordinary course of our business, we may collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, processing) proprietary, confidential, and sensitive data, including personal data, intellectual property, and trade secrets (collectively, sensitive information). We may rely upon third-party service providers and technologies to operate critical business systems to process sensitive information in a variety of contexts, including, without limitation,
third-party
providers of cloud-based infrastructure, encryption and authentication technology, employee email, content delivery to customers, and other functions. Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. We may share or receive sensitive information with or from third parties.
Cyberattacks, malicious internet-based activity, and online and offline fraud are prevalent and continue to increase. These threats are becoming increasingly difficult to detect. These threats come from a variety of sources, including traditional computer “hackers,” threat actors, personnel (such as through theft or misuse), sophisticated nation-states, and nation-state-supported actors. Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including
cyber-attacks,
that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services. We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions),
denial-of-service
attacks (such as credential stuffing), personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
Ransomware attacks, including by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. Similarly, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain
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exploitable defects or bugs that could result in a breach of or disruption to our information technology systems (including our products and services) or the third-party information technology systems that support us and our services. Because of the
COVID-19
pandemic, many of our staff are choosing to work remotely, which presents increased risks to our information technology systems and data, as remote staff utilizes computing resources and network connections outside our premises. Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.
Any of the previously identified or similar threats could cause a security incident or other interruption. A security incident or other interruption could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information. A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our products or services. The failure of our information security infrastructure, procedures, and controls to protect us from an expanding variety of cybersecurity threats could have a material adverse effect on our business, operational performance, financial position, and damage to our reputation as a provider of solutions for information security.
We may expend significant resources or modify our business activities to try to protect against security incidents. Certain data privacy and security obligations may require us to implement and maintain specific security measures, industry-standard or reasonable security measures to protect our information technology systems and sensitive information.
To date, we have not experienced a security incident or similar event. Although we have implemented information security infrastructure, procedures, and controls to address these threats, there can be no assurance that these measures will be effective. Our systems remain vulnerable to an expanding variety of cybersecurity threats, including data theft, financial fraud, ransomware and similar third-party criminal activity, and computer viruses or similar operationally disruptive problems, given the pace at which such threats evolve. We may be unable in the future to detect vulnerabilities in our information technology systems (including our products) because such threats and techniques change frequently, are often sophisticated in nature, and may not be detected until after a security incident has occurred. Despite our efforts to identify and address vulnerabilities, if any, in our information technology systems (including our products), our efforts may not be successful. Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.
Applicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents. Such disclosures are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences. If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences. These consequences may include: government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms. Security incidents and attendant consequences may cause customers to stop using our products or services, deter new customers from using our products or services, and negatively impact our ability to grow and operate our business. Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. While we maintain certain third-party insurance coverage to address the consequences of failure of our information security infrastructure, procedures, and controls to adequately protect us, the policy is limited in scope and may not fully reimburse our costs or fully indemnify us from liabilities in the event of a claim against such insurance. Additionally, such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.
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We may pursue strategic transactions, including acquisitions including acquiringof other biometric companies, as partbusinesses operating in our current market or operating in a new market, and integration of any such acquired assets or operations into our growth strategycompany may be disruptive or not meet expectations, thereby harming our business, operating performance, and that may disrupt our business.

financial position.

We may pursue strategic acquisitionstransactions in the future. Risks in acquisitionassociated with mergers, acquisitions, investments, asset purchases, joint ventures, and related strategic transactions includeinclude:
incomplete or inadequate due diligence on our part, regarding the business, operational, financial, and legal characteristics of the business and the development of associated assumptions and estimates;
challenges and difficulties in the integration of acquired businessesbusiness operations into our operations, information systems, and control environment,environment;
challenges and difficulties in assimilating and retaining employeesemployees;
challenges and intermediaries, difficulties in integrating technologies, intellectual property, and product development activities;
challenges and difficulties in retaining the existing customers of the acquired entities,business and developing new customers after the strategic transaction;
challenges and difficulties in integrating supply chains and inventories;
meeting the terms of contractual liabilities assumed by us, or unforeseentransferred to us, as a result of the strategic transaction;
unanticipated liabilities and contingent obligations that may arise in connectiondue to the strategic transaction;
the breach of representations and warranties by one or more parties to the definitive agreement associated with the acquired businesses, strategic transaction, for which remedy may be insufficient or unavailable;
the failure of counterpartiesone or more parties to the definitive agreement associated with the strategic transaction to satisfy any obligations to indemnify us against liabilities arising from the strategic transaction; and
development of unfavorable economic or trading conditions in the market segments we target (or are targeted by the acquired businesses, and unfavorable market conditions thatbusiness), which could negatively impact the accuracy of our growth expectations forassumptions and estimates associated with the acquired businesses. Fully integrating an acquired companystrategic or business into our operations may take a significant amountfinancial value of time. We cannot assure you that we will be successful in overcoming these risks or any other problems encountered with acquisitionsthe strategic transaction.
These and other strategic transactions. These risks may prevent us from realizing the expected strategic and financial benefits from acquisitionscompletion of the strategic transaction, and, could result in the failure to realizeif the full economic value of athe strategic transaction oris not realized, we may be required to incur an impairment charge to reduce the impairmentcarrying value of any goodwill and/or intangible assets recognizedrecorded at the time of an acquisition. These risks could be heightened if we complete a large acquisition or multiple acquisitions within a short period of time. Additional risks may include:

difficulties in integrating operations, technologies, services and personnel;

the diversion of financial and management resources from existing operations;

strategic transaction.

the risk of entering new markets;

the potential loss of existing customers following an acquisition;

the potential loss of key employees and the associated risk of competitive efforts from such departed personnel; and

the inability to generate sufficient revenue to offset acquisition or investment costs.

As a result, ifIf we fail to properly evaluate and successfully execute any acquisitions or investments,strategic transaction, our business, operational performance, and prospectsfinancial position may be seriously harmed.

Because the value of an investment in our equity securities is subject to a range of risks, including those described herein, if investors were to experience significant losses in the value of their investments in our equity securities, we may face litigation alleging that we have violated securities laws.
Companies that have experienced declines in the quoted prices of their shares, leading to investor losses, have been the subject of securities class action litigation, principally associated with allegations of material misstatements or omissions in disclosures required under SEC rules. Any such lawsuit to which we are a party, with or without merit, may result in an unfavorable judgment, or we and our insurance carriers may decide to settle litigation on unfavorable terms. Any such negative outcome could result in substantial damages or fines, damage to our reputation, or require modification of our business practices, all of which could harm our business, operational performance, and financial position. Defending litigation is costly and time-consuming and could
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divert management’s attention and our resources. Furthermore, negative public announcements associated with the litigation could have a negative effect on the quoted prices of our ADSs or Ordinary Shares.
Risks Related to Intellectual Property
Any failure to protect our proprietary technology and intellectual property rights could substantially reduce our ability to compete effectively, thereby harming our business, operational performance, and financial position.
We protect our proprietary technology and confidential information through the use of patents, trade secrets, trademarks, confidentiality agreements, and other contractual instruments and provisions.
Our intellectual property rights cover individual inventions and complete systems ranging from fingerprint measurement principles, fingerprint processing and matching algorithms, image sensor designs, integrated circuit designs,
card-not-present
solutions, dynamic registration enrolment solutions, and integrated system solutions. We have filed applications to protect our intellectual property rights in many countries, including Norway, South Korea, the United Kingdom, the United States, and those of the European Union. As of December 31, 2021, we have been granted 146 patents and have 66 pending patent applications.
The wordmark ‘IDEX’ and the IDEX logo are registered trademarks of IDEX Biometrics ASA and are owned by our company. There can be no assurance we will obtain protective registrations of our trademarks in key markets. Failure to obtain registrations could compromise our ability to fully protect our trademarks and brands and could increase the risk of challenge from third parties to our use of our trademarks and brands.
Effective intellectual property protection may be unavailable or limited in some foreign countries in which we operate. For example, the validity, enforceability, and scope of protection of intellectual property in China, where we operate, are still evolving and do not protect our intellectual property rights to the same extent as the laws in the other countries in which we operate.
We rely upon written agreements with our customers, suppliers, manufacturers, and other recipients of our technologies and products, in which our intellectual property is used, setting forth requirements for the treatment of confidential information, including our intellectual property. However, such agreements may not be adequate to protect our intellectual property and other proprietary information. Our customers, suppliers, manufacturers, and other recipients of our technologies and products may seek to use our intellectual property or proprietary information in violation of the terms of such written agreements.
Unauthorized parties may attempt to copy or otherwise use elements of intellectual property or proprietary information. Other parties, including our competitors, may independently develop technologies and products that are similar to or replicate features and functions of our technologies and products, potentially infringing on our intellectual property rights. If our efforts to protect and enforce our intellectual property rights are ineffective, we may engender increased competition in the market segments we target or in other markets in which fingerprint authentication applications are appropriate.
We may pursue and, from time to time, defend litigation to enforce our intellectual property rights, to protect our trade secrets, and to determine the validity and scope of the proprietary rights of others. Such litigation, whether successful or unsuccessful, could result in substantial costs and diversion of resources, which could have a material adverse effect on our business, operating performance, and financial position.
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Any claims by third parties alleging we have infringed on their intellectual property rights could result in substantial costs and diversion of resources, which could have a material adverse effect on our business, operating performance, and financial position.
Our success depends, in part, on our ability to develop and commercialize our solutions and services without infringing, misappropriating or otherwise violating the intellectual property rights of third parties. However, we may not be aware that our solutions or services are infringing, misappropriating, or otherwise violating
third-party
intellectual property rights and such third parties may bring claims alleging such infringement, misappropriation, or violation. For example, there may be issued patents of which we are not aware, held by third parties that, if found to be valid and enforceable, could be alleged to be infringed by our current or future technologies or products. There also may be pending patent applications of which we are not aware that may result in issued patents, which could be alleged to be infringed by our current or future technologies or products. Because patent applications can take years to issue and are often afforded confidentiality for some period of time there may currently be pending applications, unknown to us, that later result in issued patents that could cover our current or future technologies or products. A claim may also be made relating to technology that we acquire or license from others. We are not aware of any claims of infringement. However, any such claims, with or without merit, could result in significant litigation costs and diversion of resources, including the attention of management, and could require us to enter into licensing agreements. There can be no assurance such licenses could be obtained on commercially reasonable terms in a timely manner, if at all, or that the terms of any offered licenses would be acceptable to us.
We also may be required to pay substantial penalties and damages to third parties, potentially including treble damages if we are found to have willfully infringed patents or copyrights. We may also be required to indemnify customers or our licensees for penalties and damages they suffer, if the products they purchase from us, or the technology they may license from us, are found to violate third-party intellectual property rights. We cannot predict the outcome of lawsuits and cannot ensure that the results of any such actions will not have an adverse effect on our business, operational performance, or financial position or results of operations. An adverse determination in a judicial or administrative proceeding, or a failure to obtain necessary licenses to use such third-party intellectual property could prevent us from manufacturing, using, or selling certain of our products, and there is no certainty we will be able to develop or acquire
other non-infringing intellectual
property to allow us to continue to offer such products without infringement.
In addition, we may license from third-parties certain technologies used in our products. These third-party licenses may be granted with restrictions, and there can be no assurances that such third-party technologies will be available to us on commercially acceptable terms. If we are unable to license technologies for our products from third-parties on commercially acceptable terms, or if any third-party initiates litigation against us for alleged infringement of their intellectual property rights, we may not be able to sell certain of our products and we could incur significant costs in defending against litigation or attempting to develop or acquire alternate
non-infringing products,
which would have an adverse effect on our business, operating performance, and financial position.
Our patents may not provide us with competitive advantages.
Our success is dependent, in part, upon protecting our intellectual property rights. We rely on a combination of patents, copyrights, trademarks, service marks, trade secret laws, and contractual restrictions to establish and protect our intellectual property rights in our products and services. However, the steps we take to protect our intellectual property may be inadequate. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Despite our precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create products and services that compete with ours.
We hold numerous patents in the United States and in other countries, covering multiple elements of our highly-differentiated technologies and products. There can be no assurance we will continue to develop
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proprietary technologies and products that are patentable, that any issued patent will provide us with any competitive advantages or will not be challenged by third-parties, or that patents of others will not limit our ability to effectively compete. Although we have patented the intellectual property that we believe provides us with competitive advantages, our competitors offer products for fingerprint authentication applications, employing different technologies and processes.
Additionally, the process of obtaining patent protection is expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patent applications, or we may not be able to do so at a reasonable cost or in a timely manner. The United States Patent and Trademark Office (the USPTO) and various foreign governmental patent agencies also require compliance with procedural, documentary, fee payment, and other similar provisions during the patent application process and after a patent has issued. There are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Even if issued, these patents may not adequately protect our intellectual property, as the legal standards relating to the infringement, validity, enforceability, and scope of protection of patent and other intellectual property rights are complex and often uncertain. Any patents, trademarks, or other intellectual property rights that we have or may obtain may be challenged or circumvented by others or invalidated or held unenforceable through administrative processes,
including re-examination,
 inter partes
 review, interference and derivation proceedings and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings) or litigation.
In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation brought to protect and enforce our intellectual property rights could be costly, time consuming, and distracting to management, and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights. An adverse determination of any litigation proceedings could put our intellectual property at risk of being invalidated or interpreted narrowly and could put our related patents, patent applications and trademark filings at risk of being invalidated, not issuing or being cancelled. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential or sensitive information could be compromised by disclosure in the event of litigation. In addition, during the course of litigation there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay further sales or the implementation of our existing products, impair the functionality of our products, delay introductions of new products, result in our substituting inferior or more costly technologies into our products, or harm our reputation or brand. In addition, we may be required to license additional technology from third-parties to develop and market new products, and we may not be able to license that technology on commercially reasonable terms or at all. Our inability to license this technology could harm our ability to compete.
Risks Related to Government Regulation, Data Collection, Intellectual PropertyLaws and Litigation

Regulations

Our business is subject to a complex variety of laws and regulations around the world. Any changes in government regulations relating to our business or other unfavorable developments may adversely affect our business, operating results,operational performance, and financial condition.

position.

We are an international company that isincorporated in and registered under the laws of the Kingdom of Norway, with offices and/or operationsstaffed subsidiaries in Norway, the United Kingdom, the United States, the UK and China. We also have personnel in various other countries in which we operate. As a result of this organizational structure and the scope of our operations, we are subject to a complex variety of laws inand regulations across different countries. The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting. It is alsoIf we establish operations in, or have
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customers domiciled in, other countries, we likely that if our business grows and evolves and our solutions are used more globally, we will become subject to the laws and regulations in additional jurisdictions.of those countries. It is difficult to accurately predict how existing laws willand regulations may be applied to our business, and theor what new laws to which weand regulations may become subject.

come into effect.

We are subject to various businesslaws and regulations and laws.regarding how we conduct our business. Such laws and regulations include, but are not limited to, labor, advertising and marketing, real estate, taxation, user privacy, data collection and protection, intellectual property, anti-corruption, anti-money laundering, tariffs and customs regulations, export controls, economic sanctions, foreign exchange controls, antitrust and competition, electronic contracts, telecommunications, sales procedures, credit card processing procedures, and consumer protections. We cannot guarantee that we have been or will be fully compliant in every jurisdictioncountry in which we are subject to regulation,operate, as existing laws and regulations governing issues such as intellectual property, privacy, taxation, and consumer protection, among others, are constantly changing.complex and subject to constant change. The adoption or modification of laws or regulations relating to our product development or other areas of our businesstechnologies and products, and the use thereof, could limit or otherwise adversely affect the manner in which we currently conduct our business. Further, compliance with laws, regulations, and other requirements imposed upon our business may be onerous and expensive, and theysuch compliance may be inconsistent from jurisdiction to jurisdiction, further increasing the costcosts and risk of compliance and doing business.

noncompliance.

Noncompliance with applicable laws, regulations, or requirements could subject us to investigations, sanctions, mandatory product recalls, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties, injunctions, or other collateral consequences. If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations, and financial condition could be materially adversely affected. In addition, respondingOur response to any legal action willor a government enforcement action or sanction likely would result in a significant diversion of management’smanagement attention, andan unproductive redirection of resources, and an increase in professional fees. Enforcement actions and sanctions could harmcosts. If our response is ineffective, our business, reputation, results of operationsoperational performance, and financial condition.

Because our productsposition could be usedmaterially adversely affected.

We are subject to collectstringent and store personal information, domesticevolving U.S. and internationalforeign laws, regulations, rules, contractual obligations, policies, and other obligations related to data privacy concernsand security. Our actual or perceived failure to comply with such obligations could result in additional costslead to regulatory investigations or actions; litigation; fines and liabilities to us or inhibit salespenalties; disruptions of our products.

Personalbusiness operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences.

In the ordinary course of business, we process personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, sensitive third-party data, and biometric identification information, although we do not copy or store any such data or sensitive information. Our data processing activities may subject us to numerous data privacy has become a significant issue inand security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contracts, and other obligations that govern the United Statesprocessing of personal data by us and in many other countries where we offeron our products and related software solutions. The regulatory framework for privacy issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. behalf.
Many federal, state and national government bodies and agenciesgovernments have adopted or are considering adopting laws and regulations regarding the collection, use, storage and disclosure of personal information and breach notification procedures. Interpretation

of these laws, rules and regulations and their application to our products and professional services in Norway, the United States and other foreign jurisdictions is ongoing and cannot be fully determined at this time.

In the United States, these include rules and regulations promulgated under the authority of the Federal Trade Commission, the Electronic Communications Privacy Act, Computer Fraud and Abuse Act, the Health Insurance Portability and Accountability Act of 1996, the Gramm Leach Bliley Act, the California Consumer Privacy Act, or the CCPA, and other state laws relating to privacy and data security. The CCPA, which became effective on January 1, 2020, drastically changes the ability for individuals to control the use of their personal data. It contains detailed requirements regarding collecting and processing personal information, imposes certain limitations on how such information may be used, and provides rights to consumers that have never before been available in the past, all of which may be imposed on us by our customers and/or end users. This could increase our costs of doing business. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States, which could increase our potential liability and adversely affect our business.

Virtually every jurisdiction in which we operate has established its own data security and privacy legal framework with which we or our customers must comply, including but not limited to the EU. The EU’s data protection landscape is currently unstable, resulting in possible significant operational costs for internal compliance and risk to our business. The EU has adopted the GDPR, which went into effect in May 2018 and contains numerous requirements and changes from previously existing EU law, including more robust obligations on data processors and heavier documentation requirements for data protection compliance programs by companies. Among other requirements, the GDPR regulates transfers of personal data, subject toincluding biometric information, and notification procedures in the GDPR to third countries that have not been found to provide adequate protection toevent of a breach of data security or other unintentional disclosure of such personal data, includinginformation. For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United States. TheKingdom’s GDPR also introduced numerous privacy-related changes(“UK GDPR”), and China’s Personal Information Protection Law (“PIPL”) impose strict requirements for companies operating inprocessing personal data. For example, under the EU including greater control forGDPR, government regulators may impose temporary or definitive bans on data subjects (including, for example, the “right to be forgotten”), increased data portability for EU consumers, data breach notification requirements and increased fines. In particular, under the GDPR,processing, as well as fines of up to 20 million euros or up to 4% of the annual global revenue, of the noncompliant company, whichever is greater, couldgreater. Further, individuals may initiate litigation related to processing of their personal data. We also target customers in Asia and have an office in China, and, as such, may be imposed for violationssubject to new and emerging data privacy regimes in Asia, including China’s PIPL, Japan’s Act on the Protection of certain of the GDPR’s requirements. Such penalties are in addition to any civil litigation claims byPersonal Information, and Singapore’s Personal Data Protection Act.

We, our card manufacturer customers, and their issuing customers are subject to evolving laws and regulations limiting the circumstances under which certain personal data subjects. The GDPR requirements apply not only to third-party transactions, but also to transfers of informationcan be obtained, transferred, received, and processed between uscountries or jurisdictions. Many jurisdictions in which we operate have established data security and our subsidiaries, including employee information.

In additionlegal frameworks specifically applicable to the GDPR,collection and storage of biometric information.

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European countries and the European Commission has another draft regulationUnion (the “EU”) have been early and active in the approval process that focuses on a person’s rightdevelopment of such frameworks, but the terms and provisions of such frameworks are not uniform and are subject to conduct a private life (in contrastchange. As such, we are exposed to the GDPR, which focuses on protection of personal data). The proposed legislation, knownincreased costs associated with compliance, as the Regulation on Privacywell as increased risks caused by evolving regulatory requirements and Electronic Communications, or ePrivacy Regulation, would replace the current ePrivacy Directive. Originally planned to be adopted and implemented at the same time as the GDPR, the ePrivacy Regulation continues to be delayed. While the new legislation contains protections for those using communications services (for example, protections against online tracking technologies), the timing of its proposed enactment following the GDPR means that additional time and effort may need to be spent addressing differences between the ePrivacy Regulation and the GDPR. New rules related to the ePrivacy Regulation are likely to include enhanced consent requirements in order to use communications content and communications metadata, which may negatively impact our products and our relationships with our customers.

uncertainties.

Complying with the GDPR and the ePrivacy Regulation, when it becomes effective,enacted, may cause us to incur substantial operationaladditional costs or require us to changemodify our strategy, business practices. We maypractices, and solutions, as many of our current and targeted customers are domiciled in the EU. Norway, the domicile of our company, is not be successfulan EU member state, although it is associated with the EU through its membership in our efforts to achieve compliance either due to internal or external factors such as resource allocation limitations or a lackthe European Economic Area (“EEA”). Through Norway’s adoption of vendor cooperation. Non-compliance could resultthe Personal Data Act in proceedings against us by governmental entities, customers, data subjects or others. We may also experience difficulty retaining or obtaining new European or multi-national customers due to2018, the legal requirements, compliance cost, potential risk exposure, and uncertainty for these entities, and we may experience significantly increased liability with respect to these customers pursuantGDPR was incorporated into Norway’s EEA agreement, thus binding Norway to the terms set forthof the GDPR in the same manner as an EU Member State.
In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, and consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act). For example, the California Consumer Privacy Act of 2018 (“CCPA”) imposes obligations on covered businesses. These obligations include, but are not limited to, providing specific disclosures in privacy notices and affording California residents certain rights related to their personal data. The CCPA allows for statutory fines for noncompliance (up to $7,500 per violation). In addition, it is anticipated that the California Privacy Rights Act of 2020 (“CPRA”), effective January 1, 2023, will expand the CCPA. Additionally, the CPRA establishes a new California Privacy Protection Agency to implement and enforce the CPRA, which could increase the risk of enforcement. Other states have enacted data privacy laws. For example, Virginia passed the Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act, both of which become effective in 2023. Additionally, several states and localities have enacted statutes banning or restricting the collection of biometric information. Furthermore, data privacy and security laws have been proposed at the federal, state, and local levels in recent years, which could further complicate compliance efforts.
Additionally, there are U.S. state laws and regulations governing the collection and use of biometric information, such as fingerprints. For example, the Illinois Biometric Information Privacy Act regulates the collection, use, safeguarding, and storage of “biometric identifiers” and “biometric information” by private entities and provides a private right of action for persons who are aggrieved by violations of the law, which have resulted in a number of class action lawsuits. These regulations could have a significant impact on our engagements with them.

business.

In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that may applybecome applicable to us. For example, certain privacy laws, such as the GDPR and the CCPA, require our customers to impose specific contractual restrictions on their service providers. Because the interpretation and application of privacy and data protection laws are still uncertain, it is possible that these laws and other actual or alleged legal obligations, such as contractual or self-regulatory obligations, may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our products and softwarefingerprint authentication solutions. If so, in addition to the possibility of fines, lawsuits, and other claims, we could be required to fundamentally change our business activities and practices or to modify our products and software solutions, which could have an adverse effect on our business, operational performance, and financial position.
Certain jurisdictions have enacted data localization laws and cross-border personal data transfer laws, which could make it more difficult to transfer information across jurisdictions (such as transferring or receiving personal data that originates in the EU or in other foreign jurisdictions). Existing mechanisms that facilitate cross-border personal data transfers may change or be invalidated. For example, absent appropriate safeguards or other circumstances, the EU GDPR generally restricts the transfer of personal data to countries outside of the EEA that the European Commission does not consider to provide an adequate level of data privacy and security, such as the United States. The European Commission released a set of “Standard Contractual Clauses” (“SCCs”) that are designed to be a valid mechanism to facilitate personal data transfers out of the EEA to these jurisdictions. Currently, these Standard Contractual Clauses are a valid mechanism to transfer personal data outside of the EEA, but there exists some uncertainty regarding whether the SCCs will remain a valid mechanism.
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Additionally, the SCCs impose additional compliance burdens, such as conducting transfer impact assessments to determine whether additional security measures are necessary to protect the
at-issue
personal data. In addition, Switzerland and the United Kingdom similarly restricts personal data transfers outside of those jurisdictions to countries such as the United States that do not provide an adequate level of personal data protection, and certain countries outside Europe (e.g., China) have also passed or are considering laws requiring local data residency or otherwise impeding the transfer of personal data across borders, any of which could increase the cost and complexity of doing business. Any
If we cannot implement a valid compliance mechanism for cross-border data transfers, we may face increased exposure to regulatory actions, substantial fines, and injunctions against processing or transferring personal data from Europe or other foreign jurisdictions. The inability to import personal data to the United States could significantly and negatively impact our business operations; limiting our ability to collaborate with parties that are subject to such cross-border data transfer or localization laws; or requiring us to increase our personal data processing capabilities and infrastructure in foreign jurisdictions at significant expense.
Obligations related to data privacy and security are quickly changing in an increasingly stringent fashion, creating some uncertainty as to the effective future legal framework. Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions. Preparing for and complying with these obligations requires significant resources and may necessitate changes to our information technologies, systems, and practices and to those of any third parties that process personal data on our behalf. Although we endeavor to comply with all applicable data privacy and security obligations, we may at times fail (or be perceived to have failed) to do so. Moreover, despite our efforts, our personnel or third parties upon whom we rely may fail to comply with such obligations, which could negatively impact our business operations and compliance posture. For example, any failure by a third-party processor to comply with applicable law, regulations, or contractual obligations could result in adverse effects, including inability to or interruption in our ability to operate our business and proceedings against us by governmental entities or others.
If we fail or are perceived to have failed to adequately address privacy concerns even if unfounded, or comply with applicable privacy or data protection laws, regulations and policies, we could result inface significant consequences. These consequences may include, but are not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-related claims); additional costreporting requirements and/or oversight; bans on processing personal data; and liabilityorders to us, damage our reputation, inhibit sales and adversely affect our business.

Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, and policies that are applicable to the businesses of our customers may limit the use and adoption of, and reduce the overall demand for, our products. Privacy concerns, whether validdestroy or not valid, may inhibit market adoptionuse personal data. Any of our products and software solutions particularly in certain industries and foreign countries.

We face risks associated with security breaches, cyber-attacks and hacking.

We face risks associated with security breaches, cyber-attacks and hacking of our computer systems or those of our third-party representatives, vendors, and service providers. Although we have implemented security procedures and controls to address these threats, our systems may still be vulnerable to data theft, computer viruses, programming errors, attacks by third parties, or similar disruptive problems. If our systems, or systems owned by third parties affiliated with our company, were breached or attacked, the proprietary and confidential information of our company, our employees and our customers could be disclosed and we may be required to incur substantial costs and liabilities, including the following: liability for stolen assets or information; fines imposed on us by governmental authorities for failure to comply with privacy laws or for disclosure of any personally identifiable information as a part of such attack; costs of repairing damage to our systems; lost revenue and income resulting from any system downtime caused by such breach or attack; loss of competitive advantage if our proprietary information is obtained by competitors as a result of such breach or attack; increased costs of cyber security protection; costs of incentives we may be required to offer to our customers or business partners to retain their business; damage to our reputation; and expenses to rectify the consequences of the security breach or cyber-attack. In addition, any compromise of security from a security breach or cyber-attack could deter customers or business partners from entering into transactions that involve providing confidential information to us. As a result, any compromise to the security of our systemsevents could have a material adverse effect on our reputation, business, reputation,or financial condition, and operating results.

Any failure to protect our proprietary technology and intellectual property rights could substantially harmposition, including but not limited to: loss of customers; interruptions in our business and operating results.

We protect our proprietary technology and confidential information through the use of patents, trade secrets, trademarks, confidentiality agreements and other contractual provisions. Theoperations; inability to process of seeking patent protection is lengthy and expensive. Further, there can be no assurance that even if a patent is issued, that it will not be challenged, invalidatedpersonal data or circumvented, or that the rights granted under the patents will provide us with meaningful protection or any commercial advantage.

Our intellectual property rights cover individual inventions and complete biometric systems ranging from measurement principles, algorithms, sensor design and system solutions. We have filed applications to protect our intellectual property rights in a wide range of countries including the United States, the United Kingdom, Norway and several other countries. As of December 31, 2020, we have been granted 127 patents and have 97 pending patent applications. The wordmark ‘IDEX’ and the IDEX logo are registered trademarks of IDEX Biometrics ASA and are owned by IDEX.

There can be no assurance that we will obtain registrations of principal or other trademarks in key markets. Failure to obtain registrations could compromise our ability to fully protect our trademarks and brands, and could increase the risk of challenge from third parties to our use of our trademarks and brands. Effective intellectual property protection may be unavailable or limited in some foreign countries in which we operate. For example, the validity, enforceability and scope of protection of intellectual property in China, where we operate are still evolving and historically, have not protected and may not protect in the future, intellectual property rights to the same extent as laws developed in certain other countries.

We rely upon written agreements with our customers, suppliers, manufacturers, and other recipients of our technologies and products. However, such confidentiality and non-disclosure agreements may not be adequate to protect our proprietary technologies or may be breached by other parties. Additionally, our customers, suppliers, manufacturers, and other recipients of our technologies and products may seek to use our technologies and products without appropriate limitations. Unauthorized parties may attempt to copy or otherwise use aspects of our technologies and products that we regard as proprietary. Other companies, including our competitors, may independently develop technologies that are similar or superior to our technologies, duplicate our technologies, or design around our patents. If our intellectual property protection is insufficient to protect our intellectual property rights, we could face increased competition in the markets for our technologies and products.

We may pursue, and from time to time defend litigation to enforce our intellectual property rights, to protect our trade secrets, and to determine the validity and scope of the proprietary rights of others. These litigations, whether successful or unsuccessful, could result in substantial costs and diversion of resources, which could have a material adverse effect on our business, financial condition, and operating results.

Any claims that our technologies infringe the intellectual property rights of third parties could result in significant costs and have a material adverse effect on our business.

We cannot be certain that our technologies and products do not and will not infringe issued patents or other third party proprietary rights. Any claims, with or without merit, could result in significant litigation costs and diversion of resources, including the attention of management, and could require us to enter into royalty or licensing agreements, any of which could have a material adverse effect on our business. There can be no assurance that such licenses could be obtained on commercially reasonable terms, if at all, or that the terms of any offered licenses would be acceptable to us. We may also have to pay substantial damages to third parties, or indemnify customers or licensees for damages they suffer if the products they purchase from us or the technology they license from us violates any third party intellectual property rights. An adverse determination in a judicial or administrative proceeding, or a failure to obtain necessary licenses to use such third-party technology could prevent us from manufacturing, using, or selling certain of our products, and there is no guarantee that we will be ablejurisdictions; limited ability to develop or acquire alternate non-infringing technology.

In addition, we may license certain technology used incommercialize our products; expenditure of time and for our products from third parties. These third-party licenses may be granted with restrictions, and there can be no assurances that such third-party technology will be availableresources to us on commercially acceptable terms.

If we are unable to license technology for our products from third parties on commercially acceptable terms,defend any claim or if any third party initiates litigation against us for alleged infringement of their proprietary rights, we may not be able to sell certaininquiry; adverse publicity; or revision or restructuring of our products and we could incur significant costs in defending against litigation or attempting to develop or acquire alternate non-infringing products, which would have an adverse effect on our operating results.

Our patents may not provide us with competitive advantages.

We hold numerous patents in the United States and in other countries, which cover multiple aspects of our technology. There can be no assurance that we will continue to develop proprietary products or technologies that are patentable, that any issued patent will provide us with any competitive advantages or will not be challenged

operations.

by third parties, or that patents of others will not hinder our competitive advantage. Although certain of our technologies are patented, there are other organizations that offer products with comparable functionality that employ different technological solutions and compete with us for market share.

We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, andin which we could be obligated to pay additional taxestaxes.
Given our international operating structure, with our parent company domiciled in various jurisdictions.

As a multinational organization,Norway and subsidiaries domiciled in the United Kingdom, the United States, and China, we maycan be subject to taxation on sales, profits, and assets, as well as payments of social security obligations, in several jurisdictions around the world with increasinglyworldwide jurisdictions. Tax laws are complex, tax lawsdifficult to interpret accurately, and subject to change. Accordingly, the amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles,laws and regulations, including increased tax rates new tax laws or revised interpretations of existing tax laws and precedents, which could have a material adverse effect on our liquiditybusiness, operating performance, and operating results.financial position. Moreover, we generally conduct our international operations through wholly-owned subsidiaries and report our taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions. Our intercompany relationships are and will continue to be subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions.

Additionally, tax authorities in the jurisdictions in which we operated could review our prior and future tax returns and impose additional tax, interest, and penalties.

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As of December 31, 2020, we had an accumulated unrecognized2021, the Company has a tax loss carryforward balance in Norway of $251.1 million, representing a potential deferred tax asset, if recognized and calculated at the current corporate tax rate of 22.0%, of $55.2 million. The Company has a tax loss carryforward balance in the amountUnited Kingdom of $48.2$1.9 million, related torepresenting a potential deferred tax asset, if recognized and calculated at the current corporate tax rate of 19.0%, of $361 thousand. The Company also has a tax loss carryforwardscarryforward balance in Norway.China of $771 thousand, representing a potential deferred tax asset, if recognized and calculated at the current corporate tax rate of 2.5%, of $18 thousand. While there are no restrictions as to how longthe length of time tax losses may be carried forward in Norway and the United Kingdom, we cannot guarantee that we will generate sufficient taxable profit in future periods that will enablewould allow us to recognize the value of the deferred tax asset on our Consolidated Statement of Financial Position or ultimately realize the tax benefit of the application of such carryforwards.

The relevant taxing authoritiesdeferred tax assets against taxable income in these jurisdictions could review ourany country in which he have tax returns and impose additional tax, interest and penalties, and the authorities could claim that various withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, any of which could have a material impact on us and the results of our operations.

loss carryforwards.

Forecasting our estimated annual effective tax rate for financial accounting purposes is complex and subject to uncertainty, and there may be material differences between our forecasted and actual tax rates.

Forecasts of our income tax position and effective tax rate for financial accounting purposes are complex and subject to uncertainty because our income tax position for each year combines the effects of a mix of profits earned and losses incurred by us in various tax jurisdictions with a broad range of income tax rates, as well as changes in the valuation of deferred tax assets and liabilities, the impact of various accounting rules and changes to these rules and tax laws, the results of examinations by various tax authorities, and the impact of any acquisition, business combination, or other reorganization or financing transaction.
To forecast our global tax rate, we estimate
our pre-tax profits
and losses by jurisdiction and forecast our tax expense or benefit by jurisdiction. If the actual mix of profits and losses, our ability to use tax credits, or effective tax rates by jurisdiction isare different than those estimated, our actual tax rate could be materially different than forecasted, which could have a material impact on our results of business, operational performance, and financial condition and results of operations.

position.

The countries in which we operate may have broad authority to issue regulations and interpretative guidance that may significantly impact how we will apply tax laws and influence the law and impactpresentation of our results of operations infinancial statements for the period issued. As additional regulatory guidance is issued by the applicable taxing authorities, as accounting treatment is clarified, as we perform additional analysis on the application of the law, and astax laws, we refine estimates used in calculatingour tax calculations. As such, assumptions and estimated for current tax calculations for the effect, our final analysis, which will be recorded in themost recent period completed may differ from assumptions and estimated used for prior tax calculations, causing reported tax expense or benefits to differ from period to period. These differences could be different from our current provisional amounts, which could materially affect ourmaterial to the tax obligationsexpense or benefit reported and to comparisons of effective tax rate.

rates for the periods.

We are subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws, and
non-compliance
with
such laws can subject us to criminal or civil liability and harm our business, operational performance, and financial condition and results of operations.

position.

We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA,(“FCPA”), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the United Kingdom Bribery Act 2010, and other anti-corruption laws in countries in which we conduct activities. Anti-corruption laws are

interpreted broadly and prohibit our companycompanies from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector. We use third-party law firms, accountants, and other representatives for regulatory compliance, sales, and other purposes in different countries. We can be held liable for the corrupt or other illegal activities of these third-party representatives, our employees, contractors, and other agents, even ifregardless of whether we do not explicitly authorizeauthorized such activities. In addition, although we have implemented policies and procedures to ensure compliance with anti-corruption laws, there can be no assurance that all of our employees, representatives, contractors, or agents will comply with these laws at all times.

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Noncompliance with these laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, othergovernment enforcement actions, prosecution, litigation settlements, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarmentprohibition from contracting with certain persons,parties, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operationsoperational performance, and financial conditionposition could be materially harmed. In addition, respondingOur response to any event or action will likely would result in a materially significant diversion of management’s attention and resources and a significant defenseincrease in legal costs and other professional fees. Enforcement actions and sanctions could further harm our business, results of operations,operational performance, and financial condition. Moreover, asposition.
As an issuer of securities, we also are subject to the accounting and internal controls provisions of the FCPA. These provisions require us to maintain accurate books and records and a system of internal controls sufficient to detect and prevent corrupt conduct. Failure to abide by these provisions maycould have an adverse effect on our business, operations oroperational performance, and financial condition.

position.

We must comply with U.S. government laws and regulations governing exports and imports, and we and certain employees are subject to governmental exportcriminal and import controls that could impair our ability to compete in international markets due to licensing requirements and subject us to liability if we are not in compliance with applicable laws.

civil liabilities for violation of those controls.

Our products and solutionssales are subject to export control and import laws and regulations governing exports and imports, including the U.S. Export Administration Regulations, U.S. Customs regulations, and the economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. Exports of our productstechnologies and technologyproducts must be made in compliance with these laws and regulations. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possiblefines and loss of export or import privileges.

privileges for us and fines or imprisonment for certain employees.

In addition, changes in our products or solutions or changes in applicable export or import laws and regulations may create delays in the introduction and sale of oursuch products and solutions in certain international markets, prevent our customers from deploying our products and solutions or, in some cases, prevent the export or import of our products and solutions to certain countries governments or persons altogether.customers. Any change in export or import laws and regulations, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons, or technologies targeted by such laws and regulations could also result in decreased usea substantial reduction of revenue, with potentially adverse effects on our business, operational performance, and financial position.
Risks Related to Our Governance and Investor Protections
Concentration of ownership of our productsOrdinary Shares (including Ordinary Shares represented by ADSs) among our executives, members of our Board of Directors, and solutions,our principal shareholders may prevent new investors from influencing important corporate decisions and matters submitted to shareholders for approval.
Certain executives, members of Board of Directors (“Board,” as a whole, and each member a “Director”), and beneficial owners of 5% or more of our Ordinary Shares, in aggregate beneficially owned approximately 26.6% of our issued and outstanding Ordinary Shares, as of December 31, 2021. As a result, depending on the level of attendance at general meetings of our shareholders, these persons, acting together, would be able to significantly influence all matters requiring shareholder approval, including the
election, re-election, and
removal of Directors, any merger, scheme of arrangement, or sale of all or substantially all of our assets, other significant corporate transactions, and amendments to our Articles of Association. Accordingly, this concentration of ownership may harm the market price of our Ordinary Shares or ADSs by enabling the persons, acting as a group, to:
delay, defer, or prevent a change in control;
take steps to entrench our management and/or the Boards;
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impede or disproportionately influence a merger, change of control transaction, or other business combination involving us;
discourage a potential acquirer from a tender offer or otherwise influence the outcome of any attempt to obtain control of the Company; or
pursue strategies that deviate from the interests of other holders of our equity securities.
Under SEC rules, we qualify as a foreign private issuer and, as a result, we are exempt from certain governance requirements, for as long as we maintain such qualification. Because of such reduced requirements, investors may find our equity securities less attractive.
Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act applicable to domestic (i.e., domiciled in the United States) public companies, including the sections of the Exchange Act regulating: (i) the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; (ii) insider reporting requirements regarding insider share ownership and trading activities; (iii) liabilities for insiders who profit from trades made in a short period of time (i.e., “short-swing trading”); and (iv) the required filings with the SEC of quarterly reports on
Form 10-Q containing
unaudited financial and other specified information, or current reports on
Form 8-K upon
the occurrence of specified significant events. In addition, foreign private issuers are not required to file their Annual Report on
Form 20-F until
120 days after the end of each fiscal year, while domestic issuers must comply with shorter periods. Foreign private issuers also are exempt from Regulation Fair Disclosure, which sets forth rules for issuer disclosures of material information.
As a result of these exemptions, investors in our decreased abilityADSs or Ordinary Shares may not have protections and safeguards afforded to export or sellinvestors holding the equity securities of companies that are not considered foreign private issuers. As such, investors may find our products and solutionsequity securities less attractive.
As a foreign private issuer domiciled in Norway, under Nasdaq rules we are permitted to existing or potential customers. Any decreased useadopt certain Norwegian corporate governance practices that differ significantly from corporate governance standards applicable to a domestic issuer. These practices may afford less protection to holders of our products and solutions or limitationequity securities than they would enjoy if we complied fully with Nasdaq listing standards.
As a foreign private issuer listed on Nasdaq, we are subject to corporate governance listing standards. However, Nasdaq rules permit a foreign private issuer to follow the corporate governance practices of its home country in lieu of certain Nasdaq corporate governance listing standards. Corporate governance practices in Norway, which is our abilityhome country, may differ significantly from Nasdaq corporate governance listing standards.
Notably, Norwegian independence requirements for our Board are less stringent than the Nasdaq requirements applicable to export or selldomestic issuers. In Norway, we are required to comply with the Oslo Børs Issuer Rules, published by Oslo Børs ASA, which operates the stock exchange on which our products and solutions would likely adversely affect our business, financial condition and resultsOrdinary Shares are listed. These rules require at least two of operations.

We face product liability or other liability risks that could result in large claims against us.

We have risk of exposure to product liability and other liability claims resulting from the useshareholder-elected members of our products, especiallyBoard to the extent customers may depend on our products in public safety situations that may involve physical harm or even death to individuals, as well as exposure to potential loss or damage to property. Despite quality control systemsbe independent of material business relationships with us and inspection, there remains an ever-present risk of an accident resulting from a faulty manufacture or maintenance of products, or an act of an agent outsideany of our orsignificant shareholders. Also, our business partners’ control. Even ifBoard may not include members of our products perform properly, we may become subjectexecutive management. Subject to claims and costly litigation due to the catastrophic nature of the potential injury and loss. A product liability claim, or other legal claims based on

theories including personal injury or wrongful death, made against us could adversely affect operations and financial condition. Although wethese home country requirements, our Board may have insurance to cover product liability claims, the amountmembers who are not considered independent, and holders of coverageour equity securities may not be sufficient.

afforded the same protections otherwise required under Nasdaq corporate governance listing standards applicable to domestic issuers. See “Item 6. Section C. Board Practices—Corporate Governance” for the exemptions to the Nasdaq corporate governance rules applicable to foreign private issuers.

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At some point in the future, we may no longer be considered a foreign private issuer, and we would be required to comply with the Exchange Act’s domestic reporting requirements and the corporate governance listing standards applicable to domestic issuers, likely causing us to incur possibly significant legal, accounting, and other costs related to achieving and maintaining compliance.
As a foreign private issuer, we are not required to comply with certain periodic disclosure and current reporting requirements of the Exchange Act applicable to domestic issuers. Although we do not anticipate losing foreign private issuer status for the foreseeable future, if we were to lose such status, we would be required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers, beginning with the next fiscal year after loss of such status.
In order to maintain our status as a foreign private issuer, either:
(a)
a majority of our voting securities must be either directly or indirectly owned of record by non-residents of the United States, or
(b)
(i) a majority of our Executive Officers or Directors
2
cannot be U.S. citizens or residents,
(ii) more than 50% of our assets must be located outside the United States, and
(iii) our business must be administered principally outside the United States.
If we lose our status as a foreign private issuer, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We also will be required to make changes in our corporate governance practices in accordance with applicable SEC and Nasdaq rules.
If we lose our status as a foreign private issuer, the compliance and regulatory filing costs and commitments of management time we would likely incur under SEC and Nasdaq requirements could be higher than those we currently incur as a foreign private issuer, potentially increasing our uncertainty regarding whether or when we will achieve profitability.
Because we are an “emerging growth company” and utilize exemptions to certain SEC disclosure requirements, our ADSs and Ordinary Shares may be less attractive to investors.
We are an emerging growth company (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as we continue to meet the definition of an emerging growth company, we may utilize exemptions from various SEC reporting requirements applicable to other public companies, including exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. We may take advantage of these exemptions until we are no longer qualify as an EGC.
We will maintain our EGC status until the earliest of:
(a)
the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more;
(b)
December 31, 2026;
(c)
the date on which we have issued more than $1.0 billion in nonconvertible debt over the prior three years; and
(d)
the date on which we are considered a “large accelerated filer” under SEC rules.
We cannot determine whether investors consider our Ordinary Shares or ADSs less attractive because of our utilization of EGC exemptions, but if they do, we could have reduced demand for our equity securities, resulting in less active trading, reduced liquidity, and greater volatility in quoted prices.
For a list of our Executive Officers and Directors, see “Item 6. Section A. Directors and senior management.”
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Risks Related to Our ADSs and Ordinary Shares

An active trading market for our ADSs may not develop or be sustained, and youinvestors in our ADSs may not be able to resell yourthose ADSs at or above the price you paypaid for them, if at all. If such a market is sustained, we cannot predict its effect on the trading price of our ordinary sharesOrdinary Shares on the Oslo Børs.

While our ordinary shares

Our Ordinary Shares have been traded on Oslo Børs since 2010, no public market existedand we listed our ADSs on Nasdaq on March 1, 2021. Each ADS represents 75 Ordinary Shares. The average daily trading volume for our Ordinary Shares for the period from October 1, 2021, through December 31, 2021, was 7,827,827 shares (64 trading days). In contrast, the average daily trading volume for our ADSs or ordinaryfor the same period was 1,277 shares in the United States prior to the listing of our ADSs on Nasdaq. (41 trading days), representing 95,826 Ordinary Shares.
There can be no assurance that an active trading market for the ADSs will develop or be sustained, now thatand the lack of active trading could limit investor interest in our ADSs. If active trading of our ADSs are listedwere to develop on Nasdaq. The lack of an active trading market would reduce the value of the ADSs. In addition,Nasdaq, we cannot predict how a sustained marketsuch trading would influence the quoted prices for our ADSs, nor can we predict the extent to which trading volumes and quoted prices for ADSs, on Nasdaq, will affect the market priceand trading volumes and quoted prices for our ordinary sharesOrdinary Shares, on the Oslo Børs. The price at which ADSs representing our ordinary shares trade on Nasdaqrs, may or may not be correlatedcorrelated.
If equity research analysts do not publish research or reports, or express unfavorable opinions about us, our business, or our targeted market segments, the quoted prices of our equity securities could decline. A sustained decline likely will have a negative influence on our ability to access additional capital on favorable terms, if at all.
The quoted prices and trading volumes of our equity securities are influenced by the research and reports, published by equity research analysts, setting forth opinions about our company, our estimated financial performance, estimated future prices for our equity securities, and many other matters such analysts consider important.
We do not have any control over the analysts, or the content and opinions included in their reports. The quoted price atof our equity securities could decline if one or more analysts expresses unfavorable opinions or lowers a previously published estimate of future prices of our equity securities. If one or more analysts ends coverage of us or fails to publish reports on us on a regular basis, demand for our equity securities could decrease, which our ordinary shares trade on Oslo Børs.

Thein turn could cause the trading price or trading volume of our equity securities to decline.

Because the quoted prices of our ADSs and ordinary sharesOrdinary Shares may be volatile, an investor in our equity securities could incur a rapid and you could lose all or part of your investment.

substantial loss.

The trading price of our ordinary shares on Oslo Børs or the trading pricequoted prices of our ADSs on Nasdaqand our Ordinary Shares may be highly volatile, with sudden changes to quoted prices and could be subjecttrading volumes, due to wide fluctuations in response to variousnumerous factors, some of which are beyondoutside of our control, including limitedinfluence or control. Limited liquidity for investors holding our ADSs is a significant source of price volatility, given a relatively small trading volume. float (i.e., the total number of ADSs held by investors).
In addition to theother risk factors discussed herein, such sources of volatility include investor reactions to:
our public disclosures, including our regulatory filings, press releases, and other public statements;
publications or statements made by securities analysts regarding our company, our customers, our competitors, or developments in this “Risk Factors” section and elsewherethe market segments in this report, these factors include:

actual or anticipated fluctuations in our financial condition and operating results;

variance in ourwhich we are active, including revisions to investment recommendations, estimates of future financial performance from expectations of securities analysts;

changes in the prices of our products and software solutions;

changes in our projected operating and financial results;

changes in laws or regulations applicable to our products and software solutions;

announcements byfor us or our competitors, estimates of significant business developments, acquisitionsgrowth rates for market segments, and other relevant matters, including the launch or new offerings;

our involvement in any litigation;

our saletermination of our ordinary sharesresearch coverage;

credible news, reported by reliable sources, directly or indirectly related to us, our customers, our competitors, or the market segments in which we are active;
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publication of business analyses, industry surveys, or related information authored by organizations focused on the development of market studies and related research products and services;
investor reactions to rumors, speculative statements, and other securities inunreliable information, sometimes deliberately misleading, published by unidentified authors on social media, Internet investment forums, and other unreliable outlets, with the future;

changes in senior managementintent of influencing or key personnel;

manipulating the trading volumequoted prices of our ordinary shares;

equity securities;

coordinated buying and/or selling activity in our ordinary sharesADSs and/or ADSs,Ordinary Shares, including such trading intended to manipulate quoted prices of our equity securities;
large short positions in our Ordinary Shares, publicly reported from time to time; and
sudden and significant news regarding economic, political, and financial market manipulation;

conditions.

publication

We caution investors to thoughtfully consider the sources and context of information in the media, including online blogs andencountered regarding or describing us, particularly if that information is found on social media, about our company by third parties;

changes inInternet investment forums, and other unreliable outlets. While we communicate regularly with investors, securities analysts, the anticipated future sizeinvestment press, and growth ratetrade publications, employ a dedicated investor relations professional supporting the investor communications efforts of our market;executives, and

general economic, regulatory maintain an active investor relations program coordinated by a third-party professional services firm, we cannot offer assurances regarding our ability, through our communications and market conditions.

Theseinvestor outreach, to offset the negative influence of rumors, speculative statements, and other marketunreliable information, which may be associated with those engaged in speculative trading activities.

We cannot accurately predict whether or when the nature of these and industryother factors may cause the market price and demand forquoted prices or trading volumes of our ordinary sharesADSs or ADSsOrdinary Shares to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from selling their ordinary sharesADSs or ADSsOrdinary Shares at or above the price paid for such securities and may otherwise negatively affect the liquidity of those securities.
Because we do not anticipate paying any cash dividends on our ordinary shares or ADSs. In addition, the stock marketOrdinary Shares (including Ordinary Shares underlying ADSs), capital appreciation, if any, will be an investor’s sole source of return, and an investor may not receive a return on an investment in general,

our equity securities.

and biometric companies

An investment in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionateADSs should not be made to provide dividend income to the operating performance of these companies.

Some companies thatinvestor. Under current Norwegian law, a public limited liability company may only distribute dividends to the extent it will have experienced volatility innet assets covering the trading price of their sharescompany’s share capital and other restricted equity after the dividend distribution has been made. We have beennever declared or paid a dividend on our Ordinary Shares, and we intend to retain our future net earnings, if any, to fund the subject of securities class action litigation. Any lawsuit to which we are a party, with or without merit, may result in an unfavorable judgment. We also may decide to settle lawsuits on unfavorable terms.

Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation or adverse changes to our business practices. Defending against litigation is costly and time-consuming, and could divert our management’s attention and our resources. Furthermore, during the course of litigation, there could be negative public announcements of the results of hearings, motions or other interim proceedings or developments, which could have a negative effect on the market priceexpansion of our ordinary shares or ADSs.

The dual-listing of ordinary shares and ADSs may adversely affect the liquidity and value of our ordinary shares and ADSs.

Our ordinary shares trade on Oslo Børs and we list our ADSs on Nasdaq. We cannot predict the effect of this dual listing on the value of our ADSs and ordinary shares. However, the dual listing of ADSs and ordinary shares may dilute the liquidity of these securities in one or both markets and may adversely affect the development of an active trading market for our ADSs. The price of our ADSs could also be adversely affected by trading in ordinary shares on Oslo Børs.

We incur increased costs as a result of operating as a company that is both publicly listed on Oslo Børs in the Kingdom of Norway and in the United States, and our senior management are required to devote substantial time to new compliance initiatives and corporate governance practices.

As a company publicly listed in the United States, and particularly after we no longer qualify as an “emerging growth company”, or EGC, we incur significant legal, accounting and other expenses that we did not incur previously. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq and other applicable securities rules and regulations impose various requirements on non-U.S. reporting public companies, including the establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our senior management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and have made some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified senior management personnel or members for our board of directors.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we are required to furnish a report by our senior management on our internal control over financial reporting beginning with our second annual report to be filed with the SEC. However, while we remain an EGC we are not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To prepare for eventual compliance with Section 404, once we no longer qualify as an EGC, we are engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we need to continue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

Further, being a U.S. listed company and a Norwegian public company with ordinary shares admitted to trading on Oslo Børs impacts the disclosure of information and requires compliance with two sets of applicable rules. From time to time, this may result in uncertainty regarding compliance matters and result in higher costs necessitated by legal analysis of dual legal regimes, ongoing revisions to disclosure and adherence to heightened governance practices.business. As a result, of the enhanced disclosure requirements of the U.S. securities laws, business and financial information that we report is broadly disseminated and highly visible to investors, which we believe may increase the likelihood of threatened or actual litigation, including by competitors and other third parties, which could, evencapital appreciation, if unsuccessful, divert financial resources and the attention of our management from our operations.

We are an “emerging growth company” and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, the ordinary shares or ADSs may be less attractive to investors.

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we continue toany, will be an emerging growth company, we may take advantageinvestor’s sole source of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, and, to the extent we no longer qualify as a foreign private issuer, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We may take advantage of these exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earliest of (1) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more; (2) December 31, 2026; (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; and (4) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We cannot predict if investors will find the ordinary shares or ADSs less attractive because we may rely on these exemptions. If some investors find the ordinary shares or ADSs less attractive as a result, there may be a less active trading marketreturn for the ordinary shares or ADSs and the price of the ordinary shares or ADSs may be more volatile.

We are obligated to develop and maintain proper and effective internal controls over financial reporting and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our ordinary shares.

We will be required, pursuant to Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the year ending December 31, 2021. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. Our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting until our first annual report required to be filed with the SEC following the date we are no longer an “emerging growth company,” as defined in the Securities Act of 1933.

If we identify future material weaknesses in our internal control over financial reporting or fail to meet our obligations as a public company, including the requirements of Section 404, we may be unable to accurately report our financial results, or report them within the timeframes required by law or stock exchange regulations, and we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our ordinary shares to decline. Under Section 404, we are required to evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report as to internal control over financial reporting. Failure to maintain effective internal control over financial reporting also could potentially subject us to sanctions or investigations by the SEC, Nasdaq, or other regulatory authorities, or shareholder lawsuits, which could require additional financial and management resources. We cannot assure you that additional material weaknesses will not occur in the future, which could materially adversely affect our business, operating results, and financial condition.

foreseeable future.

Fluctuations in the exchange rate between the U.S. dollarDollar and the Norwegian kroneKrone may increase the risk of holding ADSs and ordinary shares.

Ordinary Shares.

The share price of our ordinary sharesOrdinary Shares is quoted on the Oslo Børs in Norwegian krone,Krone, while the price of our ADSs tradeis quoted on Nasdaq in U.S. dollars.Dollars. Fluctuations in the exchange rate between the U.S. dollarDollar and the Norwegian kroneKrone may result in differences between the value of our ADSs (each of which represents 75 Ordinary Shares) and the value of our ordinary shares,Ordinary Shares, which may result in heavyhigh trading byvolumes, as investors seekingseek to exploit such differences. In addition, as
As a result of fluctuations in the exchange rate between the U.S. dollarDollar and the Norwegian krone,Krone, the U.S. dollarDollar equivalent of the proceeds that a holder of the ADSs would receive upon the sale inon the KingdomOslo Børs, for Norwegian Krone, of Norway of any ordinary sharesOrdinary Shares withdrawn from the depositary, andDepositary may fluctuate. Similarly, the U.S. dollarDollar equivalent of any cash dividends paid by us in Norwegian krone on ordinary sharesKrone to holders of Ordinary Shares or Ordinary Shares represented by the ADSs held, could also decline.

fluctuate.

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Raising additional capital may cause dilution to our holders, includinglikely will dilute the ownership interests of holders of our ADSs, restrict our operations or require us toequity securities. Also, depending on the nature and source of additional capital raised, we may relinquish certain rights to our technologies.

intellectual property, future revenue streams, or other sources of value.

We expect that significantare not certain whether or when we will generate sufficient cash flow to offset our costs and accelerate the expansion of our business, nor whether or when we will generate sufficient revenue to achieve or maintain profitability. Because we intend to continue pursuing our strategy in order to achieve expected rapid revenue growth, we anticipate additional capital maylikely will be needed in therequired to fund such revenue growth (e.g., funding of increased working capital requirements). However, if we do not meet our current performance forecast, we likely will require additional funding to support future to continue our planned operations, including sales and marketing efforts, expanded research and development activities and costs associated with operating a publicly listed company in both Norway and the United States. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through any or a combination of securities offerings, debt financings, supplier and licensing agreements and research grants. losses.
If we raise capital through issuance of equity securities offerings,or convertible debt securities, such sales may alsoissuance will result in material dilution toof the ownership interests of then-current holders of our existing shareholders, andequity securities. Also, new investors could gain rights, preferences, and privileges senior to thethose of then-current holders of our ADSs or ordinary shares.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a shareholder. securities.

Debt financing and preferred equity financing, if available, could result in fixed payment obligations, and we may be required to accept terms that restrict our ability to incur additional indebtedness, force us to maintain specified liquidity ratios or other financial ratios, or restrict our ability to pay dividends or make acquisitions.

If we raise additional funds through collaborations, strategic partnerships or alliances, or through marketing, distribution, or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies,intellectual property, future revenue streams, and development activities, or to grant licenses on terms that may not be favorable to us. In addition, we could also be required to seek funds through arrangements with collaboratorspartners or others at an earlier stage than otherwise would be desirable. If we raise funds through government research grants, as we have, we may be subject to certain requirements which may limitlimiting our ability todiscretionary use of the funds provided or require us to share information from our research and development.
If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development or future sales and marketing efforts or grant rights to a third partythird-party to develop and market products or software solutions that we would otherwise prefer to develop and market ourselves. Raising additional capitalfunds through any of these or other means could adversely affect our business and the holdings or rights of the holders of our shareholders,equity securities and may cause the marketquoted price of our ADSsequity securities to decline.

The rights of holders of our shareholdersequity securities may differ from the rights typically offered to shareholders of a U.S. corporation.

corporation domiciled in the United States.

We are incorporated under Norwegian law. The rights of holders of ordinary sharesOrdinary Shares and, therefore, certain of the rights of holders of our ADSs, are governed by Norwegian law, including the provisions of the Companies Act and by our articlesArticles of association.Association. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations.

Investors should be aware thata corporation domiciled in the United States.

The following summarizes certain important differences in shareholder rights provided to our shareholdersbetween Norway and holders of ADSs under Norwegian corporate law and our articles of association differ in certain respects from the rights that you would typically enjoy as a shareholder of a U.S. company under applicable U.S. federal and state laws.

United States:

Under Norwegian corporate law, a shareholder may, at the general meeting of shareholders, require that the Board and the Chief Executive Officer make available information about (i) matters that may affect the consideration of the annual financial statements and report; (ii) any matters that have been submitted to the shareholders for decision; (iii) the company’s financial positioncondition and (iv) any other matters whichbefore the general meeting is to deal with. meeting.
Other than the foregoing, or in respect of a formal investigation of the company, as approved by at least 10% of the share capital represented at a general meeting, our shareholders may not ask for an inspection of our corporate records. UnderIn contrast, under Delaware corporate law, for example, any shareholder, irrespective of the size of such shareholder’s shareholdings,holdings, may do so.
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An individual shareholder of a Norwegian limited liability company is, as a starting point, also unable to initiate a derivative action, a remedy typically available to shareholders of U.S. companies domiciled in the United States, in order to enforce aour right, of our company, in case we fail to enforce such right ourselves, other than in certain cases of board member/Board and management liability under limited circumstances. Additionally, distribution
Distribution of dividends from Norwegian companies to foreign companies and individuals may be subject to
Norwegian non-refundable withholding
tax, and not all receiving countries allow for deduction for the Norwegian withholding tax. See “E. Taxation—Material Norwegian Income Tax Considerations for U.S. Holders” for a more detailed description of the withholding tax. Also, the
The rights as a creditor may not be as strong under Norwegian insolvency law as under U.S.United States law or otherrelevant state insolvency law, and, consequentlyas a consequence, creditors may recover less in the event our company iswe are subject to insolvency, compared to a similar case including a U.S.involving an insolvent United States debtor. In addition, the
The use of thea deferred tax asset consisting of the accumulated tax losses (i.e., carryforwards) requires that we are able to generate positive taxable income, and the use of tax losses carried forward to offset against future income is subject to certain restrictions and can be restricted further by future amendments to Norwegian tax law. Finally,
Norwegian corporate law may not provide appraisal rights in the case of a business combination, in a manner equivalent to those generally affordedavailable to a shareholder of a U.S.United States company under applicable U.S.United States or state laws.
For additional information on these and other aspects of Norwegian corporate law and our articlesArticles of association,Association, see ExhibitsExhibit 2.4 (Description of Share Capital and Articles of Association) filed herewith.
As a result of thesethe differences between Norwegian corporate law and our articlesArticles of association,Association, on the one hand, and U.S.United States federal and state laws, on the other hand, in certain instances, youan investor could receive less protection as an equitya holder of our companyequity securities than you would be available as a shareholder of a U.S. company.

company domiciled in the United States and chartered under the corporate laws of a particular state.

Holders of ADSs have fewer rights than holders of our shareholdersOrdinary Shares and, must withdraw shares from depositary and temporarily register its ownership to the underlying shares with Norwegian registries to exercise their voting rights.

rights, must withdraw underlying Ordinary Shares from the Depositary and temporarily register ownership of those withdrawn Ordinary Shares with the appropriate Norwegian authority.

A single ADS represents a claim on 75 Ordinary Shares held on deposit by the Depositary. Holders of our ADSs (and the beneficial owners thereof) do not have the same rights as our shareholders who hold our ordinary shares directlyholders of Ordinary Shares and may only exercise their voting rights with respect to the underlying ordinary sharesOrdinary Shares in accordance with the provisions of our deposit agreement with the deposit agreement.Depositary and the holders of ADSs (the “Deposit Agreement”). An ADS holdersholder is not able to call for a meeting of shareholders.
The following is an incomplete summary of the procedure to be followed if an ADS holder seeks to exercise his or her voting rights. As this procedure is complex and time-consuming, an ADS holder may encounter difficulties and delays in exercising his or her voting rights, and such delays could result in an ADS holder being unable to do so.
An ADS holder cannot vote deposited shares underlying ADSsOrdinary Shares held by the Depositary at our generala meeting of shareholders, unless those deposited sharesunderlying Ordinary Shares are temporarily registered in our VPS registrywith the Norwegian Central Securities Depository and with the Norwegian Foreign Registrar in the name of the holder (or the beneficial owner, of those ADSs.if the holder is not the beneficial owner). Under the deposit agreement,Deposit Agreement, ADS holders may instruct the depositaryDepositary how to vote thethat number of deposited sharesOrdinary Shares underlying their ADSs represent.ADS holdings. In order to carry out votingsuch instruction, received from ADSs holders in accordance with current Norwegian law, the depositaryDepositary will temporarily re-register deposited sharesthe underlying Ordinary Shares in the namesname of the ADS holder (or beneficial owners of those ADSs,owner), vote those sharesOrdinary Shares as proxy for thosethe holder (or beneficial ownersowner) as instructed, by the holders of those ADSs and then cause the deposited sharesOrdinary Shares to
be re-registered in its
the Depositary’s name or(or the name of its nomineecustodial nominee) immediately after the meeting. Ifmeeting of
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shareholders. In giving voting instructions to the depositaryDepositary as provided in the deposit agreement,Deposit Agreement, ADS holders may be required to agree to the temporary blockingrestriction of transfer of their ADSs until after the shareholders’ meeting of shareholders and disclosethe disclosure of the identity of the beneficial owner of the ADSs. ADS holder.
When a general meeting of shareholders is convened, if you hold ADSs, youan ADS holder may not receive sufficient notice of a shareholders’ meetingbeforehand to permit youallow the holder to giveinstruct the depositary instructions in time so it canDepositary to take the actions required for it to carry out your instructions, which may include instructingin the custodian to

temporarily re-register the underlying ordinary shares on our share register in Norway.time available. We will make all commercially reasonable efforts to cause the depositaryDepositary to extend voting rights to youADS holders, as described, in a timely manner, but we

cannot assure you that youADS holders they will receive voting materials in time to instruct the depositaryDepositary to vote, and itvote. It is possible that you, or persons who hold their ADSs through securities brokers dealers or other third parties,third-parties will not have the opportunity to exercise a right to vote. Furthermore, the depositaryDepositary will not be liable for any failure to carry out any instructions to vote, for the manner in which any vote is cast, or for the effect of any such vote. As a result, youan ADS holder may not be able to exercise yourhis or her right to vote and you may lack recourse if yourhis or her ADSs are not voted as you request. In addition,requested.

Investors should review the Deposit Agreement, specifically Section 4.7. Voting of Deposited Shares, which sets forth this procedure in your capacitydetail. The Deposit Agreement is presented as an ADS holder, you will not be ableExhibit 2.2 to call a shareholders’ meeting.

this Annual Report and is archived on the SEC website.

The depositaryDepositary is entitled to charge ADS holders fees for various administrative services, including annual service fees.

Holders of our Ordinary Shares are not subject to many of these charges.

The depositaryDepositary is entitled to charge ADS holders fees for various administrative services, including for the issuance of ADSs upon deposit of ordinary shares,Ordinary Shares, cancellation of ADSs, distributions of cash dividends or other cash distributions, distributions of ADSs pursuant to share dividends, or other free share distributions, distributions of securities other than ADSs, and annual service fees.
In the case of ADSs held through The Depository Trust Company or DTC,(“DTC”), the fees will be charged by the DTC participant (e.g., a securities broker) to the account of the applicable beneficial owner in accordance with the procedures and practices of the DTC participant as in effect at the time.

Concentration of ownership of our ordinary shares (including ordinary shares represented by ADSs) among our existing senior management, directors and principal shareholders may prevent new investors from influencing significant corporate decisions and matters submitted to shareholders for approval.

Members of our senior management, directors and beneficial owners of 5% or more of our ordinary shares, in the aggregate, beneficially own approximately 43.7% of our issued and outstanding ordinary shares, based on the number of ordinary shares issued and outstanding as of December 31, 2020. As a result, depending on the level of attendance at general meetings of our shareholders, these persons, acting together, would be able to significantly influence all matters requiring shareholder approval, including the election, re-election and removal of directors, any merger, scheme of arrangement, or sale of all or substantially all of our assets, or other significant corporate transactions, and amendments to our articles of association. In addition, these persons, acting together, may have the ability to control the management and affairs of our company. Accordingly, this concentration of ownership may harm the market price of our ADSs by:

delaying, deferring, or preventing a change in control;

entrenching our management and/or the board of directors;

impeding a merger, scheme of arrangement, takeover, or other business combination involving us; or

discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

In addition, some of these persons or entities may have interests different than yours. For example, because many of these shareholders have held their shares for a longer period, they may be more interested in selling our company to an acquirer than other investors, or they may want us to pursue strategies that deviate from the interests of other shareholders.

YouADS holders may not receive distributions on our ordinary shares represented bywe may make to holders of Ordinary Shares underlying the ADSs or any value for themheld, if the Depositary determines it is illegal or impractical to make them availablesuch distributions to holders of ADSs.

Although we do not have any present plans to declare or pay any dividends to holders of Ordinary Shares, in the event we declare and pay any dividend,do so, the depositaryDepositary has agreed to pay to youADS holders the cash dividends or other distributions it or the custodian(or its custodian) receives on our ordinary shares or other deposited securitiesOrdinary Shares, after deducting its fees and expenses. YouAn ADS holder will receive these distributionssuch dividends, in proportion to the number of our ordinary shares yourOrdinary Shares underlying the ADSs represent. However,held, after conversion of the dividend’s value in accordanceNorwegian Krone to U.S. Dollars.
The provisions of the Deposit Agreement associated with distributions of cash, securities, subscription rights, and other property are complex and afford the limitations set forthDepositary discretion in decision making, particularly regarding the deposit agreement, it may bedetermination that a distribution is unlawful or impractical to make a

distribution available to holders of ADSs.impractical. We have no obligation to register under U.S. securities lawswith the SEC any offering of ADSs, ordinary sharesOrdinary Shares, rights, or other securities received through such distributions. We alsoThe Depositary may determine a distribution made to the holders of Ordinary Shares may be unlawful or impractical if made to ADS holders, and we have no obligation to take any other action to permit such distribution onto ADS holders. As such, an ADS holder is exposed to the ADSs, ordinary shares, rightsrisk he or anything else to holders of the ADSs. This means that youshe may not receive the distributions we make on our ordinary sharesOrdinary Shares, or any value from themsuch distributions, if it is unlawful or impractical to make them available to you.an ADS holder. These restrictions may have an adverse effect on the value of your ADSs.

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Holders of the ADSs may not be able to exercise
the pre-emptive subscription
rights related to the shares that they represent,underlying Ordinary Shares and, accordingly, may suffer dilution of their equity holdingownership in the event of future issuances of our shares.

equity securities.

Under the Companies Act, our shareholdersholders of Ordinary Shares benefit from
a pre-emptive subscription
right on the issuance of sharesOrdinary Shares, for cash consideration only and(and not in the event of issuance of shares Ordinary Shares
against non-cash contributioncontributions
or debt conversion. Shareholders’conversion).
Such pre-emptive subscription
rights, in the event of issuancesissuance of shares againstOrdinary Shares for cash payment,proceeds, as in a private placement, may be disappliedwaived by a resolution of the shareholdersholders of Ordinary Shares at a general meeting of our shareholders withrepresenting a majority
of two-thirds of
the votes cast and the share capital represented at thesuch general meeting and/or the shares may be issued on the basis of an authorization granted to the board of directors pursuant to which the board may disapply the shareholders’ pre-emptive subscription rights. meeting.
At the extraordinary general meeting heldof shareholders on December 15, 2020, our shareholders agreed to waive their
pre-emptive
subscription rights with respect to the proposed authorization of our Board to our boardincrease capital through issuance of directorsup to effect share capital increases in connection with private placement of shares, such83,214,674 Ordinary Shares. This authorization maximized to 10% of the registered share capital at the time of the authorization. The authorization to issue shares was used by our board of directorsBoard on February 15, 2021, when resolvingit resolved to issue that number of Ordinary Shares in a private placementplacement.
At the Annual General Meeting of 83,214,674 shares, and noshareholders on May 12, 2021, shareholders agreed to waive their
pre-emptive
subscription rights with respect to the proposed authorization of our Board to increase capital through issuance of up to 91,672,048 Ordinary Shares. This authorization was used by our board of directorsBoard on November 9, 2021, when it resolved to issue shares is currently issued and outstanding.

Furthermore,89,777,824 Ordinary Shares in a private placement.

Pursuant to the Deposit Agreement, we have no obligation to register with the SEC any subscription rights received through a distribution made to holders of Ordinary Shares. The Depositary may determine such a distribution may be unlawful or impractical if made to ADS holders, would not necessarilyand we have no obligation to take any other action to permit such distribution to ADS holders. However, a distribution of
pre-emptive
subscription rights to holders of Ordinary Shares underlying ADSs may be entitled, even if such rights accrued toaddressed in a manner of our shareholders in any given instance, to receive such pre-emptive subscription rights related to the shares that they represent. Rather, the depositary has the option,choice, to the extent permitted by law and practical,subject to if requestedthe determination of the Depositary that the proposed process is practical. For example, we may instruct the Depositary, to the extent permitted by us,law, to grant ADS holders rights to instruct the depositaryDepositary to purchase the securitiesnumber of Ordinary Shares proportional to which the ADSs held (i.e., the number of Ordinary Shares subject to the
pre-emptive
subscription rights relatedistributed to the Ordinary Shares underlying the ADSs held) and deliver those securitiesOrdinary Shares or the proportional number of ADSs to you, or, if requested by us, deliver such rights to you, or sell such rightsthe holder. Alternatively, we may instruct the Depositary, to the extent practicablepermitted by law, to (i) deliver the
pre-emptive
subscription rights to ADS holders, or (ii) to the extent practical, sell such
pre-emptive
subscription rights and distribute the net proceeds thereof to you pro rata.ADS holders. If any
such pre-emptive rights
are not so exercised, delivered, or otherwise disposed of, the depositaryDepositary is required to permit the rights to lapse unexercised.

Because we do not anticipate paying any cash dividends on our ordinary shares (including ordinary shares represented by ADSs) in the foreseeable future, capital appreciation, if any, will be your sole source of gains and you may never receive a return on your investment.

You should not rely on an investment in our ADSs to provide dividend income. Under current Norwegian law, a public limited liability company may only distribute dividends to the extent it will have net assets covering the company’s share capital and other restricted equity after the distribution has been made. In the amount that may be distributed, a deduction shall be made for (i) the aggregate nominal value of treasury shares held by the company, (ii) certain credits and collateral as defined by law and (iii) other dispositions after the balance day which pursuant to law shall lie within the scope of the funds that the company may use to distribute dividend. Even if all other requirements are fulfilled, the company may only distribute dividend to the extent that it maintains a sound equity and liquidity following the distribution. We have never declared or paid a dividend on our ordinary shares in the past, and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. As a result, capital appreciation, if any, on our ADSs will be your sole source of gains for the foreseeable future. Investors seeking cash dividends should not purchase our ADSs.

If we are a deemed a passive foreign investment company, there could be adverse U.S. federal income tax consequences for ADS holders that are subject to U.S. Holders.

taxation in the United States.

Under the Internal Revenue Code of 1986, as amended or the Code,(“IRC”), we will be a passive foreign investment company, or PFIC,company(“PFIC”), for any taxable year in which (1)(i) 75% or more of our gross income consists of passive

income, or (2) 50% or more of the of the gross value our assets (determined on the basis of a weighted quarterly average) consists of assets that produce, or are held for the production of, passive income (including cash). For purposes of these tests, passive income includes dividends, interest, gains from the sale or exchange of investment property, and certain rents and royalties. In addition, for purposes of the above calculations, non-U.S.foreign domiciled corporation that directly or indirectly owns at least 25%, by value, of the shares of another corporation is treated as if it held its proportionate share of thethat corporation’s assets and received, directly itsfrom that corporation, a proportionate share of the income of such other corporation. its income.

If we are deemed a PFIC for any taxable year during which a U.S. Holder“U.S. Holder” (as defined below under “E. Taxation—Material U.S. Federal Income Tax Considerations for U.S. Holders”herein in “Item 10. Section E. Taxation”) holds our ADSs, the U.S. Holder may be subject to adverse tax consequences, regardless of whether we continue to qualify as a PFIC, including ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements.

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Based on our analysis of our income, assets, activities, and market capitalization, we do not believe we weremet the tests to be deemed a PFIC for our taxable year ended December 31, 2020.2021. However, no assurances regarding our PFIC status can be provided for any past, current, or future taxable years. Theyears, as the determination of whether we are a PFIC is a fact-intensive determination, made on an annual basis, and the applicable law isIRC provisions are subject to varying interpretation. In particular, the characterization of our assets as active or passive may depend in part on our current and intended future business plans, which are subject to change. In addition, for our current and future taxable years, the total value of our assets for PFIC testing purposes may be determined in part by reference to the market price of our ordinary sharesOrdinary Shares or ADSs from time to time, which may fluctuate considerably. Under the income test, our status as a PFIC depends on the composition of our income, which will depend on the transactions we enter into in the future, and our corporate structure.structure, and other considerations. The composition of our income and assets is also affectedinfluenced by how, and how quickly,at what pace, we spend the cash we raise in any offering. Ifthrough issuance of securities or borrowing. Even if we determine that we are not a PFIC for a taxable year, there can be no assurance that the Internal Revenue Service (“IRS”), will agree with our conclusion and that the IRS would not successfully challenge our position. Accordingly, our U.S. holders ofcounsel expresses no opinion with respect to our ADSs would be subject to adverse U.S. federal income tax consequences, such as ineligibilityPFIC status for any preferred tax rates on capital gainsprior, current, or on actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements under U.S. federal income tax laws and regulations. future taxable year.
For further discussion of the PFIC rules and the adverse U.S. federal income tax consequences in the event we are classified asdeemed a PFIC, see the section titled ‘‘herein under “Item 10. Section E. Taxation—Material U.S. Federal Income Tax Considerations for U.S. Holders” in this report.

ChangesTaxation.”

C
hanges and uncertainties in the tax system in the countries in which we have operations could materially adversely affecthave an adverse effect our business, operational performance, and financial condition and results of operations, and reduceposition, potentially reducing the net returns available to holders of our shareholders.

equity securities.

We conduct business globally and file income tax returns in multiple jurisdictions. Our consolidated effective income tax rate could be materially adversely affected by several factors, including: changing tax laws, regulations and treaties, or the interpretation thereof; tax policy initiatives and reforms under consideration (such as those related to the Organisation for
Economic Co-Operation and
Development’s or OECD,(“OECD”), Base Erosion and Profit Shifting or BEPS, Project, the European Commission’s state aid investigations and other initiatives); the practices of tax authorities in jurisdictions in which we operate; the resolution of issues arising from tax audits or examinations and any related interest or penalties. Such changes may include (but are not limited to) the taxation of operating income, investment income, dividends received or (in the specific context of withholding tax) dividends paid.

Tax authorities may disagree with our positions and conclusions regarding certain tax positions, or may apply existing rules in an unforeseen manner, resulting in unanticipated costs, taxes, penalties, or the
non-realization of
expected benefits.

A tax authority may disagree with tax positions that we have taken, which could result in increased tax liabilities. For example, the U.S. Internal Revenue Service or anothera tax authority could challenge our allocation of income by tax jurisdiction and the amounts paid between our affiliated companies, pursuant to our intercompany arrangements and transfer pricing policies, including amounts paid with respect to our intellectual property development. Similarly, a tax authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a ‘‘permanent establishment’’ under

international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions.

A tax authority may take the position that material income tax liabilities, interest, and penalties are payable by us, for example where there has been a technical violation of contradictorywhich may occur due to complex and changing tax laws and regulations that are relativelymay be contradictory, as new laws and regulations have not been subject to extensive review or interpretation, in which case we expect that we might contest such assessment. High-profile companies can be particularly vulnerable to aggressive application of unclear requirements. Many companies mustinterpretation. We may negotiate their tax billsobligations with tax inspectors who may demand higher taxes than applicable law appears to provide. Contesting such an assessmentof a particular jurisdiction, which may be lengthycostly, time-consuming, and costly and if we were unsuccessful in disputing the assessment, the implications could increase our anticipated effective tax rate, where applicable.

subject to an unpredictable outcome.

36

Provisions found inof the Norwegian Securities Trading Act may delay or discourage a takeover attempt, including attempts that may be beneficial to holders of our ADSs.

The

We are subject to the Norwegian Securities Trading Act or the STA,(the “STA”), as it applies amongst other things, to an offer formade by a third-party to acquire the equity securities of a Norwegian public company whose registered office is in Norway and whosewith securities are admitted to trading on a regulated market place in Norway. We are therefore currently subject to the STA.

Norwegian exchange. The STA provides a framework within which takeovers of certain companies organized in Norway are regulated and conducted. The provisions of the STA may materially differ from the provisions of other such frameworks (e.g., the takeover provisions of the Delaware General Corporate Law).    

The following is a brieflimited summary of some of the most important rules of the relevant sections of the STA:

The STA requires any person, entity, or consolidated group that becomes the owner of shares representing more
than one-third of
the voting rights of a Norwegian company whose shares are listed on a Norwegian regulated marketexchange to, within four (4) weeks, make an unconditional general offer for the purchase of the remaining shares inof that company.
A mandatory offer obligation may also be imposed by the Oslo Børs, on which our Ordinary Shares are listed for trading, when a party acquires the right to become the owner of shares that, together with the party’s own shareholding, represent more
than one-third of
the voting rights in the company, and the Oslo Børs decides thatdetermines this acquisition is regarded as an effective acquisition of the shares in question. The mandatory offer obligation ceases to apply if the person, entity, or consolidated group sells the portion of the shares that exceeds the relevant threshold within four (4) weeks of the date on which the mandatory offer obligation was triggered.

When a mandatory offer obligation is triggered, the person subject to the obligation is required to immediately notify the Oslo Børs and the company in question accordingly.targeted company. The notification shall state the person’s intentions and whether an offer will be made to acquire the remaining shares in the companytargeted company. An earlier notification stating an intention to acquire no additional shares or whether a sale will take place. A notification informing about a disposalan intention to dispose of acquired shares can be altered to become a notice of making an intended offer within the four-week period, while a notification stating that the shareholder willan intention to make an offer cannot be retracted and is thus binding.

The offer price per share associated with a mandatory offer must be at least as high as the highest price paid or agreed by the offeror for the shares in
the six-month period
prior to the date the ownership threshold was exceeded. If the acquirerofferor acquires or agrees to acquire additional shares at a higher price prior to the expiration of the mandatory offer period, the acquirerofferor is obligated to restate its offer at such higher price. A mandatory offer must be settled in cash or contain a cash alternative at least equivalent to any other consideration offered.

In case of failure to make a mandatory offer or to sell the portion of the shares that exceeds the relevant threshold within four (4) weeks, the Oslo Børs may force the acquireracquiring party to sell the shares exceeding the threshold bythrough public auction. Moreover, a shareholder who fails to make an offer may not, as long asWhile the mandatory offer obligation remains in force, an acquiring party failing to make such an offer may not exercise rights in the company, such as voting in a general meeting, without the consent of a majority of the remaining shareholders. The shareholderacquiring party may, however, exercise his/her/its rights to dividends
and pre-emptionpre-emptive
subscription rights
in the event of a share capital increase.increase by the targeted company. If the shareholderacquiring party neglects his/her/its duty to make a mandatory offer, Oslo Børs may impose a cumulative daily fine that runsis cumulative until the circumstance has been rectified.

Any

A mandatory offer obligation also is triggered when any person, entity, or consolidated group, that ownsalready owning shares representing more
than one-third of
the votes in a Norwegian company listed on a Norwegian regulated market is obliged to make an offer to purchase the remaining shares of the company (repeated offer obligation) if the person, entity or consolidated groupexchange, through acquisition of additional shares, becomes the owner of shares representing 40% or more of the votes in the company. The same applies correspondingly ifSimilarly, a mandatory offer obligation is triggered when the person, entity, or consolidated group, through acquisition, becomes the owner of shares representing 50% or more of the votes in the company. The mandatory offer obligation ceases to apply if the person, entity, or consolidated group sells thethat portion of thethat shares which exceeds the relevant threshold within four (4) weeks of the date on which the mandatory offer obligation was triggered.

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Any person, entity, or consolidated group that has passed any of the above mentionedstated thresholds in such a way as not to trigger the mandatory bid obligation, and, therefore, has therefore not previously made an offer previously for the remaining shares in the company in accordance with the mandatory offer rules is as a main rule, obligedrequired to make a mandatory offer in the event of a subsequent acquisition of shares that increases the shareholder’sacquiring party’s voting rights in the company.

Claims of U.S. civil

Civil liabilities judgements made in United States courts may not be enforceable against us.

We are incorporated under Norwegian law. Certain membersDirectors and executive officers are not residents of our board of directors and senior management are non-residents of the United States, and all or a substantial portion of our assets and the assets of such persons are located outside the United States. As a result, it may not be possible to serve process on such persons or us in the United States or to enforce judgments obtained in U.S. courts against them or us based on civil liability provisions of the securities laws of the United States. As a result, it may not be possible for investors to effect service of process withinin the United States upon us or such persons or to enforce judgments obtained in U.S. courts in the United States against them or us, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws.

The United States and the Kingdom of Norway currently do not currently have a treaty providing for recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. Consequently, a final judgment for payment given by a court in the United States, whether or not predicated solely upon U.S.the securities laws of the United States, may not automatically be recognized or enforceable in Norway. In addition, uncertainty exists as to whether the courts in Norway would entertain original actions brought in Norway against us, our Board , or our directors or senior managementExecutive Officers predicated upon the securities laws of the United States or any state in the United States.
Any final and conclusive monetary judgment for a definite sum obtained against us in U.S. courtsthe United States would not be automatically recognized by Norwegian courts, unlessunless: (i) the relevant parties have agreed to such court’s jurisdiction in writing and for a specific legal action or for legal actions that arise out of a particular legal relationship; and (ii) the judgment is not in conflict with Norwegian public policy rules (
ordre public
) or internationally mandatory provisions. Instead, new proceedings would need to be initiated before the competent court in Norway. However, a judgment obtained in the U.SUnited States may still have a strong evidentiary weight in the Norwegian proceedings, depending on the circumstances and the assessment of the court. If the conditions for recognition of a U.S. judgement against us in the United States are satisfied, or a Norwegian court gives judgmentrules for the sum payable under a U.S.such judgment, the U.S. judgement or the Norwegian judgmentruling (as the case may be) will be enforceable by methods generally available for this purpose. These methods generally permit the Norwegian court discretion to prescribe the manner of enforcement. In addition, it may not be possible to obtain a Norwegian judgmentruling or to enforce that judgmentruling if the judgment debtorparty subject to the ruling is or becomes subject to any insolvency or similar proceedings, or if the judgment debtor has any set-off or counterclaim against the judgment creditor. Also note that, in any enforcement proceedings, the judgment debtor may raise any counterclaim that could have been brought if the action had been originally brought in Norway. other circumstances.
As a result, U.S.United States investors may not be able to enforce any judgments against us or certain ofDirectors and our directors any judgmentsExecutive Officers obtained in U.S. courts of the United States in civil and commercial matters, including judgments under the U.S. federal securities laws.

We qualify as a foreign private issuer and, as a result, we will not be subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those

Holders of a U.S. domestic public company.

We report under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K upon the occurrence of specified significant events. In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers also are exempt from Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with Nasdaq corporate governance listing standards.

As a foreign private issuer listed on Nasdaq, we are subject to corporate governance listing standards. However, Nasdaq rules permit a foreign private issuer like us to follow the corporate governance practices of its home country in lieu of certain Nasdaq corporate governance listing standards. Certain corporate governance practices in the Kingdom of Norway, which is our home country, may differ significantly from Nasdaq corporate governance listing standards. For example, the independence requirements for our board of directors are less stringent than the requirements that would have followed under the Nasdaq rules had we not been a foreign private issuer. In Norway, we are required to follow, and comply with, the Oslo Børs Issuer Rules published by Oslo Børs ASA and have adopted the Corporate Governance Code published by the Norwegian Corporate Governance Board (NUES). It is a requirement in the Oslo Børs Issuer Rules that at least two of the shareholder elected members of the board of directors shall be independent of the company’s executive management, material business contacts and the company’s larger shareholders. Further, our board of directors shall not include representatives of the company’s executive management. The Corporate Governance Code states that the majority of the shareholder-elected members of the board should be independent of the company’s executive personnel and material business contacts and that at least two of the shareholder-elected board members should be independent of the company’s main shareholder(s). Subject to these requirements, our board of directors may contain non-independent directors. Therefore, our shareholders may be afforded less protection than they otherwise would have under Nasdaq corporate governance listing standards applicable to U.S. domestic issuers. See “Item 6. Directors, Senior Management and Employees—C. Board Practices—Corporate Governance Practices” for the exemptions to the Nasdaq corporate governance rules applicable to foreign private issuers.

We may lose our foreign private issuer status, which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses.

As a foreign private issuer, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. Although we do not expect this to occur in the near term, we may no longer qualify a foreign private issuer as early as June 30, 2021, which would require us to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers as of January 1, 2022. In order to maintain our current status as

a foreign private issuer, either (a) a majority of our voting securities must be either directly or indirectly owned of record by non-residents of the United States or (b)(i) a majority of our executive officers or directors cannot be U.S. citizens or residents, (ii) more than 50% of our assets must be located outside the United States and (iii) our business must be administered principally outside the United States. If we lose our status as a foreign private issuer, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and Nasdaq rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time consuming and costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors.

If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about us, our business or our market, the price and trading volume of our ADSs could decline.

The trading market for our ADSs is influenced by the research and reports that equity research analysts publish about us and our business. Equity research analysts may elect not to provide research coverage of our ADSs, and such lack of research coverage may adversely affect the market price of our ADSs. We do not have any control over the analysts, or the content and opinions included in their reports. The price of our ADSs could decline if one or more equity research analysts downgrade our ADSs or issue other unfavorable commentary or research about us. If one or more equity research analysts ceases coverage of us or fails to publish reports on us regularly, demand for our ADSs could decrease, which in turn could cause the trading price or trading volume of our ADSs to decline.

You may be subject to limitations on transfers of your ADSs or the right to surrender ADSs for the purpose of withdrawal of ordinary shares.

Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when deemed necessary or advisable by it in good faith in connection with the performance of its duties or at our reasonable written request, subject in all cases to compliance with applicable U.S. securities laws. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason, subject to certain rights to cancel ADSs and withdraw the underlying ordinary shares. Temporary delays in the cancellation of ADSs and withdrawal of the underlying ordinary shares may arise because the depositary has closed its transfer books or we have closed our transfer books, the transfer of ordinary shares is blocked to permit voting at a shareholders’ meeting, or because we are paying a dividend on our ordinary shares or similar corporate actions.

In addition, holders of ADSs may not be able to cancel their ADSs and withdraw the underlying ordinary shares when they owe money for fees, taxes and similar charges and when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to the ADSs or to the withdrawal of our ordinary shares or other deposited securities.

ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement,Deposit Agreement, which could result in less favorable results to the plaintiff(s)a plaintiff in any such action.

The deposit agreement governing the ADSsDeposit Agreement provides that owners andADS holders of ADSs irrevocably waive the right to a trial by jury in any legal proceeding arising out of or relating to the deposit agreement or the ADSs, including claims under U.S. federal securities laws, against us or the depositary to the fullest extent permitted by applicable law. If this jury trial waiver provision is prohibited by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with a jury trial. Although weDeposit Agreement. We are not aware of a specific federal decision that addressesaddressing the enforceability of a jury trial waiver in the context of U.S. federal securities laws, it is our understandingand we have been advised by counsel that jury trial waivers are generally enforceable.enforceable in the United States. Moreover, insofar as the deposit agreementDeposit Agreement is governed by the laws of the State of New York, New Yorksuch laws similarly recognize the validity of jury trial waivers in appropriate circumstances. In determining whether to enforce a jury trial waiver provision, New York courts and federal courts likely will consider whether the visibility of the jury trial waiver provision within the agreement in question is sufficiently prominent, such that a party has knowingly waived any right to trial by jury. We believe that this is the case with respect to the deposit agreement and the ADSs.

In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable setoff or counterclaimDeposit Agreement.

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Table of fraud or one which is based upon a creditor’s negligence in failing to liquidate collateral upon a guarantor’s demand, or in the case ofContents
Because an intentional tort claim (as opposed to a contract dispute). No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any provision of U.S. federal securities laws and the rules and regulations promulgated thereunder.

If any owner or holder of ADSs brings a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under U.S. federal securities laws, such owner orADS holder may not be entitled to a jury trial with respect to suchhis or her claims which may havearising under the effect of limiting and discouragingDeposit Agreement against us or the Depositary, lawsuits against us or the depositary.Depositary may be discouraged or limited. If a lawsuit is brought against us or the depositaryDepositary under the deposit agreement, itDeposit Agreement, the proceedings may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures than a jury trial and may result in different resultsoutcomes than a trial by jury would have had,trial, including results that could be less favorable to the plaintiff(s) in any such action, depending on, among other things, the nature of the claims, the judge or justice hearing such claims, and the venue of the hearing.

Item 4.

Information on the Company.

A. History and Development of the Company

We were incorporated as a public limited company under the laws of Kingdom of Norway on July 24, 1996. Our ordinary sharesOrdinary Shares have been listed for trading in Norway on the Oslo Børs under the symbol “IDEX” since March 12, 2010. In March 2021, we completed the listing of2010, and our ADSs have been listed for trading on the Nasdaq Capital Market under the symbol “IDBA.”“IDBA” since March 1, 2021.
Since IDEX was founded, our strategy has been based on the development and commercialization of differentiated solutions for fingerprint authentication. Our principal executive officestechnologies originated within SINTEF, the largest research organization in Scandinavia, which is affiliated with the Norwegian Institute of Technology. The Company’s initial focus was on the development and sale of swipe sensors for fingerprint authentication, targeting consumer applications such as user authentication for personal computers, personal digital assistants, and the then-emerging market for smart phones. We also pursued a licensing strategy, which would enable others to create and market their own products based on our intellectual property.
Our early products were based on proprietary innovations in fingerprint imaging, processing, and matching. However, we achieved limited success in a rapidly commoditizing market in which silicon image sensors of limited functionality were popular due to their low cost. Such limited functionality was acceptable, notably in the fast-growing mobile phone market, as the devices in which they were being used possessed robust processing resources for performing biometric functions. Also, power consumption and efficiency were not critical considerations in these applications, given their use of large capacity batteries or access to electric power.    
In 2013, IDEX acquired the assets and operations of PicoField Technologies, Inc., obtaining important intellectual property associated with touch (i.e., full fingerprint) sensors and adding biometric industry veterans to our design team. In 2015, we acquired the patent portfolio of Metadyne Software, a developer of highly-efficient fingerprint algorithms. Both acquisitions contributed to advancing our development of fingerprint authentication solutions with differentiated characteristics.
In the latter half of the last decade, IDEX undertook a strategic pivot toward market segments and applications for which these differentiated characteristics provided demonstrable and sustainable competitive advantages. Our focus today is on smart cards, which present challenging form factors, demanding performance requirements, and extreme power limitations, for which our fingerprint authentication solutions are ideally suited.
3
This strategic pivot toward differentiation of a comprehensive solution is embodied in our latest offering, the TrustedBio family of fingerprint authentication modules.
We do not own or operate industrial manufacturing facilities, but operate as a “fabless” manufacturer, utilizing third parties for outsourced manufacturing, assembly, and test capabilities. Our capital expenditures for the years ended December 31, 2021, 2020, and 2019 were $141 thousand, $152 thousand, and $850 thousand, respectively. As a fabless manufacturer, our capital expenditures primarily are for purchases of laboratory and test equipment related to product development, although, as was the case in 2019, we will acquire production equipment for use by our contract manufacturing service providers.
The International Standards Organization (“ISO”), an independent standard-setting body, uses the term Integrated Circuit Card, or ICC, to encompass all devices in which an integrated circuit is contained within a defined form factor, the ISO
ID-1
standard for the dimensions of an identification card.
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During 2021, 2020, and 2019, we raised, through private placements of our Ordinary Shares, gross proceeds of $47.1 million, $18.0 million, and $34.2 million. As of December 31, 2021, our accumulated losses (i.e., our cumulative tax loss carryforward) totaled $251.1 million. For further financial information, see “Item 5. Operating and Financial Review and Prospects.”
We have locations in Oslo, Norway (sales and marketing, finance, and group administration), Farnborough, United Kingdom (systems engineering, quality, supply chain management, and human resources), Rochester, New York, United States (hardware engineering), Wilmington, Massachusetts, United States (software engineering, circuit design, and administration), and Shanghai, China (customer support and applications engineering).
Our headquarters are located at Dronning Eufemias gate
16, NO-0191 Oslo,
Norway, which is also our registered office address, and our telephone number is +47 6783 9119. Our agent for service of process in the United States is IDEX Biometrics America Inc., with a registered address at 187 Ballardvale Street, SuiteSuite. B211, Wilmington, MA 01887.

Our actual capital expenditures for the years ended December 31, 2020, 2019 and 2018 amounted to $0.3 million, $0.9 million and $1.1 million, respectively. The major item in 2020 was a chip design block. In 2019 and 2018 the capital expenditures primarily consisted of purchases of laboratory and production equipment related to product development and commercialization

The SEC maintains an Internet site, that containshttp://www.sec.gov, containing reports, proxy information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov. Our website address is
www.idexbiometrics.com
. The reference to our website is an inactive textual reference

only and information contained in, or that can be accessed through, our website or any other website cited in this annual reportherein is not part of this annual report.

Annual Report.

B. Business Overview

Overview

We are a biometrics company specializing in

Description of the design, development and saleCompany
IDEX develops and markets differentiated fingerprint authentication solutions optimized for use in smart cards, based on patented and proprietary sensor technologies, integrated circuit designs, and highly-specialized firmware and software. We primarily target fingerprint authentication applications involving standardized smart cards without batteries,
although our products also are applicable to battery-powered devices in different form factors.
Our extensive intellectual property portfolio, leveraging 146 patents awarded and 66 patents pending, across applicable jurisdictions worldwide (as of December 31, 2021), is a critical enabler of our strategy and competitive positioning.
From time to time, we may provide project-oriented engineering or design services to customers. We also license our intellectual property and software to third parties, although licensing currently does not contribute materially to our revenue.
A standard-format smart card, utilizing our fingerprint authentication solution, offered by Rocker AB and manufactured by our customer, IDEMIA France SAS
Our current product portfolio consists of fingerprint authentication modules, related software, and cardholder enrolment solutions. Our latest generation of fingerprint authentication device, introduced in 2020, the TrustedBio family of modules, is a single package solution consisting of our most advanced fingerprint imaging sensor and a proprietary application specific integrated circuit (“ASIC”), which is a multi-purpose microprocessor executing image processing, biometric processing, and power management functions. Our cardholder enrolment solutions currently are based on an innovative, reusable sleeve, which provides secure, convenient smart card enrolment.
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Our current product portfolio is targeted at three applications, which we refer to as “market segments,” within the smart card market: financial payments (i.e., credit, debit, and stored value transaction cards), cyber authentication (i.e., devices for identification and authorization of users for access to high-value electronic networks or sensitive physical facilities), and digital currency storage (i.e., devices for highly-secure authorized access to cryptocurrency trading platforms and the secure storage of digital currencies, both private and government-sponsored). The financial payments market segment is the largest of the three we target, and it is the most developed. The cyber authentication and digital currency storage segments currently are far smaller, and application-specific form factors, performance requirements, and standards are evolving.
Our customer focus primarily is on manufacturers of smart cards. Other customers include integrators of authentication technologies and developers and vendors of security systems, across a broad market for identification-based authorization solutions. We also have individual corporate customers that design authentication solutions for their own consumption. Our fingerprint sensors and biometric solutionsproducts are usednot limited to use in dual interface and contactless or touch-free smart cards, including payment cards, andbut also are applicable to a range of electronic devices.

We offerapplications across varying form factors.

Because a critical element of demand for our solutions originates with these manufacturers’ own customers (e.g., the demand for financial payment cards with fingerprint sensorsauthentication originates with a bank issuer interested in offering such cards), we also direct our marketing and biometric solutions todemand creation efforts toward the education of customers of smart card manufacturers, as well as other influential participants in the smart card industry.
We utilize a direct sales force and other integrators of biometric fingerprint sensor technology in a broad range of markets, including payments, identification, access control, healthcare andhave customers around the Internet of Things, or IoT. Based on an analysis by Zion Market Research in February 2020,world. At the sizepresent time, we do not sell our products through stocking distributors. Given the early-stage characteristics of the global fingerprint sensor market is estimated to be $3.6 billion in 2020 and is projected to expand at a compound annual growth rate, or CAGR, of nearly 15% to $6.7 billion by 2025.

Our largest market opportunity is the biometric payment card market and more specifically our addressable market includes chip enabled cards which also include contactless payment cards. According to EMVCo, the industry standard organization, there are more than 8.2 billion chip-enabled consumer cards—credit and debit—now in use across the world. We believe the addition of a biometric sensor to the payment cards will significantly reduce the opportunity for fraud while making the transaction more convenient while using existing point of sale infrastructure. We believe the continue migration towards contactless payment cards will provide additional opportunities for our technologies. A report, Contactless Payment Market Global Forecast to 2025, published by Markets and Markets indicates that the global contactless credit/debit card payment market size is expected to grow from $10.3 billion in 2020 to $18.0 billion by 2025. This represents a CAGR of 11.7% during the forecast period. The major advantage offered by contactless payments is that customers can instantly complete transactions with the tap of a card. This increases the speed of transactions, making contactless payments even more efficient stated the Markets and Markets report.

In addition, following the COVID-19 outbreak, we believe consumers increasingly are motivated to go cashless. With many businesses discouraging the use of cash, in part due to hygiene questions linked to handling money, the prevalence of contactless payments increased significantly in 2020. For example, a survey in March of 2020 in 19 countries around the world indicated a 25% increase in contactless payments (out of all credit card payments) compared to March 2019, and approximately 79% of consumers worldwide are now using tap and go payments. In an increasingly cashless and contactless society, there is a growing risk of card fraud. We believe that this could have a positive impact on the sale of biometric solutions going forward.

Our patent-protected fingerprint sensors can be integrated on the front side of a payment card, thereby enabling the card to use biometric fingerprint recognition instead of a personal identification number, or PIN, to authenticate the cardholder. To use this feature the cardholder first enrolls their fingerprint. A biometric template, which is representative of the fingerprint, is created and securely stored on the card. When the cardholder uses the card to make a payment, he or she places his or her finger on the card’s sensor. Through fingerprint sensing and biometric authentication, the card can determine if the person using the card is the enrolled user or not.

Our portfolio of products includes fingerprint sensors, fingerprint modules with software and algorithms and remote enrollment devices. Our fingerprint sensors can be used in dual interface, contactless-only and contact-only payment cards. Our fingerprint modules offer a complete biometric solution that integrates fingerprint sensing with additional biometric processing and system power management functions. Additionally, with our remote enrollment solutions, cardholders can easily enroll their fingerprints at home and without the need to visit a bank branch.

Our sensors use a patented off-chip design, which separates the fingerprint sensor into two key components: the sensor array and the silicon chip (Application Specific Integrated Circuit, or ASIC). This off-chip design

architecture allows the sensor array to be made from a flexible and cost-efficient polymer substrate while minimizing the silicon area needed for the ASIC. Compared to conventional silicon sensors, for which the sensor array is made of silicon, the off-chip design allows for a larger sensing area, better matching reliability and lower costs. We believe thatsegments we are targeting, including the only provider supplying capacitive off-chip sensorsextended and biometric algorithms optimizedunpredictable sales cycles frequently associated with marketing new and innovative technology-based products, we expanded our marketing and sales staff in 2021 and increased our marketing budget for integration with payment cards. In 2020, we launched TrustedBio, our next generation of dual interface products and solutions designed to reduce biometric smart card cost while improving both performance and security. TrustedBio utilizes advanced semiconductor technology to transform the sensor ASIC into a complete biometric system on chip, while maintaining all the benefits of the capacitive off-chip sensor architecture.

Our current generation products are commercially available, and we have begun to ship samples of our products on our TrustedBio platform. To date, product revenue has not been material; however, we have seen an increase in product revenues. For the years ended December 31, 2020, 2019, and 2018, product revenues were $1.0 million, $0.2 million and $0.2 million, respectively.

We market our products and solutions to smart card manufacturers and other integrators of biometric sensor technology, such as keyboards, dongles and other information and physical access control devices. 2022.

We do not own or operate industrialcapital-intensive manufacturing facilities, which could be potentially costly. Instead, we work closely with our customers onbut operate as a fabless manufacturer, utilizing third parties for outsourced manufacturing and alongside other component suppliersproduct assembly capabilities. We currently rely on Taiwan Semiconductor Manufacturing Company, Limited (“TSMC”), the leading producer of semiconductor wafers, as the sole source of wafers for our proprietary ASIC designs. We also rely on a limited number of providers of outsourced semiconductor packaging, design, and test services, including Amkor Technology, Inc., and Silicon Precision Industries Limited , both of which are leaders in outsourced semiconductor assembly and test services.
Fingerprint Authentication Steps
Every individual has unique, immutable fingerprints. A fingerprint consists of a series of ridges and valleys on the surface of a finger. The uniqueness of a fingerprint is established by each finger’s distinctive pattern of ridges, valleys, and minutiae points, which are specific ridge characteristics occurring at either the point at which a fingerprint ridge bifurcates or ends.
Biometric technologies are automated methods for identifying individuals based on a comparison of stored biological and behavioral characteristics with the current presentation of such characteristics. Of all biometric techniques, fingerprint-based identification is the oldest and most established. Fingerprint identification has been successfully used in numerous applications for over a century.
A fingerprint authentication solution, in summary, is an electronic system, combining hardware and software, that captures an image of these unique fingerprint characteristics, transforms that image into a mathematical representation, and then compares that representation with a valid representation. If the results of the comparison exceed a predefined verification threshold, the identity of the presenting individual is authenticated.
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The following summarizes the primary elements of fingerprint authentication, addressing our approach to each:
Scanning
Scanning is the process of recognizing and capturing the necessary characteristics of an individual’s fingerprint using an electronic device. Ink and paper were originally used to capture fingerprint images. Optical scanning was an early method for electronic capture of a fingerprint, and remains common in certain high-volume applications, primarily in law enforcement. Other scanning technologies for the detection of fingerprint variances include those based on sensing variances in heat, pressure, and ultrasound.
Our scanning technology is based on capacitive sensing, which utilizes an electrical field to detect fingerprint characteristics such as ridges, valleys, and minutiae by measuring miniscule variances in current associated with those varying characteristics. The surface of the sensor, the platen, acts as one plate of a capacitor, and the finger acts as the other. Capacitive sensing, the most appropriate technology for resource-constrained applications, was the area in which the Company pioneered the signal processing innovations that remain foundational to our strategy.
More recently, we have developed a differentiated approach to capacitive image capture, using a polymer substrate (i.e., a flex circuit) in which a capacitive sensing array (i.e., a fine-pitched wire mesh, with each wire intersection representing an electrode) is embedded. Compared to conventional semiconductor-based capacitive sensors, for which the sensing array is on the surface of a rigid integrated circuit, our flexible sensor is relatively inexpensive to manufacture and allows for a larger sensor surface area, more than twice the size of competitive silicon sensors. Our capacitive sensor produces a larger image, yielding more data, which enables superior scanning, feature extraction, and matching performance.
Feature Extraction
The miniscule variations in current detected in scanning are a data set representing the fingerprint, and the common practice is to create from this data set an
8-bit
gray-scale digital image for further processing (i.e., feature extraction). Feature extraction is a computationally-challenging process requiring speed and signal-processing precision. Algorithms used in a resource-constrained environment such as a smart card must be highly efficient, reducing the burdens placed on processor, memory, and power resources.
We utilize proprietary algorithms to refine the image, allowing for precise identification of patterns, which are transformed into an accurate mathematical representation of the image, referred to as a “template.”
Matching
A matching algorithm compares the template created from the scanned image to the encrypted template stored within the card ecosystem. We havesystem at the time of the user’s enrolment. These algorithms also established partnerships with secure element, or SE, producers, card inlay providersare computationally-challenging, again requiring speed and card networks to help bring biometric smart cards to market. Our strategic rationale is to ensure that all the crucial components, within the biometric smart card ecosystem, are compatible and ready for mass production and to enhance our ability to offer comprehensive solutions to the market.

Over the past three years, we have built a research and development, or R&D, team with deep industry expertise, comprised of systems and technology engineers, software engineers, silicon engineers, sensor engineers and packaging technologists. We are an integrated systems company and we maintain in-house design, testing and supply chain management functions. Manufacturing is outsourced to large and established semiconductor fabrication companiesprecision, as well as other providersconsistency of componentsoutcomes. Matching performance is measured by the correlated rates of false acceptance (“FAR”) and manufacturing services.

During 2020, we raised $18.0 million through private placements. During 2019, we raisedfalse rejection (“FRR”), accuracy and reliability, and computational speed. Matching algorithms can be adjusted to meet the requirements of the application, addressing the trade-offs between desired security levels and

end-user
convenience (i.e., a totallow FAR, suggesting high security, implies a high FRR, suggesting low
end-user
convenience).
Our matching algorithms, which are compact and highly efficient, are well-suited for providing fast results in resource-constrained environments. They are differentiated by patented features such as insensitivity to image rotation and the ability to process incomplete images (i.e., partial touches), enabling high accuracy and reliability.
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Table of $34.2 million in capital. Additionally, in February 2021, we raised an additional $27.2 million throughContents
Our algorithms also are differentiated by the flexibility of how they may be used. In a private placement. For further financial information, see the section titled “Operating and Financial Review and Prospects.”

While wesmart card implementation, because of security requirements, matching algorithms are preparing to fully commercialize our products and services, we have begun to generate revenue through the sale of biometric sensors and system solutions that incorporate our technology. In 2020, we generated revenue of $1.1 million, $1.0 million of which was related to product sales and $0.1 million of which was related to engineering services. In 2019, we generated revenue of $0.4 million, $0.2 million of which related to product sales and $0.2 million of which related to engineering services. In 2018, we generated revenue of $0.4 million, $0.2 million of which related to product sales and $0.2 million of which related to engineering services. We have also secured in excess of $7.0 million of business under contract (consisting of current order backlog and committed purchases not yet entered) expected to ship within the next 12 to 24 months, including a $6.0 million minimum commitment to supply fingerprint sensors and software to a major global financial news and IT services company. We had a net loss of $26.8 million, $32.4 million, and $30.2 million in 2020, 2019 and 2018, respectively.

We were incorporated in Norway in 1996, and currently have operationstypically executed in the United Kingdom,SE. However, our TrustedBio is designed to allow matching algorithms to be executed in a distributed (i.e., shared) mode, whereby computationally intensive functions can be executed on our module’s faster ASIC, reducing the United Statescomputational requirements of the SE. This allows customers the flexibility to optimize designs based on application requirements and China.

Industry Background

available processing resources, reducing overall system costs.

Summary of Smart Cards and Applications
A fingerprint sensor issmart card can be described as a biometric security devicecompact microelectronic system, generally with the dimensions of a credit card or driver’s license, in which one or more embedded integrated circuits (“ICs”) enable secure storage, processing, and communication of encrypted data.
Standards Bodies
The highest-level standards bodies defining smart card formats and functionalities are the International Standards Organization (“ISO”) and the International Electrotechnical Commission (“IEC”), two independent organizations that combines hardware and software to recognizejointly develop the fingerprint scans of an individual and in turn to identify and authenticate an individual in order to grant or deny

access to an electronic device, secure information or a physical facility. It is used involuntary requirements for smart card compatibility. ISO/IEC 7816 addresses a broad range of requirements, including the physical dimensions of a smart card (the

“ID-1”
standard is 85.60 × 53.98 x 0.76 millimeters), electrical interfaces, the structure of data and their use (i.e., defining file and command structures, including those for biometric verification), and communications and encryption protocols. ISO/IEC 14443 addresses the requirements of contactless smart cards, including electrical interfaces and protocols for radio frequency communications. ISO/IEC 18092 addresses NFC standards. ISO/IEC standards are applicable to smart card use in the three market segments we are targeting, and our fingerprint authentication solutions are designed to meet or exceed all applicable requirements.
Because we primarily target the financial payments market segment, our fingerprint authentication solutions are designed in compliance with industry standards of EMV Company, LLC (“EMV”), a consortium established by Europay, Mastercard, and VISA to develop and maintain communications, security, and encryption specifications for the use of smart cards across financial payment networks. Because our solutions are used in smart cards utilizing the JavaCard card operating system and Java-based “applets,” we comply with the standards of GlobalPlatform, an independent standards body, for secure channel communications and the use of cryptographic data.
Smart Card Design
The enabling ICs in a smart card are typically a secure microcontroller (referred to as a secure element (“SE”)), which functions as the system-level processor, and one or more secondary microcontrollers dedicated to functions such as power management or biometric processing. SE processors execute the card operating system and one or more applets, which are compact programs that execute proprietary functions (e.g., an applet for a payment network will coordinate communication of encrypted data using an encryption key only known by that payment network). SEs generally have robust memory blocks for encrypted data storage, with multiple memory types, but separate memory ICs may be necessary, depending on the smart card’s application.
Also embedded in the layers of a smart card are an antenna, for wireless communication and power harvesting, connecting circuitry (referred to as an inlay), and, depending on the design of the smart card, various passive electronic devices. Multi-layer smart cards are generally made of thermoplastics (polyvinyl chloride, or PVC, is the most common material used), although metal and ceramic compounds recently have been introduced.
Contact-only and dual-interface (i.e., contact and contactless functionality) smart cards do not have batteries and are powered, in the case of contact-only and dual-interface designs, through physical contact with a card reader, or, for dual-interface designs in contactless mode, though energy harvesting (i.e., resonant inductive coupling) enabled, most commonly, by near field communications (“NFC”) interface protocols.
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A trend toward greater use of contactless communication continues across smart cards and reader infrastructure (e.g.,
point-of-sale
terminals) has been underway, accelerated by heightened
end-user
concerns about hygiene caused by the
COVID-19
pandemic. According to ABI Research, worldwide shipments of dual-interface cards for financial payments represented over 75% of the 3.0 billion smart cards shipped in 2021, and we expect this percentage to expand. ABI Research also estimates the worldwide volume of contactless smart card transactions grew by 49% from 2020 to 2021. However, contactless smart card transactions generally are limited by financial institutions and payment processing networks to small value transactions, given the absence of a required signature or personal identification number (“PIN”) as a second authentication factor.
Usage and Applications
The defining characteristic of a smart card is the security afforded by the SE and its use of data encryption to secure storage and communications, making it an ideal solution for a very broad range of applications. Smart cards are used worldwide in high volumes across the following applications including payments,(in descending order of estimated total unit volumes for 2021): financial payments; government identification (including healthcare and social-security applications); transportation and ticketing; and access control healthcare(for logical and IoT. physical applications).
The sizedevelopment of widely accepted standards for smart card performance uniformity and cross-vendor compatibility has contributed to the sustained growth of smart cards in circulation, notably for financial payment applications. ABI Research estimates approximately 10.3 billion smart cards, in the form of credit and debit cards, ATM cards, and stored value cards, were in circulation as of December 31, 2021, with 3.4 billion financial payment cards shipped during the year.
We estimate this total to represent three-quarters of the global fingerprint sensortotal volume of smart cards shipped across all
ID-1
format applications.
4
In contrast, we estimate less than 10% of smart cards shipped in 2021 were across all access control applications.
5
Shipments for use in digital currency storage applications, an emerging market is estimated at $3.6 billionsegment, were not material in 2020volume.
Our Strategy
Our strategy emphasizes demonstrable solution advantages that address evolving customer and is projected
end-user
requirements, leading to expand at a CAGRsustainable competitive position and the avoidance of nearly 15% to $6.7 billioncommoditizing pressures. Since the Company was founded, our strategy and competitive positioning have been based on continuous advances in technologies, innovations in design, and achievements in performance, enabled by 2025.

Total Addressable Market

Basedour focus on an analysis by Zion Market Research, the global demand for biometric payments in 2019 was approximately $5.0 billionresearch and is anticipated to reach around $19.0 billion by 2026. The anticipated CAGR for the market is around 19% through 2026.

Our largest market opportunity is the biometric payment card market and more specifically our addressable market includes chip enabled cards which also include contactless payment cards. According to EMVCo, the industry standard organization, there are more than 8.2 billion chip-enabled consumer cards—credit and debit—now in use across the world. development.

We believe the additioncombination of our broad and substantive intellectual property portfolio, our expertise across a comprehensive range of challenging and complex domains, and our integrated, systems engineering approach represents a significant competitive advantage for IDEX.
We derived these estimates from market data regarding SE shipments categorized by smart card applications, published by Eurosmart (February 2022). Subscriber identity modules, also known as SIM cards, are included in this market data, as the enabling SEs and technologies are similar, although the form factors are very different. SIM cards are much smaller devices used in mobile telephony applications for subscriber authentication. Similarly, the subscriber authentication devices used in
pay-television
applications also are categorized as smart cards. Our fingerprint authentication solutions are not applicable to such telephony or
pay-television
applications.
Physical access control applications commonly utilize keycards, also known as proximity cards, which are wireless devices enabling a relatively low level of security for contactless identification. Applications include opening facility doors and gates, time and attendance systems, and automated toll collection. Keycards can be passive (i.e., powered by resonant inductive coupling) or active (i.e., powered by a battery). Keycard designs, functionalities, and communication protocols are proprietary to the vendor, resulting in closed systems. Our estimate of smart cards shipped for access control applications considers only those smart cards meeting the relevant ISO/IEC standards.
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Our intellectual property portfolio, as of December 31, 2021, consisted of 146 patents awarded and 66 patents pending, across applicable jurisdictions worldwide. Reflecting our core competencies, we have substantial intellectual property across the following areas: design of biometric sensors, ASICs, and modules; signals and data processing; and a broad range of solution features and functionalities.
Our core competencies, characterized by deep domain expertise and a multi-disciplined, systems engineering approach, are built on organizational strengths in the following domains: biometric imaging and processing; sensor architectures; integrated circuit design; materials, manufacturing, and packaging; algorithm, firmware, and software development; encryption technologies; NFC and power management; and industrial design.
Our value proposition is based on the differentiated functionality and performance of our fingerprint authentication solutions and our distinctive systems engineering approach to offering integrated solutions addressing multiple customer needs. These customer needs may vary among the market segments we target, but generally are associated with the enhancement of our customer’s competitive advantages, based on the differentiated functionality and performance of our solutions, and reduced total cost of ownership (“TCO”), based on our distinctive systems engineering capabilities, enabling comprehensive, integrated solutions.
TCO represents the sum of the purchase price of our products, which we believe are competitive, and the costs customers may encounter when implementing a fingerprint authentication solution in their own products. In contrast to vendors of individual elements of a biometric sensorsolution, our core competencies enable us to contribute to lowering the payment cards will significantly reduce the opportunitycosts and challenges of system design for fraudcustomers, while making the transaction more convenient while using existing point of sale infrastructure. accelerating their
time-to-market.
We believe the continue migration towards contactless payment cards will provide additional opportunities for our technologies. A report, Contactless Payment Market Global Forecast to 2025, published by Markets and Markets indicates that the global contactless credit/debit card payment market size is expected to grow from $10.3 billion in 2020 to $18.0 billion by 2025. This represents a CAGR of 11.7% during the forecast period. The major advantage offered by contactless payments is thatmany customers can instantly complete transactions with the tap of a card. This increases the speed of transactions, making contactless payments even more efficient stated the Markets and Markets report.

We believe that the rapid growth of this market is attributable to an ever-increasing need for highly secure yet safe, fast and convenient identification and authentication solutions. According to the findings of a survey commissioned by Visa, for example, consumers are ready to leave the password behind. 70% of the consumers surveyed believe that biometrics are always more convenient as they do not involve memorizing passwords. More than 65% of consumers are already familiar with biometrics, while 86% are interested in using biometrics to verify the identity or to make payments.

For this reason, the market for mobile devices equipped with fingerprint sensors has grown dramatically in recent years. Led by industry giants, such as Apple and Samsung, an increasing number of smartphone manufacturers have integrated fingerprint sensors in their devices. In 2012, only 2.5 million smartphones were shipped with fingerprint sensors, whereas fingerprint sensors were used in an estimated 797 million smartphones in 2016. In 2017, fifty-five percent of smartphones shipped globally had a fingerprint sensor and according to a publicly available report by Credit Suisse, the shipment of smartphones with fingerprint sensors worldwide stood at 1.1 billion units in 2018.

The rising penetration of biometric solutions and fingerprint sensors in mobile devices has paved the way for the inclusion of such technology into payment cards. Nowadays, cards are routinely used as a payment device in lieu of cash or checks. We believe that the integration of a fingerprint sensor into payment cards will not only enhance security, but also enable financial institutions and other participants in the payments and disbursements ecosystem to pursue new market opportunities.

As the global pandemic of COVID-19 continues to rapidly evolve, we do not yet know the full extent of its potential impacts on our addressable market, business, operations, or the global economy as a whole. While we believe that the pandemic may increase end-user awareness of the benefits of contactless payment solutions such as the ones we offer, and therefore may increase the demand for our products as discussed below, the ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change.

Market Opportunities

Our largest target market is the biometric payment card market. We also offer our products and solutions for the access control market, as well as other adjacent verticals including, government and identification, healthcare and IoT.

We believe that the need for biometric payment cards is driven by consumers’ desire for a completely contactless or touch-free secure payment transaction. Consumers want a fast and frictionless transaction process but with a feeling of enhanced security. In addition, card issuers view innovation as important to remain relevant and “top of wallet with their customers.

As of December 2018, there were 22 billion payment cards in circulation globally. This number is projected to further grow to 29 billion by 2023. Most of these cards are smart cards, i.e., cards with a chip. Our payment card total addressable market or TAM includes all cards with a chip. According to EMVCo, the industry standard organization, there are more than 8.2 billion chip-enabled consumer cards—credit and debit—now in use across the world.

Touch-free or contactless payment cards are expected to drive significant growth for our products. The global touch-free card transaction value is expected to increase by 300% from $2 trillion to $6 trillion between 2020 and 2024. Touch-free payments have accelerated significantly, and contactless limits have been increased due to the global COVID-19 pandemic driven by concerns for safety. However, these trends increase the risk of fraud and we believe that adding a biometric fingerprint sensor meets the needs of a touch-free payment environment while providing a high level of security.

We expect demand for a contactless, safe and secure payment solution, that a biometric payment card offers, to grow in the near future. We expect to see banks launching more pilots and soft launches in 2021. We also believe our TrustedBio solution offers compelling performance, security, manufacturability and cost benefits which will allow for the large-scale adoption of biometric payment cards beginning in 2022. Also, industry analysts and observers project significant and steep growth in fingerprint biometrics in payment cards. Estimates for biometric payment card shipments in 2021 are several thousand units for pilots, with smaller scale soft launches later in the year and in 2022. Independent third-party research projects that 2021 to 2025 will show significant growth in shipments to as many as 350 million units.

LOGO

Projected number of biometric payment card shipments (millions of units)

We are already engaged with leading payment card manufacturers and have design wins and supply agreements with some of the industry leaders. In addition, we have formed partnerships with key members of the biometric card ecosystem including SE providers. We expect to continue to establish new partnerships and customers.

Before a payment card can be actively offered to consumers, it must first be certified by the payment network. In the last year several of the largest payment networks, including China UnionPay, or CUP, Mastercard and Visa, have all published their certification processes for biometric smart cards. Certification involves a rigorous multi-step process carried out by third-party testing institutions along with the card network. The process includes testing of biometric performance, such as the fingerprint sensor and the ASIC, and the software and security testing. The card’s physical aspects are also tested, for torsion endurance, scratch resistance and structural strength. Certification represents a high barrier to entry for both new entrants to the market and our existing competitors. All three major global payment networks now have certified biometric payment cards.

During the second quarter of 2020 our technology was certified by two major global payment networks: CUP and a large US-based payment network. The two networks combined issue 70% of global branded payment cards. We were the first fingerprint sensor company to have achieved certification for its system solution with two global payment networks. Certification enables the transition from the pilot phase to commercialization and therefore broader market adoption of biometric payment cards.

In 2020, our fingerprint sensors were selected by IDEMIA France SAS, or IDEMIA, the global leader in augmented identity and a leading global payment card manufacturer. We expect products using our TrustedBio technology to be in the market insegments we target could benefit from the fourth quarterTCO element of 2021.

We continue to seeour value proposition, as only a few global card manufacturers currently have the depth of resources and other suppliers in the ecosystem invest significantly in biometric payments technology.

Impact of COVID-19

In the first quarter of 2020, the World Health Organization declared COVID-19experience to develop a global pandemic. We quickly adopted the guidelines, outlined by the relevant governments where our company operates, to ensure the health of our employees and their families.

We establishedfingerprint authentication solution on an internal virus response team. Effective March 16, 2020, all travel and face-to-face meetings were stopped and we asked most staff to work from home. Staff with specific roles who need to work at one of our facilities are being supported in line with local government guidelines. Our management and board of directors continue to monitor the situation closely and will take further action as appropriate.

There have not been any significant delays in development projects, and we have not incurred any significant additional costs due to the actions taken. The pandemic did cause some short-term delays in early adoption activities, including temporary delays for pilots.

On the other hand, we believe that the pandemic has increased end-user awareness of the benefits of contactless payments. Following the outbreak, consumers are motivated to go cashless more than ever before. With many businesses discouraging the use of cash, because of hygiene questions that surround handling money, contactless payments are front of mind to avoid touching pin pads. In an increasingly cashless ecosystem, there is a growing threat of card fraud from the lack of authentication. Contactless payments need to be made more secure in order to ensure transactions are hygienic, convenient and free from the risk of fraud.

We, and other industry participants, believe this attention to hygienic aspects could have a positive impact on business going forward.

The Importance of Our Solution to the Payment Card Market

The integration of fingerprint sensor into payment cards provides the following benefits:

Higher Level of Security: Payment card fraud is estimated to be a $28 billion problem, globally. Unlike a password, PIN or swipe card, biometrics cannot be lost, stolen, forgotten or easily forged. The

addition of a fingerprint sensor onto payment cards adds an additional security layer via a multi-factor authentication approach. It improves and hardens the security mechanisms already well adopted and established in the payment card market, enabling Stronger Customer Authentication, which is a key requirement outlined in the European Union’s, or EU’s, Second Payment Services Directive, or PSD2.

Frictionless Transaction Experience: Thanks to the proliferation of smartphones embedded with fingerprint sensing technology, consumers nowadays are generally familiar with biometrics and its application to consumer devices. The combination of biometrics with payment cards eliminates the need to remember passwords and simplifies the enrollment and transaction processes. Tap and go contactless transaction is then done with no procedural changes now with biometric identification.

Increased Market Competitiveness for Card Issuers: The average number of payment cards held per consumer is increasing, which means increased competition among card issuers. There needs to be a compelling reason for a user to choose one card over another. The integration of technology, such as fingerprint sensors, transforms payment cards from a static, generic solution, to one that is more personalized and tailored to users, potentially creating card differentiation and brand stickiness.

Lower Cost of Card Ownership: Traditional payment cards typically have a life span of three years, due to the need to update the card’s physical features periodically. As banks and other financial institutions adopt fingerprint sensing technology and look toward technology that extends the lifeexpedited timeline. Design of a card, the costs associated with the manufacturing, issuance and shipping of replacement cards presumptively will decrease.

Our Competitive Strengths

We believe the following strengths will enable us to maintain and extend our position in the global fingerprint sensor and biometric technology market.

Patented Sensor Design: Our fingerprint sensors use a patented off-chip design, which separates the sensor into two key components: the sensor array and the silicon chip (i.e., ASIC). This off-chip design architecture allows the sensor array to be made from a flexible and cost-efficient polymer substrate while minimizing the silicon area needed for the ASIC. Compared to conventional silicon sensors, where the sensor array is implemented directly on silicon, the off-chip design allows for a larger sensing area, better matching reliability and lower costs. We believe that we are the only provider supplying capacitive off-chip sensors and biometric algorithms optimized for integration with payment cards.

Full System Approach: We understand that building a biometric smart card incorporating fingerprint authentication can be challenging, as the interaction between the fingerprint sensor, the smart card electronics, and itsthe environment is complex, particularly when there aregiven the limitations on power, processing capacity, and physical space, while having to satisfyform factor, and the stringent requirements for response time and biometric reliability. Weaccuracy. As such, we are therefore committed to offering a full systemdifferentiated, integrated approach to our customers.

An important element of our strategy, linked to our delivery of comprehensive, integrated solutions, is our development and use of strategic partnerships, which are intended to extend the scope of the integration of our TrustedBio modules and related elements of our software across the smart card supply chain, thereby enhancing our value proposition and, potentially, accelerating adoption of fingerprint authentication and demand for our solutions.
Our Solutions
Our solutions consist of integrated fingerprint authentication modules, which our customers use in their
end-products,
and our enrollment device, with which a user can securely and easily store his or her fingerprint on a smart card, manufacturers. We developthereby activating the smart card’s fingerprint authentication capabilities. In 2021, we announced our intention to market and license certain elements of our proprietary software, including our card operating system, special purpose applets, and biometric algorithms, but we have not yet generated such revenue.
Recent product and solution announcements are indicative of our strategy and value proposition, as well as the strategic shift we undertook late in the last decade toward market segments and applications for which the differentiated characteristics of our solutions provide system-level reference designsa demonstrable and software,sustainable competitive advantage.
In 2017, we announced a patented solution architecture, which we believe is competitively unique: a small, and lightweight module containing two optimized components, a fingerprint imaging sensor made of a flexible
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polymer substrate for image scanning and a small, yet powerful, ASIC for feature extraction, matching, and a range of other advantageous functions. This architecture is ideal for use in additionsmart cards and similar demanding applications.
TrustedBio Product Family
In 2020, we announced the latest generation of this architecture, the TrustedBio family of modules, and, in 2021, released an enhanced version, the TrustedBio Max.
A TrustedBio module, showing the sensor surface (left) and, on the reverse side (right), our ASIC and connection circuits
The capacitive sensor in a TrustedBio module is made using a polymer substrate (i.e., a flex circuit) in which a capacitive sensing array (i.e., a fine-pitched wire mesh, with each wire intersection representing an electrode) is embedded. The platen is covered by a robust, protective coating, allowing for years of usage. Our flexible sensor is relatively inexpensive to manufacture and allows for an approximately 90 square millimeter sensor surface area, more than twice the size of competitive silicon sensors. The capacitive sensor in a TrustedBio module produces a larger image, yielding more data, which enables superior scanning, feature extraction, and
matching performance. Semiconductor-based sensors can have higher electrode density, but their smaller sensor areas yield meaningfully less data for image processing, while increasing processing challenges to fingerprint sensors. Our reference designachieve equivalent results. Additionally, the flexibility of the polymer substrate, into which the wire mesh array is embedded, allows the TrustedBio module to easily meet industry specifications for torsion of plastic smart cards.
The ASIC used in a TrustedBio module is mounted on the reverse side of the polymer substrate in which our sensor array is embedded. The ASIC is a technical blueprint of a system thatproprietary microprocessor executing our customers can use as-is or customize to their own requirements. Our reference design provides a faster path for device manufacturers to embedthird generation scanning and template-creation (i.e., image processing and feature extraction) algorithms, our fingerprint sensors in their products. It typically consists of a complete solution to implement a biometric system including antenna,patented anti-spoofing algorithm, NFC power harvesting and voltage management, key external component selection (if any), system software, biometric matching algorithms and enrollment solutions.

Clear Focus on Cost-Efficiency: Card cost and manufacturing complexity has been a barrier to mass adoption of biometric smart cards. Now, due to the integration levels of our recently launched TrustedBio solutions, we believe that the cost of building a biometric smart card product will be dramatically reduced, which will accelerate market adoption. We have built on our off-chip sensor technology with new biometric-system-on-chip based products. This system-on-chip approach lowers the cost of materials required to build a biometric smart card, while providing major enhancements to

both performance and security. Unlike existing sensors, this new generation of products removes the need to have any electronic components laminated within the card’s inlay. We believe that this will lead to an improvement in manufacturing processes and yields, while substantially reducing the overall time to market.

Market Readiness: We were the first fingerprint sensor company to have achieved certification for fingerprint sensors and biometric solutions with two global payment networks. Our technology is included in the first biometric payment card certified on the CUP payment network. In addition, our technology is used in a biometric card certified by one of the world’s largest and most recognized payment networks. We are also the first biometric sensor company to have passed a development siteEMVCo® Security Evaluation. We continue to work with our customers to prepare them for the various card network certification processes that are essential for them to take their smart cards to market.

Robust Intellectual Property Portfolio: Our technology is baseddata encryption. Depending on a robust portfolio ofcustomer’s design or application requirements, our ASIC also can store and execute our proprietary technologies. We hold over 200 patents and patent applications. Our intellectual property rights cover our complete biometric system ranging from measurement principles, algorithms, sensor design to system solutions.

matching algorithms.

Customer Collaboration: We continuously work with our partners and customers to ensure we have and maintain a deep understanding of market needs. This continuous approach provides us with deep current and future insightsThe ASIC in our customers and the market aslatest TrustedBio Max module provides a whole. In turn we can use this insight to develop and deliver products and solutions that meet our customers’ demands and anticipate market developments.

Strong management and engineering teams with significant industry expertise: We have deliberately built our management and engineering teams, to include personnel with extensive industry experience and with technical experience in systems and technology engineering, software engineering, silicon engineering, sensor engineering and packaging technology. As of December 31, 2020, we had an engineering and research team of 72 employees and contractors, representing 74% of our workforce. Our company culture encourages all employees to work in a collaborative way to develop innovative solutions for our customers.

Our Growth Strategy

We intend to implement the following strategies to further expand our business:

Continue Advancing Technologies and Products: We are dedicated to enhancing our technologies and products, including end-to-end architectures and match-on-SE algorithms, in order to ensure a continuing high level of security. We plansingle-device functionality for fingerprint authentication in a smart card. Fabricated on a

40-nanometer
process node by TSMC, the approximately 10 square millimeter ASIC utilizes an ARM
Cortex-M3
32-bit
processor, operating at up to achieve further improvements in terms200 MHz, enhanced memory, and a proprietary parallel-processing logic core for accelerating our template-creation and anti-spoofing algorithms.
The capabilities of usability, conveniencethe TrustedBio Max module reflect our strategy of creating competitive differentiation for our customers, while reducing TCO. The TrustedBio Max enables smart cards with fingerprint authentication that are secure, accurate, and performance in our products through next-generation silicon, sensor and algorithm designs,power efficient, while maintaining cost-efficiency through optimized packaging and integration architectures.

Maximize Efficiency and Cost Competitiveness: We are focusedproviding a differentiated user experience characterized by fast transaction speed. The groundbreaking functionality of TrustedBio Max reduces computational burdens on continuing to maximize efficiency and cost competitiveness by designing our products using industry standard design processes, incorporating verified high-volume components and materials and utilizing established manufacturing processes.

Mass Production Readiness: In 2019, paymenta smart card’s SE, thereby allowing smart card manufacturers workedto utilize standard,

low-cost
SEs, rather than more costly SEs with expanded capabilities to address biometric processing. The capabilities of the ASIC allow for a smart card with fingerprint authentication to be designed without separate microcontrollers for biometric processing and power management functions, reducing design complexity and costs. Our advanced algorithms and other proven software elements of our solution minimize software development by our customers, as well as reducing associated risks and delays. The TrustedBio Max solution is targeted at smart card manufacturers seeking faster
time-to-market
with a comprehensive fingerprint authentication design that maximizes performance, while reducing development and manufacturing costs.
Also in 2021, we announced a reference design based on overcomingintegration of the complexities associatedSLC38 security controller, the latest SE released by Infineon Technologies AG, and the latest version of our TrustedBio module. Applicable to implementation of fingerprint authentication in smart card applications across all three of our targeted market
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segments, the high level of integration of this reference design enables differentiated authentication performance (e.g., low latency, high accuracy, and high electrical efficiency), while reducing integration challenges for the card manufacturer, thereby reducing costs and
time-to-market.
This reference design, developed with the introductionSE market share leader, represents an important achievement toward our strategic goal of aoffering to smart card manufacturers the most comprehensive solutions for fingerprint sensor into payment cards. Severalauthentication, creating competitive advantages for their own smart card products, while lowering the barriers to adoption of fingerprint authentication by lowering TCO, reducing complexities, and accelerating
time-to-market.
Software Solutions
As stated, last year we announced our intention to market and license certain elements of our customers are now readyproprietary software, including our JavaCard operating system, special-purpose Java applets, biometric algorithms, and, capable of mass production of biometric payment cards, using both hot and cold lamination processes, for embedding the sensor and electronics within the card.as their development is completed, our software-based enrolment solutions. We believe that our innovative technologyexpanding capabilities in software development have the potential to meaningfully add to our value proposition, broadening customer engagements and approach will enable usincreasing revenue.
For example, we are assisting issuers of smart cards as they develop dual- or
multi-use
applications to achieve mass production.broaden the appeal of their smart cards. Adding applications for execution within our JavaCard operating system on a smart card with fingerprint authentication involves the creation of customized applets. We are also actively working with other participants in the payment card ecosystem to accelerate high-volume manufacturing of biometric cards.

Form Strategichave assisted issuers and Global Partnerships: As part of our strategy to facilitate the mass production of biometric payment cards, we have partnered with smart card manufacturers in multiple regions who specialize in the development design, manufacturingof

dual-use
applications through the use of applets. For example, we supplied fingerprint authentication solutions to Chinese smart card manufacturers for banks piloting
dual-use
smart cards. One pilot involved a bank’s issuance of a smart card with fingerprint authentication on which user health and salewelfare data was stored, enabling streamlined, but highly secure, access to healthcare services and government benefits. The other pilot involved a bank’s issuance of dual interface cards. These partnerships allow usa smart card with fingerprint authentication for financial payment and ticketing applications. On this
co-branded
smart card, users could combine their bank transactions with the purchase and storage of high-speed rail tickets. To board a train, the user passed the contactless card over a wireless reader on the platform. While these pilots have not yet led to ensure that crucial components within biometric payment cardshigh-volume smart card issuance, we are compatibleencouraged by the potential of dual- and ready
multi-use
applications, as they represent compelling use cases for mass production. We have also established other strategic partnerships such as the one with Feitian, a manufacturerhigh level of security provided by fingerprint authentication.
Our software roadmap includes the development of smart card pre-laminated card inserts, in orderapplications that are being designed to includesignificantly enhance the competitive differentiation of our sensors as partcustomers’
end-products
and address important customer needs. In particular, we are focusing resources on the development, for which we have protected the associated intellectual property rights, of a mass-produced, low-cost and end-to-end solutionsmart card application to address the substantial level of fraud associated with
“card-not-present”
transactions, which consistently represents approximately three-quarters of the total value card-based fraud reported annually.
6
We anticipate this application could be attractive to smart card issuers in the EU, as they seek to comply with expanding Stronger Customer Authentication requirements for card manufacturers.

two-factor

authentication under the Second Payment Services Directive, or PSD2.

Address Additional Growing Markets: In addition

According to a December 2021 issue of Nilson Report, global payment card fraud totaled $28.6 billion in 2020, representing approximately 6.8% of total purchase value.
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Enrolment Solutions
In 2017, we introduced a patented enrolment solution, addressing another significant barrier to adoption of fingerprint authentication, particularly within the financial payments market segment: user enrolment (i.e., the process of imaging and storing a user’s fingerprint, in the form of a template, within the memory of the smart card, thereby enabling its use). IDEX was the first to release such an innovative device, incorporating proprietary hardware and software, which we developed in partnership with Mastercard Inc. We license the design to our customers or their
end-customers,
for use with contactless-only, contact-based, and dual interface smart card designs. Under such a license, we provide a customized design meeting
end-customer
requirements and coordinate volume manufacturing for the
end-customer
by a third-party.
Our on-card, remote enrollment solution, a battery-powered, reusable device enabling creation of a user fingerprint template, which is stored on – and never leaves – the smart card
Using our battery-powered, reusable device, which is delivered to the biometric payment card market, we also offer our products and solutions to other growing markets such asuser along with the markets for access control and IoT. The access control market is estimated at 250 million units annually and growing at 5%. In access control, we have secured a $6.0 million minimum commitment to supply fingerprint sensors and software to a major global financial news and IT services company. We were chosen based on our ability to implement the customer’s security requirements and to bring the fingerprint sensor into the system’s chain of trust. We also have had additional design wins in Asia for access control applications.

Our Products

The products we market are fingerprint sensors and fingerprint modules and solutions which include proprietary software algorithms and remote enrollment technology.

Fingerprint Sensors

We currently market and sell our IDX3200 and IDX3205 fingerprint sensors. These can be used in dual interface, contactless-only as well as contact-only payment cards. The fingerprint sensor is the front end of the fingerprint solution which captures the fingerprint image from which the biometric template is extracted.

In 2017, we launched an ASIC platform for off-chip sensors. The platform delivered both enhanced performance and reduced power consumption at a lower price compared to our previous generation ASIC. The ASIC was designed to be used across multiple product applications in our target markets, including the biometric payment card market, access control market, identification market and IoT market. The chip’s low power consumption increased its compatibility with contactless card applications. Additionally, the ASIC featured increased processing power and enhanced security features. Products designed on this ASIC platform began to ship in volume in 2020.

In February 2020, we launched TrustedBio, our next generation of dual-interface products and solutions designed to reduce biometric smart card, cost while improving both performance and security. The TrustedBio sensor utilizes leading semiconductor technology to implement a biometric-system-on-chip in the ASIC while maintaining all the benefits of the capacitive off-chip sensor architecture. Unlike existing sensors, this new generation of products removes the need to have any electronic components laminated within the card’s inlay. This is expected to lead to an improvement in manufacturing processes and yields, substantially reducing the time to market and cost of the card. We completed the first shipment of TrustedBio in August 2020. We expect to release the first member of the TrustedBio family in the fourth quarter of 2021, in support of customer pilots, and to eventually achieve commercial deployment in the first half of 2022.

Fingerprint Modules

A fingerprint module consists of the fingerprint sensor, together with ancillary components, such as the microprocessor unit and power management needed for a complete solution. In addition to the fingerprint sensor, which comes with the image-capturing ASIC, our fingerprint modules also include circuitry for power harvesting from the card terminal and power management circuitry, microcontroller with software for image processing and

template creation in addition to secure channel communication with the SE. In a payment card, the matching typically takes place in the SE, however for applications which do not require a SE matching can also occur in the module.

Our fingerprint modules offer a turn-key solution for customers to develop, prototype and manufacture their own end-product.

On-Card Enrollment Solutions

We design, develop and license our remote enrollment devices, which enable cardholders to enroll their fingerprints on a payment card. Our on-card enrollment solutions can be used for contactless-only, contact-based as well as dual interface smart card applications. We believe that a low-cost, simple, convenient and secure end-user registration process is the key to accelerating adoption of biometric payment cards by issuers and consumers alike.

Using our device, the enrollment can be completed in less than a minute.minute, following the instructions on the device, guided by LED indicators. A user can simply follow the instructions indicated on the device, further guided by flashing LED light indicators.

LOGO

Our seamless end-to-end solution allows card users toenroll securely enroll themselves without visiting a physical site, such as a bank branch or ATM.automated teller machine. Enrollment takes placeis completed entirely insidewithin the biometric smart card using its standard secure EMV® chip. There is noand, importantly, without the need to connect the enrollment device or the smart card itself to a computer, smartphone, or any other device connected to a network.

We also support tablet-based and similar enrolment solutions for use in circumstances involving centralized enrolment of a user population. These electronic data collection devices are manufactured and sold by third parties and incorporate elements of our fingerprint authentication solutions. They most commonly are used in bank branches (for payment card enrolment) and human resources or security offices (for access control card enrolment).
We believe
low-cost,
simple, convenient, and secure user enrolment processes are necessary to accelerate the adoption of fingerprint authentication in smart cards. To further lower the costs of enrolment and improve user experience, we are developing software-based enrolment solutions, for which we have protected the associated intellectual property rights, to allow for enrolment over the user’s mobile phone or, specifically for enrolment of financial payment card users, through a
point-of-sale
terminal.
Three-Year Revenue Summary
For the full year 2021, the Company recorded consolidated revenue of $2.8 million, compared to $1.1 million for 2020, and $424 thousand for 2019. Product revenue, as a percentage of total revenue, represented 99%, 93%, and 38% for 2021, 2020, and 2019, respectively. Revenue associated with our early-adopting customer in the cyber authentication market segment represented 85%, 81%, and 72% of our total revenue for 2021, 2020, and 2019, respectively. Our TrustedBio module was introduced in 2020 and began shipping in 2021. There was no licensing revenue for 2021, 2020, or 2019.
Backlog
We define backlog as
non-cancellable
orders scheduled to be delivered within 12 months and any deferred revenue scheduled for recognition within 12 months. Customer order volume accelerated across 2021 from both existing customers and, notably, new customers adopting the TrustedBio – SLC38 reference design we developed with Infineon Technologies. Our backlog totaled $2.5 million, $1.7 million and $120 thousand as of
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December 31, 2021, 2020, and 2019, respectively. These backlog figures exclude committed deliveries pursuant to a multi-year supply contract we have with our largest customer, as shipment volumes and scheduled delivery dates are subject to change. As of December 31, 2021, the value of these committed deliveries was approximately $1.2 million.
Marketing and Sales
Our customer focus primarily is on manufacturers of smart cards. Other customers include integrators of authentication technologies and developers and vendors of security systems, across a broad market for identification-based authorization solutions. We also have individual corporate customers that design authentication solutions for their own consumption. Our products are not limited to use in smart cards, but also are applicable to a range of applications across varying form factors.
Because a critical element of demand for our solutions originates with these manufacturers’ own customers (e.g., the demand for financial payment cards with fingerprint authentication originates with a bank issuer interested in offering such cards), we also direct our marketing and sales efforts toward the customers of smart card manufacturers, as well as other influential participants in the smart card industry.
Within the cyber authentication market segment, vendors of hardware- and software-based security systems and associated access control solutions represent the majority of our targeted customers, although, to date, the majority of our revenue has been derived from the development and sale of a customized network authentication solution to a single enterprise customer.
Within the digital currency storage market segment, which is less structured than our other targeted market segments, our customers have ranged from large smart card manufacturers addressing emerging digital currency applications to small technology innovators developing devices for secure access to proprietary cryptocurrency exchanges.
We utilize a direct sales force and have customers around the world. At the present time, we do not sell our products through stocking distributors. Given the early-stages of the market segments we are targeting, including the extended and unpredictable sales cycles frequently associated with marketing new and innovative technology-based products, we expanded our sales and marketing staff in 2021 and plan to increase our marketing activities in 2022.
Our
go-to-market
strategy emphasizes the creation and maintenance of relationships with and between companies and organizations that are positioned to support the acceleration of the adoption of fingerprint authentication in smart card applications. An important element of this strategy is establishing collaborative agreements with well-positioned partners, leveraging their expertise and resources. Examples of these partnerships include: IDEMIA France SAS and Zwipe AS, customers with which we have critical
go-to-market
engagements
7
; Mastercard Inc., which is a valuable contributor to demand creation and the advancement of fingerprint authentication in financial payments; and Infineon Technologies AG and Tongxin Microelectronics Co., Ltd., leaders in SE design and smart card electronics, with which we are developing integrated solutions.
With current and potential strategic partners, we have several initiatives underway intended to extend the scope of the integration of our TrustedBio modules and related elements of our software across the smart card
We have entered into separate supply agreements with IDEMIA France SAS and Zwipe AS. IDEMIA France SAS, the second largest manufacturer of smart cards globally, utilizes our TrustedBio fingerprint authentication solution in its F.CODE platform, which it markets to issuers in banking and financial services. Zwipe AS utilizes our TrustedBio fingerprint authentication solution in its Pay ONE platform, which Zwipe markets to smart card manufacturers and issuers as a comprehensive design.
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supply chain, thereby enhancing our value proposition and, potentially, accelerating adoption of fingerprint authentication and demand for our solutions. Recent examples of these initiatives include the following, targeted specifically as complements to the TrustedBio-SLC38 reference design:
with a supply chain partner, we have developed an optimized card inlay, consisting of a card antenna and connective circuits, which should reduce customer design and procurement costs;
with another supply chain partner, we have developed a proprietary card operating system for the TrustedBio-SLC38 reference design which can be installed on the SLC38 prior to shipment to a smart card manufacturer, further reducing costs and process steps; and
we have collaborated with a vendor of equipment used for card manufacturing to optimize tooling and process management software, thereby increasing card production throughput, while lowering yield losses.
Other strategic initiatives involve integration projects with numerous developers of SEs and electronic components for financial payment smart card applications, as well as vendors supplying the cyber authentication and digital currency storage market segments. We consider our initiatives to extend the scope of the integration of our fingerprint authentication solutions across the smart card supply chain to be an important element of our strategy, and we intend to expand such initiatives in the future.
Our marketing and sales personnel work closely with our product line management personnel to support strategic sales activities. A broad range of marketing communications activities also help to expose and promote the benefits of our fingerprint authentication solutions to potential customers. We have invested significant time and resources to meet with card and device manufacturers to understand their requirements and performance issues.
Our Opportunity
Targeted Market Segments and Customers
We currently target fingerprint authentication applications involving smart cards without batteries (i.e., cards conforming to ISO/IEC standards for electronic identification cards), for which prevents tamperingour solutions are especially well-suited. Customers for these and adjacent applications are within three emerging market segments, for which the solutions we offer and the applications served are summarized in the following table:
Market Segment
IDEX Solutions
Representative Applications
Financial
Payments
•  Smart cards
•  Dual-interface, NFC powered
•  Thermoplastic or metal
•  Customized COS and Applets
•  Enrolment sleeve or tablet-based solution
•  EMV-compliant
transaction applications
•  Credit, debit and stored value cards
•  Dual- and
multi-use
applications
•  Co-branded
with partners
Cyber
Authentication
•  Smart cards and similar devices
•  ID-1
form factor or customer design
•  RFID/NFC or battery powered
•  Customized COS and Applets
•  Enrolment sleeve or tablet-based solution
•  Secure user authorization for high value assets
•  Critical networks or applications
•  High security facilities
•  Easily integrated with IAM platforms
•  FIDO Alliance compliance
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Market SegmentIDEX SolutionsRepresentative Applications
Digital Currency Storage
•  Enhanced smart cards and similar devices
•  ID-1
form factor or customer design
•  RFID/NFC or battery powered
•  Optional displays and keypads
•  Optional Bluetooth connectivity
•  Customized COS and Applets
•  Enrolment sleeve or tablet-based solution
•  Secure devices for government digital currency
•  Example:
e-CNY
initiative of Chinese central bank
•  Card-like “wallets” issued by state-owned banks
•  Dual- and
multi-use
applications
•  Secure storage of health and welfare records
•  Highly secure cryptocurrency management devices
•  Authorized user access to trading platforms
•  Secure storage of cryptocurrencies
Our targeted customers in the financial payments market segment primarily are smart card manufacturers. We believe this market segment has the potential to be significantly larger and more well-defined than the other two targeted market segments. According to ABI Research, three global companies, IDEMIA France SAS (France), Giesecke+Devrient GmbH (Germany), and Thales Group SAS (France), represent approximately 70% of total 2021 revenue associated with shipments of smart cards for financial payments, and another seven smart card manufacturers share approximately 15% of such revenue. According to Nilson Report, an industry newsletter, revenue from over 100 regionally-focused smart card manufacturers represented the balance of total 2021 revenue. As previously disclosed, IDEMIA currently is our largest customer in the financial payment market segment.
Within the cyber authentication and digital currency storage market segments, our targeted customers include vendors of access control and identity and access management (“IAM”) platforms, vendors and integrators of authentication technologies, and developers of application-specific devices. As previously disclosed, we also have a long-standing relationship with a customer that designs network authentication solutions for its own consumption. As indicated in the preceding table, our fingerprint authentication solutions are not limited to use in smart cards without batteries and are suitable for a range of applications within the access control and digital currency storage market segments, across varying form factors and power requirements.
Smart cards are used in a variety of other applications appropriate for fingerprint authentication, each of which could develop in the future into a compelling market segment for us. A primary example of a potential opportunity outside of our targeted market segments is within health care, for which a
non-transferable
form of identification, on which an individual’s personal details, health records, and insurance or external interference duringsimilar social-security data is encrypted and stored, addresses an important need for both providers and patients for immediate, secure access to necessary information. We have investigated, and will continue to investigate, such opportunities for new use cases, but our limited resources currently inhibit our ability to adequately support such activities.
The market segments we currently target are not subject to seasonal shifts in demand.
Demand Drivers
Demand for fingerprint authentication in our targeted market segments starts with the enrollmentevolving needs of the
end-users.
Across all smart card market segments, demand drivers for our solutions at the consumer level uniformly include the following “ease of use” requirements: convenient enrolment; fast, convenient transactions; and accuracy and security of transactions.
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Since the onset of the
COVID-19
pandemic, hygienic, touch-free transactions have become a primary demand driver for
end-users,
particularly within the financial payments market segment. Given evidence of a substantial shift toward contactless transactions, the Smart Payment Association in December 2021 concluded that “tap and go” transactions, whether using smart cards or mobile phone applications, had become the preferred payment option for all age groups.
The shift toward contactless transactions is evidenced by ABI Research estimates of worldwide shipments of dual-interface cards for financial payments, which represented over 75% of the 3.0 billion smart cards shipped in 2021. ABI Research also estimates the worldwide volume of contactless smart card transactions grew by 49% from 2020 to 2021. However, contactless smart card transactions generally are limited by financial institutions and payment processing networks to small value transactions, given the absence of a second authentication factor, such as a user-entered PIN.
Another contributor to
end-user
satisfaction, in our opinion, is a desire to reduce abstract uncertainties and perceptions of risk associated with fraud, identity theft, and other information security risks. Cybersecurity events have become frequent and high profile, and public opinion surveys indicate that consumers are aware of biometric authentication solutions and are willing to adopt such solutions to offset their concerns. According to a 2020 Gallup survey, respondents reported that identify theft and loss of personal information were their greatest concerns, by more than a
two-to-one
margin over other forms of crime.
Mobile devices (e.g., cell phones) are considered particularly vulnerable to a wide variety of security threats, primarily because they are connected to public networks. According to recently published research by a provider of fraud prevention solutions, mobile devices account for greater than 60% of reported digital fraud, with mobile digital wallets, cryptocurrency applications, and payment services applications experiencing significant increases in fraudulent transactions.
Bridging consumer preference for contactless transactions and ease of use requirements is a demand driver shared with the issuers of smart cards: the elimination of the password or PIN as an authentication factor. Long established as the “what you know” element of
two-
or multi-factor authentication (“MFA”), MFA has become a core component of a security-conscious organization’s IAM policy and procedures, increasing security and user confidence, while lowering risks and costs of access to, or usage of, a secured device, a secured network or online application, or a secured facility. Despite their prevalent use, passwords and PINs are acknowledged as now as a burden, cost, and source of risk for
end-users
and organizations relying on them. Passwords and PINs frequently are forgotten and must be replaced or reinstated. Entering passwords and PINs can inconveniently slow the MFA process, impacting user experience, particularly when making a purchase with a credit or debit card, causing such delays to be a concern for
end-users,
merchants, issuers, and eliminatestransaction processors. Also, the vulnerabilities of MFA using passwords or PINs to phishing and other social engineering techniques are well-known and associated with costly and disruptive data breaches.
However, passwords and PINs do have demonstrable value. According to Nilson Report, credit card fraud losses associated with MFA at the
point-of-sale
are the lowest of the transaction categories tracked. A consequence of the shift to contactless transactions has been the imposition of transaction value limits on
end-users,
who are required to enter a PIN at the
point-of-sale
when a purchase exceeds a threshold value. In response to
end-user
preferences, financial institutions and transaction processing networks have raised these threshold values, but doing so increases risk of loss, increases the volume and costs of charge-backs to merchants, and taxes the fraud detection and prevention systems of issuers and transaction processing networks.
Fingerprint authentication represents a compelling security solution for smart cards, particularly in the financial payments market segment, as a fingerprint, unlike a password or PIN, cannot be lost, forgotten, transferred, stolen, or easily compromised. Fingerprint authentication:
meets
end-user
requirements for ease of use;
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addresses
end-user
concerns about biometric information collection and storage, as the fingerprint template never leaves the smart card;
addresses
end-user
concerns about transaction security risks;
provides a secure alternative to vulnerable mobile devices for payments and financial transactions;
enables contactless transactions, while eliminating passwords, PINs, and limits on transaction value; and
maintains the higher security level of MFA, while efficiently combining two authentication factors (“what you have” and “what you are”).
Fingerprint authentication demand drivers for issuers and transaction processors include:
maintaining the superior fraud protection of MFA, while improving
end-user
experience;
given the improved
end-user
experience, the possibility of higher frequency card usage (i.e., the “top of wallet” effect), thereby increasing transaction-based revenue;
increased differentiation for their smart card offerings and brands, potentially improving customer retention and customer acquisition rates;
addition of tangible value, potentially supporting new or higher fees for a premium card offering; and
minimal investment in infrastructure to support fingerprint authentication:
no modification of existing protocols for encrypted communications and transactions;
existing contactless
point-of-sale
terminals seamlessly process such transactions; and
limited modifications to
back-end
transaction processing.
For smart card issuers and transaction processors in the EU, fingerprint authentication satisfies the revised Stronger Customer Authentication requirements for
two-factor
authentication under the Second Payment Services Directive, or PSD2.
Many of these demand drivers are applicable to the Cyber Authentication and Digital Currency Storage market segments we target. Ease of use considerations are important for
end-users,
and the efficiencies of fingerprint authentication as an alternative to passwords and PINs in MFA applications are compelling to
end-users
and organizations relying on MFA. Given the different characteristics and development stages of these market segments, however, our experience has been that demand drivers are frequently very specific to individual customers.
Advantages of Our Fingerprint Authentication Solution for Smart Card Manufacturers
We believe the historically high cost of manufacturing smart cards with fingerprint authentication has impeded their adoption. In response, we have focused on reducing the upfront cost of our products to smart card manufacturers, while developing a value proposition emphasizing our differentiated approach to addressing multiple customer needs. Our approach to providing fingerprint authentication solutions is to contribute to a comprehensive design and bill of materials that should significantly reduce development and manufacturing costs, while accelerating time to market.
Our TrustedBio module, integrating a
low-cost
polymer sensor and advanced biometric processing circuitry, has been designed to be cost-competitive with alternative solutions, while delivering high levels of accuracy, reliability, and power efficiency. The TrustedBio module has been designed to provide smart card manufacturers numerous advantages, including the ability to design a smart card optimized for cost and performance objectives by:
utilizing a general-purpose SE, thereby reducing component costs and increasing design flexibility;
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eliminating the need for separate microcontrollers for biometric processing or power management, reducing component costs, integration challenges, layout complexity, and manufacturing risks;
offering a large, yet flexible, sensor surface, enabling superior image capture, processing, and matching performance, improving user experience;
providing design flexibility (e.g., our matching algorithms can operate entirely on the SE, or be partitioned to also operate on the ASIC within our TrustedBio module, maximizing resource efficiency and system performance).
We have developed and are marketing a reference design integrating our TrustedBio module with the SLC38 security controller from Infineon Technologies, thereby allowing our manufacturing customers to further minimize their own integration costs and improve manufacturing yields (through reduced design complexity), while accelerating their
time-to-market.
For this reference design:
we can provide a proprietary card suppliersoperating system, which can be installed on the SLC38 prior to shipment to the customer, substantially reducing software development time and issuers to provide and maintain mobile devices or desktop applications for enrollment purposes.

Our Technology

Off-chip Capacitive Fingerprint Sensing

A fingerprint sensor capturescosts;

with a high-resolution imageleading inlay vendor, we have developed an optimized, cost-effective card inlay, consisting of a finger for use in biometric identificationcard antenna and authentication applications. Our sensors use an off-chip capacitive sensing approach to measure tiny differences in the three-dimensional ridge and valley profiles that make up a person’s fingerprint.

Our off-chip sensor product is made up of two key elements: the sensor array and the silicon chip. The sensor array contains a high-density matrix of electrodes embedded within a low-cost, multilayer polymer substrate. The silicon chip (also referred to as the ASIC) drives and measures electrical signals onto these sensor electrodes to measure ridge-valley capacitances and form an overall image of the fingerprint. The ASIC is mounted to the underside of the substrate, whereas the topside of the substrate is covered in a hard-black coating and exposed to the finger.

LOGO

This off-chip sensor approach, which separates the sensor array from the ASIC, is patented and differs in bothconnective circuits, reducing customer design and construction from conventional silicon sensors. Inprocurement costs; and

with a conventional silicon sensor,leading production equipment vendor, we have optimized the sensor’s pixel array is implemented withinvendor’s tooling and process management software, thereby facilitating for a customer rapid creation of manufacturing capacity delivering increased card production volume and lower yield losses.
We also have valuable relationships with standards bodies and leading global payment processors, which provide the silicon ASIC itself, requiring direct finger contact to the coated surface of the silicon chip andnecessary certifications for a large silicon area. By leveraging the off-chip sensor architecture the sensor arraynew financial payment card design before that design can be implemented in a low-cost polymer substrate and the total silicon content can be minimized. Since polymer is less expensive than silicon, the overall sensor cost is reduced compared to conventional silicon sensors of the same size. This also offers the possibility of enlarging the off-chip sensing area, whereby a larger portion of the fingerprint is captured, thus improving both usability and security at a lower price.

Since the off-chip sensor array is made from a bendable polymer substrate, rather than stiff and brittle silicon, our sensor is inherently mechanically bendable, yet robust.released for production. We believe thathave had our fingerprint sensors are particularly suited to integration within smart cards, which must satisfy stringent bending and twisting requirements in order to be compliant with the International Organization for Standardization, or ISO, requirements for smart cards.

Furthermore, since the off-chip sensor decouples the sensor array from the ASIC, it becomes possible to utilize advanced semiconductor lithographies within the smaller silicon ASIC. By using advanced semiconductor lithographies the off-chip sensor can integrate more features and functionality without adding significant system cost. As a result, our off-chip sensor product can become more than just a fingerprint sensing front-end, it can be transformedauthentication solutions incorporated into a complete biometric-system-on-chip. The following graphic demonstrates the conventional structure on a biometric smart card (left) designs approved by Mastercard, VISA, and a biometric smart card with integration of discrete components on onto our ASIC (right):

LOGO

This biometric integration facilitates cost reduction and reduces the manufacturing complexity of biometric smart cards by allowing the elimination of additional discrete components that would otherwise be required to build an overall biometric system.

Biometric Software and Algorithms

Both software and algorithms are required to make fingerprint sensors and modules operate and communicate with their host device.China UnionPay. We develop software components, ranging from elements such as on-sensor firmware to enrollment software, and extract-and-match algorithms.

We have a range of high-performance embedded ridge-matching algorithms which extract biometric features from sensor images and then perform a proprietary matching process against a reference set of biometric features. These algorithms have been developed for security, performance and convenience in highly resource constrained environments. Our distributed matcher algorithms use a unique partitioning approach to perform processing in both secure and non-secure domains and optimize system performance while meeting the strict security requirements of the payment card schemes.

In 2017, we launched our third-generation system software that is optimized for dual interface biometric cards. The software is designed to be power and memory efficient. In the same year, we introduced a proprietary matcher algorithm for biometric cards. This patented algorithm is rotation insensitive and accepts partial touches. It is designed for use in both smart card and IoT applications.

In the past two years, we released security-enhanced versions of our matcher. The version released in 2019 moves the critical matcher function and template information onto the SE, while the less secure on-card biometric processor performs feature extract functions that do not need to be secured. This distributed matcher architecture meets the biometric performance and security guidelines of multiple global payment schemes. Recently, we becamealso were the first and only biometric sensor companyvendor to achievehave passed a development site EMVCo® Security Evaluation.

Enrollment Solutions

Before usingsecurity evaluation performed by EMV.

Given our breadth of experience and core competencies, as well as the breadth of our collaborative relationships with vendors across the smart card supply chain, we add value well beyond that associated with the cost of our products. We believe many customers in the market segments we target could benefit from the comprehensive, systems engineering element of our value proposition, as only a few global card manufacturers currently have the depth of resources and experience to develop a fingerprint based biometric authentication system for the first time, the user’s fingers need to be registered and enrolled. This involves going through a process to securely capture a numbersolution on an expedited timeline. Design of fingerprint images and then using a biometric algorithm to extract a set of unique features from the images. These unique features are then stored securely as biometric reference templates for future comparison or matching. Our on-card enrollment devices are secure and low-cost, enabling users to enroll from the comfort of their own home, they leverage the large sensing area of the off-chip sensor to enable a highly effective yet simple remote enrollment process.

Full Systems Approach

The biometric smart card represents a highly challenging and resource constrained environment. The traditional fingerprint sensor captures an image of the fingerprint; however, this image also needs to be processed by a biometric authentication algorithm. This combination of sensor and algorithm form a biometric system which needs to operate seamlessly with the card’s payment chip, the SE, and the associated payment terminal. The resources of the SE also need to be leveraged carefully for control of the biometric system, secure storage of biometric templates and part-execution of the biometric algorithm. The electrical power to operate the biometric system can be supplied by the host device. For example, smart cards can be powered when inserted into a payment terminal. Alternatively, power can be harvested from a magnetic field in the case where a smart card is

being tapped on a contactless payment terminal. The following graphic depictsincorporating fingerprint authentication can be challenging, as the system design within a biometric payment card:

LOGO

The interaction betweenamong the fingerprint sensor, the smart card electronics, and itsthe environment is complex, particularly when there aregiven the limitations on power, processing capacity, and physical space, while having to satisfyform factor, and the stringent requirements for response time and biometric reliability. Therefore,accuracy.

Potential Size and Growth Rates of Targeted Market Segments
Within the financial payment market segment, we consider the annual volume of dual-interface smart cards shipped to be a reasonable approximation of our addressable market opportunity. Significant demand drivers are the increasing preference by
end-users
for contactless payments and the desire of both
end-users
and issuers and transaction payment processors to replace passwords and PINs with fingerprint authentication, thereby efficiently combining two authentication factors into one device. As such, we believe a reasonable and appropriate measurement of our strategic progress in the financial payment market segment is the rate at which our fingerprint authentication solutions are incorporated into the annual volume of dual-interface smart cards shipped.
8
ABI Research refers to this measurement as the “penetration rate.”
Since 2016, ABI Research no longer tracks the very small volume of purely contactless cards manufactured each year, tracking only dual-interface and contact-only card production. Because approximately 20% of worldwide
point-of-sale
terminals and related reader infrastructure are contact-only, and because a dual-interface capability allows for a transaction to occur when contactless functionality is not available,
end-users
and issuers prefer dual-interface cards.
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According to ABI Research (February 2022), worldwide shipments of dual-interface smart cards, enabling contactless transactions, totaled 2.3 billion units for 2021, representing a record 76% of total smart card shipments. This annual shipment volume of dual-interface smart cards is expected to expand to 3.0 billion units by 2026, representing a five-year CAGR of 5.6%.
ABI Research also estimates the worldwide volume of contactless smart card transactions grew by 49% from 2020 to 2021, forecasting growth for the next five years at a compound annual rate exceeding 27%.
While we believe dual-interface card volumes represent an approximation of our addressable market for payment cards, we do not believe the historical rate of adoption for contactless payments is indicative of a rate of adoption for fingerprint authentication in smart cards.
According to the Smart Payment Association, contactless smart cards transaction volume took approximately six years to reach 15% of total transaction volume at the
point-of-sale.
According to Mastercard, that total today has reached 50%. Contactless capabilities (e.g., NFC) were introduced in parallel with the introduction of the
SE-enabled
smart card in 2004. Prior to that introduction, payment card transactions utilized cards with
end-user
account information stored on a strip of exposed magnetic tape (the “mag stripe”). Both contact-only and contactless transaction volumes were inhibited for the following decade by the slow pace at which merchants upgraded
point-of-sale
infrastructure. Several events contributed to rapid shift in smart card transactions toward contactless volumes during the latter half of the last decade, including mandates by major transaction processing networks requiring the installation by merchants of
point-of-sale
systems capable of accepting contactless payments. The most recent driver of contactless volume has been the onset of the
COVID-19
pandemic, which significantly changed consumer behavior. The Smart Payment Association in December 2021 concluded that “tap and go” transactions, whether using smart cards or mobile phone applications, had become the preferred payment option for all age groups.
Fingerprint authentication adoption is not inhibited by the challenges faced by contactless transaction methods when they were introduced. Today, contactless-capable
point-of-sale
infrastructure, as a percentage of total infrastructure, varies from approximately 50% to 90% by region globally, with expectations for that figure to continue higher, driven by consumer demand for contactless smart card and mobile device transactions. Also, the major transaction processing networks, aligned with EMV in support of fingerprint authentication, have facilitated streamlined integration of
match-on-card
fingerprint authentication at the
point-of-sale.
9
Deployment of smart cards with fingerprint authentication has been limited to date, with numerous program trials of various volumes since 2018. In 2021, one major bank in Europe launched a full-scale commercial launch, using a competitor’s silicon image sensor. In aggregate, we estimate fewer than 300,000 smart cards with fingerprint authentication have been deployed to date for financial payment applications. As of December 31, 2021, we are aware of 20 announced programs of various volumes. Of these, eight involve the use of our fingerprint authentication solutions, either through our partnerships with IDEMIA France SAS and Zwipe AS or through our direct relationships with smart card manufacturers. Since we announced in July 2021, with Infineon Technologies, a reference design based on an integration of our TrustedBio fingerprint authentication module with their SLC38 secure controller, we have secured five important design wins with smart card manufacturers, each of which we believe could be in mass production in 2023. Based on these announcements and design wins, we believe the financial payment market segment is moving from the earliest stage of technology adoption, characterized by risk-tolerant innovators, to the early-adopter stage, characterized by visionaries who are willing to accept a degree of risk for the opportunity to lead in their own markets.
Fingerprint authentication occurs within the processing capabilities of the smart card, with the matching algorithm determining if the presented fingerprint template matches the template stored in the memory of the SE. All user information, including the stored template, is encrypted within the smart card and never leaves the smart card at any time. A data element indicating the transaction originated with a smart card incorporating fingerprint authentication is the only additional information communicated to the
point-of-sale
reader.
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For forecasting, we utilize a modified version of the framework published by ABI Research for assessing the types of deployments expected to be associated with an issuer’s introduction of smart cards incorporating fingerprint authentication to its customers:
Stage 1: an initial trial, consisting of several hundred smart cards, generally distributed to a controlled group within the issuer, intended as “proof of concept” and used to assess systems requirements. Our experience has been that a Stage 1 trial is generally for less than 90 days.
Stage 2: an expanded pilot, consisting of several thousand smart cards, more broadly distributed to a targeted cohort of users, and intended to identify deployment risks and evaluate usage patterns. We anticipate many of the 20 announced programs of which we are aware are Stage 2 deployments.
Stage 3: an initial commercial launch, consisting of multiple, phased deployments of tens of thousands of smart cards over six to 12 months, supported by consumer education and high-touch marketing initiatives. A Stage 3 deployment may be a distinct program, for example, targeting an exclusive customer cohort with a premium service level, or it may be a preparatory deployment in anticipation of a full system approachcommercial launch.
Stage 4: a full commercial launch, also consisting of multiple, phased deployments, but of hundreds of thousands of smart cards, over an extended period, with broad marketing support highlighting the program as a mature element of the issuer’s product portfolio.
Based on our own research and estimates independently developed by biometric industry analysts and securities analysts covering the Company and its competitors, we have developed, using this four-stage framework, multiple scenarios for the “penetration rate” (i.e., the percentage of annual shipments of dual-interface smart cards represented by smart cards incorporating fingerprint authentication) we might achieve over the five-year forecast period. All of these scenarios are characterized by single-digit rates of penetration over the first three years, reflecting our assumptions regarding the number and sequencing of trials, pilots, and launches for which our customers, the smart card manufacturers, are supplying smart cards incorporating our fingerprint authentication solutions. Our scenarios’ revenue levels markedly diverge, beginning in year four, based on our assumptions regarding our ability over the preceding three years to “cross the chasm” of technology adoption. Based on our recent accomplishments, we are confident we can reduce costs, improve our solutions, and, through development of innovative, complementary software, notably addressing scalable,
low-cost
enrolment solutions, deliver a compelling fingerprint authentication solution to mainstream, high-volume customers. If we successfully reach the mainstream of the financial payment market segment, our potential long-term growth could be substantial.
The cyber authentication market segment we are targeting shares certain characteristics with the financial payment market segment, but we estimate it to be far smaller. As is the case with the financial payment market segment, we believe the annual unit volume of smart cards shipped for access control applications is a reasonable approximation of our addressable market opportunity. Based on ABI Research estimates and our own assessment of available industry data, we estimate the annual unit volume to be between 200 million and 250 million units. We estimate the five-year compound annual growth rate to be approximately 5%.
As is the case with the financial payment market segment, we also believe measurement of our strategic progress in the cyber authentication market segment could be based on the rate at which our fingerprint authentication solutions are incorporated into the annual volume of smart cards shipped. However, given the characteristics of the broader access control market and the varying nature of our customer engagements to date, our revenue forecasting based on such penetration assumptions is less certain. We have achieved success with a high-profile customer with which we developed a customized network authentication solution for that includescustomer’s own consumption. In 2021, we secured a design win for a government identification card with cyber authorization features, and we also have multiple design wins for cyber authorization solutions with smart card manufacturers. As such, currently estimating any penetration rate for the cyber authorization market segment is difficult.
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Within the digital currency storage market segment, which is very early in its development, accurately estimating the size and growth rate of our opportunity is difficult. We have experienced encouraging success in developing customized solutions with a small number of early innovators. Based on this limited experience, and providing system-level reference designs and software, in additionour assessment of the opportunity, we believe the market segment has the potential to develop into a meaningful contributor to our standalonerevenue.
Competition
We compete worldwide with many companies offering identification and authentication solutions, and some of these companies have substantially greater financial, engineering, marketing and sales, customer support, and other resources than we do. We compete directly with other companies providing biometric sensors and solutions, including our principal competitors, Fingerprint Cards AB and NEXT Biometrics ASA. On January 25, 2022, Samsung Electronics, a global leader in semiconductors, introduced a device integrating a fingerprint sensors. A reference designsensor, secure element, and a microprocessor. The device is targeted at the same market segments and applications as our TrustedBio solution. While we have yet to encounter Samsung in the market segments we are targeting, nor can we predict when we will, we consider Samsung’s announcement to be a technical blueprintconfirmation of a systemour own positive view of the business opportunity for fingerprint authentication in applications using smart cards.    
The principal competitive factors upon which we compete include breadth of solution, engineering and manufacturing support, solution performance (i.e., accuracy, ease of use, power consumption, reliability, and transaction speed), and total cost of ownership. We maintain our ability to compete effectively primarily through our engineering activities and the ongoing development of new and enhanced technologies, methods, and processes.
We also may face competition from companies that may expand into our industry and introduce additional competitive products. Existing and potential customers can use as-isand partners are also potential competitors. These customers may internally develop or customizeacquire competitive technologies or comparable products, which may cause them to reduce or end their own requirements. Our reference design provides a faster path for device manufacturers to imbedpurchases of our sensors in their products. It typically consists of a complete solution to implement a biometric system including antenna, power management, key external component selection (if any), system software, biometric matching algorithms and enrollment solutions.

Research and Development

Our R&Dresearch and development activities are conducted primarily performed in the United StatesKingdom and the United Kingdom.

The R&D activities include: (i) designStates. As of December 31, 2021, we had an engineering staff of 77 employees and developments relating toeight individual contractors, representing approximately 70% of our ASIC; (ii) system engineering and software development to create a full biometric system; (iii) activities to extend our existing products and create new intellectual property and know-how related to fingerprint sensors; (iv) industrialization activities including support to our production partners; and (v) activities to enhance our biometric algorithms for improved matching and enrollment, particularly in power-constrained environments.

workforce.

Innovation through research and development is critical for us to remain competitive and to help our customers maintain cost and performance leadership. Our technology roadmap focuses on:

includes:

significant reductions in

further reduction of system costs through optimized architecture and integration;

continuous solution performance improvements in usability, convenience and performance through next;

generation ASIC,enhancing sensor and algorithm design;

ASIC designs;

enhancements to security through secure end to end architectures,

further refinement and advanced match on secure element algorithms; and

Developing advanced solutions for in-display sensor integration.

We have built an engineering team with significant industry experience capable of supporting our customers in the integration of complex components within a smart card or other devices. As of December 31, 2020, we had an engineering and research team of 72 employees and contractors, most of whom were based in Europe and the United States, representing 74%enhancement of our workforce. The team is comprisedscanning, feature extraction, and matching algorithms;

development of systemscompelling software to complement our solution strategy, including innovative software-only enrolment solutions and technology engineers, software engineers, silicon engineers, sensor engineers
card-not-present
applications; and packaging technologists.

developing and integrating technologies (e.g., displays) for use in next-generation smart cards.
Manufacturing and Supply Chain

Our operationsfabless operational strategy is to maximize efficiency and cost competitiveness by designing our products using industry standard design processes, incorporating verified high-volume components and materials, and utilizing established manufacturing processes. In support of the anticipated demand for biometric smart cardour solutions, we have established a supply chain capable of satisfying expected future marketforecast demand. We currently utilize external manufacturing partners for the fabrication, assembly, and testing of our products. Our strategy, which is referred to as fabless, is to design and develop our ASIC and outsource the manufacturing to large established semiconductor fabrication foundries. We believe this strategy provides the best combination of performance, cost, and feature attributes necessary for our products.

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We develop the production test solutions for use by our manufacturingassembly and test partners. In addition, to accelerate the development of future mass production test solutions for our biometric sensor products, we have invested in high-volumesophisticated test equipment at our facility in Rochester, New York. Production test deployments with the OSAT partnersroutines are fully verified in house
in-house,
prior to installation on the production line,lines at our partners’ facilities, reducing cycle time, production engineering support, and costs.

Our selected manufacturing partners for sensor production are Amkor Technology, Inc. and Silicon Precision Industries Limited, both of which are leaders in outsourced semiconductor assembly and test or OSAT, production. We have partnered with Taiwan Semiconductor Manufacturing Corporation, orservices. TSMC, one of the leading semiconductor manufacturers in the world, is our partner for volume manufacturing of our ASICs.ASIC wafer production. The TSMC relationship gives us access to the newest and most competitive silicon manufacturing processes and geometries, and provideswhile providing the capacity and cost structure to serve high volume opportunities.

We select our manufacturing partners based on a comprehensive supplier capability analysis, in order to meet the high quality and reliability standards required of our products. Our engineers and supply chain personnel work closely with manufacturing and supply chain partners to increase yield, reduce manufacturing costs, improve product quality, and ensure that component sourcing strategies are in place to support our manufacturing needs.

We believe our outsourcedfabless manufacturing model enables us to focus our resources and expertise on the design, development, sales, marketing and support of our products to best meet customer requirements.products. We also believe that this manufacturing model provides us with the flexibility required to quickly respond to new market opportunities and changesshifts in customer demand,demand. It also simplifies the scope of our operations and administrative processes and significantly reduces our working capital requirements, while providing the ability to scale production rapidly.

requirements.

Intellectual Property

Our intellectual property rights cover individual inventions and complete biometric systems ranging from measurement principles, algorithms, sensor design, and system solutions. We have filed applications to protect ourOur extensive intellectual property rights inportfolio, leveraging 146 patents awarded and 66 patents pending, across applicable jurisdictions worldwide (as of December 31, 2021), is a wide range of countries including the United States, the United Kingdom, Norway and several other countries. We continue to seek patent protection for aspectscritical enabler of our technology that provide significantstrategy and competitive advantage.

Our success and ability to compete depend substantially upon our core technology and intellectual property rights. We rely on patent, trademark and copyright laws, trade secret protection and confidentiality agreements to protect our intellectual property rights. In addition, we require employees and consultants to execute appropriate non-disclosure and proprietary rights agreements. These agreements acknowledge our exclusive ownership of intellectual property developed for and by us and require that all proprietary information remain confidential.

positioning. We maintain a program designed to identify technology that is appropriate for patent and trade secret protection, and we file patent applications in the United States and certain other countries for inventions that we

consider significant. AsWe continuously seek to protect aspects of December 31, 2020, we have been granted 127 patents and have 97 pending patent applications. The wordmark ‘IDEX’ and the IDEX logo are registered trademarks of IDEX Biometrics ASA and are owned by IDEX.

our technology that provide significant competitive advantage.

Although our business is not materially dependent upon any one intellectual property right, our intellectual property rights and the products made and sold under them, taken as a whole, are a significant element of our business. business and our ability to compete. We rely on patents, trademark and copyright laws, trade secret protection efforts, contractual terms, and confidentiality agreements to protect our intellectual property rights. In addition, we require employees and consultants to execute appropriate
non-disclosure
and proprietary rights agreements. These agreements acknowledge our exclusive ownership of intellectual property developed for, and by, us, requiring confidential treatment of all proprietary information.
In addition to patents, we also possess other forms of intellectual property rights, including trademarks,
know-how,
trade secrets, design rights and copyrights. We control access to and use of our software, technology, and other proprietary information through internal and external controls, including contractual protections with employees, contractors, customers and partners.information. Our software is protected by EU, the United States and other international copyright, patent, and trade secret laws.laws of appropriate jurisdictions. Despite our efforts to protect our software, technology, and other proprietary information, unauthorized parties may still copy or otherwise obtain and use our software, technology, and other proprietary information. In addition, as we further expand our international operations and markets, effective patent, copyright, trademark and trade secret protectionprotections may not be available, may be limited, or may not be enforceable in certain foreign countries.

Companies in the markets in which we operate frequently are sued or receive informal claims of patent infringement or infringement of other intellectual property rights. As we become more successful, we believe it is
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likely that competitors will be more likely to tryattempt to develop products that are similar to ours, and thatwhich may infringe our intellectual property rights. It also is also possible that competitors or other third parties will claim that our products infringe on their intellectual property rights. Successful adjudication of claims of infringement by a third party,third-party could result inin: injunctions that could prevent us from selling some of our products in certain markets,markets; penalties, settlements, or judgements that require payment of royalties or damages,financial damages; and settlements or requirejudgements requiring us to expend time and money to develop
non-infringing products.
products at significant expense. We cannot assure you thatprovide assurance we will not in the future be accused of infringeinfringing any third-party intellectual property rights.

Salesrights at any time in the future.

The wordmark “IDEX,” the IDEX logo, and Marketing

We sell our productsthe brand name TrustedBio are registered trademarks of, and solutions through a direct sales force. Our sales staff provides product education, application advisory servicesowned by, IDEX Biometrics ASA.

Human Capital Management
Talented, highly-motivated contributors are important to and maintain close relationships with our customers. We also have sales and business development personnel located close to major customers across Europe,executing the United States and Asia. Our sales and business development teams work closely with our product line management personnel to support strategic sales activities. A broad range of marketing communications activities have also helped us to promote the benefits of our fingerprint sensors and biometric solutions to all members of the value chain. We have invested significant time and resources to meet with card and device manufacturers to understand their requirements and performance issues. These efforts have provided us with a deep understanding of the challenges faced by card manufactures and issuers which, in turn, enabled us to focus our product and technology development efforts to address our customers’ challenges. As an example, we understand that several of our customers are looking to offer a digital currency biometric card, we are therefore developing products to satisfy these requirements.

As a result of this direct approach, we have achieved improved visibility into the sales channel as well as valuable real-time customer feedback which directs our on-going technology development and manufacturability improvements.

Our products typically have a long sales cycle, requiring discussions with prospective customers inCompany’s strategy. In order to better understandmaintain our leadership position in fingerprint authentication in a highly competitive employment market, attracting and retaining the best employees and individual contractors worldwide is a priority. Accordingly, we offer compelling compensation and benefits, and seek to foster a culture of innovation in which personnel are empowered to do (and are rewarded for) their application and system level requirements and technology roadmaps. Our customers are predominantly smart card manufacturers, and we have discussions with them regarding the requirements of their end customers, which provides our sales force with insight into how our products will be deployed. We develop strong customer relationships to ensure technical and business alignment. The period of time from our initial contact with a prospective or current customer to the receipt of an actual purchase order is frequently a year or more. Prospective customers perform system and card level testing before the cards are certified and then

best work.

deployed by the card network and card issuers. Customers require us to perform extensive verification testing and qualification based on industry standards. This phase of our sales cycle can take several months.

Our in-house sales personnel also assist customers with forecasts, orders, delivery requirements and other administrative functions. Our technical support engineers respond to technical and product-related questions and provide application support to customers.

The Ecosystem of Payment Card Market

The payment card ecosystem is complex and involves many different companies working together to bring biometric payment cards to the addressable markets. The biometric payment card value-chain is shown below:

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We are a supplier at the starting point of this value-chain and sell our products and solutions to smart card manufacturers. We also work closely with our customers on manufacturing methodologies and improvements, and alongside other component suppliers within the card ecosystem. For example, we have established partnerships with suppliers of other components of a payment card, including SE producers, card inlay providers and card networks, to help bring biometric smart cards to market. Our strategic rationale is to ensure that crucial components within the biometric smart card ecosystem are compatible and ready for mass production and to enhance our ability to offer comprehensive solutions to our customers.

Our Customers

Our target customers are primarily manufacturers of smart cards, and other electronic devices located in Europe, the United States and Asia. The number of customers who have purchased our products has increased from 7 in 2016 to 23 in 2020.

The largest 3 payment card manufacturers or tier one card manufacturers comprise approximately 60% of EMVCo certified payment cards manufactured. We also serve a number of small or tier two card manufacturers, including Chutian Dragon, Eastcompeace, Feitian Technologies, Goldpac Group, Hengbao, IDEMIA and Quest Payment Systems. At times we also charge a fee for engineering services we provide to our customers in connection with the integration and manufacturing of our fingerprint sensors and software programs.

We have historically generated the majority of our revenue from a few larger customers. In 2020, 2019 and 2018, our five largest customers in each period (which differed by period) collectively accounted for 98%, 91%, and 96% of our revenue, respectively. During 2020, one customer, a leading global provider of financial news

and services, accounted for approximately 88% of our revenue. During 2019, two customers accounted for approximately 69% and 10% of our revenue, respectively. During 2018, three customers accounted for approximately 39%, 36% and 13% of our revenue, respectively.

Orders and Backlog

As of December 31, 2020,2021, we had 111 individuals on staff, consisting of 93 employees and 18 individual contractors (individual contractors typically reside in countries in which we do not have business operations). Of this total, 19 were assigned to our Oslo office, 56 were assigned to our two offices in the United States, 27 were assigned to our office in the United Kingdom, and nine were assigned to our office in China.

Certain members of our staff serve on a part-time basis. As such, we assess staffing needs based on a full-time equivalent (“FTE”) basis. As of December 31, 2021, we had 90 FTE employees and eight FTE individual contractors. Of this total of 98 FTEs:
72 were engaged in engineering functions (33 in hardware design (i.e., silicon, sensors, and packaging); 21 in systems design; and 18 in software development);
15 were engaged in marketing and sales functions;
nine were engaged in administrative and financial functions; and
two were engaged in production planning and supply chain management.
None of our employees are represented by a labor union or covered by a collective bargaining agreement.
Our compensation program is designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals, and create long-term value for our holders of our equity securities. We provide employees with compensation packages including a competitive base salary and benefits, which may vary from country to country, such as life and health insurance, supplemental insurance, paid time off, paid parental leave, and an order backlogEmployee Share Purchase Plan in which eligible employee may participate. Generally (and subject to local laws), new employees and individual contractors are awarded subscription rights for the purchase of $1.7 million,the Company’s Ordinary Shares. Staff members also generally are eligible to participate in an annual performance-based variable compensation plan, as well as be eligible for periodic awards of subscription rights based on the performance of the Company and that of the staff member. We believe a substantial portioncompensation program with the appropriate balance of short- and long-term incentives aligns the interests of holders of our equity securities and our personnel.
Environmental, Social, and Governance Considerations
We acknowledge and embrace the importance of Environmental, Social, and Governance (“ESG”) considerations in the development and execution of the Company’s strategy, which must be sustainable and contribute to the well-being of the communities in which we operate.
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Our values are set forth in our Code of Conduct and Code of Ethics (“the Code,” available on our website). The Code states, “The purpose of the Company is to create value for an information access control customer.the shareholders, while the business shall also be to the benefit for the Company’s customers, staff, suppliers, other business relations and the society at large.”
The Code also states, “IDEX makes every reasonable effort to secure a healthy, safe, and lawful work environment, and that the Company complies with all applicable laws, rules, and regulations concerning occupational health, safety, and environmental protection. The Company promotes equality and
non-discrimination,
non-harassment,
fairness, and ethical behavior. The Company offers a pleasant, well-equipped, and safe work environment, maintains fair and balanced employment practices and equal employment opportunity policies, and complies with all applicable labor laws. IDEX encourages and also expects similar commitment from its suppliers, partners, and customers.”
As a fabless developer and supplier of high-technology products, we outsource all manufacturing activities. We define backlog as non-cancellable orders scheduledselect manufacturing partners and other providers of products and services that follow responsible practices in all ESG aspects. Our own operations do not have a significant impact on the natural environment, and the
end-products
in which our fingerprint authentication solutions are used (e.g., PVC smart cards) can be efficiently recycled. The Company is committed to be delivered within 12 months and items in deferred revenue.

Competition

The biometrics market is highly competitive and rapidly evolving. We compete with both U.S. and international companies, someminimizing use of which have substantially greater financialenergy, raw materials, water, and other resources, thanand makes every reasonable effort to minimize the waste we do.generate. We encounter multiple competitorshave recycling programs in place in all our facilities.

As set forth in our Code, we consider shareholders, staff, customers, business partners, authorities, and society in general to be important stakeholders, with interests to be protected and served. We consider how we interact with and treat our stakeholders to be the most efficient way we can have a meaningful impact on their wellbeing. As such, IDEX is committed to fulfill its obligation to be a responsible member of society through the conduct of its business in an ethical, socially-responsible, and transparent manner.
As of December 31, 2021, women represented 15% of our markets, although staff, and two departments are led by women. The composition of our Board meets Norwegian statutory requirements, with women as three of our seven members.
Pursuant to Regulation
S-K,
we believe no one competitor competes with us across our full suite of solutions and markets. We compete against other companies that provide biometric sensors and modules and related software, algorithms and enrollment solutions. Our principal competitors include companies such as Fingerprint Cards AB and NEXT Biometrics ASA.

The principal competitive factors uponare required to disclose the material risks faced by the Company, which we competedo herein (see “Item 3. Section D. Risk Factors”). However, ESG risks are not required to be addressed when those risks are considered immaterial to our financial statements. We have not identified any such risks that could have the potential to materially harm our business in a

non-financial
manner.
As our business grows, our operations and the elements of our ESG profile likely will evolve. When our ESG profile evolves to include performance, low power consumption, rapid innovation, breadth of product line, availability, product reliability, multi-sourcingmeasurable and selling price. We believe that we compete effectively by offering high levels of customer value through high speed, high density, low power consumption, broad integration of photonic functions, software intelligence for configuration, control and monitoring, cost-efficiency, ease of deployment and collaborative product design. We cannot be certainmaterial matters, we will continue to compete effectively.

We also may face competition from companies that may expand intosupply investors and other stakeholders with decision-useful information regarding our industryESG objectives and introduce additional competitive products. Existing and potential customers and partners are also potential competitors. These customers may internally develop or acquire additional competitive products or technologies, which may cause them to reduce or cease their purchases from us.

indicators of our progress toward those objectives.

Government Regulation

Regulation related to the provision of services over the internetInternet is evolving, as federal, state, and foreign governments continue to adopt new, or modify existing, laws and regulations addressing data privacy and the collection, processing, storage, transfer, and use of data, including biometric data.
In some cases, data privacy laws and regulations, such as the European Union’s General Data Protection Regulation or GDPR, that(“GDPR”), which took effect in May 2018, impose new obligations on us as a participant in the technology sector, as well as on our customers. In addition, domestic data privacy laws in the United States, such as the California Consumer Privacy Act or CCPA,(“CCPA”), which took effect in January 2020, continue to evolve and could expose us to further regulatory burdens. Further, laws such as the EU’s proposed e-Privacy Regulation are increasingly aimed at the use of personal information for marketing purposes, and the tracking of individuals’ online activities.

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Although we monitor the regulatory environment and have invested in addressing these developments, these laws may require us to make additional changes to our servicesproducts to enable us or our customers to meet the new legal requirements and may also increase our potential liability exposure through higher potential penalties for
non-compliance.
These new or proposed laws and regulations are subject to differing interpretations and may be inconsistent among jurisdictions. These and other requirements could interrupt our operations, require us to take on more onerous obligations in our contracts, restrict our ability to store, transfer and process data or, in some cases, impact our ability or our customers’ ability to offer our services in certain locations, to deploy our solutions, to reachjurisdictions (see “Item 3. Section D. Risk Factors” for additional disclosures regarding current and prospective customers, or to derive insights from customer data globally. The costs of compliance with, and other burdens imposed by, privacy laws, regulations and standards may limit the

possible future regulation).

use and adoption of our solutions and services, reduce overall demand for our solutions and services, make it more difficult to meet expectations from or commitments to customers, lead to significant fines, penalties or liabilities for noncompliance or impact our reputation, any of which could harm our business.

C. Organizational Structure

The organization structure of our

IDEX Biometrics ASA, the registrant, is the Norwegian-domiciled parent company is as shownfor wholly-owned subsidiaries in the figure below. All entities areUnited States (IDEX Holding Company Inc., which owns 100% owned.

LOGO

of IDEX America Inc.), the United Kingdom (IDEX Biometrics UK Ltd.), and China (IDEX Electronics (Shanghai) Co., Ltd.).

D. Property, Plants and Equipment

We lease office space in Oslo, Norway, for our corporate headquarters under a lease withwhich currently has a rolling three-month term. We also lease laboratory space and regional offices on 3-5three to five year fixed-term agreements in Wilmington, Massachusetts and Rochester,the United States (Rochester, New York, United States, Farnborough,and Wilmington, Massachusetts), the United Kingdom (Farnborough), and Shanghai, China.China (Shanghai). We believe our existing facilities meet our current needs.

We do not own or operate industrial manufacturing facilities. Our philosophy is toAs a fabless manufacturer, we design our products based on proven standard, readily available manufacturing techniques. The different componentstechniques and processing work are outsourcedobtaining wafer foundry and semiconductor packaging, design, and test services from leading industry contract manufacturers in various countries.

providers. Our capital expenditures generally are associated with purchases of laboratory and test equipment related to product development.
Item 4A.

Unresolved Staff Comments.

Not applicable.

Item 5.

Operating and Financial Review and Prospects.

You should read the

The following discussion of our operating and financial reviewperformance and future prospects should be read in conjunction with our audited financial statements and the related notes thereto included elsewhere in this Annual Report. In addition to historical information, the following discussion and analysis contains forward lookingforward-looking statements that reflectreflecting our plans, estimates, and beliefs. Our actual results and the timing of events could differ materially from those anticipated in the forward lookingforward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in sections titled “Risk Factors” and “Special Note Regarding Forward Looking Statements.Statements” and “Risk Factors.” The audited financial statements as of and for the years ended December 31, 2021, 2020 2019 and 20182019 were prepared in accordance with International Financial Reporting Standards, or IFRS,(“IFRS”), as issued by the International Accounting Standards Board or IASB,(“IASB”) and adopted by the European Union.

EU.

Overview

We are a biometrics company specializing

Since the Company was founded, we have generated limited revenue and have incurred significant losses. Previous efforts to commercialize our portfolio of differentiated technologies for fingerprint authentication were not successful, as targeted markets did not develop as anticipated or, once developed, quickly became commoditized, undermining our differentiation and competitive positioning.
Our competitive positioning has been, and is, based on continuous advances in technologies, innovations in design, and achievements in performance, enabled by our focus on research and development. After the commoditization (and subsequent competitive consolidation) of the mobile device market in the design, developmentlatter half of the last decade, IDEX undertook a strategic pivot toward applications for which our differentiated characteristics
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provided demonstrable and salesustainable competitive advantages, reducing our exposure to commoditization. Our focus today is on incorporating fingerprint authentication into smart cards, which present the challenging form factors, demanding performance requirements, and extreme power limitations for which our solutions are ideally suited.
IDEX has established customer relationships with innovators and early adopters sharing our vision for the potential of fingerprint identificationauthentication in smart card applications, and, over the last two years, we have experienced increasing strategic momentum, successfully attracting new customers and increasing our reported revenue, as of December 31, 2021, for eight consecutive quarters.
With the July 2021 announcement of a reference design integrating our TrustedBio fingerprint authentication solutions. Our fingerprint sensorsmodule and biometric solutions are used in dual interface and contactless or touch-freethe SLC38, the latest SE from Infineon Technologies, we began aggressively marketing the reference design to smart cards, including payment cards, and a rangecard manufacturers. As of electronic devices.

We offer fingerprint sensors and biometric solutions tothe date of this Annual Report, we have five design wins (i.e., contractual commitments) for this reference design with worldwide smart card manufacturers and other integratorsanticipate these designs could be in full production in 2023.

Customer order volume accelerated across 2021 from both existing customers and, notably, new customers adopting the TrustedBio—SLC38 reference design. Our backlog, consisting of biometric fingerprint sensor technology inconfirmed customer orders scheduled for delivery within the following 12 months (and amounts, if any, of deferred revenue scheduled for recognition during the period), totaled $2.5 million, $1.7 million and $120 thousand as of December 31, 2021, 2020, and 2019, respectively. These backlog figures exclude committed deliveries pursuant to a broad range of markets, including payments, identification, access control, healthcare and the Internet of Things, or IoT. Our patent-protected fingerprint sensors can be integrated

on the front side of a payment card, thereby enabling the card to use biometric fingerprint recognition instead of a personal identification number, or PIN, to authenticate the cardholder. To use this feature the cardholder first enrolls their fingerprint. A biometric template, which is representative of the fingerprint, is created and securely stored on the card. When the cardholder uses the card to make a payment, he or she places his or her finger on the card’s sensor. Through fingerprint sensing and biometric authentication, the card can determine if the person using the card is the enrolled user or not.

Our portfolio of products includes fingerprint sensors, fingerprint modules with software and algorithms and remote enrollment devices. Our fingerprint sensors can be used in dual interface, contactless-only and contact-only payment cards. Our fingerprint modules offer a complete biometric solution that integrates fingerprint sensing with additional biometric processing and system power management functions. Additionally,multi-year supply contract we have with our remote enrollment solutions, cardholders can easily enroll their fingerprints at homeearly-adopting customer in the cyber authentication market segment, as individual shipment volumes and withoutscheduled delivery dates are subject to change. The terms of this supply contract provide for automatic extensions of one year. As of December 31, 2021, the needremaining value of these committed deliveries under our supply contract was approximately $1.2 million.

IDEX recorded revenue of $2.8 million for 2021, compared to visit$1.1 million for 2020, and $424 thousand for 2019. Product revenue, as a bank branch.

Our sensors use a patented off-chip design, which separatespercentage of total revenue, represented 99.9%, 92.5%, and 37.5% for 2021, 2020, and 2019, respectively. Revenue associated with our early-adopting customer in the fingerprint sensor into two key components: the sensor arraycyber authentication market segment, inclusive of services revenue associated with product development, represented 85.4%, 89.7%, and the silicon chip (Application Specific Integrated Circuit, or ASIC). This off-chip design architecture allows the sensor array to be made from a flexible72.3% of our total revenue for 2021, 2020, and cost-efficient polymer substrate while minimizing the silicon area needed for the ASIC. Compared to conventional silicon sensors, for which the sensor array is made of silicon, the off-chip design allows for a larger sensing area, better matching reliability and lower costs.2019, respectively. We believe that we are the only provider supplying capacitive off-chip sensors and biometric algorithms optimized for integration with payment cards. This year, we launched TrustedBio, our next generation of dual interface products and solutions designed to reduce biometric smart card cost while improving both performance and security. TrustedBio utilizes advanced semiconductor technology to transform the sensor ASIC into a complete biometric system on chip, while maintaining all the benefits of the capacitive off-chip sensor architecture.

Our current generation products are commercially available, and we have begunbegan to ship samplesproduction volumes of our products on our TrustedBio platform. To date, productsolution in 2021 and expect such volumes to represent an increasing percentage of total revenue has not been material; however, we have seen an increase in product revenues. For the years ended December 31, 2020, 2019, and 2018, product revenues were $1.0 million, $0.2 million, and $0.3 million, respectively.

future.

We do not own or operate capital-intensive manufacturing facilities, but operate as a fabless manufacturer, utilizing third parties for outsourced manufacturing and product assembly capabilities. We currently rely on TSMC, the leading producer of semiconductor wafers, as the sole source of wafers for our proprietary ASIC designs. We also rely on a limited number of providers of outsourced semiconductor packaging, design, and test services, including Amkor Technology, Inc., and Silicon Precision Industries Limited , both of which are leaders in outsourced semiconductor assembly and test services. Despite well-publicized disruptions throughout the semiconductor supply chain, in 2021 we did not experience disruptions that were material to our operations or financial results. However, we have a historyordered, and may continue to order, relatively high values of generating significant revenue. We generated net lossesraw materials and carry relatively large quantities of $26.8 million, $32.4 millionfinished goods so that customer delivery schedules can be met. While inventory levels likely will continue to expand as order backlog increases and $30.2 millionexpectations of higher orders and shipments increase, we do not believe such quantities of inventory represent, for the years endedforeseeable future, a material risk to our financial position.
Due to recent inflationary pressures, primarily in the semiconductor supply chain, we expect our costs and expenses likely will increase, which could negatively influence cash flow and profitability, even if we are able to significantly increase our revenue. Given our fabless model, our manufacturing costs for the products we currently sell are most influenced by the discounts our vendors offer for sustained, high-volume production
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orders. We may not achieve the necessary volume of production orders to obtain advantageous pricing for the manufacture of our current products. Also, we may not be able to pass on increased costs to customers by increasing the prices of our products.
Variable costs are associated primarily with production volumes. Our operating cost structure is largely fixed, reflecting our business model and strategic focus on research and development. Because we believe the Company’s leadership in fingerprint authentication technologies is an important competitive differentiator, we intend to maintain research and development activities to maintain this leadership.
We utilize a direct sales force and have customers around the world. At the present time, we do not sell our products through distributors. We expanded our marketing and sales staff in 2021 and plan to increase our marketing and sales activities in 2022, as we seek to reduce the extended and unpredictable sales cycles we have encountered. Fingerprint authentication applications in the market segments we target are in the early stages of development, and such extended and unpredictable sales cycles frequently are associated with marketing new and innovative technology-based products.
As a Norwegian public company, with Ordinary Shares listed on the Oslo Børs, and an SEC registrant, with ADSs listed on Nasdaq, we are required to comply with two sets of applicable laws, rules, and regulations. From time to time, this may result in uncertainties regarding compliance, with the consequence being higher costs associated with analysis of dual legal regimes, ongoing revisions to disclosure requirements, and adherence to different governance practices. We devote a substantial amount of time to these compliance initiatives, which has increased our legal and accounting costs. These compliance costs and commitments of management time likely will continue to expand.
Our largest expenses are associated with personnel costs, including salaries, variable, performance-based compensation, sales commissions, benefits, and charges for the recognition of share-based compensation costs. Our total staff, consisting of employees and individual contractors located in countries in which we do not have operations, totaled 111, 102, and 116 as of December 31, 2021, 2020, 2019 and 2018,2019, respectively. As of December 31, 2020, we had an accumulated deficit of $14.7 million. Our ability2021, 19 were assigned to generate revenue sufficientour Oslo office, 56 were assigned to achieve profitability will depend on our successful developmenttwo offices in the United States, 27 were assigned to our office in the United Kingdom, and continuing commercialization ofnine were assigned to our products and software solutions.

We expect to incur significant expenses and operating losses for the foreseeable future as we further develop our products and software solutions, including introducing new designs and functionality, and as we further expand our business development, sales and customer support teams to drive new customer adoption, expand use cases and integrations, and support international expansion. We will also face increased compliance costs associated with growth and the expansion of our customer base. Furthermore,office in China. While we expect to continueadd personnel to incur additional costsour marketing and sales staff during 2022, we also expect such expansion will be offset largely by staffing reductions through attrition across other areas of the Company.

We anticipate our profitability could improve as revenue increases, as our forecasts for operating expenses are based on our assumed ability to increase revenue without proportional increases in our operating cost structure. However, because of the uncertainties associated with operating as a foreign private issuer with ADSs listed on Nasdaq as well as ordinary shares listed onaccurately forecasting revenue levels, inventory planning, and achieving operational economies of scale, we cannot predict whether, or when, we might achieve profitability.
Impact of
COVID-19
In the Oslo Bors, including significant additional legal, accounting, investor relations and other expenses that we did not previously incur prior to the listingfirst quarter of our ADSs on Nasdaq.

As a result of these anticipated expenditures, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales and services, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. Our inability to raise capital as and when needed would have a negative

impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability, and we may never do so.

Impact of COVID-19

In December 2019, a novel strain of coronavirus, since named SARS-CoV-2, causing the disease known as COVID-19, was reported in China. Since then, COVID-19 has spread globally, including throughout Europe and the United States. In March 2020, the World Health Organization declared

COVID-19
a global pandemic. We quickly adopted the outbreak of COVID-19 as a “pandemic,” or worldwide spread of a new disease. In response, many countries around the world, including European countries and the United States, have imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the virus, and have closed non-essential businesses.

We could be materially and adversely affectedguidelines, outlined by the risks, orrelevant governments where our company operates, to ensure the public perception of the risks, related to an epidemic, pandemic, outbreak, or other public health crisis, such as the recent outbreak of COVID-19. For example, while many of our business partners in Asia impacted by the COVID-19 pandemic in the first quarter of 2020 have since returned to operations, there is considerable uncertainty surrounding the timing, duration or impact of any future disruptions. We have implemented a work-from-home policy for employees and are evaluating hybrid working models for our operations on a go-forward basis. We will continue to monitor federal, state, and local regulations and the recommendations of public health professionals as we determine which actions are in the best interests of our employees and shareholders. To date, theretheir families. We established an internal virus response team. Effective March 16, 2020, all travel and

face-to-face
meetings were stopped, and we asked most staff members to work from home. Staff members with specific roles required to be
on-site
at one of our facilities are being supported in line with local government guidelines. As certain countries relaxed restrictions, many staff members have returned to working
on-site
and have resumed travel. Our management and Board continue to monitor the situation closely and will take further action as appropriate.
We have not been anyexperienced significant delays in our development projects, and we have not incurred any significant additional costs due to the actions taken. The pandemic did cause some short-term delays in early adoption activities including temporary delays for pilots. The pandemic did not have a material impact on our revenue as our revenue has not been material to date.

We did initiate certain cost reduction actions as a result of our response to the pandemic beginning in Marchpandemic. Disruption of 2020 including temporary salary reductions and travel restrictions. These actions have resulted in lower operating expenses, and therefore lower net loss, duringsupply chains, particularly the second quarter

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semiconductor supply chain, has been attributed to the pandemic. While we expect that operating expenses could increase in future periods if and when certain restrictions are lifted.

We did not experience asupply chain disruptions that were material change in liquidityto our operations or cash flows as a resultfinancial results during 2021, operational planning and management of the pandemic.

On the other hand,inventory levels were challenging, given uncertainties associated with vendor capacity availability and allocations to us of such capacity. Because we expect such uncertainties will continue through 2023, we may place orders for, and hold balances of, inventory at higher levels than would be expected if such uncertainties did not exist.

We believe that the pandemic has increased end-user awarenesshad an adverse influence on the timing of activities of smart card manufacturers and issuers, including delaying product development and the benefitsinitiation of contactless payments. Following the outbreak, consumers are motivated to go cashless more than ever before. With many businesses discouraging the use of cash, because of hygiene questions that surround handling money, contactless payments are front of mind to avoid touching pin pads. In an increasingly cashless ecosystem, there is a growing threat of card fraud from the lack of authentication. Contactless payments need to be made more secure in order to ensure transactions are hygienic, convenienttrials and protected from the risk of fraud. We believe these trends could have a positive impact onpilots involving smart cards incorporating our revenue in future periods, but it is difficult to predict the impact with any certainty.

fingerprint authentication solutions.

The ultimate extent of thefull impact of any epidemic, pandemic, outbreak, or other public health crisis
COVID-19
on ourthe Company’s business, financial condition and results of operations, willand financial condition may depend on future developments, whichnumerous evolving factors that are highly uncertain and cannot be predicted, including newaccurately predicted. As additional information thatis obtained, the Company may emerge concerningbe required to update its judgements, estimates, and assumptions. Actual results could differ from prior judgements, estimates, and assumptions, and any such differences may be material to the severity of such epidemic, pandemic, outbreak, or other public health crisis and actions taken to contain or prevent the further spread, among others. Accordingly, we cannot predict the extent to which our business,Company’s financial condition and results of operationsstatements. The Company will be affected. We remain focused on maintaining liquidity and financial flexibility and continue to monitor developments as we deal with the disruptionsevolving situation and uncertainties from a business andwill assess the relevant implications for its consolidated financial perspective relating to COVID-19.

statements.

Financial Operations Overview

Components of ResultsConsolidated Statements of Operations

Profit and Loss

Revenue

We have not generated significant

Our primary source of revenue since our inception. We maintain in-house design, testing and supply chain management functions. Manufacturing is outsourced to large and established semiconductor fabrication companies as well as other providers of components and manufacturing services. We generate revenue throughderived from the sale of fingerprint sensors and solutions and engineering services.

Revenue from product sales is recognized at the point in time in which the customer obtains control of the products, which normally is when title passes at the point of delivery, based on the contractual terms of the agreements. Revenue from services is recognized over time pursuant to the terms and conditions in the agreements.

Operating Expenses

Our operating expenses consist of purchases, net of inventory variation, payroll, research and development, sales and marketing, and general and administrative expenses. Personnel and payroll costs are the most significant component of operating expenses. Operating expenses also include overhead costs for facilities, including depreciation expense.

Purchases, net of inventory variation

Purchases, net of inventory variation, primarily consist of materials, contract manufacturing, and transportation related costs. Purchases excludes payroll, allocated overhead, depreciation and amortization.

We intend to continue to invest additional resources in our engineering, supply chain and customer support teams to expand the adoption of our products and services. We sell directly to customers and do not utilize distributors for the resale of our products.

We record revenue from the sale of our products and the delivery of technical development and other engineering services to our customers. Product-related revenue is recognized upon shipment, generally on an Incoterms EXW (i.e.,
Ex-works)
basis. Revenue is recognized according to the criteria of IFRS 15
Revenue from Contracts with Customers
. Sales taxes, value add taxes, and ensure that our customersother taxes incurred concurrent with revenue producing activities are realizingexcluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are not recorded as revenue.
The Company, from time to time, licenses its intellectual property under
right-to-use
licenses, in which royalties due to the full benefit thereof. The level, timing and relative investmentCompany are based upon a percentage of the licensee’s sales and/or unit volumes. There was no licensing revenue for 2021, 2020, or 2019.
Operating expenses
Pursuant to IAS 1
Presentation of Financial Statements
, we classify the expenses recognized in our infrastructureConsolidated Statements of Profit and Loss based on the nature of such expenses, without allocations to functional departments. Our operating expense categories for presentation purposes are:
Cost of materials, net of inventory change
This category of expense was captioned “Purchases, net of inventory variation” in prior presentations. We have changed the caption to better reflect the nature of the category as representing the costs of goods sold during a period. The costs included, which have not changed, are those costs associated with materials consumed, contract manufacturing, and inbound logistics. Inventory is valued as the lower of cost or market value.
Excluded from this category are costs of personnel could affect our costassigned to inventory management, procurement, logistics, and other functions typically associated with manufacturing overhead. Also excluded are any charges associated with the depreciation of purchasesCompany-owned equipment (e.g., tooling) utilized by contract manufacturing vendors. These costs have not been material to date.
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Compensation and benefits
This category of expense was captioned “Payroll expense” in prior presentations. We have changed the future.

Payroll

Payroll expense consistscaption to better reflect the scope of the category, which includes, for all departments and activities, the following employee-related expenses: salaries, variable, performance-based compensation, sales commissions, benefits, bonuses,and charges for the recognition of share-based compensation expense and sales commissions. We expect that our payroll expense will increase and continue to be our largest operating expense forcosts.

As of December 31, 2021, we had 18 individuals on staff, out of a total staff of 111, whom we characterize as individual contractors, not employees. These individuals live in countries in which the foreseeable futureCompany does not have a formal business presence. Compensation of individual contractors is reported as we expand our business.

Research and Development

Research and development expenses or Sales and administrative expenses, as applicable, based on the roles assigned to the individuals. While individual contractors may be eligible for awards of subscription rights and may be eligible to participate in variable, performance-based compensation plans, the Company does not provide benefits to individual contractors.

Research and development
Expenses in this category consist primarily of consumedthe costs of services and materials costsused in engineering activities and certain outsourced development costs relatedactivities. Our policy has been to the creation and improvements of our technology. We currently have multipleexpense research and development projects in process. Research costs are expensed as incurred. Development expenses are capitalized whenincurred, unless the criteria for recognition iscapitalization of certain development costs have been met. DevelopmentNo development costs that do not meetwere capitalized in 2021, 2020 or 2019.
Research and development expenses also include the criteriacompensation paid to individual contractors assigned to engineering roles. As of capitalization are expensed as incurred. The assets are amortized over their expected useful life once the asset is available for use. MaintenanceDecember 31, 2021, eight of our total engineering staff of 85 were individual contractors.
Research and trainingdevelopment costs are expensed as incurred. Grantsoffset by the earned (i.e., recognized) value, if any, of government grants applicable to research and development activities. Generally, the applications or claims for such grants are creditedsubmitted after completion of the qualifying activities. When there is reasonable assurance that the application or claim will be successful and the amount can be determined reliably, we credit the value of the grant against costs. We expect that our research and development expense will increaseexpenses for that reporting period. Due to the timing difference between the completion of the qualifying activities, the approval of our grant application or claim, and the receipt of the funds associated with the grant, we may record, pending receipt of funds, the value of the grant as our business grows, particularly as we incur additional costs related to continued investmentsan Account receivable, other. We recorded credits of $0.7 million, $2.3 million, and $0.6 million against research and development expenses in our productseach of 2021, 2020, and technology.

Other Operating Expenses

2019, respectively.

Other operating expense primarilyexpenses
Expenses in this category consist of sales andcosts associated with our marketing and generalsales activities and costs associated with administrative expenses, includingactivities.
Marketing and sales costs include the fees of third-party service providers supporting public relations, advertising, website and social media programs, and related activities. The direct costs of customer engagement (e.g., promotional material and trade show participation) are included. Marketing and sales expenses also include the compensation paid to individual contractors assigned to such roles. As of December 31, 2021, nine of our total marketing activities, contractorand sales staff of 15 were individual contractors.
Administrative costs include fees for administrative functions and other non-personnel costs, such as legal, accounting and other professional fees, hardware and software costs, certain tax, license and insurance-related expenses and allocated overhead costs.

We expect to incur additional expenses as a result of being listed in the United States in addition to Norway, including costs to comply with the rules and regulations applicable to companies listed on a U.S. securities exchange, costs related to compliance andthird-party service providers supporting auditing, financial reporting, obligations, and increased expenses for insurance,human resources, investor relations, and professional services. We expect thatlegal and regulatory activities. Direct administrative costs include those associated with banking and insurance, communications, information systems, occupancy (excluding lease payments), and supplies. Administrative expenses also include the compensation paid to individual contractors assigned to such roles. As of December 31, 2021, one of our generaltotal administrative staff of nine was an individual contractor.

On our Consolidated Statements of Profit and administrative expense will increaseLoss, we do not include lease payments in absolute dollarsOther operating expenses. Lease accounting, pursuant to IFRS 16
Leases
(effective January 2019), requires
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the capitalization of a lease, recorded as the calculated present value of future lease payments, and the creation of a corresponding
right-of-use
asset to be depreciated. Both are presented in our business grows. However, we expect thatConsolidated Statements of Financial Position. As such, a periodic lease payment is recorded in our generalConsolidated Statements of Profit and administrative expense will decreaseLoss as a percentageperiodic depreciation expense and a periodic interest expense. The initial values of the lease liability and the associated
right-of-use
asset are amortized over the term of the lease liability. Given the inclusion of an interest charge on the liability balance in such amortization, the Company records higher expenses early in the term of a lease and lower expenses late in the term of a lease, in contrast to the amount of the actual lease payments, which generally are fixed for the term of a lease.
Amortization and depreciation
Expenses in this category consist of charges associated with amortization of certain intangible assets and depreciation of our revenue asproperty, plant, and equipment, including the charges associated with the depreciation of our revenue grows over
right-of-use
assets recorded pursuant to IFRS 16. For assets subject to amortization or depreciation, these periodic charges generally are calculated using the longer term.

Taxation

General

straight-line method, based on each asset’s estimated useful life.

Finance income and Finance cost
Pursuant to IAS 1,
the Finance income and Finance cost captions appear below the Operating income (loss) caption and include income and expenses associated with financial transactions (i.e., transactions not related to the Company’s operations), the net amount of foreign exchange gains or losses arising from settlement of obligations denominated in foreign currencies during the period and foreign currency translation adjustments recognized at
period-end,
and income and expenses arising from the adoption of, or changes to, IFRS reporting requirements.
For the Company:
Finance income may include interest received on bank balances, the net gain associated with aggregated foreign exchange translation adjustments for the period, and upward revisions to provisions, reserves, or the recorded fair values of financial assets or liabilities.
Finance cost may include interest expenses on lease liabilities, interest expenses on VAT obligations, the net loss associated with aggregated foreign exchange translation adjustments for the period, and downward revisions to provisions, reserves, or the recorded fair values of financial assets or liabilities.
Income tax on resultsexpense (benefit)
The provision for income tax presented in the year, which is comprisedConsolidated Statements of Profit and Loss consists of the sum of current taxtaxes due and changes in deferred tax. Any portion of income tax expense (benefit) attributable to changes in equity during the period is recognized in the consolidated statementsequity section of profitthe Consolidated Statements of Financial Position.
Current taxes due represents the sum of the periodic income tax obligations of our parent company and our individual subsidiaries. Our parent company is subject to tax pursuant to the corporate tax laws of Norway. As our parent company has been in a loss whereasposition since inception, no corporate income taxes have been incurred in Norway. Each of our subsidiaries is taxed pursuant to the portion attributablecorporate tax laws of their respective countries of domicile. None of our subsidiaries are considered permanent establishments and, accordingly, their income is taxed on a cost-plus basis.
10
10 
Our subsidiaries do not generate revenue from external sales of products or services. Pursuant to international tax treaties based on the definitions of the Organisation for Economic
Co-operation
and Development, our subsidiaries are taxed using the cost-plus transfer pricing method, by which a taxable profit is calculated based on the costs of each subsidiary incurred in providing services to our parent company and an assumed
arm’s-length
level of profitability on such services.
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Deferred tax is measured, pursuant to entriesIAS 12
Income Taxes
, using the liability method, whereby expected future tax effects of timing differences (i.e., temporary differences between the value of tax obligations calculated for financial reporting purposes and tax obligations calculated following tax laws and regulations) are reported as liabilities or assets. Both are measured at the tax rates applicable when the timing difference is expected to reverse, and balances recorded on equity is recognized directly in equity.

Current tax liabilities and current tax receivables are recognized in the consolidatedour Consolidated statements of financial position asare adjusted to reflect changes in tax calculated onrates or the taxable income for the year adjusted for tax on previous years’ taxable income and taxes paid on account/prepaid.

Deferred tax is measured according to the statementimposition of financial position liability method in respect of temporary differences between the carrying amount and the tax base of assets and liabilities. new taxes.

Deferred tax liabilities are generally recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent, thatin management’s judgment, it is probable thatsufficient taxable profits will be availablegenerated, against which deductible temporary differences can be utilized. Suchutilized (i.e., against which a recorded deferred tax asset can be used to reduce future taxes due). We review the potential carrying value of deferred tax assets and liabilities are not recognized ifat the temporary difference arises fromend of each reporting period, based on the initial recognition (other than in a business combination)balance of other assets and liabilities in a transaction that affects neithertax loss carryforwards at the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognized if the temporary difference arises from the initial recognitiontime. If we conclude there is insufficient convincing evidence of goodwill.

Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries, except where we are able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficientfuture taxable profits, against which a recorded deferred tax asset can be used to utilize the benefitsreduce future taxes due, we do not recognize a deferred tax asset.

The values of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount ofsuch unrecognized deferred tax assets, is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or partas of the asset to be recovered.

This judgment is made on an ongoing basis and is based on the factor that recent historical loss carries more weight than factors such as budgets and business plans for the coming years, including planned commercial initiatives. The creation and development of biometric products within emerging industries such as payments and access control is subject to considerable risks and uncertainties. So far, we have reported significant losses, and as a consequence, we have unused tax losses. Management has concluded that deferred tax assets should not be recognized at December 31, 2018,2021, 2020, and 2019, and 2020. The tax assets are currently not deemed to meet the criteria for recognition as management determined that it was not probable that future taxable profit will be available against which the deferred tax assets can be utilized.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realized based on tax laws and rates that have been enacted or substantively enacted at the balance sheet date.

Income Tax

As a Company headquartered in Norway, our parent company, IDEX Biometrics ASA, is subject to tax under the corporate tax laws of Norway. As our Norwegian operations have been in a loss position since inception, there has been no corporate income taxes paid in Norway.

Pursuant to Norwegian tax legislation for companies incurring research and development costs, we have for several years conducted projects that have qualified us to receive a cash tax credit. We recorded a cash tax credit of $0.5totaled $57.1 million, $0.6$51.3 million, and $0.6$42.8 million, relatingrespectively. The figure as of December 31, 2021, includes, in addition to research and development costs in eachthe

tax-effected
value of 2020, 2019, and 2018, respectively. These amounts have been credited to research and development expenses.

We also have operationscumulative tax losses (i.e., carryforwards), $1.6 million of available tax credits in the United States, United Kingdomrelated to our research and China, through wholly owned subsidiaries in each respective country, and are subject to corporate income taxes in those countries pursuant todevelopment activities.

For further information regarding the tax laws in each jurisdiction. All income taxes and tax credits mentioned are specific to the country to which they relate.

The accumulated unrecognized deferred tax assets amounting to $51.3 million, $42.8 million and $36.4 million at December 31, 2020, 2019 and 2018, respectively, are related primarily to the tax losses carryforward in Norway and the United Kingdom. At December 31, 2020, there was not sufficiently convincing evidence that sufficient taxable profit will be generated, against which the unused tax losses could be applied. Consequently, no deferred tax asset has been recognized.

Critical Accounting Policies, Judgments and Estimates

In the applicationcalculation of our accounting policies, we are requiredtax provisions, see Footnote 6 to make judgments, estimates, and assumptions about the value of assets and liabilities for which there is no definitive third-party reference. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. We review our estimates and assumptions on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revisions and future periods if the revision affects both current and future periods.

The following are our critical judgments that we have made in the process of applying our accounting policies and that have the most significant effect on the amounts recognized in our consolidated financial statements included elsewhere in this report.

Intangible assets

Research costs are expensed as incurred. Our patents and other intellectual property rights created by us are capitalized and held in the consolidated statements of financial position only when they satisfy the criteria for capitalization. No development costs have been capitalized in 2020, 2019 or 2018, thus all development costs and internal costs related to the creation of intellectual property have been expensed when incurred. Acquired intangible assets are capitalized at the price allocated to the various assets based on estimated fair value. Intangible assets are amortized over their useful lives.

Inventory

Raw materials,Consolidated Financial Statements, which are partpresented in Part III of the trade or manufacturing flow in the sense that the item is embedded in or otherwise becomes a part of the physical delivery to the customer (work in process and finished goods), are inventoried if we are in the position to take orders on the related product. Materials and components for research or development are expensed at the time of purchase and not included in inventory. Inventory is held at the lower of cost and net realizable value, less impairment, if any. The determination of net realizable value is subject to judgment, as reselling components may not be easily achieved, and our finished goods are part of a newer market with varying margins.

this Annual Report.

Deferred tax assets

Deferred tax assets related to net operating loss carryforwards are recognized when it is probable that the net operating loss carryforward may be utilized. Judgment of probability is based on historical earnings, expected future margins and the size of the order backlog.

Significant Accounting Estimates

Share based compensation

We estimate the fair value of incentive subscription rights at the grant date by using the Black-Scholes option pricing model. The valuation is based on share price and exercise price, share price volatility, interest rates and duration of such subscription rights, and assumptions of staff attrition and the likelihood of early exercise. The share-based compensation is expensed as earned over the vesting period. The accrued cost of the employer’s social security tax on the earned intrinsic value of such subscription rights is calculated at each consolidated statement of financial position date.

Impairment evaluation of goodwill

Goodwill amounts to the fair value of the consideration for the assets less the capitalized value of the identifiable assets and any impairment charges, if any. Impairment testing of goodwill is based on the estimated fair value or the value in use of the business. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the forecast for the next five years. The recoverable amount is sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

Recent Accounting Pronouncements

IFRS 3 Business Combinations: The amendments to IFRS 3, issued in October 2018 and effective from 1 January 2020, introduce clarification to the definition of a business. The amendments clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs, and they narrow the definitions of a business and of outputs by focusing on goods and services provided to customers and by removing the reference to an ability to reduce costs. The amendments also establish an optional test to identify a concentration of fair value that, if applied and met, would lead to the conclusion that an acquired set of activities and assets is not a business. We have implemented the amendments effective from 1 January 2020. We did not have any relevant transactions that occurred on or after the implementation date.

We do not expect that any newly issued, but not yet effective standards, amendments and interpretations will have a significant impact on the consolidated financial statements or notes for our current activity and assets but may affect the accounting for future transactions or arrangements. We will implement the new standards and interpretations as they become effective.

A. Operating Results

The following table summarizes the results of our operations for the years ended December 31, 2021, 2020, 2019, and 2018.

   Year Ended December 31,       
   2020  2019  2018  2020-2019
Change
  2019-2018
Change
 

Revenue:

      

Product

  $1,013  $159  $268   537  (41%) 

Service

   82   265   172   (69%)   54

Total revenue

   1,095   424   440   158  (4%) 

Operating expenses:

      

Purchases, net of inventory variation

   275   62   185   344  (66%) 

Payroll expenses

   17,672   21,750   19,770   (19%)   10

Research and development expenses

   1,895   4,385   5,631   (57%)   (22%) 

Other operating expenses

   5,936   4,641   3,919   28  18

Amortization and depreciation

   1,719   1,633   842   5  94

Total operating expenses

   27,497   32,471   30,347   (15%)   7

Loss from operations

   (26,402  (32,047  (29,907  18  (7%) 

Finance income

   26   135   134   (81%)   1

Finance cost

   (477  (351  (411  (36%)   15

Loss before tax

   (26,853  (32,263  (30,184  17  (7%) 

Income tax expense

   (99  (160  (41  38  290

Net loss for the year

  $(26,754 $(32,423 $(30,225  18  (7%) 

2019.

   
Year Ended December 31,
       
($000s)  
2021
  
2020
  
2019
  
2021-2020

Change
  
2020-2019

Change
 
Revenue:
      
Product
  $2,837  $1,013  $159   180  537
Service
   3   82   265   (96%)   (69%) 
  
 
 
  
 
 
  
 
 
   
Total revenue
   2,840   1,095   424   159  158
Operating expenses:
      
Cost of materials, net of inventory change
   1,254   275   62   356  344
Compensation and benefits
   21,107   17,672   21,750   19  (19%) 
Research and development
   2,680   1,895   4,385   41  (57%) 
Other operating expenses
   7,347   5,936   4,641   24  28
Amortization and depreciation
   1,802   1,719   1,633   5  5
  
 
 
  
 
 
  
 
 
   
Total operating expenses
   34,190   27,497   32,471   24  (15%) 
  
 
 
  
 
 
  
 
 
   
Loss from operations
   (31,350  (26,402  (32,047  (19%)   18
Finance income
   11   26   135   (58%)   (81%) 
Finance cost
   (1,123  (477  (351  (135%)   (36%) 
  
 
 
  
 
 
  
 
 
   
Loss before tax
   (32,462  (26,853  (32,263  (21%)   17
Income tax expense (benefit)
   90   (99  160   (190%)   38
  
 
 
  
 
 
  
 
 
   
Net loss for the year
  $(32,552 $(26,754 $(32,423  (22%)   18
  
 
 
  
 
 
  
 
 
   
67

Revenue

Revenue for the year ended December 31, 2021, was $2.8 million, consisting of $2.8 million of revenue from product sales and a negligible amount of revenue from services. The increase in product sales of $1.8 million from 2020 to 2021, representing an annual increase of 180%, is associated with higher sales to an existing customer, with which we developed a customized cyber authentication solution. Revenue associated with this customer represented approximately 85% of our total revenue for 2021. The balance of 2021 revenue was associated with initial sales of our TrustedBio modules, which were introduced in 2020, with one customer representing 9% of total revenue. In 2021, we continued to ship earlier generations of products to customers for
non-custom
applications, although we expect such shipments will decline through 2022 as we fulfil customer commitments and deplete existing inventories of these products. Service revenue for 2021 was negligible, as we have deemphasized services as an element of customer engagement.
We expect shipments of our TrustedBio modules will expand through 2022, based on our backlog and our current forecast for additional orders, production lead times, and shipments. Such shipments are expected to contribute to important diversification of our customer base. We also expect to sustain shipments of our customized cyber authentication solution, to the customer referenced above, at current levels through 2022.
Revenue for the year ended December 31, 2020, was $1.1 million, consisting of $1.0 million of revenue from product sales, and $0.1 million$82.0 thousand of revenue from services. The increase in product salesservices associated with the completion of $0.9 million or 537% from 2019 to 2020 relates primarily to sales to a single large customer, a leading global providerdevelopment of financial news and services. In 2020, we continued to ship our current generation of sensors, and we expect to continue to ship these productsthe customized cyber authentication solution for the next several quarters. We began shipping samplescustomer referenced above. As such, this single customer represented approximately 81% of our newest TrustedBio product during the third quarterrevenue for 2020. Our second largest customer represented approximately 4% of 2020 and expect commercial shipments of TrustedBio products in the second half of 2021. Servicetotal revenue for the year was less than $0.1 million, as the 2019 service revenue was non-recurring, and we expect product revenue to comprise the majority of our revenue on a go-forward basis.

year.

Revenue for the year ended December 31, 2019, was $0.4 million, consisting of $0.2 million of revenue from product sales, and $0.2 million of revenue from services consistingassociated with the development of non-recurringthe customized cyber authentication solution for the customer referenced above. Revenue from this customer represented approximately 72% of our revenue for 2019. Our second largest customer represented approximately 10% of total revenue for the year.
We categorize our customer base utilizing the billing addresses of our customers. Certain customers may be domiciled in one country but utilize contract manufacturers located in other countries. While the terms of customer agreements vary, and customers may or may not utilize contract manufacturers, when they do so, customer agreements generally provide for orders to be placed with us by the contract manufacturers utilized. As such, we are potentially exposed to the risks associated with the countries in which the contract manufacturers are domiciled (e.g., risks associated with customs delays and other logistical delays). During 2021, 2020, and 2019, in excess of 98% of product revenue each year was associated with shipments to addresses in countries other than Norway. For each of these years, in excess of 94% of service revenue each year was associated with the development of the customized cyber authentication solution for the customer referenced above, which is domiciled in the United States.
Cost of materials, net of inventory change
Cost of materials, net of inventory change, rose roughly 356% from 2020 to 2021, to $1.3 million, reflecting the 180% increase for the year in product revenue. For 2020, the figure was $275 thousand, a sequential increase of 344%, reflecting a 537% increase for the year in product revenue. Because we present our Consolidated Financial Statements reflecting the nature of expenses, the costs of personnel delivering engineering services performedassociated with services revenue are not included in Cost of Materials, net of inventory change. Accordingly, the sequential change in Cost of materials, net of inventory change, from 2019 to 2020 reflected a shift in the composition of total revenue. For 2019, services represented 63% of total revenue, but for 2020, products represented 93% of total revenue.
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As stated above, certain costs typically associated with manufacturing overhead, such as partpersonnel costs and depreciation charges, are excluded from Cost of materials, net of inventory change, given the Company’s presentation of operating expenses based on the nature of expenses rather than by functional categorization. These excluded costs have not been material to date. Pursuant to IAS 1 and our presentation of operating expenses based on the nature of expenses, we do not present in our Consolidated Statements of Profit and Loss figures representing “gross margin,” reflecting the subtraction of Cost of materials, net of inventory change, from Revenue. Because the costs of delivering services are primarily related to project-specific allocations of personnel costs, Cost of materials, net of inventory change, as presented, excludes such personnel costs. As such, we assess product-level profitability by calculating a $6gross margin based on subtraction of Cost of materials, net of inventory change, from revenue derived from product sales. For 2021, such a product gross margin figure was $1.6 million, dollar minimum commitment fromand the aforementioned global providercorresponding ratio of financial newssuch figure to product revenue was 55.7%. For 2020, the product gross margin figure was $738 thousand, and services. This customer accountedthe corresponding ratio was 72.9%. For 2019, the product gross margin figure was $97 thousand, and the corresponding ratio was 61.0%. Variances in these ratios reflect sequentially higher shipment volumes and shifts in product mix and pricing.
11
Compensation and benefits
Compensation and benefits expenses include, for all departments and activities, the following employee-related expenses: salaries, variable, performance-based compensation, sales commissions, benefits, and charges for the increase in service revenuerecognition of $0.1 million or 54% from 2018 to 2019.

Revenueshare-based compensation costs.

Compensation and benefits expenses for the year ended December 31, 2018 was $0.42021, were $21.1 million, consisting of $0.2as compared to $17.7 million of revenue from product sales, and $0.2 million of revenue from services, primarily for non-recurring engineering services.

The decrease in product sales of $0.1 million or 41% from 2018 to 2019 relates to our transition to newer product lines as sales of certain products that shipped in 2018 did not recur in 2019, and we began shipping newer products to new customers in 2019. During the year ended December 31, 2019, approximately 10% of revenue came from new customers.

In 2020, 99.5% of our product revenues came from customers outside of the United States, however, 93.9% of our service revenues came from a single customer in the United States due to the aforementioned

non-recurring engineering services related to a $6 million dollar minimum commitment. As product deliveries to this customer only began in 2020, an increased and significant portion of our revenues will come from the United States during 2021. Substantially all of our product revenue in 2019 and 2018 was from customers outside of the United States, comprising 96.9% and 98.9% of product revenue in 2019 and 2018, respectively.

Purchases, net of inventory variation

Purchases increased by $0.2 million, or 344%, for the year ended December 31, 2020, comparedan increase of $3.4 million, or 19%, reflecting a higher number of employees, customary merit-based salary increases, and increased levels of share-based compensation costs. Notably, such expenses for 2020 reflected a temporary reduction of salaries for approximately one quarter of the year, implemented in response to the year ended December 31, 2019. This increase was primarily due to higher product sales to the aforementioned large customer,

COVID-19
pandemic, as well as other commercial shipmentsa lower average number of our current generation of card products and samples of TrustedBio.

Purchases decreased by $0.1 million, or 66%, for the year ended December 31, 2019 compared to the year ended December 31, 2018. This decrease was primarilyemployees, due to lower product salesheadcount reductions and our transition to newer product lines.

Payroll Expenses

Payrollattrition.

Such expenses for the year ended December 31, 2020, were $17.7 million, as compared to $21.8 million for the year ended December 31, 2019, a decrease of $4.1 million, or 19%(19%). The decrease was primarily due to cost reduction activitiesreductions undertaken in the fourth quarter of 2019, as well as the temporary salaryreduction of salaries during 2020 described above.
The
year-end
numbers of employees for 2021, 2020, and 2019 were 93, 90, and 102, respectively, reflecting headcount reductions in the 2nd quarter of 2020 due to uncertainty surrounding the COVID-19 pandemic. The average number of FTEs was 102and attrition that occurred in 2020 down from 109and the expansion of our marketing and sales team during 2021.
We expect staffing levels through 2022 will not change meaningfully, as we anticipate incremental hiring for specific needs, if any, will be offset by attrition.
For more information regarding compensation and the composition of our staff, see Footnote 4 to our Consolidated Financial Statements, which are presented in 2019 due to headcount reductions takenPart III of this Annual Report.
11 
Under IFRS, the gross margin and ratio figures discussed herein are alternative performance measures (“APMs”), as they are neither specified nor defined in IFRS. As we expect in the future to maintain the current level of product revenue, relative to total revenue, we believe these figures are useful indicators of our performance. We also believe these figures are consistent with IFRS, as no adjustments to other IFRS-defined figures have been made, and their use in no way represents
pro forma
presentation of
non-IFRS
figures in our Consolidated Financial Statements.
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Research and development
Research and development expenses are presented in connection with our costConsolidated Statements of Profit and Loss on a net basis, reflecting the reduction activities.

Payrollof gross expenses through application of grants approved, if any. As described, we regularly apply for and receive grants under government programs, in Norway and the United Kingdom, supporting research and development activities.

For the year ended December 31, 2021, Research and development expenses were $2.7 million, reflecting gross expenses of $3.4 million, offset by government grants of $676 thousand. For the year ended December 31, 2020, Research and development expenses were $1.9 million, reflecting gross expenses of $4.2 million, offset by government grants of $2.3 million. For the year ended December 31, 2019, were $21.8 million as compared to $19.8 million for the year ended December 31, 2018, an increase of $2.0 million, or 10%. The increase was primarily due to an increase in the average number of full-time equivalents, or FTE, employees during the year as we added additional development and sales staff. The average number of FTEs was 109 in 2019, up from 99 in 2018. However, as a result of cost reduction activities undertaken in the fourth quarter of 2019, we had 100 FTEs as of December 31, 2019, compared to 104 FTEs at the end of 2018.

Research and Development Expenses

Research and development expenses for the year ended December 31, 2020 were $1.9 million as compared to $4.4 million, for the year ended December 31, 2019, a decreasereflecting gross expenses of $2.5$5.0 million, or 57%. The decline was mainly due to R&Doffset by government grants in the United Kingdom of $1.8 million, which was credited to research and development expenses.

$568 thousand.

Research and development expenses forinclude the year endedcost of individual contractors assigned to engineering roles. As of December 31, 2021, December 31, 2020, and December 31, 2019, compensation for eight, six, and eight individual contractors, respectively, were $4.4 million as compared to $5.6 millionincluded in Research and development expenses.
The sequential reductions in gross expenses reflect a reduced reliance on third-party service providers for outsourced engineering activities. Variances in the year ended December 31, 2018, a decreasevalues of $1.2 million, or 22%. The decline was mainly due togovernment grants approved reflect the shiftingtiming of a portionour applications and when we are notified of outsourced development work to be performed internally.

approvals. During the first quarter of 2020, we filed amended tax returnsclaims in the United Kingdom for the tax years 2017 and 2018 to claim research and development relief grants for these years,applicable to activities in addition to2017, 2018, and 2019. As a result, we received $1.5 million of grant funds in refunds. 2020, which contributed to the significant increase in grant value for that year.

For 2020,2022, we have accrued $0.3 million in R&D relief grants in the UK. In addition, we received afocused our research and development activities on a narrow range of priorities associated with near-term product introduction objectives. We expect gross expenses associated with these activities will be comparable to gross expenses incurred in 2021. Similarly, we expect government grant funding for 2022 will be approximately the same as received in 2021.
Other operating expenses
As described above, expenses in this category consist of costs associated with our marketing and sales activities and costs associated with administrative activities.
Other operating expenses for the year ended December 31, 2021, were $7.3 million, as compared to $5.9 million for the year ended December 31, 2020, an increase of $1.4 million, or 24%. The increase was primarily associated with higher professional services fees associated with the SkatteFunn grant,Company’s listing of ADSs on the Nasdaq during the first quarter of 2021, as well as the expanded scope of regulatory compliance and investor relations. Expanded liability coverage for our Directors and Executive Officers caused insurance costs to rise significantly. Also, increased costs incurred with the renewal of certain enterprise software licenses contributed to the 2021 increase, as well as higher charges from cloud hosting providers.
The expansion of our marketing and sales staff during the second half of 2021 contributed to the increase in Other operating expenses, as the amountcosts of $0.5 million, $0.6 million,individual contractors assigned to such roles are included in marketing and $0.6 million, respectively,sales expenses. The number of individual contractors in marketing and sales roles expanded to nine as of December 31, 2021, up from five at the Norwegian government in eachend of 2020 2019, and 2018. The total grantssix at the end of $2,301 was credited2019. Due to researchthe restrictions associated with the
COVID-19
pandemic, travel and development expenses, see notes 5 and 6 in the consolidated financial statements.

related customer engagement costs remained significantly below
pre-pandemic

levels, partially offsetting these increases.

Other Operating Expenses

Other operating expenses for the year ended December 31, 2020, were $5.9 million, as compared to $4.6 million for the year ended December 31, 2019, an increase of $1.3 million, or 28%. TheThis increase was
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primarily due to higher outside professional servicesservice fees associated with the company’sCompany’s application for Nasdaq listing of ADSs, which began in the second half of the year. Due to the restrictions associated with the onset of the
COVID-19
pandemic, travel and related customer engagement costs were significantly below 2019 levels, partially offsetting these increases.
While we seek to identify opportunities to reduce our use of outside providers of professional services, we rely on the Nasdaqexpertise of such providers given our dual listing of Ordinary Shares and ADSs and the resulting exposure to the complex legal and regulatory requirements of Norway and the United States. If we increase our revenue as we currently anticipate, these expenses should decline as a percentage of revenue, but we do not expect an absolute decline in the first quarter of 2021in the amount of $1.1 million during 2020, as well $0.3 million of additional stock compensation expense during the year compared to 2019.

Other operatingthese expenses for the foreseeable future.

Finance income and Finance cost
As described above, Finance income generally includes interest received on bank balances, the net gain associated with aggregated foreign exchange translation adjustments for the period, and upward revisions, if any, to provisions, reserves, or the recorded fair values of financial assets or liabilities. Finance cost generally includes interest expenses on lease liabilities, interest expenses on VAT obligations, the net loss associated with aggregated foreign exchange translation adjustments for the period, and downward revisions, if any, to provisions, reserves, or the recorded fair values of financial assets or liabilities.
For the year ended December 31, 2019 were $4.6 million as compared to $3.9 million2021, Finance income totaled $11 thousand, consisting primarily of interest income on our bank deposits. Finance cost for the year, totaled ($1.1 million), consisting primarily of the net amount of losses associated with foreign exchange translation adjustments.
In 2020 and 2019, Finance income of $26 thousand and $135 thousand, respectively, consisted primarily of interest income, while Finance cost in those years, ($477 thousand) and ($351 thousand), respectively, were net foreign exchange translation losses.
Income tax expense (benefit)
The provision for income tax presented in the Consolidated Statements of Profit and Loss represents, for the reporting period, the sum of current taxes due and changes in deferred tax. Current taxes due represents the sum of income tax expense (benefit) for each of our taxable entities: IDEX Biometrics ASA (Norway); IDEX Biometrics UK Ltd. (United Kingdom); IDEX Biometrics Holding Company Inc. and IDEX Biometrics America Inc. (United States); and IDEX Electronics (Shanghai) Co., Ltd. (China). Income tax expense (benefit) for each entity is calculated using the income tax rates of the tax jurisdiction in which it operates, net of available tax credits in each jurisdiction, if any.
For the years ended December 31, 2018, an increase of $0.7 million, or 18%. The increase was primarily due to outside professional services associated with2021, 2020, and 2019, the two capital raisesprovision for income tax presented in the firstConsolidated Statements of Profit and fourth quartersLoss was an expense of 2019, as well as certain information technology costs$90 thousand, a benefit of ($99 thousand), and increased operating expenses relating to higher employee headcount.

Taxation

an expense of $160 thousand. During the years ended December 31, 2021, 2020 and 2019, and 2018, the Companyparent company did not payrecord or accruepay income taxes in Norway dueNorway.

Changes in deferred tax represent the periodic reconciliation of differences between financial reporting values and tax reporting values. For further discussion of our deferred tax calculations, see Footnote 6 to continuing net operating losses. In 2020, the company recognizedour Consolidated Financial Statements, which are presented in income $0.1 million in the United Kingdom. The Company paid and accrued $0.2 million and $41,000 in 2019 and 2018, respectively, in the United States and United Kingdom. Due to taxPart III of this Annual Report.
Net loss carryforward in China, we have not paid any corporation income tax in China.

We conduct research and development activities in the United States and, in 2020, claimed research and development tax credits relating to 2017, 2018 and 2019. The tax credit in the United States is used to offset a portion of taxable income.

As of December 31, 2020, we have Norwegian and UK tax net operating loss carryforwards of $219.2 million and $5.3 million, respectively, which do not expire.

Net Loss for the Year

year

Net loss for the years ended December 31, 2020, 2019, and 2018 was $26.8 million, $32.4 million, and $30.2 million, respectively. As of December 31,2021, 2020, and 2019 we have accumulatedwas ($32.6 million), ($26.8 million), and ($32.4 million), respectively.
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On a per share basis for these three years, these losses were ($0.04), ($0.03), and ($0.05) per share, respectively. For the Company, pursuant to IAS 33
Earnings per Share
, these loss per share figures are the same on a basic and fully-diluted basis. Because the Company has recorded a loss, loss per share on a fully-diluted basis excludes any Ordinary Shares issuable upon exercise of $14.7 million and $198.2 million, respectively. $210.3 millionoutstanding subscription rights, as doing so, given the loss, would be anti-dilutive (i.e., reduce loss per share).
For the Company, basic earnings per share is the quotient of the profit or loss for the period divided by the weighted average number of Ordinary Shares outstanding for the period. The weighted average number of Ordinary Shares outstanding during the period is the number of Ordinary Shares outstanding at the beginning of the period, adjusted by the number of Ordinary Shares issued or bought back during the period, multiplied by a time-weighting factor representing the number of days the Ordinary Shares are outstanding as a proportion of the total number of days in the period.
Similarly, for the Company, fully-diluted earnings per share premium has been allocatedis the quotient of the profit or loss for the period divided by the weighted average number of Ordinary Shares outstanding for the period, but, if profit is recorded for the period, the weighted average number of Ordinary Shares also includes the weighted average number of Ordinary Shares that would be issued upon exercise of vested subscription rights at a share price equal to cover accumulated losses, effective December 31, 2020.

the Ordinary Share price for the period. Such weight average of dilutive Ordinary Shares shall be calculated on a time-weighting basis, assuming subscription rights vested at the beginning of the period would be exercised at the beginning of the period or, if vesting occurs after the beginning of the period, assuming exercise of subscription rights would occur on the subsequent vesting date.

B. Liquidity and Capital Resources

Overview

Since our inception, we have incurred significant operating losses and negative cash flows. We anticipate that we will continue to incur operating losses forand consume cash through 2022. However, we believe we have adequate cash to meet our operational requirements through a period of at least 12 months after the foreseeable future. date of this Annual Report.
Because we intend to continue pursuing our strategy and expect rapid revenue growth, we anticipate additional capital may be required to fund such revenue growth (e.g., funding of increased working capital requirements). However, if we do not meet our current performance forecast, we likely will require additional funding to defray future operating losses.
We expect that our revenue for 2022 will be higher than the level we recorded for 2021. We expect shipments of our TrustedBio modules will expand through 2022, based on our backlog and our current forecast for additional orders, production lead times, and shipments. We also expect to sustain shipments of our customized cyber authentication solution, to the customer referenced above, at current levels through 2022.
If we achieve higher revenue, and we maintain current product-level profitability, increased revenue should allow us to absorb expected increases in operating expenses. However, maintaining product-level profitability will depend on our ability to pass along expected increases in the costs to manufacture, assemble, and test our products.
As compensation and related personnel expenses are our largest costs, we anticipate a modest rise in such expenses in 2022, reflecting expected merit-based salary increases, given our expectation of little net change in staffing levels across 2022. Our research and development spending is expected to continue at its current level through 2022, reflecting ongoing technology and otherproduct development, some of which is funded by grants from the governments of Norway and the United Kingdom. Other operating expenses likely will increase in connection with conducting developmentexpanded marketing and marketingsales activities, for our products,given higher staffing levels and expanded initiatives, as
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well as the likelihood of increased travel costs, given reduced restrictions on travel due to the partial abatement of the
COVID-19
pandemic. We also anticipate higher administrative costs, particularly due to the expanded regulatory compliance requirements associated with operating as a foreign private issuer listed on Nasdaq. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity financings, debt financings, research funding, collaborations, contract and grant revenue or other sources. To date, we have financed our operations primarily through the issuancescontinued listing of our equity securities.

Ordinary Shares on the Oslo Børs and our ADSs on Nasdaq.

On November 12, 2021, we completed a private placement of Ordinary Shares, with proceeds of $30.0 million. On February 15, 2021, we completed a private placement of Ordinary Shares, with proceeds of $27.2 million.
As of December 31, 2020,2021, we had cash and cash equivalents of $7.3$33.8 million, representing 43%approximately 80% of the total assets.

In February 2021, we completed an additional private placement with existing and new shareholders and raised $27.2 million.

While we have been successful in raising funds through private placements of shares in the past, there can be no assurance that such actions will be successful in the future.

We have no debt to financial institutions or other lenders. Our ongoing material financing commitments such as linesare limited to the lease agreements we entered into associated with our office and lab facilities.
Cash Flows
Pursuant to IAS 7
Statement of credit or guarantees, that are expected to affectCash Flows
, we present our liquidity overConsolidated Statements of Cash Flow following the next five years, other than our leases.

Cash Flows

indirect method. The following table summarizes the results of our cash flows for the periods presented:

   Year Ended December 31, 
   2020   2019   2018 

Net cash flow used in operating activities

  $(23,294  $(27,168  $(26,775

Net cash flow provided by (used in) investing activities

   (232   (721   (970

Net cash flow provided by financing activities

   17,438    32,989    835 
  

 

 

   

 

 

   

 

 

 

Net change in cash and cash equivalents

  $(6,088  $5,100   $(26,910
  

 

 

   

 

 

   

 

 

 

   
Year Ended December 31,
 
($000s)  
2021
   
2020
   
2019
 
Net cash used in operating activities
  $(27,533  $(23,294  $(27,168
Net cash used in investing activities
   (143   (232   (721
Net cash provided by financing activities
   54,148    17,438    32,989 
  
 
 
   
 
 
   
 
 
 
Net change in cash and cash equivalents
  $26,472   $(6,088  $5,100 
  
 
 
   
 
 
   
 
 
 
Net cash flow used in operating activities

During the year ended December 31, 2020, cash used in2021, operating activities was $23.3 million,consumed cash of ($27.5 million), primarily resulting fromas a consequence of our net loss before tax of $26.9 million less ($32.5 million), partially offset by
non-cash
charges of $4.5$4.6 million included in the net loss andfor the year. We did not have a meaningful change in net cash used in working capital for the year.
Operating activities during 2020 consumed cash of $1.0 million.

During the year ended December 31, 2019, cash used in operating activities was $27.2 million,($23.3 million), primarily resulting fromas a result of our net loss before tax of $32.3($26.9 million) and a net working capital increase of ($1.0 million), partially offset by

non-cash
charges of $5.1 million less included in net loss for the year.
Operating activities during 2019 consumed cash of ($27.2 million), primarily as a result of our net loss before tax of ($32.3 million), partially offset by
non-cash
charges of $4.2 million included in net loss for the year and a net cash provided by working capital decrease of $1.2 million.

During the year ended December 31, 2018, cash used in operating activities was $26.8 million, primarily resulting from our net loss before tax of $30.2 million less non-cash charges of $3.8 million included in net loss, and net cash used for working capital of $0.1 million.

Net cash flow used in investing activities

Net cash flow used in investing activities was $0.2 million for

During the year ended December 31, 2021, investing activities consumed cash of ($143 thousand), reflecting the use of ($141 thousand) for capital expenditures for engineering equipment.
Investing activities during 2020 compared to $0.7 millionconsumed cash of ($232 thousand), reflecting the use of ($152 thousand) for capital expenditures for engineering equipment and the use of ($181 thousand) for the year ended December 31, 2019. This change was primarily due toacquisition of certain patents.
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Investing activities during 2019 consumed cash of ($721 thousand), reflecting the use of ($850 thousand) for capital expenditures for production equipment utilized by a decreasevendor of $0.5 million in purchasescontract manufacturing services, partially offset by the receipt of property, plant and equipment investment in 2020 as compared to 2019.

Net$135 thousand of interest income associated with higher cash flow used in investing activities was $0.7 millionbalances for the year ended December 31, 2019, compared to $1.0 million for the year ended December 31, 2018. This change was primarily due to a decrease of $0.3 million in purchases of property, plant and equipment investment in 2019 as compared to 2018.

period.

Net cash flow provided by financing activities

The decrease in net cash flow provided by financing activities to $17.4 million for

During the year ended December 31, 2021, share issuance generated cash of $54.1 million, which included the proceeds from two private placements of Ordinary Shares, as well as proceeds from share issuances associated with our Employee Share Purchase Program and the exercise of subscription rights, partially offset by reductions of lease liabilities totaling ($844 thousand).
Financing activities during 2020 generated cash of $17.4 million, representing proceeds of $18.0 million from a private placement of Ordinary Shares and proceeds of $731 thousand from share issuances associated with our Employee Share Purchase Program and the exercise of subscription rights, partially offset by reductions of lease liabilities totaling ($793 thousand) and the last payment of ($500 thousand) associated with a vendor-financed purchase of capital equipment.
Financing activities during 2019 generated cash of $33.0 million, forrepresenting the year ended December 31, 2019 was due to the decrease intotal proceeds from share issuances of $15.4 million.

The increase in net cash flow provided by financing activities to $33.0 million for the year ended December 31, 2019 from $0.8 million for the year ended December 31, 2018 was due to increases in share issuances of $33.3$34.2 million, partially offset by net payment on a financed asset purchase andreductions of lease liabilities totaling ($675 thousand) and a payment of $1.2 million.

($500 thousand) associated with the purchase of intangible assets.

Operating and Capital Expenditure Requirements

We have not achieved profitability on an annual basis since our inception, andinception. While we expect our revenue for 2022 will be higher than the level we recorded for 2021, we also expect to incur net losses inand consume cash for the future.year. We expect that our operating expenses will increase as we continue to invest to growspend on the development of new products and expanded product features and the development of new customers in our product pipeline, hire additional employees and increase research and development expenses.

three targeted market segments. Additionally, as a foreign private issuerwe have Ordinary Shares listed on Nasdaq,in Norway and ADSs listed in the United States, we expect we will continue to incur the costs of regulatory compliance.

We do not anticipate an increase in capital expenditures above the level incurred during 2021 and 2020. We also are not planning to acquire intangible assets or have significant additional audit, legal and other expenses.

investment activities for the foreseeable future.

Our future funding requirements will depend on many factors, including but not limited to:

the pace and amount of new production orders placed with us by existing customers and customers with which we have recently secured design wins;
the scope, rate of progress, and costcosts of our expanded marketing and sales activities;
the scope, rate of progress, and costs of our product development activities;
our ability to secure manufacturing capacity and marketing efforts andaddress other related activities;

ongoing supply chain uncertainties;

the cost of manufacturing our products or componentsand our ability to pass on cost increases to our customers;
the cost of developing our products;

software and the timing thereof;

the costs involved in filing and prosecuting patent applications and enforcing and defending potential patent claims;

and

the cost and timing of enhancing sales, marketing and distribution capabilities; and

the costs of retaining existing personnel and hiring additional skilled employeesindividuals to support our continued growth.

We have a history

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Table of losses, limited revenue and negative cash flows from operations. We have been ableContents
For additional information regarding the risks to raise funds through private placements of shares in the past. During 2020,which we raised $18.0 million through private placements. In February 2021, we completed an additional private placement with existing and new shareholders and raised $27.2 million. We have adequate working capital to meet its operating commitments for at least twelve months from the date of this report.

are, or may be, exposed, see “Item 3. Section D. Risk Factors.”

C. Research and Development

For a discussion of our research and development activities and policies, see “Item 4.B-Business Overview”4. Section B. Business Overview,” “Item 5. Section A. Operating Results,” herein, as well as Footnote 3 and “Item 5.A-Operating Results.”

Footnote 5 to our Consolidated Financial Statements, which are presented in Part III of this Annual Report.

D. Trend Information

For a discussion of business trends, see “Item 4.B-Business4. Section B. Business Overview,” “Item 5.A-Operating Results”5. Section A. Operating Results,” and “Item 5.B-Liquidity“Item 5. Section B. Liquidity and Capital Resources.”

E. Off-Balance Sheet Arrangements

DuringCritical Accounting Estimates

The application of certain accounting standards requires considerable judgment based upon estimates and assumptions that may involve high levels of uncertainty at the time the estimates are made. Judgments and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes may deviate from estimates. Changes in assumptions and deviations between estimates and final outcomes may have a material influence on the financial statements in the periods presented, we did not and do not currently have any off-balance sheet arrangements as defined under SEC rules, such as relationships with other entitieswhen assumptions are changed or financial partnerships,when uncertainty is resolved.
As set forth in Footnote 3 to our Consolidated Financial Statements, which are often referred to as structured finance or special purpose entities, established forpresented in Part III of this Annual Report, we consider the purpose of facilitating financing transactions that are not requiredfollowing to be reflectedthe notable accounting items requiring management’s judgement, based on our statementthe use of financial position.

F. Tabular Disclosureestimates and assumptions: the recorded values of Contractual Obligations

The following table summarizes our contractual commitmentsgoodwill, intangible assets, and obligations asinventory; the calculation and recognition of December 31, 2020.

   Payments Due by Period 
   Total   Less than
1 Year
   1 to 3
Years
   4 to 5
Years
   More than
5 Years
 
   (in thousands) 

Lease obligations(1)

  $1,093   $762   $331   $—     $—   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $1,093   $762   $331   $—     $—   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(1)

The lease obligations above are presented as undiscounted amounts, excluding imputed interest.

The commitment amounts inshare-based compensation expenses, and the table above arecalculation and presentation of values associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions,our capitalized leases and the approximate timing of the actions under the contracts. Our lease commitments relate to our office space.

G. Safe Harbor

This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and as defined in the Private Securities Litigation Reform Act of 1995. See “Special Note Regarding Forward-Looking Statements.”

Item 6. Directors, Senior Management and Employees.

A. Directors and Senior Management

associated

right-of-use
assets.
Item 6.
Directors, Senior Management and Employees.
A.
Directors and senior management
The following table sets forth information concerning our executive officersExecutive Officers and directorsDirectors as of December 31, 2020:

2021:

Name

  
Age
   

Position(s)

Executive Officers:

    

Vincent Graziani

   6061   Chief Executive Officer

Derek P. D’Antilio*

James A. Simms
   4862   Chief Financial Officer

Anthony Eaton

   4849   Chief Technology Officer
Catharina Eklof
52Chief Commercial Officer

Board of

Directors:

    

Morten Opstad

68Chair
Lawrence J. Ciaccia
2
63Deputy Chair
Deborah Lee Davis
1,2
58Director
Hanne Høvding
1
   67   ChairDirector

Lawrence John Ciaccia(2)

Annika Olsson
   6245   Deputy ChairDirector

Deborah Lee Davis(1)(2)

57Board member

Hanne Høvding(1)

66Board member

Stephen A. Skaggs(1)

Thomas M. Quindlen
   58   Board memberDirector

Thomas M. Ouindlen

Stephen A. Skaggs
1
   58   Board observerDirector

(1)1.

Member of Audit Committee.

(2)2.

Member of Compensation Committee.

*

Mr. D’Antilio tendered his resignation effective April 23, 2021. On April 21, 2021, we announced the appointment of Mr. James A, Simms as our new Chief Financial Officer, effective April 26, 2021. In the meantime, we have appointed Mr. Erling Svela, our VP of Finance, as interim Chief Financial Officer, effective April 24, 2021.

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Executive officers

Officers

Vincent (“Vince”) Graziani
has served as our Chief Executive Officer (“CEO”) since February 2020. He joined IDEX from Infineon Technologies whereAG, for which he was most recently Vice President of Strategy Development and Implementation, where he was responsiblewith responsibility for leading new business development and strategic partnerships. Mr. Graziani has also led technology companies from the
pre-revenue
stage to significant revenues and scale while serving as CEO of Sand 9, Inc., Vbrick Systems, and Sandburst Inc. These were all early-stage technology companies when he joined them.Sandburst. Earlier in his career, he held positions of increasing responsibility in engineering as well as salesmarketing and marketingsales at Intel, Broadcom, and Siemens Semiconductor. Mr. Graziani holds a Bachelor of ScienceB.S. in Electrical Engineering from Thethe University of New Hampshire and a Masters degreeM.S. in Electrical Engineering from Northeastern University.Mr.University. Mr. Graziani is located at IDEX America Inc.the Company’s offices in Wilmington, Massachusetts.

Derek P. DAntilio

James A. Simms
has served as our Chief Financial Officer (“CFO”) since July 2019. We disclosed on March 31, 2021 that Mr. D’Antilio has tendered his resignation effective April 23, 2021. Prior to joining us, Mr. D’Antilio served as Vice President of Finance and Corporate Controller of MKS Instruments, Inc., a multi-billion Nasdaq-listed global semiconductor equipment supplier, from December 2010 to January 2019. From Decembersince 2008, to December 2010, he served as Assistant ControllerCFO, Treasurer, and DirectorCorporate Secretary of Finance at 3ComVicor Corporation (acquired by Hewlett-Packard). Prior to that,(NASDAQ: VICR), for which he also served as a member of the board of directors. At Vicor, he played a key role in repositioning the company strategically and organizationally. Before 2008, Mr. D’Antilio spent nearly a decade in public accounting and auditSimms worked as an investment banker for over two decades, most recently with BDO Global and PricewaterhouseCoopers LLP. He has held senior finance positions at high-growth US-listed technology companies with responsibility for global accounting and reporting, financial planning, treasury, tax, operations and investor relations.Needham & Company, Inc. Mr. D’Antilio is a certified public accountant and certified management accountant andSimms holds a B.S.B.A in Accounting and EconomicsB.A. from Salem Statethe University of Virginia and an M.B.AM.B.A. from Babson College with Honors. Mr. D’Antiliothe Wharton School of the University of Pennsylvania. He is located at IDEX America Inc.the Company’s offices in Wilmington, Massachusetts.

Anthony Eaton
has served as our Chief Technology Officer since March 2019. Mr. Eaton served as our Vice President of Systems Engineering from February 2017 to February 2019, and our Senior Director of Engineering from August 2016 to January 2017. Before IDEX,Prior to joining us, he served as Director of System Engineering at Atmel, where he was responsible for building and running the System Engineering function for the MaxTouch Business Unit. Prior to this MrEarlier, Mr. Eaton held senior engineering roles at NVIDIA, Mirics Semiconductor and Sony Semiconductor. Mr. Eaton holds a First Class BachelorsBachelor’s and Master’s degreedegrees in Engineering from Cambridge University, England. Mr. EatonUniversity. He is located at IDEX Biometrics UK Ltd.the Company’s offices in Farnborough, UK.

BoardUnited Kingdom.

Catharina Eklof
has served as our Chief Commercial Officer (“CCO”) since June 2021. Prior to joining us, Ms. Eklof held the position as Chief Commercial Officer at Defentry, a cyber safety solutions provider, for which she led marketing and sales, leading the company’s international expansion. Ms. Eklof has over 20 years of Directors

Ourexperience as a global executive leading business transformation across financial services, retail, travel, and information security. Notably, she had roles of increasing responsibility over 12 years with Mastercard. She was instrumental in establishing Mastercard’s global strategic merchant program, bringing digital payment solutions and new, data-driven business models to the organization. Ms. Eklof serves on the board of directors of Avanza Bank Holding AB (Nasdaq Stockholm: AZA). Ms. Eklof holds an M.B.A. in International Business and a M.S. in Economics from the University of Uppsala, Sweden. Ms. Eklof is assigned to our office in Oslo, Norway, but resides in Belgium.

Board of Directors
Our Board held eleveneight meetings during the period from our annual general meetingAnnual General Meeting on May 15, 202012, 2021, until and including April 14, 2021.20, 2022. All meetings have been conducted as virtual meetings via live webcast.

Morten Opstad
has served as chair of our board of directorsBoard Chair since March 1997. Mr. Opstad is a partner in Advokatfirmaet Ræder AS in Oslo, Norway. He has rendered legal assistance with respect to establishing and organizing several technology and innovation companies. He currently serves as chair of the board of Thin Film Electronics ASA.Ensurge Micropower ASA (Oslo Børs: ENSU). Mr. Opstad holds a legal degree (Cand.Jur.) from the University of Oslo. HeOslo and was admitted to the Norwegian Bar Association in 1986. Mr. Opstad was born in 1953, and is a Norwegian citizen, and resides in Oslo. Mr. Opstad attended all of the boardBoard meetings in the period.

Lawrence John (Larry)J. Ciaccia
has served as a member of our board of directorsDirector since May 2015 and was appointed as Deputy Chair of our board of directors in May of 2019. He has broad expertise from the semiconductor industry. Mr. Ciaccia playedindustry, most notably playing a pivotal role in transforming AuthenTec from a
start-up
into the world’s leading fingerprint sensor supplier, servingsupplier. He served as
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AuthenTec’s CEO from September 2010 and instrumental inuntil the company’s acquisition of AuthenTec by Apple in October 2012. He remained with Apple through February 2013 to assist in the acquisition integration and transition. Mr. Ciaccia holds a Bachelor of Science inB.S.in Electrical Engineering from Clarkson University and an M.B.A. from the Florida Institute of Technology. Mr. Ciaccia was born in 1958, is a USUnited States citizen, and resides in Florida. Mr. Ciaccia attended all of the boardseven Board meetings in the period.

Deborah Lee (Deborah) Davis
has served as a member of our board of directorsDirector since May 2015. She is independent of the company’sCompany’s executive management, material business contacts, and the company’s larger shareholders. Ms. Davis holds non-executive director positions atserves on the Boardsboards of directors of International Personal Finance Plc, The Institute of Directors, and Diaceutics plc, in the UK and isLloyds Banking Group Insurance Board. She also serves as a trustee of the Southern African Conservation Trust in South Africa. Prior to this,During her career, she held senior executive leadership roles at PayPal, eBay, Verizon, and Symantec. Ms. Davis holds a Diploma in Company Direction with distinction from IoD, a Sloan Masters in Science (Management) with Distinction from London Business School and a Bachelor of Applied Science (Electronics) Honours degree from the University of Melbourne. She also holds a Diploma in Company Direction with distinction from The Institute of Directors. Ms. Davis was born in 1963, and is a dual citizen of the UK and Australia and splits her time across UK, Africa and the Far East.United Kingdom. Ms. Davis attended ten of the boardall Board meetings in the period.

Hanne Høvding
has served as a member of our board of directorsDirector since December 2007. She is independent of the company’sCompany’s executive management, material business contacts, and the company’s larger shareholders. During her professional career, Ms. Høvding hasheld several management positions within personnel administration, finance, credit card administration, and debt collection. She holds a Bachelor’s DegreeB.S. in Economics and Business Administration from the Norwegian School of Economics and Business Administration. In her professional career Ms. Høvding has held several management positions within personnel administration, finance, credit card administration and debt collection. Ms. Høvding was born in 1954. She1954, is a Norwegian citizen, and resides in Oslo. Ms. Høvding attended all of the boardBoard meetings in the period.

Stephen A. (Steve) Skaggs has served

Annika Olsson
was elected as a member of our board of directors sinceDirector in May 2019. He2021. She is independent of the company’sCompany’s executive management, material business contacts, and the company’s larger shareholders. He currentlyMs. Olsson is the CEO of Express Bank A/S, a unit of the BNP Paribas Group. During her
20-year
career in consumer financial services, Ms. Olsson has held various executive positions. Before joining Express Bank A/S in 2010, she served as Commercial Director for Resurs Bank, a leader in retail finance in the Nordic region. Ms. Olsson also serves as a non-executive director and audit committee chairon the board of Coherent, Inc., a leading global manufacturerdirectors of lasers. Mr Skaggs has more than 25 yearsFinans & Leasing (the Association of experience in the semiconductor industry, including serving as President, CEO and CFO of Lattice Semiconductor, a supplier of programmable logic devices and related software. Mr Skaggs most recently served as Senior Vice President and CFO of Atmel Corporation, a leading supplier of microcontrollers, prior to its acquisition by Microchip Technology Incorporated in early 2016. Early in his career, he worked for Bain & Company, a global management consulting firm. Mr. SkaggsDanish Finance Houses). She holds an M.B.A. degree from the Harvard Business School and a B.S. degree in Chemical Engineeringfinance and marketing from the University of California, Berkeley. Mr. SkaggsIHM Business School. Ms. Olsson was born in 1962,1976, is a United StatesSwedish citizen, and works and resides in Oregon. Mr. SkaggsCopenhagen, Denmark. After her election as a Director, Ms. Olsson attended ten of the boardall Board meetings in the period.

Thomas M. Quindlen has attended
was elected as a Director in May 2021. From October 2020 until his election, he attended Board meetings as a
non-voting observer
observer. He is independent of our board of directors since October 2020.the Company’s executive management, material business contacts, and larger shareholders. Mr. Quindlen has worked in the Financial Services industryfinancial services for 30 yearsthree decades and is now the CEO and EVP of Retail Card, a division of Synchrony, a Fortune 200 company. Formerly,Earlier in his career, Mr. Quindlen heldserved in several leadership roles infor GE Capital, the financial services subsidiary of the General Electric Company. Mr. Quindlen holds a bachelor’sB.S. in accounting degree from Villanova University. Mr. Quindlen was born in 1962, is a United States citizen, and worksresides in Connecticut. After his election as a Director, Mr. Quindlen attended all Board meetings in the period.
Stephen A. Skaggs
has served as a Director since May 2019. He is independent of the Company’s executive management, material business contacts, and larger shareholders. Mr. Skaggs has more than 25 years of experience in the semiconductor industry and most recently served as Senior Vice President and CFO of Atmel, a leading supplier of microcontrollers, prior to its acquisition by Microchip Technology in 2016. Mr. Skaggs served as CEO and, earlier, as CFO of Lattice Semiconductor, a supplier of programmable logic devices and related software. Earlier in his career, he worked for Bain & Company, a global management consulting firm. He currently serves as a
non-executive
director and audit committee chair of Coherent, a leading supplier of laser technologies. Mr. Skaggs holds a B.S. in Chemical Engineering from the University of California, Berkeley, and an M.B.A. from the Harvard Business School. Mr. Skaggs was born in 1962, is a United States citizen, and resides in Connecticut.

Nevada. Mr. Skaggs attended all Board meetings in the period.

77

Family ArrangementsRelationships and Selection Arrangements

There are no family relationships between any of the directors.Directors. There are no family relationships between any directorDirector and any member of the senior management of our Company. There is no arrangement or understanding with major shareholders, customers, suppliers, or others, pursuant to which members of the boardDirectors were elected or members of management was selected.

Board Diversity Matrix
Under the Board Diversity Rule of Nasdaq, we are required to publicly disclose statistics describing the diversity of our Board. Our philosophy regarding candidates for the Board is to identify, nominate, and elect the most qualified individuals available to us, regardless of race, creed, sexual orientation, nationality, ethnicity, language, or religion.
The following table sets forth a profile of the composition of our seven-member Board as of December 31, 2021:
Board Diversity Matrix
  
Female
   
Male
 
Part I: Gender Identity
  
Directors:
   3    4 
Part II: Demographic Background
  
Norway Citizen
   1    1 
Swedish Citizen
   1   
United Kingdom Citizen
1
   1   
United States Citizen
     3 
Ethnicity: White
   2    4 
Ethnicity: Underrepresented Individual in Home Country Jurisdiction
2
   1   
1.
This Director holds dual citizenship in Australia and the United Kingdom.
2.
Pursuant to Nasdaq instructions, under representation is based definitions of “national, racial, ethnic, indigenous, cultural, religious, or linguistic identity” in the country of the Company’s principal executive offices (i.e., Norway).
B. Compensation

Compensation of Directors and Executive Officers and Directors

For the year ended December 31, 2020,2021, the aggregate compensation accrued or paid to the members of our board of directorsDirectors and our executive officersExecutive Officers for services in all capacities was $3.1$2.3 million.

Executive Officer Compensation

Guidelines for Compensation of Executive Officers

Our compensation of officers

Compensation for all employees includes a basic salary and other standard benefits. Performance-basedCertain salaried employees, including our Executive Officers, are eligible for performance-based cash bonuspayments and incentivemerit-based awards of subscription rights may supplement the salary. Cash bonusrights. Amounts payable under annual performance-based plans are limited to fixed amounts or fixed percentagepercentages of base salary. The highest bonus plan for any officer is currentlyFor our CEO, the performance-based payments are limited to a maximum of 40 percent70% of base salary, and bonus planwhile the limit for our Chiefsuch payments for other Executive OfficerOfficers is currently limited to a maximum of 70 percent of base salary. All components of the compensation of our officers, whether fixed or variable, shall reflect the responsibility and performance of such officer from time to time.

40%.

The base salary of our officersExecutive Officers is evaluated annually, and our bonus plan cycle is from January 1 to December 31.performance-based, variable compensation plans are established each year, in effect for the calendar year. Executive Officers are enrolled in the same benefit and pension and other benefit schemes thatprograms we offer to other

employees, to the extent available in their home country. country of domicile.

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The board of directorsBoard has the authority to determine the salary, maximum bonusvariable compensation under performance-based plans, and other compensation for the Chief Executive Officer. Our Chief Executive OfficerCEO, who, in turn, determines the salary and other compensation offor all other employees,staff, within the applicable framework set by our board.Board. All share-based compensation programs must be authorized by the shareholders inat a general meeting. We do not provide any post-employment compensation beyond conventional notice periods of 3three to 6six months, or such shorter notice period as applicable.

We have not made any advance payments or issued loans to, or guarantees in favor of, any members of the management.

Executive Officer.

Share-Based Compensation of Officers

All share-based compensation programs must be authorized by the shareholders in a general meetingmeeting. We have in place a subscription rights incentive program, which is renewed on an annual basis, whereby independent subscription rights are issuedgranted to employees, including our executive officers,Executive Officers, and to eligible individual contractors performing similar work.contractors. Under the Companies Act, such subscription rights have a maximum duration of five years from the date of the general meeting of shareholders approvingat which the program.program was approved. To enable a four-year vesting schedule, we renew our subscription rights incentive plans each year at the annual general meetings,Annual General Meeting, whereby the preceding plan is closed for new grants when the new plan takes effect. The maximum number of Ordinary Shares underlying subscription rights that may be issued under each annual plan, and all plans collectively, may not exceed 10% of our company’sthe Company’s share capital.

At our annual general meetingAnnual General Meeting held on May 15, 2020,12, 2021, our shareholders adopted the 20202021 Subscription Rights Incentive Plan, or the 20202021 Plan. As a result, each of our previous incentive plans adopted in 2016, 2017, 2018, 2019, and 20192020 ceased to be available for future issuance as of such date.

As of our Annual General Meeting held on May 15, 2020, we had 31,890,450 subscription rights outstanding under the 2016 Plan, 2017 Plan and 2018 Plan, at a weighted average exercise price of NOK 5.40 per share. As the trading price of our sharesOrdinary Shares on the Oslo Børs had been significantly lower than thesuch exercise prices of subscription rights issued under the 2016, 2017, and 2018 incentive plans,price, these subscription rights had no intrinsic value and represented no actualwere not contributing to the incentive for our employees.and retention goals in support of which those subscription rights were granted. Therefore, at our 2020 annual general meeting,the Annual General Meeting, it was also resolved that we may offer employees, including our executive officers,Executive Officers, and eligible individual contractors who hold existingheld subscription rights granted under such previous plans,the 2016 Plan, 2017 Plan, and 2018 Plan an optionopportunity to surrender and cancel theirthose existing subscription rights granted under such previous plans in exchange for a right to receive new subscription rights under the 2020 Plan. On October 2,June 17, 2020, our board of directorsthe Board resolved to replace subscription rights to purchase an aggregate of 25,962,800 ordinary shares, all of which were granted pursuant to our previous plans adopted in 2016, 2017 and 2018,authorize this offer, with new subscription rights granted pursuant to the 2020 Plan, on a one-to-one basis, effective June 17, 2020. The new subscription rights havehaving an exercise price of NOK 1.71 per share. One-thirdshare and a three-year vesting schedule. Following the offer to eligible holders and upon receipt of suchsurrender notices from those holders, the Board resolved on October 2, 2020, to award new subscription rights under the 2020 Plan, representing an aggregate of 25,962,800 Ordinary Shares, in exchange, on a
one-for-one
basis, for subscription rights granted pursuant to subscription rights awarded under the 2016 Plan, 2017 Plan and 2018 Plan. All these replacement subscription rights will vest each year, beginning on April 15, 2021. All of such replacement subscription rights will expire on May 15, 2025.

We periodically grant subscription rights to employees and consultants to enable them to share in our successes and to reinforce a corporate culture that aligns their interests with that of our shareholders.

As of December 31, 2020,2021, subscription rights to purchase 56,344,093 ordinary shares71,756,399 Ordinary Shares were outstanding.

In 2020, we established a 2020adopted an Employee Share Purchase Plan or the ESPP,(the “ESPP”), to secure the services of new employees, to retain the services of existing employees, and to provide incentives for such individualsparticipants to exert maximum efforts toward our success and that of our affiliates.success. Our employees, including executive officers,Executive Officers, are eligible to participate in such plan.the ESPP. See “—Equity Incentive Plans” below.

Executive Officer Compensation for the Year Ended December 31, 2020

2021

During the year ended December 31, 2020,2021, our executive officers hadExecutive Officers were paid salaries and payments pursuant to performance-based incentive compensation programsplans, which were subject to current income taxes in the countries in which the Executive Officers were domiciled. The Company also provided healthcare and amounts paidrelated employee
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benefits, and, in one country, pension contributions, to provide pension and healthcare benefits. Executive Officers who are employees of the Company. Individual contractors serving as Executive Officers do not participate in the Company’s benefit plans.
The compensation of our Chief Executive Officer was proposed by the compensation committeeCompensation Committee and determined by our board of directors.

the Board.

During the year ended December 31, 2020,2021, subscription rights to purchase 6,125,000 ordinary shares6,418,100 Ordinary Shares were awarded to our current executive officers.Executive Officers. None of our executive officersExecutive Officers exercised any subscription rights during the year ended December 31, 2020.

2021.

Beginning in March 2020, due to uncertainty surrounding
COVID-19,
the executive officersbase salaries of the Company took a temporaryExecutive Officers at the time were reduced by 30% reduction in base salary.. Salaries were restored to their normal ratesearlier levels in June 2020.

The following table sets forth the compensation paid to our executive officersExecutive Officers during the year ended December 31, 2020:

In thousands ($)  Salary   Cash
Bonus Paid
   Other
Benefits
   Pension
Contribution
   Share-Based
compensation(1)
   Total 

Vincent Graziani(2)
Chief Executive Officer

   312    —      23    —      120    455 

Derek P. D’Antilio(3)
Chief Financial Officer

   279    18    25    —      84    406 

Anthony Eaton
Chief Technology Officer

   220    24    1    13    132    390 

Stanley A. Swearingen(4)
Executive Vice President of Advanced Technology and Strategy

   227    92    23    —      677    1,019 

Total

   1,038    134    72    12    1,013    2,270 

2021:
($000s)  
Salary
   
Cash
Bonus Paid
   
Other
Benefits
   
Pension
Contributions
   
Share-Based
Compensation 
1
  
Total
 
Vincent Graziani
2

Chief Executive Officer
  $400   $44  $25    —     $126  $595 
James A. Simms
3

Chief Financial Officer
   211    —      20    —      180   411 
Derek P. D’Antilio
4

Chief Financial Officer
   100    56    10    —      (25  141 
Anthony Eaton
Chief Technology Officer
   254    22    3    15    60   354 
Catharina Eklof
5

Chief Commercial Officer
   259    76    —      —      108   442 
Total
  $1,224   $198   $58   $15   $449  $1,944 
(1)

The amount represents the amortized cost in the year, underpursuant to IFRS 2 share-based payments,
Share-based Payments
, for incentive subscription rights, as well as the cost of our ESPP. The amortized cost of subscription rights is based on an upfront optiona calculations of grant value calculation and does not represent any gain fromat the subscription rights. Gain, if any, is reported separately in the yeartime of exercise.

grant.
(2)

Mr. Graziani has served as our Chief Executive Officer since February 27, 2020.

(3)

Mr. Simms was appointed as our Chief Financial Officer effective April 26, 2021.
Mr. D’Antilio tendered his resignation effective April 23, 2021.

(4)

Mr. Swearingen served

Ms. Eklof was appointed as our Chief ExecutiveCommercial Officer until February 27, 2020, following which he ceased to beeffective June 1, 2021. As she resides in Belgium, Ms. Eklof serves the Company as an executive officer, but continued to serve as our Executive Vice President of Advanced Technology and Strategy. The amounts are the full year compensation amounts.

individual contractor.

The following table sets forth the number subscription rights granted to our executive officersExecutive Officers during the year ended December 31, 2020:

   Grant date   Number of
subscription
rights
   Exercise price
NOK per
share
 

Vincent Graziani(1)
Chief Executive Officer

   February 26, 2020    5,000,000    1.11 

Derek P. D’Antilio(2)
Chief Financial Officer

   —      —      —   

Anthony Eaton(3)(5)
Chief Technology Officer

   June 17, 2020    1,125,000    1.71 

Stanley A. Swearingen(4)(5)
Executive Vice President of Advanced Technology and Strategy

   June 17, 2020    6,815,000    1.71 

2021:
   
Grant Date
   
Number of
Subscription
Rights
   
Exercise Price
NOK per
Share
 
Vincent Graziani
1

Chief Executive Officer
   August 11, 2021    1,210,400    2.40 
James A. Simms
2

Chief Financial Officer
   
April 20, 2021
August 11, 2021
 
 
   
2,750,000
247,400
 
 
   
2.71
2.40
 
 
Anthony Eaton
3

Chief Technology Officer
   August 11, 2021    210,300    2.40 
Catharina Eklof
4

Chief Commercial Officer
   June 3, 2021    2,000,000    2.38 
(1)

Mr. Graziani has served as our Chief Executive Officer since February 27, 2020. The board granted subscription rights to purchase 5,000,000 shares on such date in connection with Mr. Graziani’s appointment.

As of December 31, 2020,2021, Mr. Graziani held subscription rights to purchase an aggregate of 5,000,000 shares.

6,210,400 Ordinary Shares.

(2)

The Board granted subscription rights to purchase 2,750,000 Ordinary Shares at the time of Mr. Simms’ appointment as CFO. As of December 31, 2020,2021, Mr. D’AntilioSimms held subscription rights to purchase an aggregate of 2,000,000 shares. Mr. D’Antilio tendered his resignation effective April 23, 2021.

2,997,400 Ordinary Shares.
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(3)

As of December 31, 2020,2021, Mr. Eaton held subscription rights to purchase an aggregate of 1,452,800 shares.

1,663,100 Ordinary Shares.
(4)

Mr. Swearingen served as our Chief Executive Officer until February 27, 2020, following which he ceased to be an executive officer, but continued to serve as our Executive Vice President of Advanced Technology and Strategy.

(5)

This grant on June 17, 2020, was made against cancellation of a corresponding number of

The Board granted subscription rights granted duringto purchase 2,00,000 Ordinary Shares at the period from 2016time of Ms. Eklof’ appointment as CCO. As of December 31, 2021, Ms. Eklof held subscription rights to 2018.

purchase an aggregate of 2,000,000 Ordinary Shares.

Our Executive Officers may also participate in our ESPP, on the same terms as other participants in their respective countries of domicile. In, 2021, Messrs. Graziani and Eaton purchased 40,474 Ordinary Shares and 12,392 Ordinary Shares, respectively, through their participation in the ESPP.
As of December 31, 2020,2021, the aggregate number of outstanding subscription rights to purchase ordinaryOrdinary shares held by our then-current officers, including their close associates, was 8,452,800,12,870,900, representing 1.02%1.27% of our share capital.

The grants set forth in the table above were made under our 2020 and 2019 subscription rights incentive plans as resolved at the annual general meetings on May 15, 2020 and May 9, 2019, respectively. Unless specifically resolved otherwise, 25% of the subscription rights vest each year. The grants effective June 17, 2020 vest by 1/3 each year. The subscription rights expire on May 15, 2025 and May 9, 2024.

At our annual general meeting held on May 15, 2020, it was resolved that, subject to offer from the Company, our employees may elect to receive part of their compensation in the form of ordinary shares in lieu of cash. If so elected, the employee may purchase our ordinary share at a 15% discount. On July 1, 2020, 59 employees received an aggregate of 4,318,523 shares in lieu of cash incentive compensation of $0.6 million. The shares are subject to a 6-month lock-up period. Messrs. D’Antilio, Eaton and Swearingen acquired 136,479 shares, 181,041 shares and 718,464 shares, respectively, through this program.

Our executive officers may also participate in the ESPP, on the same terms as all other employees in their home country. On December 1, 2020, Messrs. Graziani, D’Antilio, Eaton and Swearingen acquired 125,239 shares, 70,447 shares, 38,534 shares and 31,112 shares, respectively, through the ESPP.

Director Compensation

Our chair and members of our board of directorsDirectors receive board compensation in arrears, as determined annually at the annual general meeting.Annual General Meeting. At our 2020 annual general meeting of shareholders2021 Annual General Meeting, held on May 15, 2020,12, 2021, it was resolved that the annual board compensation is $34,090 per board memberfor each Director would be $50,000 for the period from the date of the 2019 annual general meeting until the date of the 2020 annual general meeting. Thenext year. Mr. Opstad, Board chair, of our board receivedreceives an additional amount of $8,522.$10,000 for his service. Each of the compensationCompensation Committee members receives an additional $10,000 for their service on the committee, members received $6,818 in addition to the board compensation and the committee chair of the compensation committee receivedreceives a further supplement of $1,704.$5,000. Each of the Audit Committee members receives an additional $3,000 for their service on the committee, and the committee chair receives a further supplement of $7,000. Director compensation for the period from the date of our 2020 annual general meeting2022 Annual General Meeting through the date of our 2021 annual general meeting2023 Annual General Meeting will be determined at that 2022 meeting.
The following table sets forth the compensation paid to our Directors during the year ended December 31, 2021, for service as Directors and on committees of the Board:
($000s)  
Cash
Compensation
   
Share-based
Compensation
   
Total
 
Morten Opstad
  $59   $—    $59 
Lawrence J. Ciaccia
   28    33    61 
Deborah Lee Davis
   67    —      67 
Hanne Høvding
   52    —      52 
Annika Olsson
   —      —      —   
Thomas M. Quindlen
   2    32    34 
Stephen A. Skaggs
   4    58    62 
Total
  $212   $123   $335 
At our 2021 meeting.

Members of our board of directors had an optionAnnual General Meeting, held on May 12, 2021, it was resolved to allow Directors to elect to receive all or part of their respective boardBoard compensation in the form of sharesOrdinary Shares. During 2021, Directors elected to receive Ordinary Shares as in our company.Thethe following compensation was paid in shares:

Ms. Davisamounts. Shares were acquired 227,073 shares with a purchase priceat their par value of NOK 0.15 per share,0.15:

Mr. Ciaccia acquired 143,458 Ordinary Shares, in lieu of $27,345$33 thousand of herhis total boardBoard compensation. Ms. DavisMr. Ciaccia received the remainder of $9,278$28 thousand due in cash;
Mr. Quindlen acquired 138,981 Ordinary Shares, in lieu of $32 thousand of his total board compensation. Mr. Quindlen received the remainder of $2 thousand due in cash; and

Mr. Skaggs acquired 214,909 shares with a purchase price of NOK 0.15 per share,253,144 Ordinary Shares, in lieu of $25,880$58 thousand of his total board compensation. Mr. Skaggs received the remainder of $3,418$4 thousand due in cash.

The following table sets forth the compensation paid to our directors during the year ended December 31, 2020 for service on our board of directors:

Name

  Cash
Compensation
   Share-based
compensation
   Total 
In thousand            

Board Members:

      

Morten Opstad

  $40   $—     $40 

Lawrence John Ciaccia

   38    —      38 

Deborah Lee Davis

   10    36    46 

Hanne Høvding

   32    —      32 

Stephen A. Skaggs

   4    34    38 

Board Observer:

      

Thomas M. Quindlen(1)

   —      —      —   

(1)

Mr. Quindlen has served as a non-voting observer of our board of directors since October 2020.

Our board of directorsDirectors do not participate in any performance-related incentive schemes, nor do they receive any benefits in connection with their board services other than reimbursement ofservices. Directors are reimbursed for travel costs for attendance at meetingsBoard meetings.
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Contents

Share-Based Compensation of Directors

Our 2020 annual general meeting held on May 15, 2020. approved an option to the board members to take their compensation in connection with board services in full or in part in shares, as described above.

We do not grant subscription rights to members of our board of directorsDirectors, in their capacity as directorssuch, pursuant to our subscription rights incentive plans, which practice is in line with the recommendations in the Code of Practice.We haveplans. However, we granted Mr. Ciaccia subscription rights to purchase 600,000 ordinary sharesOrdinary Shares as compensation for certain consulting and advisory services he provided to us.us, outside of his responsibilities as a Director. See “Item 7. Major Shareholders andSection B. Related Party Transactions—Arrangements with Our Board of Directors.” Pursuant to the Board resolution by our board of directors adopted on October 2, 2020, described above, Mr. Ciaccia exchanged his subscription rights to purchase the 600,000 ordinary sharesOrdinary Shares in full for new subscription rights under the 2020 Plan. For clarity, said subscription rights were granted to Mr. Ciaccia in his capacity as an adviser to our company and not as a board member.

Equity Incentive Plans

2020

2021 Subscription Rights Incentive Plan

At our annual general meetingAnnual General Meeting held on May 15, 2020,12, 2021, our shareholders adopted the 20202021 Subscription Rights Incentive Plan or the 2020 Plan,(the “2021 Plan”), to enable our companyCompany to offer employees (including any officers) and individual contractors (including any directors, consultants and advisors) equity interests in our company,the Company, thereby helping to attract, retain, and motivate such persons to exercisestaff members and align their best efforts on behalfinterests with those of our company.shareholders. In the past, we have adopted an annual subscription rights incentive plan in each of 2016, or the 2016 Plan, 2017, or the 2017 Plan, 2018, or the 2018 Plan, 2019, or the 2019 Plan, and 2019,2020, or the 2020 Plan, or collectively, the Previous“Previous Plans. Each of these previous incentive plansPrevious Plans ceased to be available for future issuance immediately prior to the time thatat which the next annual planyear’s Subscription Rights Plan became effective.

Our 20202021 Plan provides for the grant of awards of share options (also known as “subscription rights” in Norway),subscription rights, including subscription rights characterized as: (i) incentive sharestock options, within the meaning of Section 422 of the U.S. Internal Revenue Code of 1986, as amended, or the Code,IRC; (ii) nonstatutory sharenonqualified stock options and(i.e., subscription rights not considered incentive stock options); (iii) independent subscription rights within the meaning of
Section 11-12
of the Public Limited Companies Act of the Kingdom of Norway dated June 13, 1997, as amended or the PLCA,(the “PLCA”); or, if permitted by applicable law and our shareholders, (iv) any other

appreciation-based incentiveinstrument as may be designated by our board of directors. Board.

The maximum number of sharesOrdinary Shares that may be issued under the 20202021 Plan may not exceed 71,798,873 shares; 91,672,048; provided, however,, that the maximum number of sharesOrdinary Shares that may be outstanding under all the plans2021 Plan and Previous Plans may not exceed 10 %10% of the total authorized number of shares of our companyOrdinary Shares at any given time. As of December 31, 2020,2021, subscription rights to purchase 56,344,093 shares,71,756,399 Ordinary Shares, at exercise prices ranging from NOK 0.15 to NOK 8.42 per share, or a weighted average exercise price of NOK 1.661.84 per share, were outstanding under all subscription rights incentive plans, including the 20202021 Plan and the Previous Plans.

The subscription rights granted under our 20202021 Plan generally vest over a four-year period and may be subject to acceleration of vesting and exercisability under certain termination and change of control events. The subscription rights generally vest 25% each year, beginning one year after the vesting commencement date, being the latest of the following dates preceding a grant: (i) January 15, (ii) April 15, (iii) July 15 or (iv) October 15. Our Board may determine an accelerated vesting schedule, if deemed appropriate.
In casethe event the subscription right holder resigns or is terminated, without cause, he or she will be entitled to exercise, within 90 days after end of employment or service, the subscription rights that were vested at the end of the employment or service notice period. Our board of directors may determine an accelerated vesting schedule, if deemed appropriate. The 25% per year vesting is chosen as it balancesIn the short-term incentives and the long-term attractiveness. In caseevent the subscription right holder is terminated for cause, all
non-exercised
subscription rights will be cancelled. The subscription rights are
non-assignable
other than by will or by the laws of descent and distribution. The terms and conditions for vesting and exercise of subscription rights under the Previous Plans are substantially the same as the terms and conditions under the 20202021 Plan.

Upon vesting, each subscription right entitles the holder to demand the issuance of one share in our company.Ordinary Share. As consideration for the sharesOrdinary Shares to be issued upon exercise of the subscription rights issued under the 20202021 Plan, the holder of such subscription rights shall pay to us a price per share (i.e., the exercise price), which at least shall equalbe the greater of (i) the average quoted closing price of our shares,Ordinary Shares, as traded on Oslo Børs, over a
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period of 10 (ten) trading days immediately preceding the date of grant of such subscription rights, andor (ii) the quoted closing price of our shares,Ordinary Shares, as traded on Oslo Børs, on the trading day immediately preceding the date of grant of such subscription rights. Under certain circumstances, the price per share of such subscription rights may be lower than stated above, as long as it is not less than the par value per share of our shares at any given time. The maximum number of shares that may be issued with a lower price per share shall not exceed 7,179,887 shares.
The subscription rights under the 20202021 Plan will expire five years after the resolution by our 2020 annual general meeting2021 Annual General Meeting resolving the 20202021 Plan.

As of our annual general meeting held on May 15, 2020, we had 31,890,450 subscription rights outstanding under the 2016 Plan, 2017 Plan and 2018 Plan, at a weighted average exercise price of NOK 5.40 per share. As the trading price of our shares on Oslo Børs had been significantly lower than such exercise price, these subscription rights had no intrinsic value and represented no actual incentive for our employees. Therefore, at our 2020 annual general meeting, it was resolved that we may offer employees and individual contractors who hold existing subscription rights under the 2016 Plan, 2017 Plan and 2018 Plan an option to surrender and cancel their existing subscription rights granted under such previous plans in exchange for a right to receive new subscription rights under the 2020 Plan. Holders of existing subscription rights pursuant to the previous plans that have an exercise price higher than the fair market value of our shares as of the date of exchange were eligible for the exchange program. At our 2020 annual general meeting, it was further resolved that such exchanged subscription rights shall have a three-year vesting period. One-third of such subscription rights will vest each year, beginning on April 15, 2021. As consideration for the shares to be issued upon exercise of such exchanged subscription rights, the holders of such subscription rights shall pay to us an exercise price of NOK 1.71 per share, which was the closing price of our shares on Oslo Børs on May 11, 2020, the date on which we issued additional shares to existing and new investors through a private placement. Other than the foregoing, the terms and conditions of the 2020 Plan apply correspondingly to these exchanged subscription rights.

On October 2, 2020, our board of directors adopted a resolution to replace subscription rights to purchase an aggregate of 25,962,800 ordinary shares, all of which were granted pursuant to the 2016 Plan, 2017 Plan and

2018 Plan, with new subscription rights under the 2020 Plan, on a one-to-one basis, effective June 17, 2020. The number of outstanding subscription rights remained unchanged following such exchange. As discussed above, such new subscription rights under the 2020 Plan shall have an exercise price of NOK 1.71 per share. One-third of such replacement subscription rights will vest each year, beginning on April 15, 2021. All of such replacement subscription rights will expire on May 15, 2025.

2020

2021 Employee Share Purchase Plan

The 2021 ESPP was adopted at our annual general meeting heldAnnual General Meeting on May 15, 2020.12, 2021. The purpose of theour ESPP is to secure the services of new employees,provide a voluntary, convenient, and cost-effective way for employee participants to retain the services of existing employees, and to provide incentives for such individuals to exert maximum efforts toward our success and that of our affiliates.become shareholders. Our ESPP has three components: (i) a U.S. component intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the CodeIRC for U.S. employees who are taxpayers in the United States; (ii) a UK component applicable to UK employees who are taxpayers in the United Kingdom; and (iii) a general component applicable to all employees outside the United States and United Kingdom. TheUnder the 2021 ESPP, authorizes the issuanceas of 32,670,706 shares of our share capital under purchase rights granted to our employees or to employees of any of our designated affiliates,December 31, 2021, 45,836,090 new Ordinary Shares can be issued, representing 5% of ourthe authorized share capital of the Company at the time of our 2020 annual general meeting. As of December 31, 2020, 34,371,519 shares of our share capital remain available for future issuance under the ESPP.

ESPP was adopted.

The ESPP is structured around four using two
six-month
contribution periods a year, each starting on the first day of the calendar month following each planned disclosure of a quarterly report of the company,March-August and lasts for the following three months (i.e. March-May, June-August, September-November, and December-February).September-February. During each contribution period, a fixed amount (up to 20% of the employee’s gross base salary) is withdrawn from the employee’s salary. The employee may sign upelect to participate in the ESPP from the date of a public disclosure of a quarterly report until the beginning of the contribution period. Unless the employee explicitly withdraws from the ESPP, the employee’s participation in the plan is automatically renewed for the same amount for subsequent contribution periods. The subscription price per share is equal to the lowestlower of 85% of i) the closing price of our shares,Ordinary Shares, as traded on Oslo Børs, on the first day of the contribution period, and ii) the closing price of our shares,Ordinary Shares, as traded on Oslo Børs, on the last trading day of the contribution period. Payment ofOrdinary Shares purchased through the subscription amount is made by withdrawals from the amount withdrawn from the employees’ salary. The shares will beESPP are issued after the end of each contribution period.

Limitations on Liability and Indemnification Matters

To the extent permitted by the Companies Act, we are empowered by the general meeting of shareholders to indemnify our directorsDirectors against any liability to third parties that they incur by reason of their directorship.service as Directors. We maintain directors’ and officers’ insurance to insure such persons against certain liabilities. We entered into an indemnity agreement with each of our directorsDirectors and executive officersExecutive Officers in connection with the listing of our ADSs on Nasdaq. Insofar as indemnification of liabilities arising under the Securities Act may be permitted to our board, executive officersBoard, Executive Officers or persons controlling us pursuant to the foregoing provisions, we have been informed by outside legal counsel that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

C. Board Practices

C.
Board Practices
Composition of our Board of Directors

Our board of directorsBoard currently is currently composed of fiveseven members, all of whom are
non-executive directors.
Directors. As a foreign private issuer, under the listing requirements and rules of Nasdaq, we are not required to have a majority of our Board made up of independent directors on our board of directors,Directors, except that our audit committeeAudit Committee is required to consist fully of independent directors, subject to certain phase-in schedules.Directors. Nevertheless, our board of directorsBoard has undertaken a review of the independence of the directorsDirectors and considered whether any directorDirector has a material relationship

with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based upon information requested from, and provided by, each directorDirector concerning such director’sDirector’s background, employment, and affiliations, including family relationships, our board of directorsBoard has determined that allfive of our directors, except for Mr. Opstad,seven Directors qualify as “independent directors” as defined under applicable rules of the Nasdaq Stock Marketrules and the independence requirements contemplated by the Exchange Act. The Board determined that Mr. Opstad, our Board chair, and Mr. Ciaccia, our Deputy chair, do

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not qualify as independent, given their business relationships with the Company. In making these determinations, our board of directorsBoard considered the current and prior relationships that each
non-employee
director has had with our companyCompany and all other facts and circumstances that our board of directors deemed relevant in determining theirDirector independence, including the beneficial ownership of our ordinary sharesOrdinary Shares by each non-employee directorDirector and his or her affiliated entities (if any).

Furthermore, our board of directors has determined that all of our directors, except for Messrs. Opstad and Ciaccia, are “independent directors”Board made the same determination under the criteria of the Norwegian Code of Practice for Corporate Governance, dated October 17, 2018 or the Code(the “Code of Practice.Practice”). The composition of our board of directorsBoard complies with the independence requirements under the Code of Practice, as well as Oslo Børs’ terms of listing. It also meets the Norwegian statutory gender requirements.

Our corporate governance practices were last reviewed in December 2020 and April 20212022 in accordance and compliance with the Code of Practice. The Code of Practice stipulates certain compliance and explanatory guidelines. We post our corporate governance review on our website and in the annual report.

report filed with Norwegian regulatory bodies.

Our Articles of Association provide that the number of directorsDirectors shall be between three and seven members, as decided at our annual general meetingAnnual General Meeting of shareholders. At the generalsuch meeting, of shareholders, the board membersDirectors are elected to serve for a term of two years from the time of election.years. At our 2020 annual general meeting of shareholders held2021 Annual General Meeting, on May 15, 2020,12, 2021, it was resolved that (i) Mr. Opstad shall continue to serve as Board chair of our board of directors for the second year of his a
two-year
term, (ii)and Mr. Ciaccia shall continue to serve as deputyDeputy chair for a
two-year
term.
Corporate Governance Practices
The Norwegian Public Limited Liability Companies Act (the “Companies Act”) provides the legal and regulatory framework, including provisions for corporate governance, for Norwegian listed companies such as IDEX. The Company adheres to the Code of Practice, published by the Norwegian Committee for Corporate Governance, a self-regulating body of eight member organizations (the Confederation of Norwegian Enterprise (and the Owners’ Forum thereof), Finance Norway, the Norwegian Association of Financial Analysts, The Norwegian Auditors’ Association, the Norwegian Securities Funds Association, the Oslo Børs, and the Pension Fund Association).
The Issuer Rules of the Oslo Børs, on which our boardOrdinary Shares are listed, stipulate that listed companies, such as IDEX, must annually publish a statement on their principles of directors forcorporate governance in accordance with the secondCode of Practice. We present this statement each year of his two-year term,in the Annual Report we deliver to shareholders and (iii) each of Mses. Davis and Høvding and Mr. Skaggs shall continue to serve asfile with the Oslo Børs.
Although Norway is not a member of our boardthe EU, it is a member of directors for the second yearEuropean Economic Area and has implemented relevant directives of their respective two-year term. See the section titled “Description of Share CapitalEuropean Commission into national law, so that the corporate governance framework applicable to Norwegian companies is substantially similar to the framework in place across the EU.
However, Norwegian corporate governance regulations and Articles of Association—Articles of Association—Board of Directors” in Exhibit 2.4 filed herewith.

Corporate Governance Practices

principles differ from those generally applicable to public companies listed on Nasdaq. Nasdaq Rule 5615(a)(3) provides thatpermits a foreign private issuer, such as us, maythe Company, to rely on home country corporate governance practices, in lieu of certain of the rules in the Nasdaq Rule 5600 Series and Rule 5250(d), provided that wethe foreign private issuer nevertheless complycomplies with Nasdaq’s Notification of Noncompliance requirement (Rule 5625), the Voting Rights requirement (Rule 5640), and that we haveit maintains an audit committee that satisfiesmeeting the requirements of Rule 5605(c)(3), consisting of committee members that meetof the Board meeting the independence requirements of Rule 5605(c)(2)(A)(ii). We comply with the

Pursuant to Nasdaq corporate governance rules applicable to foreign private issuers, which means thatRule 5615(a)(3), we are permitted to follow certain corporate governance rules that conformconforming to Norwegian requirements in lieu of many of the Nasdaq corporate governance rules.requirements. Accordingly, our shareholders do not have the same protections afforded to shareholders of publicly-listed companies that are subject to all of the corporate governance requirements of Nasdaq. We follow Norwegian corporate governance practices in lieu of certain Nasdaq corporate governance rulesRules as follows:

We do not intend to comply with Nasdaq Rule 5605(b)(1), which requires that our board of directorsBoard be comprised of a majority of independent directors.Directors. Such requirementsprovisions are not required under the laws of Norway. However, the Code
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Table of Practice recommends that the majority of the board of directors be independent of the company’s executive personnel and material business contacts, and that at least two of the members of the board of directors be independent of the company’s main shareholders. Therefore, we do make an assessment of the independence of our directors under Norwegian corporate governance practices and have concluded that the majority of our directors are independent based upon those standards.

Contents

However, the Code of Practice, recommends (i) the majority of the Directors be independent of executive personnel and material business contacts, and (ii) at least two Directors be independent of significant shareholders. Accordingly, we do assess the independence of our Directors pursuant to the Code of Practice and have concluded the majority of our Directors are independent, based upon those standards.
We do not intend to follow Nasdaq Rule 5605(d)(1) regarding the compensation committee charter of the Compensation Committee of the Board or Nasdaq Rule 5605(d)(2) regarding compensation committeeCompensation Committee composition. Such requirementsprovisions are not

required under the laws of Norway. However, we do maintain a Compensation Committee in compliance with the Code of Practice. See “Item 6. Section C. Board Practices—Committees of Our Board of Directors—Compensation Committee” for additional information.

required under the laws of Norway. However, we do maintain a compensation committee in line with Norwegian law. See the section entitled “—Committees of Our Board of Directors—Compensation Committee” below for additional information.

We do not intend to follow Nasdaq Rule 5605(e)(1)(A) with respect to having directorDirector nominees selected by independent directors constituting a majority of our board’s independent directors in a vote in which only independent directors participateDirectors or Nasdaq Rule 5605(e)(2) regardingwith respect to the adoption of a formal written charter or boardBoard resolution, as applicable, addressing the nominationsDirector nomination process. Such requirementsprovisions are not required under the laws of Norway. However,In compliance with the Code of Practice, we do maintain a nomination committee in line with Norwegian law.Nomination Committee, which is not a subcommittee of our Board, but a separate body elected directly by shareholders at our Annual General Meeting. Members of our Nominating Committee are not Directors of the Company. The establishment of our nomination committeeNomination Committee was resolved by our annual general meetingAnnual General Meeting on May 15, 2012, in accordance with the Code of Practice, and thealong with guidelines for such committee were resolved and adopted by the same annual general meeting, which guidelines addressNominating Committee addressing the nominationsDirector nomination process, among other things.matters. See the section entitled “—“Item 6. Section C. Board Practices—Committees of Our Board of Directors—Nomination Committee” below for additional information.

We do not intend to comply with the provision of Nasdaq Rule 5610 which requiresrequiring disclosure within four business days of any determination by our Board to grant a waiver to the Company’s Directors and officers of provisions of the codeCompany’s Code of business conductConduct and ethics to directors and officers.

Code of Ethics. However, we do comply with the provision of Nasdaq Rule 5610 requiring that such determination must be disclosed in a Form
6-K

or in the next Form

20-F

we file.
We do not intend to follow Nasdaq Rule 5620(c) regarding, which sets forth quorum requirements applicable to meetings of shareholders. Such quorum requirements are not required under the laws of Norway. In Norway, only a limited number of shareholder decisions require unanimity, which effectively imposes a quorum requirement of 100% on such decisions.

Norwegian Public Companies Act.

We do not intend to follow Nasdaq Rule 5635 regarding shareholder approval requirements in connection with certain corporate actions, such as a change of control of the company.Company. However, under Norwegian law,the Companies Act, any issuance of sharesOrdinary Shares by the Company requires shareholder approval or must be resolveda resolution by the board of directorsBoard in accordance with a boardan authorization from the general meetinga General Meeting of shareholders. Shareholder approval also is also required for share-based compensation programs, as well as compensation to the board of directorsBoard and certain major agreements between the companyCompany and an affiliated party.

We mayintend to utilize these exemptions from certain Nasdaq Rules for as long as we continue to qualify as a foreign private issuer.

Committees of our Board of Directors

Our board of directors has two standing committees: an audit committee and a compensation committee. In addition, we have a nomination committee, which composition and mandate are resolved by our annual general meetingAnnual General Meeting of shareholders.

Audit Committee

Our audit committeeAudit Committee consists of Mr.Messrs. Skaggs and Quindlen and Mses. Høvding and Davis. Mr. Skaggs serves as chair of the audit committee. The audit committeeWhile the Audit Committee consists exclusively of membersDirectors who are
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financially literate, and Mr. Skaggs is considered an “audit committee financial expert” as defined by applicable SEC rules and has the requisite financial sophistication as defined under applicable Nasdaq rules. Our boardBoard has determined that all of the members of the audit committeeAudit Committee satisfy the “independence” requirements set forth in Rule
10A-3
under the Exchange Act. The audit committeeAudit Committee, which advises the Board, is governed by a charter that complies with the rules of Nasdaq.

The audit committee’sAudit Committee’s responsibilities include:

overseeing accounting and financial reporting processes, systems of internal control, financial statement audits, and the integrity of our financial statements;

managing the selection, engagement terms, fees, qualifications, independence, and performance of any registered public accounting firm engaged as our independent outside auditor for the purpose of

preparing or issuing an audit report or performing audit services, recommending appointment or retention of any such firm to our Board, and approving any
non-audit
services to be provided by such firm;

preparing or issuing an audit report or performing audit services, recommending appointment or retention of any such firm to our board of directors and approving any non-audit services to be provided by such firm;

reviewing and discussing with management and our independent auditors any financial statements, reports or disclosures required by applicable law and stock exchange listing requirements, and any other financial information issued by us;

overseeing the design, implementation, organization, and performance of our internal control over financial reporting and our internal audit function (if and when applicable);

function;

overseeing procedures for reviewing, retaining and investigating complaints regarding accounting, internal accounting controls, or auditing matters;

reviewing and approving any related partyrelated-party transactions;

helping our boardBoard oversee legal and regulatory compliance, including risk assessment; and

providing regular reports and information to our board.

Compensation Committee

Our compensation committee,Compensation Committee, which consists of Ms. Davis and Mr. Ciaccia, assists the board of directorsBoard in determining executive officerExecutive Officer compensation. Ms. Davis serves as chair of the compensation committee.

The compensation committee’sCompensation Committee’s responsibilities include advising the boardBoard on matters such as:

including:

setting a compensation policy that is designed to promote our long-term success;

ensuring that the overall compensation of employees areis in alignment with both their individual performance and their contribution to our overall results, and consistent across the company;

Company;

determining the design of, and targets for, any performance related pay plans operated by our Company for the Chief Executive Officerperformance-related variable compensation programs and the Chief Executive Officer’s direct reports and makemaking a recommendation regarding the total annual payments made under such schemes;

programs;

if applicable, recommending the policy for, and scope of, retirement fund arrangements for the CEO and executive team;

investigating any compensation or other payment-related condition whichmatter it deems appropriate to investigate, and making recommendations to the Board as it may deem appropriate;

necessary;

reviewing the design of all shareshare-based incentive plans to ensure compliance with relevant legislation and good compensation practice and, proposeas necessary, proposing any changes;changes to the Board; and

analyze

analyzing appropriate data from comparatorcomparative companies to review senior executive compensation and related policies to support strategy culture and promote long termpromotion of sustainable success and, proposeas necessary, proposing any changes.

changes to the Board.

86

Nomination Committee

In compliance with the regulations in Norway,Code of Practice, we domaintain a Nomination Committee, which is not have a nomination committee formed fromsubcommittee of our boardBoard, but a separate body elected directly by shareholders at our Annual General Meeting. Members of directors. our Nominating Committee are not Directors of the Company.
The duties of our nomination committee,Nomination Committee, election of the chair and members of the nomination committee, and the committee’s compensation are determined and approved at our general meetingsthe Annual General Meeting of shareholders. The requirement to form a nomination committeeNomination Committee is set out in our Articles of Association, as recommended by the Code of Practice.
Our nomination committeeNomination Committee consists of Robert N. Keith, Håvard Nilsson, and Harald Voigt. Mr. Keith serves as chair of the nomination committee. The nomination committee’sNomination Committee’s primary duties include proposing candidates for election to the board of directorsBoard and nomination committee,the Nomination Committee and proposing the fees to be paid to members of these bodies.

In addition, the nomination committee’sNomination Committee’s responsibilities include:

regularly reviewing the structure, size, and composition (including the skills, knowledge, experience, and diversity) required of our board of directors compared to its current positionBoard and making recommendations regarding proposed changes to the shareholders for approval at our general meetings with regard to any changes;

the Annual General Meetings;

determining the qualities and experience required of our directorsDirectors and identifying suitable candidates, assisted where appropriate by third-party recruitment consultants;

formulating plans for succession for directors, andDirectors, in particular for the key role of Board chair;

and

assessing there-appointment
re-nomination
or
re-election
of any directorDirector at the conclusion of his or her specified term, of office, having given due regard to the director’sDirector’s performance and ability to continue to contribute to our board of directors in the light of the knowledge, skills and experience required; and

assessing the re-election by shareholders of any director, having due regard to his or her performance and ability to continue to contribute to our board of directors in the light of the knowledge, skills and experience required andBoard, as well as the need for progressiveperiodically refreshing the composition of the board of directors.

Board.

Code of Conduct and Code of Ethics

We revised our Code of Conduct and Code of Ethics on December 21, 2020, to cover a broad range of matters including the handling of conflicts of interest, compliance issues and other corporate policies such as equal opportunity and
non-discrimination
standards. Our Code of Conduct is available on our website at
www.idexbiometrics.com
.

D.

Employees

As of December 31, 2020,2021, we had 89.5 full-time equivalent, or FTE,111 individuals on staff, consisting of 93 employees and 7.5 FTE contractors.18 individual contractors (individual contractors typically reside in countries in which the Company does not have a subsidiary). Of these, 72 individuals are engaged in R&D. Specifically, 33 individuals are engaged in silicon, sensor and packaging, 21 in systems and technology and 18 in software. In addition, 11.5 individuals are engaged in sales and marketing and 13 in operations, finance and administration. Of these employees and contractors, 36 FTE are based in Europe, 54this total, 19 were assigned to our Oslo office, 56 were assigned to our two offices in the United States, 27 were assigned to our office in the United Kingdom, and nine were assigned to our office in China.
Certain members of our staff serve on a part-time basis. As such, we assess staffing needs based on a
full-time
equivalent (“FTE”) basis. As of December 31, 2021, we had 90 FTE employees and 8 FTE individual contractors. Of this total of 98 FTEs:
72 were engaged in China.

engineering functions (33 in hardware design (i.e., silicon, sensors, and packaging); 21 in systems design; and 18 in software development);

15 were engaged in marketing and sales functions;
nine were engaged in administrative and financial functions; and
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two were engaged in production planning and supply chain management.
We have no collective bargaining agreements with our employees, and we have not experienced any work stoppages.

E.

Share Ownership

For information regarding the share ownership of our directors and senior management, see “Item 6.B-Compensation”“Item 6. Section B. Compensation” and “Item 7.A-Major7. Section A. Major Shareholders.”

Item 7.

Major Shareholders and Related Party Transactions.

A.

Major Shareholders

The following table and accompanying footnotes setsset forth, as of February 18, 2021,March 31, 2022, information regarding beneficial ownership of our ordinary sharesOrdinary Shares by:

each person, or group of affiliated persons, known by us to beneficially own more than 5% of our ordinary shares;

Ordinary Shares;

each of our executive officers;

Executive Officers;

each of our directors;Directors; and

all of our executive officersExecutive Officers and directorsDirectors as a group.

Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities and include ordinary sharesOrdinary Shares that can be acquired within 60 days of February 18, 2021.March 31, 2022. Percentage ownership calculations are based on 915,361,422 ordinary shares1,012,548,654 Ordinary Shares issued and outstanding as of February 18, 2021,March 31, 2022, plus, consistent with SEC rules on disclosure of beneficial ownership, ordinary sharesOrdinary Shares that each security holder has the ability to acquire within 60 days of February 18, 2021.

March 31, 2022.

Except as otherwise indicated, all of the ordinary sharesOrdinary Shares reflected in the table are ordinary sharesOrdinary Shares, and all persons listed below have sole voting and investment power with respect to the ordinary sharesOrdinary Shares beneficially owned by them, subject to applicable community property laws. The information is not necessarily indicative of beneficial ownership for any other purpose.

Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o IDEX Biometrics ASA, Dronning Eufemias gate 16,

NO-0191
Oslo, Norway.

Name of Beneficial Owner(1)  Number of
Ordinary
Shares
Beneficially
Owned
   Percentage
of
Ordinary
Shares
Beneficially
Owned
 

5% or Greater Shareholders:(2)(3)

    

Robert Keith(4)

   166,659,914    18.21

UBS Switzerland AG(5)

   73,574,103    8.04 

Sundt AS(6)

   61,740,365    6.74 

Goldman Sachs International(7)

   59,623,073    6.51 

Sundvall Holding AS(8)

   56,964,051    6.22 

Executive Officers:

    

Vincent Graziani(9)

   2,060,239    * 

Derek P. D’Antilio(10)

   1,257,926    * 

Anthony M. Eaton(11)

   706,525    * 

Stanley A. Swearingen(12)

   3,721,467    * 

Board of Directors:

    

Morten Opstad(13)

   7,398,916    * 

Lawrence John Ciaccia(14)

   471,563    * 

Deborah Lee Davis(15)

   564,479    * 

Hanne Høvding(16)

   487,778    * 

Stephen A. Skaggs(17)

   764,909    * 

Non-Voting Board Observer:

    

Thomas M. Quindlen(18)

   275,000    * 

All current directors (including non-voting board observer) and executive officers as a group (10 persons)

   17,708,802    1.93 

Name of Reported Beneficial Owner
1
  
Number of
Ordinary
Shares
Beneficially
Owned
   
Percentage
of
Total
 
5% or Greater Shareholders:
    
Robert N. Keith
2
   185,344,423    18.36
Société Générale
3
   72,660,606    7.18 
Sundt AS
4
   68,507,977    6.77 
Sundvall Holding AS
5
   52,964,051    5.23 
Executive Officers:
    
Vincent Graziani
6
   3,725,725    
James A. Simms
7
   2,182,236    
Anthony M. Eaton
8
   1,198,539    
Catharina Eklof
9
   589,684    
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Table of Contents
Name of Reported Beneficial Owner
1
  
Number of
Ordinary
Shares
Beneficially
Owned
   
Percentage
of
Total
 
Board of Directors:
    
Morten Opstad
10
   7,398,916    
Lawrence J. Ciaccia
11
   815,021    
Deborah Lee Davis
12
   564,479    
Hanne Høvding
13
   487,778    
Annika Olsson
14
   52,631    
Thomas M. Quindlen
15
   413,981    
Stephen A. Skaggs
16
   1,018,053    
  
 
 
   
 
 
 
Directors and Executive Officers as a group (11 persons)
   18,447,043    1.81
*

Represents beneficial ownership of less than 1%.

(1)1

Beneficial ownership presented in this table, as of March 31, 2022, is determined in accordance with the rules of the SEC, which differ from local rules in Norway. Pursuant to the Norwegian Securities Trading Act dated June 29, 2007, no.75, or the STA,(the “STA”), our shareholders are required to immediately and simultaneously notify us and the Oslo Stock ExchangeBørs when the shareholder’s stakeholdings, as percentage of total Ordinary Shares outstanding, reaches, exceeds, or falls below the thresholds of 5%, 10%, 15%, 20%, 25%, 1/3, 50%, 2/3, or 90% of the share capital or voting rights of our company. Shares held, acquired or disposedCompany.
2
Pursuant to annual disclosure requirements of by close associates,the STA, Mr. Keith reported to the Oslo Børs, as of November 10, 2021, that he, together with “related parties,” as such term is defined in section
2-5
of the STA, collectively held 185,344,423 Ordinary Shares, representing 18.36% of the total number of our outstanding Ordinary Shares as of that date. According to data from the Euronext VPS, as of March 31, 2022, Mr. Keith has direct holdings of 32,139,394 Ordinary Shares. We believe the balance of Ordinary Shares comprising the total number of Ordinary Shares beneficially owned by Mr. Keith, as of March 31, 2022, are regarded as equivalent to the acquirer’s or disposer’s own shares.

held in nominee accounts with a limited number of financial institutions. See also “Related Party Transactions—Capital Increases.”
(2)3

UBS Switzerland AG and Goldman Sachs International are

Société Générale is a nominee shareholders.shareholder. We are not aware of the number or identity of anythe beneficial owners of sharesOrdinary Shares held by said nominees.

(3)

On December 16, 2019, Schroder, plc. notified Oslo Bors pursuant to the STA that it held 50,030,909 shares in our company as of such date, representing approximately 6.97% of the total number of outstanding shares as of such date. Such shares are held through one or more nominee shareholders. On February 16, 2021, Schroder, plc. further notified Oslo Bors that its holding in our company decreased to 45,030,909 shares, representing approximately 4.92% of our share capital.

(4)

Pursuant to the STA, Mr. Keith reported to the Oslo Stock Exchange that, as of November 6, 2019, November 27, 2019, December 13, 2019 and February 16, 2021, Mr. Keith, and together with his close associates, as such term is defined in section 2-5 of the STA, collectively held 70,125,492, 110,130,006, 145,659,467 and 166,659,914 shares in our company, respectively, representing 11.73%, 16.85%, 20.29% and 18.21% of the total number of our outstanding shares as of the respective date. See also “Related Party Transactions—Capital Increases.”

(5)

Société Générale. The principal business address for UBS Switzerland AGSociété Générale is Bahnhofstrasse 45, 8001 Zurich, Switzerland.

92972 Paris—La Défense Cedex France.

(6)4

The principal business address for Sundt AS is Dronningen 1, 0287 Oslo, Norway.

(7)5

The principal business address for Goldman Sachs International is Peterborough Court, 133 Fleet Street, London EC4A 2BB, United Kingdom.

(8)

The principal business address for Sundvall Holding AS is Strømsveien 314B, 1081 Oslo, Norway.

(9)6

Represents 810,239 ordinary shares1,225,725 Ordinary Shares held by Mr. Graziani and 1,250,000 ordinary shares2,500,000 Ordinary Shares issuable pursuant to subscription rights that are exercisable or settled within 60 days of February 18, 2021.

March 31, 2022.
(10)7

Consists of 757,926 ordinary shares1,494,736 Ordinary Shares held by Mr. Simms and 500,000 ordinary shares687,500 Ordinary Shares issuable pursuant to subscription rights that are exercisable or settled within 60 days of February 18, 2021 that areMarch 31, 2022.
8
Consists of 284,639 Ordinary Shares held of record by Mr. D’Antilio.

(11)

Consists of 249,575 ordinary sharesEaton and 456,950 ordinary shares913,900 Ordinary Shares issuable pursuant to subscription rights that are exercisable or settled within 60 days of February 18, 2021 that are held of record by Mr. Eaton.

March 31, 2022.
(12)9

Consists of 1,149,576 ordinary shares89,684 Ordinary Shares held by Ms. Eklof and 2,571,891 ordinary shares500,000 Ordinary Shares issuable pursuant to subscription rights that are exercisable or settled within 60 days of February 18, 2021 that are held of record by Mr. Swearingen.

March 31, 2022.
(13)10

Represents 7,398,916 ordinary sharesOrdinary Shares held by Mr. Opstad as of February 18, 2021.

March 31, 2022.
(14)11

Represents 271,563 ordinary shares415,021 Ordinary Shares held by Mr. Ciaccia and 200,000 ordinary shares400,000 Ordinary Shares issuable pursuant to subscription rights that are exercisable or settled within 60 days of February 18, 2021.

March 31, 2022.
(15)12

Represents 564,479 ordinary sharesOrdinary Shares held by Ms. Davis as of February 18, 2021.

March 31, 2022.
(16)13

Represents 487,778 ordinary sharesOrdinary Shares held by Ms. Høvding as of February 18, 2021.

March 31, 2022.
(17)14

Represents 764,909 ordinary shares52,631 Ordinary Shares held by Ms. Olsson as of March 31, 2022.
15
Represents 413,981 Ordinary Shares held by Mr. Quindlen as of March 31, 2022.
16
Represents 1,018,053 Ordinary Shares held by Mr. Skaggs as of February 18, 2021.

March 31, 2022.
(18)

Represents 275,000 ordinary shares held by Mr. Quindlen as of February 18, 2021.

Significant Changes in Percentage

89

5% Ownership

as of December 31, 2021 and December 31, 2018

The following table shows shareholders who beneficially own more than 5% of our ordinary sharesOrdinary Shares as of December 31, 2020,2021, as compared to December 31, 2017,2018, as recorded in the shareholder registry in Norway:

   December 31, 2020     December 31, 2017 
Shareholder  Number of
shares
   Percent
of
shares
  Shareholder  Number of
shares
   Percent
of
shares
 

UBS Switzerland AG(N)

   73,260,653    8.80 The Northern Trust Comp, London Br(N)(2)   108,420,610    19.99

Robert Keith(1)

   61,639,394    7.41  Sundvall Holding AS   59,734,299    11.01 

Goldman Sachs International(N)

   59,623,073    7.16  Invesco Perpetual High Income Fund   53,228,391    9.81 

Sundvall Holding AS

   56,964,051    6.85  Charles Street International Ltd.(3)   38,157,236    7.04 

Sundt AS

   55,740,365    6.70  Invesco Perpetual Income Fund   36,771,609    6.78 

The Northern Trust Comp, London Br(N)(2)

   45,030,909    5.41  The Northern Trust Comp, London Br(N)(2)   29,597,688    5.46 

Others

   479,888,303    57.67  Others   216,473,272    39.91 
  

 

 

   

 

 

    

 

 

   

 

 

 

Total

   832,146,748    100.00 Total   542,383,105    100.00
  

 

 

   

 

 

    

 

 

   

 

 

 

   
December 31, 2021
     
December 31, 2018
 
Shareholder
  
Number of
Ordinary Shares
   
Percent
of
Total
  
Shareholder
  
Number of
Ordinary Shares
   
Percent
of
Total
 
Société Générale (N)
1
   72,660,606    7.19 
The Northern Trust Company (N)
4
   108,420,610    19.92
Sundt AS
2
   68,507,977    6,78  
Sundvall Holding AS
   56,911,021    10.46 
Robert N. Keith
3
   62,139,394    6.15  
Invesco Perpetual High Income Fund
5
   53,228,391    9.78 
Sundvall Holding AS
   55,964,051    5.53  
Charles Street International Holding Ltd.
6
   38,157,236    7.01 
     
Invesco Perpetual Income Fund
5
   36,771,609    6.76 
The Northern Trust Company
(N)
4
   45,030,909    4.46  
The Northern Trust Company any (N)
4
   29,597,688    5.44 
Others
   581,806,729    57.58  Others   221,227,982    40.64 
  
 
 
   
 
 
    
 
 
   
 
 
 
Total
   1,010,388,454    100.00 Total   544,314,537    100.00
  
 
 
   
 
 
    
 
 
   
 
 
 
(N)

The shareholder on record is a nominee for one or more beneficial owners,owners.
1
Societé Generale held 0.01% of outstanding Ordinary Shares as of December 31, 2018. We are not aware of the number or identity of whomthe beneficial owners of Ordinary Shares held in Société Générale nominee accounts.
2
Sundt AS did not hold any Ordinary Shares as of December 31, 2018.
3
The number of Ordinary Shares includes Mr. Keith’s holding of 30,000,000 Ordinary Shares held by the Depositary for our ADSs, as well as the reported direct ownership of 32,139,394 Ordinary Shares. Pursuant to annual disclosure requirements of the STA, Mr. Keith reported to the Oslo Børs, as of November 10, 2021, that he, together with “related parties,” as such term is not knowndefined in section
2-5
of the STA, collectively held 185,344,423 Ordinary Shares, representing 18.36% of the total number of our outstanding Ordinary Shares as of that date.
4
The beneficial owners of the Ordinary Shares held by The Northern Trust Company, London Branch, as nominee, as of December 31, 2018, were funds managed by Woodford Investment Management Ltd. As of December 31, 2021, The Northern Trust Company, London Branch, holds Ordinary Shares as nominee for funds managed by Schroders plc.
5
Invesco Perpetual High Income Fund and Invesco Perpetual Income Fund held no Ordinary Shares as of December 31, 2021.
6
Charles Street International Holding Ltd. (“CSIHL”), an entity related to us.

(1)

Mr. Keith, held no Ordinary Shares as of December 31, 2021. Pursuant to the STA, Mr. Keith reported to the Oslo Stock ExchangeBørs that, as of December 13, 2019, Mr. Keith, and together with his close associates,May 19, 2021, he received 14,905,768 Ordinary Shares as such term is defined in section 2-5 of the STA, collectively held 145,659,467 shares or 20.29% of the total number of our outstanding shares as of that date.

a distribution from CSIHL.
(2)

The beneficial owners of the shares held by The Northern Trust Company, or Nothern Trust, as of December 31, 2017, were two funds managed by Woordford Investment Management Ltd. The holding by Northern Trust as of December 31, 2020, is managed by Schroders plc.

(3)

Pursuant to the STA, Charles Street International Holding Ltd., or CSIHL, reported to the Oslo Stock Exchange that, as of January 30, 2019, that CSIHL held 59,623,073 shares or 9.98% of the share capital as of that date.

As shown in the table above, our share capital was expandedoutstanding Ordinary Shares as of December 31, 2021, increased by 289,763,643 shares over the last three years.466,073,917 Ordinary Shares since December 31, 2018. The change in shareholding byholdings of our major shareholders as of December 31, 2021, is partly caused by their purchases or sales of sharesOrdinary Shares in the open market and partly by their participation in private placements of our sharesOrdinary Shares during the period. There were only minimal changes in 2018, whileNominee shareholders’ holdings may change because the shareholding changed significantly in 2019 and 2020.

beneficial shareholders choose to move their holdings between nominee accounts.

As of January 1, 2018,2019, our largest shareholder was The Northern Trust Company, London Branch, a nominee shareholder through which two funds managed by Woodford Investment Management Ltd., or Woodford, (“Woodford”) held 19.99%19.92% and 5.46%5.44%, respectively, of our outstanding shares.Ordinary Shares. The management of these two funds were subsequently transferred from to Woodford to Link Solutions LtdLtd. and Schroders plc, respectively, in 2019. Link Solutions Ltd thensubsequently sold all of the sharesOrdinary Shares held by the fund it managed. The fund managed by Schroders plc has retained sufficient shares to remain a shareholder inits Ordinary Shares, but its holding, as of December 31, 2021, represented 4.46% of the 5%-10% bracket.

total Ordinary Shares outstanding as of that date.

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As of January 1, 2018,2019, our second largest shareholder was certain funds managed by Invesco, through two funds which they collectively held 16.59%16.53% of our outstanding shares.Ordinary Shares. Invesco sold all of such sharesOrdinary Shares in 2019.

As of January 1, 2018,2019, CSIHL was our fourth largest shareholder. Based on its report to the Oslo Stock Exchange, as of January 30, 2019,May 19, 2021, CSIHL had distributed its entire holding of Ordinary Shares to its shareholders. Pursuant to the STA, Mr. Keith reported to the Oslo Børs that, as of May 19, 2021, he received 14,905,768 Ordinary Shares as a distribution from CSIHL. We are not aware of the number or identity of other beneficial owners of Ordinary Shares formerly held 59,623,073 shares or 9.98% of our share capital. CSIHL has remained a shareholder in the 5%-10% bracket.

by CSIHL.

As of December 31, 2020, UBS Switzerland AG, or UBS,“UBS”, a nominee shareholder, was our largest shareholder.shareholder, holding 8.80% of outstanding Ordinary Shares. UBS acquired most of its sharesthese Ordinary Shares in 2019 and further acquired shares in 2020. TheUBS reduced its shareholding to 0.06% by the end of 2021. We are not aware of the number or identity of itsthe beneficial owners of Ordinary Shares held in UBS nominee accounts.
As of December 31, 2021, Société Générale, a nominee shareholder, is our largest shareholder, having acquired its Ordinary Shares in 2021. We are not known to us.

Further, aware of the number or identity of the beneficial owners of Ordinary Shares held in Société Générale nominee accounts.

Mr. Robert Keith acquired a substantial number of sharesOrdinary Shares in the fourth quarter of 2019 and has since participated in multiple private placements of our ordinary shares. Pursuant to the STA,Ordinary Shares. As of November 10, 2021, Mr. Keith reporteddisclosed to the Oslo Stock ExchangeBørs that as of December 13, 2019, Mr. Keith, andhe, together with his close associates, as such term is defined in section
2-5
of the STA, collectively held 145,659,467 shares185,344,423 Ordinary Shares or 20.29%18.36% of the total number of our outstanding sharesOrdinary Shares as of that date.

Finally,

Sundt AS acquired sharesOrdinary Shares in the market in 2019 and has also participated in private placements of shares.

Ordinary Shares in 2020 and 2021.

Voting Rights

All our sharesOrdinary Shares have equal voting rights. There are no sharesOrdinary Shares with special voting rights, nor are there any restrictions on voting. We have no other class of equity security outstanding. See also Exhibits 2.4 and 2.5 filed herewith.

Shareholders in the United States

As of December 31, 2020,2021, to the best of our knowledge, 10,517,63554,451,078 of our outstanding ordinary sharesOrdinary Shares were held by 2224 shareholders of record in the United States. The actual number of beneficial holders is greater than the numbers of holders on record, because sharesOrdinary Shares are held in streetthe custodial name byof brokers and other nominees on behalf of beneficial owners. This numberOne such nominee is Bank of holders of record also does not include holders whose shares may be held in trust by other entities.

New York Mellon, the Depositary, holding 37,524,450 Ordinary Shares that underlie 500,326 ADSs listed on Nasdaq. We listed our ADSs on Nasdaq on March 1, 2021.

B.

Related Party Transactions

Since January 1, 2020,2021, we have engaged in the following transactions with our directors, executive officersDirectors, Executive Officers and holders of more than 10% of our outstanding voting securities and their affiliates, which we refer to as our related parties:

parties.

Agreements with Our Executive Officers and Directors

We have entered into service contracts with certain of our executive officers.Executive Officers. These agreements contain customary provisions and representations, including confidentiality,
non-competition,
non-solicitation
and
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inventions assignment undertakings by the executive officers.Executive Officers. However, the enforceability of the
non-competition
provisions may be limited under applicable law.
Further, we have granted share-based awards to certain of our directorsDirectors and executive officers.Executive Officers. See “Item 6.B.6. Section B. Compensation—Compensation of Executive OfficersOffices and Directors.”

Indemnification Agreements

We entered into an indemnity agreement with each of our directorsDirectors and executive officersExecutive Officers in connection with the listing of our ADSs on Nasdaq. The indemnity agreement requires us to indemnify our directorsDirectors and executive officersExecutive Officers to the fullest extent permitted by law. See “Item 6.B.6. Section B. Compensation—Limitations on Liability and Indemnification Matters.Limitations.

Capital Increases

In May 2020, we completed a capital increase, by issuing an aggregate of 65,341,413 ordinary shares to existing and new shareholders, including a close associate of Robert N. Keith, subscribing for 11,100,000 shares, and Sundt AS, subscribing for 19,000,000 shares, for gross proceeds of approximately $10.2 million.

In July, 2020,March 2022, we issued 4,318,523 ordinary shares1,765,791 Ordinary Shares to employees who elected to receive sharesparticipating in lieu of cash incentive payment amounting to $0.6 million.our ESPP, raising $341 thousand. Among such employees, our Chief FinancialExecutive Officer, Derek D’Antilio,Vincent Graziani, acquired 136,479 shares,52,446 Ordinary Shares, and our Chief Technology Officer, Anthony Eaton, acquired 181,041 shares.

19,683 Ordinary Shares.

Also in March 2022, we issued 394,409 shares at a price NOK 0.48 per share to employees upon their exercise of vested subscription rights, raising $21 thousand. No Executive Officers exercised vested subscription rights.
In November 2020,2021, we completed a capital increase, by issuingprivate placement of an aggregate of 42,528,181 ordinary shares to89,777,824 Ordinary Shares with Norwegian and international investors, including certain existing shareholders, members of our management team, and our board of directors,Board, for gross proceeds of approximately $7.8$30.1 million. Ms. Eklof and Messrs. Graziani D’Antilio and Eaton from our management team subscribed for 150,000, 125,000, 30,000 shares,Simms acquired 89,684, 149,473 and 1,494,736 Ordinary Shares, respectively. Members of our board of directors, Messrs. Opstad, Ciaccia and Skaggs, and Mses. Davis and Høvding, subscribed for 100,000, 150,000, 100,000, 50,000 and 25,000 shares, respectively.

A Director, Ms. Olsson, acquired 52,631 Ordinary Shares.

In December 2020,September 2021, we issued 1,527,917 ordinary shares913,198 Ordinary Shares to employees pursuant toparticipating in our Employee Share Purchase Plan,ESPP, raising $0.2 million.$221 thousand. Among such employees, our Chief Executive Officer, VinceVincent Graziani, acquired 125,239 shares, our Chief Financial Officer, Derek D’Antilio, acquired 70,447 shares,20,490 Ordinary Shares, and our Chief Technology Officer, Anthony Eaton, acquired 38,534 shares.

8,029 Ordinary Shares.

In FebruaryMay 2021, we completedcertain Directors elected to receive, pursuant to a capital increase,resolution approved by issuing an aggregateshareholders at our Annual General Meeting on May 12, 2021, a portion of 83,214,674 ordinary sharestheir respective Board compensation in the form of Ordinary Shares. As a result, 535,583 Ordinary Shares were issued, representing $123 thousand of consideration to NorwegianMessrs. Ciaccia, Quindlen, and international investors, including Mr. D’Antilio, our Chief Financial Officer, subscribing for 76,000 shares, for gross proceeds of approximately $27.2 million.

Skaggs.

In March 2021, we issued 1,060,179 ordinary sharesOrdinary Shares to employees pursuant toparticipating in our Employee Share Purchase Plan,ESPP, raising $0.2 million.$228 thousand. Among such employees, our Chief Executive Officer, VinceVincent Graziani, acquired 23,093 shares,Ordinary Shares, our Chief Financial Officer at the time, Derek D’Antilio, acquired 51,960 shares,Ordinary Shares, and our Chief Technology Officer, Anthony Eaton, acquired 2,989 shares.

Ordinary Shares.

In February 2021, we completed a private placement of an aggregate of 83,214,674 Ordinary Shares to Norwegian and international investors, including certain existing shareholders and a member of our management team, for gross proceeds of $27.2 million. Mr. D’Antilio, our Chief Financial Officer at the time, acquired 76,000 Ordinary Shares.
Arrangements with Our Board of Directors

Morten Opstad, theour Board chair, of our board of directors, is a partner at Advokatfirmaet Ræder AS or (“der,der”), our Norwegian counsel. Ræder provides legal services to our company. In addition, Mr. Opstad provides certain business and management services to us that are not typical board functions, pursuant to an executive function agreement
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dated January 30, 2018, by and among Mr. Opstad, IDEX Biometrics ASA, and Ræder. Such services include, among other things, shareholder contact, strategic discussions with existing and prospective partners, customers and suppliers, organizational issues, and other projects from time to time. As consideration for such services, Mr. Opstad is entitled to receive a fee per hour at the same level as partners at Ræder invoice us, and such fee is invoiced by Ræder. We paid Ræder for its services in the amount of $0.5 million for the year ended December 31, 2020. The amount$338 thousand in 2021, $477 thousand in 2020, included, among other assignments, support to several private placements of shares.

and $470 thousand in 2019, respectively.

Larry J. Ciaccia, theour Board deputy chair, of our board of directors, is the principal owner of Black River Advisors LLC, or Black River.LLC. On November 1, 2013, Black River Advisors entered into a service agreement with us, pursuant to which Black River Advisors assigned Mr. Ciaccia to provide certain consulting services to us in the areas of fingerprint imaging and recognition technology. Mr. Ciaccia has also served on our strategy advisory council,Strategic Advisory Council, effective January 2014. The terms and conditions of this agreement apply solely to Mr. Ciaccia in his capacity as the principal of Black River.River Advisors. Either party may terminate the agreement upon a
90-day
written notice. Under this agreement, Mr. Ciaccia is entitled to receive $50,000 per annum for the consulting services and $15,000 per annum for services performed by Mr. Ciaccia as a member of our strategy advisory council.Strategic Advisory Council. In addition, Mr. Ciaccia is entitled tomay receive grants of subscription rights to purchase our ordinary sharesOrdinary Shares in such amount and on such terms as may be agreed by the parties and approved by our board of directors. For each of the year ended December 31,years 2021, 2020, and 2019, we paid Mr. Ciaccia $65,000 under this agreement. We also granted Mr. Ciaccia subscription rights to purchase 600,000 ordinary sharesOrdinary Shares on August 15, 2018, pursuant to the 2018 Plan at an exercise price NOK 5.10 per share. The 2018 subscription rights were cancelled, and we made a replacement grant of the same quantity effective June 17, June 2020, at subscription price NOK 1.71 per share. Such subscription rights vest by 1/3 annually over three years and expire on May 15, May 2025. Either party may terminate the agreement upon a 90-day written notice.

Related Party Transaction Policy

We comply with Norwegian law regarding approval of transactions with related parties. We have adopted a Code of Conduct and Code of Ethics that sets forth our procedures for the review and approval or ratification of any not immaterial related party transactions. A related party is (i) any executive officerExecutive Officer or director,Director, (ii) a shareholder, a shareholder’s parent company, or other beneficial owner who holds more than 5% of any class of our voting securities, andsecurities; (iii) other persons as defined in the Norwegian Accounting Act and regulations promulgated thereunderthereunder; and (iv) any of the immediate family members and any entity owned or controlled by such legal or natural persons as mentioned in the foregoing clauses.

Under theour Code of Conduct and Code of Ethics and related policies, if a transaction is identified as a related party transaction, including any transaction that was not a related party transaction when originally consummated or any transaction that was not initially identified as a related party transaction prior to consummation, it would be subject to approval by our audit committee, or, if audit committee approval would be inappropriate, to another independent body of our board of directors, for review, consideration and approval or ratification.

In addition, our employees and directors willDirectors have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest.

In considering related party transactions, our audit committee,Audit Committee, or other independent body of our board of directors,Board, will take into account the relevant available facts and circumstances including, but not limited to:

the risks, costs, and benefits to us;

the impact on a director’sDirector’s independence in the event that the related person is a director,Director, immediate family member of a directorDirector, or an entity with which a directorDirector is affiliated;

the availability of other sources for comparable services or products; and

the terms available to or from, as the case may be, unrelated third parties or to or from employees generally.

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All of the transactions described above were entered into prior to the adoption of the written policy, but all were approved by our board of directorsBoard to the extent required by, and in compliance with, Norwegian law.

Material transactions under which the fair market value of the obligations of the companyCompany at the time of conclusion exceeds 2.5% of the balance sheet amount of our last approved annual financial statement, which do not form part of the company’sCompany’s ordinary course of business, shall be approved by thea general meeting of shareholders. In assessing whether such threshold is met, all related party transactions in the same financial year shall be summarized.

C.

Interests of Experts and Counsel

Not applicable.

Item 8.

Financial Information.

A.

Consolidated Statements and Other Financial Information

Consolidated Financial Statements

Our consolidated financial statementsConsolidated Financial Statements are appended at the end ofpresented within this annual report,Annual Report, starting at pageF-1, and are incorporated by reference herein.

F-1.
Dividend Policy

We have never declared ornor paid any dividends on any class of our issued share capital. We intend to retain any earnings for use in our business and do not currently intend to pay dividends on our ordinary shares.Ordinary Shares. The declaration and payment of any future dividends will be subject to a resolution by thea general meeting of shareholders with a simple majority upon a proposal from our board of directorsBoard and will depend upon our results of operations, cash requirements, financial condition, contractual restrictions, any future debt agreements or applicable laws and other factors that our board of directorsBoard may deem relevant.

Under the laws of Kingdom of Norway, among other things, a public limited liability company such as usIDEX may only distribute dividends to the extent it will have net assets covering the company’sits share capital and other restricted equity after the distribution has been made. The calculation shall be made on the basis of the balance sheet in the company’s last approved financial statements, provided, however, that it is the registered share capital at the time of decision that applies. Further, extraordinaryExtraordinary dividend payments may be resolved based upon an interim balance sheet prepared no more than six (6) months prior to the date of resolution.

resolution by a general meeting of shareholders.

In the amount that may be distributed as a dividend, a deduction shall be made for (i) the aggregate nominal value of treasury shares held by the company, if any, (ii) credit and collateral pursuant to Sections
8-7
and
8-10
of the Norwegian Public Limited Companies Act, dated June 13, 1997 no. 45, or the Companies Act, with the exception of credit and collateral repaid or settled prior to the time of decision or credit which is settled by a netting in the dividend, and (iii) other dispositions after the balance day which pursuant to law shall lie within the scope of the funds that the company may use to distribute dividend. Even if all other requirements are fulfilled, thea company may only distribute dividend to the extent that it maintains a sound equity and liquidity post-distribution. See “Description“See Exhibit 2.4—Description of Share Capital and Articles of Association” for additional information.

Legal Proceedings

From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our
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management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

B.

Significant Changes

Not applicable

applicable.
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Item 9.

The Offer and Listing.

A.

Offer and Listing Details

Our ordinary sharesOrdinary Shares have been listed for trading on the Oslo Børs under the symbol “IDEX” since March 12, 2010. Prior to that date, there was no regulated trading market for our ordinary shares.Ordinary Shares. Our ADSADSs have been listed on the Nasdaq Capital Market under the symbol “IDBA” since March 1, 2021. Prior to that date, there was no public trading market for our ADSs.

B.

Plan of Distribution

Not applicable.

C.

Markets

Our ordinary sharesOrdinary Shares have been listed for trading on the Oslo Børs under the symbol “IDEX” since March 12, 2010. Prior to that date, there was no regulated trading market for our ordinary shares.Ordinary Shares. Our ADSADSs have been listed on the Capital MarketNasdaq under the symbol “IDBA” since March 1, 2021. Prior to that date, there was no public trading market for our ADSs.

D.

Selling Shareholders

Not applicable.

E.

Dilution

Not applicable.

F.

Expenses of the Issue

Not applicable.

Item 10.

Additional Information.

A.

Share Capital

Not applicable.

B.

Memorandum and Articles of Association

The information set forth in Exhibit 2.4 is incorporated herein by reference.

C.

Material Contracts

Supply Agreement with IDEMIA

On February 13, 2020, we entered into a framework supply agreement with IDEMIA France SAS or IDEMIA.(“IDEMIA”). Pursuant to this agreement, we agreed to supply IDEMIA with certain of our fingerprint sensor components,TrustedBio fingerprint sensor modules, and loaded firmware, including our TrustedBio technology, which is to be usedfor use in IDEMIA’s next-generation biometricF.CODE payment cards.

Under the terms of this agreement, we are responsible for assisting IDEMIA in installing and integrating our products when they are delivered. When needed, IDEMIA may provide us with workspace in their offices for us to work alongside IDEMIA employees to successfully integrate our products into IDEMIA’s systems. We retain the intellectual property rights to the products we provide. We are also responsible for monitoring the risk of obsolescence of any components of our products.

We retain the

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intellectual property rights to the products we provide. However, to ensure that IDEMIA maycan maintain supply of the needed products in the event we cannot supply them, the agreement provides for IDEX to place product designs and related proprietary information into escrow and grant to IDEMIA a license to access and utilize these escrowed materials under certain conditions.
IDEMIA is expected to place orders for our products on an ongoing basis. IDEMIA placed its first order in September 2020. We have not generated revenue pursuant to this agreement2020 and, as of December 31, 2021, orders from IDEMIA represented a substantial portion of the date hereof. In addition, to ensure that IDEMIA can obtain the products that they need from us, we agreed to place into escrow the materials and information needed to manufacture our products, and grant to IDEMIA a license to utilize these materials under certain conditions.Company’s order backlog. The supply agreement runs for a term of three years, and automatically renews for
one-year
terms thereafter, unless either party terminates the agreement by prior written notice no later than thirty days prior to the expiryexpiration of the original three-year term.

Master Services Agreement with Bloomberg

On April 4, 2019, we entered into an agreement to provide services to Bloomberg L.P., or Bloomberg. (“Bloomberg”). Under the initial statement of work, we agreed to provide Bloomberg with fingerprint sensors and in certain cases to modify the firmware of such sensors, such that the sensors may be integratedmodified for integration into Bloomberg’s technologicalnetwork security infrastructure. We retain the rights to all our
pre-existing
intellectual property and any future intellectual property that we create. However, we have granted Bloomberg a
non-exclusive,
royalty-free license so that Bloomberg may use any deliverables that we provide to Bloomberg under the agreement. We began shipping units to Bloomberg’s subcontract manufacturer during the second quarter of 2020.

2020 and have shipped steady volumes under the agreement through 2021. Under the terms of the agreement, we agreed to indemnify Bloomberg from all claims arising from or in connection with, among other things, our provision of services to Bloomberg, any material breach of the agreement, or any claim alleging infringement upon or misappropriation of any applicable intellectual property rights. The agreement will remain in effect, unless terminated by Bloomberg for cause with immediate effect or otherwise with 90 days’ prior written notice.

D.

Exchange Controls

Under current Norwegian foreign exchange control regulations, there are no limitations on the amount of cash payments that we may remit to residents of foreign countries. Laws and regulations concerning foreign exchange controls do, however, require that all payments or transfers of funds made by a Norwegian resident to a
non-resident such as dividend payments
be handled by an accredited intermediary. All registered banks and substantially all credit institutions in Norway are accredited intermediaries.

E.

Taxation

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR U.S. HOLDERS
The following summary contains a description of material Norwegian and U.S. federal income tax consequences of the acquisition, ownership, and sale of our ordinary sharesOrdinary Shares or ADSs.ADSs for taxpayers in the United States. This summary should not be considered a comprehensive description of all the tax considerations that may be relevant to the decision to acquire ADSs representing our ordinary shares.

Ordinary Shares.

Material U.S. Federal Income Tax Considerations for U.S. Holders

The following is a description of the material U.S. federal income tax consequences to the U.S. Holders (as defined and described belowbelow) of owning and disposing of our ordinary sharesOrdinary Shares or ADSs. ItThis is not a comprehensive description of all tax considerations that may be relevant to a particular person’s decision to acquire the Company’s securities. This discussion applies only to a U.S. Holder that holds our ordinary sharesOrdinary Shares or ADSs as a capital asset for tax purposes (generally, property held for investment).purposes. In addition, it does not describe all of the tax consequences that may be relevant in light ofto a U.S. Holder’s particular circumstances, including state and local tax consequences, estate tax consequences, alternative minimum tax consequences, the potential application of the Medicare contribution tax, and tax consequences applicable to U.S. Holders subject to special rules, such as:

banks, insurance companies, and certain other financial institutions;

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U.S. expatriates and certain former citizens or long-term residents of the United States;

dealers or traders in securities who use a
mark-to-market
method of tax accounting;

persons holding ordinary sharesOrdinary Shares or ADSs as part of a hedging transaction, “straddle,” wash sale, conversion transaction, or an integrated transaction, or persons entering into a constructive sale with respect to ordinary sharesOrdinary Shares or ADSs;

persons whose “functional currency” for U.S. federal income tax purposes is not the U.S. dollar;

Dollar;

brokers, dealers, or traders in securities, commodities or currencies;

tax-exempt
entities or government organizations;

S corporations, partnerships, or other entities or arrangements classified as partnerships for U.S. federal income tax purposes (and investors therein);

regulated investment companies or real estate investment trusts;

persons who acquired our ordinary shares or ADSsOrdinary Shares pursuant to the exercise of any employee stock option or otherwise as compensation;

a compensatory subscription right awarded by the Company
12

;

persons that own or are deemed to own ten10 percent or more of our sharesOrdinary Shares (by vote or value); and

persons holding our ordinary sharesOrdinary Shares or ADSs in connection with a trade or business, permanent establishment, or fixed base outside the United States.

If an entity that is classified as a partnership for U.S. federal income tax purposes holds ordinary sharesOrdinary Shares or ADSs, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships holding ordinary sharesOrdinary Shares or ADSs and partners in such partnerships are encouraged to consult their tax advisers as toregarding the particular U.S. federal income tax consequences of holding and disposing of ordinary sharesOrdinary Shares or ADSs.

The discussion is based on the Code,IRC administrative pronouncements, judicial decisions, final, temporary, and proposed Treasury Regulations, and the income tax treaty between the Norway and the United States or the Treaty,(the “Treaty”), all as of the date hereof, changes to any of which may affect the tax consequences described herein—herein, possibly with retroactive effect.

A “U.S. Holder” is a holder who, for U.S. federal income tax purposes, is a beneficial owner of ordinary sharesOrdinary Shares or ADSs who is eligible for the benefits of the Treaty and is:

 (1)

a citizen or individual resident of the United States;

 (2)

a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein, or the District of Columbia;

 (3)

an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 (4)

a trust, if (a) a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust, or (b) the trust has a valid election to be treated as a U.S. person under applicable U.S. Treasury Regulations.

U.S. Holders are encouraged to consult their tax advisers concerning the U.S. federal, state, local, and
non-U.S.
tax consequences of owning and disposing of our ordinary sharesOrdinary Shares or ADSs in their particular circumstances.

12 
Our annual Subscription Rights Incentive Plans only provide for the award of stock options for the purchase of the Company’s Ordinary Shares. These options may be incentive stock options or nonstatutory stock options, and both are referred to as “subscription rights” pursuant to the Public Limited Companies Act of the Kingdom of Norway dated 13 June 1997, as amended.
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The discussion below assumes that the representations contained in the deposit agreement are true and that the obligations in the deposit agreement and any related agreement will be complied with in accordance with their terms. Generally, a holder of an ADS should be treated for U.S. federal income tax purposes as holding the ordinary sharesOrdinary Shares represented by the ADS. Accordingly, no gain or loss will be recognized upon an exchange of ADSs for ordinary shares.

Ordinary Shares.

Passive Foreign Investment Company Rules

A

Pursuant to §1297(a) of the IRC, a
non-U.S.
corporation will be classified as a PFICPassive Foreign Investment Company (“PFIC”) for any taxable year in which, after applying certain look-through rules, either:

at least 75% of its gross income is passive income (such as interest income); or

at least 50% of its gross assets (determined on the basis of a quarterly average) is attributable to assets that produce passive income or are held for the production of passive income (including cash).

For purposes of this test, we will beclassification, IDEX is treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation, the equity of which we own, directly or indirectly own 25% or more (by value).

Based on our analysis of our income, assets, activities, and market capitalization, we do not believe we wereIDEX was a PFIC for ourthe taxable year ended December 31, 2020.2021. However, no assurances regarding ourthe Company’s PFIC status can be provided for any past, current, or future taxable year.
The determination of whether we arethe Company is a PFIC is a fact-intensive determination made on an annual basis, and the applicable law is subject to varying interpretation. In particular, the characterization of our assets as active or passive may depend in part on our current and intended future business plans, which are subject to change. In addition, for our current and future taxable years, the total value of our assets for PFIC testingclassification purposes may be determined in part by reference to the market price of our ordinary sharesOrdinary Shares or ADSs from time to time, which may fluctuate considerably. Under the passive income test, our status as a PFIC depends on the composition of our income, which will depend on a variety of factors that are subject to uncertainty, including the characterization of certain intercompany payments and payments from tax authorities, transactions we enter into in the future, and our corporate structure. Even if we determine that we arethe Company is not a PFIC for a taxable year, there can be no assurance that the IRS would not successfully challenge our position.determination. Accordingly, in its legal opinion issued in connection with thisthe listing of our ADSs on Nasdaq, our U.S. counsel expresses no opinion with respect to ourthe Company’s PFIC status for any prior, current or future taxable year.

If we areIDEX is classified as a PFIC in any year with respect to which a U.S. Holder owns the ordinary sharesOrdinary Shares or ADSs, we will continue to be treated as a PFIC with respect to such U.S. Holder in all succeeding years during which the U.S. Holder owns the ordinary sharesOrdinary Shares or ADSs, regardless of whether we continue to meet the tests described above, unless we ceasethe Company ceases to be a PFIC and the U.S. Holder has made a “deemed sale” election under the PFIC rules. If such a deemed sale is made, a U.S. Holder will be deemed to have sold the ordinary sharesOrdinary Shares or ADSs the U.S. Holder holds at their fair market value, and any gain from such deemed sale would be subject to the rules described below. After the deemed sale election, so long as we doIDEX does not become a PFIC in a subsequent taxable year, the U.S. Holder’s ordinary sharesOrdinary Shares or ADSs with respect tofor which such election was made will not be treated as shares in a PFIC and the U.S. Holder will not be subject to the rules described below with respect to any “excess distribution” the U.S. Holder receives from usIDEX or any gain from an actual sale or other disposition of

the ordinary sharesOrdinary Shares or ADSs. U.S. Holders should consult their tax advisers as to the possibility and consequences of making a deemed sale election if we ceasethe Company ceases to be a PFIC and such election becomes available.

For each taxable year we areIDEX is treated as a PFIC with respect to U.S. Holders, U.S. Holders will be subject to special tax rules with respect to any “excess distribution” such U.S. Holder receives and any gain such U.S. Holder recognizes from a sale or other disposition (including a pledge) of ordinary sharesOrdinary Shares or ADSs, unless (1) such

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U.S. Holder makes a “qualified electing fund” election, or QEF Election, with respect to all taxable years during such U.S. Holder’s holding period in which we areIDEX is a PFIC, or (2) our ordinary sharesOrdinary Shares or ADSs constitute “marketable stock”stock,” and such U.S. Holder makes a
mark-to-market
election (as discussed below).
Distributions a U.S. Holder receives in a taxable year that are greater than 125% of the average annual distributions a U.S. Holder received during the shorter of the three preceding taxable years or the U.S. Holder’s holding period for the ordinary sharesOrdinary Shares or ADSs will be treated as an excess distribution. Under these special tax rules:

the excess distribution or gain will be allocated ratably over a U.S. Holder’s holding period for the ordinary sharesOrdinary Shares or ADSs;

the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which weIDEX became a PFIC, will be treated as ordinary income; and

the amount allocated to each other year will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

The tax liability for amounts allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the ordinary sharesOrdinary Shares or ADSs cannot be treated as capital gains, even if a U.S. Holder holds the ordinary sharesOrdinary Shares or ADSs as capital assets.

If we arethe Company is a PFIC, a U.S. Holder will generally be subject to similar rules with respect to distributions we receive from, and our dispositions of the stock of, any of our direct or indirect subsidiaries that also are PFICs, as if such distributions were indirectly received by, and/or dispositions were indirectly carried out by, such U.S. Holder. U.S. Holders should consult their tax advisers regarding the application of the PFIC rules to our subsidiaries.

If a U.S. Holder makes an effective QEF Election, the U.S. Holder will be required to include in gross income each year, whether or not we make distributions, as capital gains, such U.S. Holder’s pro rata share of our net capital gains and, as ordinary income, such U.S. Holder’s pro rata share of our earnings in excess of our net capital gains. However, a U.S. Holder can only make a QEF Election with respect to ordinary shares or ADSs inif the Company, once designated as a PFIC, if such company agrees to furnish such U.S. Holder with certain tax information annually. We currently do not currently expect to provide such information in the event that we arethe Company is classified as a PFIC.

U.S. Holders can avoid the interest charge on excess distributions or gain relating to our ordinary sharesOrdinary Shares or ADSs by making a
mark-to-market
election with respect to the ordinary sharesOrdinary Shares or ADSs, provided that the ordinary sharesOrdinary Shares or ADSs are “marketable stock.” Ordinary sharesShares or ADSs will be marketable stock if they are “regularly traded” on certain U.S. stock exchanges or on a
non-U.S.
stock exchange that meets certain conditions. For these purposes, the ordinary sharesOrdinary Shares or ADSs will be considered regularly traded during any calendar year during which they are traded, other than in
de minimis
quantities, on at least 15 days during each calendar quarter. Any trades that have as their principal purpose meeting this requirement will be disregarded. We have applied to list ourOur ADSs are listed on Nasdaq, which is a qualified exchange for these purposes. Consequently, if our ADSs are listed on Nasdaq and are regularly traded, and you are a holder of ADSs,, we expect the
mark-to-market
election would be available to U.S. Holders if we arethe Company is classified as a PFIC. Each U.S. Holder should consult its tax advisor as to the whether a
mark-to-market
election is available or advisable with respect to the ordinary sharesOrdinary Shares or ADSs.

A U.S. Holder that makesmaking a

mark-to-market
election must include in ordinary income for each year an amount equal to the excess, if any, of the fair market value of our ordinary sharesOrdinary Shares or ADSs at the close of the taxable year over the U.S. Holder’s adjusted tax basis in the ordinary sharesOrdinary Shares or ADSs. An electing holder may also claim an ordinary loss deduction for the excess, if any, of the U.S. Holder’s adjusted basis in the ordinary shares Ordinary Shares
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or ADSs over the fair market value of the ordinary sharesOrdinary Shares or ADSs at the close of the taxable year, but this deduction is allowable only to the extent of any net
mark-to-market
gains for prior years. Gains from an actual sale or other disposition of the ordinary sharesOrdinary Shares or ADSs will be treated as ordinary income, and any losses incurred on a sale or other disposition of the sharesthereof will be treated as an ordinary loss to the extent of any net
mark-to-market
gains for prior years. Once made, the election cannot be revoked without the consent of the IRS unless the ordinary sharesOrdinary Shares or ADSs cease to be marketable“marketable stock.

However, a
mark-to-market
election generally cannot be made for equity interests in any lower-tier PFICs that we own, unless shares of such lower-tier PFIC are themselves “marketable stock.” As a result, even if a U.S. Holder validly makes a
mark-to-market
election with respect to our ordinary sharesOrdinary Shares or ADSs, the U.S. Holder may continue to be subject to the PFIC rules (described above) with respect to its indirect interest in any of our investments that are treated as an equity interest in a PFIC for U.S. federal income tax purposes. U.S. Holders should consult their tax advisersadvisors as to the availability and desirability of a
mark-to-market
election, as well as the impact of such election on interests in any lower-tier PFICs.

Unless otherwise provided by the U.S. Treasury, each U.S. shareholder of a PFIC is required to file an annual report containing such information as the U.S. Treasury may require. A U.S. Holder’s failure to file thesuch annual report will cause the statute of limitations for such U.S. Holder’s U.S. federal income tax return to remain open with regard to the items required to be included in such report until three years after the U.S. Holder files the annual report, and, unless such failure is due to reasonable cause and not willful neglect, the statute of limitations for the U.S. Holder’s entire U.S. federal income tax return will remain open during such period. U.S. Holders should consult their tax advisersadvisors regarding the requirements of filing such information returns under these rules.

Taxation of Distributions

Subject to the discussion above under “Passive Foreign Investment Company Rules,” distributions paid on ordinary sharesOrdinary Shares or ADSs, other than certain
pro rata
distributions of ordinary sharesOrdinary Shares or ADSs, will generally be treated as dividends to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because we may not calculate our earnings and profits under U.S. federal income tax principles, we expect that distributions generally will be reported to U.S. Holders as dividends. Subject to applicable limitations, dividends paid to certain
non-corporate
U.S. Holders may be taxable at preferential rates applicable to “qualified dividend income.” However, the qualified dividend income treatment may not apply if we arethe Company is treated as a PFIC with respect to the U.S. Holder. The amount of the dividend will be treated as foreign-source dividend income to U.S. Holders and will not be eligible for the dividends-received deduction generally available to U.S. corporations under the Code.corporations. Dividends will generally be included in a U.S. Holder’s income on the date of the U.S. Holder’s receipt of the dividend. The amount of any dividend income paid in foreign currency will be the U.S. dollarDollar amount calculated by reference to the exchange rate in effect on the date of actual or constructive receipt, regardless of whether the payment is in fact converted into U.S. dollars.

Dollars.

If the dividend is converted into U.S. dollarsDollars on the date of receipt, a U.S. Holder should not be required to recognize foreign currency gain or loss in respect of the dividend income. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollarsDollars after the date of receipt. Such gain or loss would generally be treated as U.S.-source ordinary income or loss. The amount of any distribution of property other than cash (and other than certain pro rata distributions of ordinary sharesOrdinary Shares or ADSs or rights to acquire ordinary sharesOrdinary Shares or ADSs) will be the fair market value of such property on the date of distribution. For foreign tax credit purposes, our dividends will generally be treated as passive category income.

Sale or Other Taxable Disposition of Ordinary Shares and ADSs

Subject to the discussion above under “Passive Foreign Investment Company Rules,” gain or loss realized on the sale or other taxable disposition of ordinary sharesOrdinary Shares or ADSs will be capital gain or loss, and will be long-termsuch capital gain or loss will be long-term if the U.S. Holder held the ordinary sharesOrdinary Shares or ADSs for more than one year. The
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amount of the gain or loss will equal the difference between the U.S. Holder’s tax basis in the ordinary sharesOrdinary Shares or ADSs disposed of, and the amount realized on the disposition, in each case as determined in U.S. dollars.Dollars. This gain or loss will generally be U.S.-source gain or loss for foreign tax credit purposes. The deductibility of capital losses is subject to limitations.

If the consideration received by a U.S. Holder is not paid in U.S. dollars,Dollars, the amount realized will be the U.S. dollarDollar value of the payment received determined by reference to the spot rate of exchange on the date of the sale or other disposition. However, if the ordinary sharesOrdinary Shares or ADSs are treated as traded on an “established securities market” and you arethe U.S. Holder is either a cash basis taxpayer or an accrual basis taxpayer that has made a special election (which must be applied consistently from year to year and cannot be changed without the consent of the IRS), youthe U.S. Holder will determine the U.S. dollarDollar value of the amount realized in a
non-U.S. dollar
Dollar currency by translating the amount received at the spot rate of exchange on the settlement date of the sale. If you arethe U.S. Holder is an accrual basis taxpayer that is not eligible to or does not elect to determine the amount realized using the spot rate on the settlement date, youthe U.S. Holder will recognize foreign currency gain or loss to the extent of any difference between the U.S. dollarDollar amount realized on the date of sale or disposition and the U.S. dollarDollar value of the currency received at the spot rate on the settlement date.

FOR U.S. HOLDERS, CERTAIN SIGNIFICANT AND POTENTIALLY ADVERSE U.S. FEDERAL INCOME TAX CONSEQUENCES WOULD RESULT FROM CLASSIFICATION OF THE COMPANY AS A PFIC. WE STRONGLY URGE YOUINVESTORS TO CONSULT YOURTHEIR TAX ADVISORADVISORS REGARDING THE IMPACT OF OURA PFIC STATUSCLASIFICATION ON YOURAN INVESTMENT IN THEOUR ORDINARY SHARES OR ADSs.
Information with Respect to Foreign Financial Assets
Certain U.S. Holders may be required to report information relating to holdings of Ordinary Shares or ADSs, AS WELL AS THE APPLICATION OF THE PFIC RULES TO YOUR INVESTMENT IN THE ORDINARY SHARES ORsubject to certain exceptions (including an exception for Ordinary Shares or ADSs held in accounts maintained by certain U.S. financial institutions). U.S. Holders should consult their tax advisers regarding their reporting obligations with respect to their ownership and disposition of the Ordinary Shares or ADSs.

Information Reporting and Backup Withholding

Payments of dividends and sales proceeds that are made within the United States or through certain
U.S.-related
financial intermediaries generally are subject to information reporting, and may be subject to backup withholding, unless (i) the U.S. Holder is a corporation or other exempt recipient or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding.

Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the holder’sU.S. Holder’s U.S. federal income tax liability and may entitle it to a refund, provided that the required information is furnished in a timely furnishedmanner to the IRS.

Information with RespectInternal Revenue Service.

Distribution of dividends from Norwegian companies to Foreign Financial Assets

Certain U.S. Holders who areforeign companies and individuals (and, under proposed regulations, certain entities) may be required to report information relating to the ordinary shares or ADSs, subject to certain exceptions (including an exception

Norwegian non-refundable withholding
tax. While Norway and the United States are parties to international tax treaties addressing withholding tax, not all countries in which a holder may be domiciled allow for ordinary shares or ADSs held in accounts maintained by certain U.S. financial institutions). U.S. Holders should consult their tax advisers regarding their reporting obligations with respect to their ownership and disposition ofdeduction for the ordinary shares or ADSs.

Norway Taxation

General

Norwegian withholding tax. (See “NORWAY TAXATION” below.)

NORWAY TAXATION
Non-Resident
Shareholders
The following is a summary of certainNorwegian tax matters relatedrules applicable to purchase, holding and disposalholders of our ordinary shares. The statements hereinOrdinary Shares or ADSs who are unless otherwise stated, based on the laws, rules and regulations in force in Norway as of the date of this report, and are subject to any changes in law occurring after such date. Such

changes could possibly be made on a retrospective basis. Tax rates indicated below are applicable for the income year 2020. The tax legislation of the investor’s member state in the EEA or country of residence/incorporation and of the issuer’s country of incorporation may have an impact on the income received from the securities.

The following summary is of a general nature and does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to acquire, own or dispose shares or subscription rights in our company. Furthermore, the summary only focuses on the shareholder categories explicitly mentioned below (individual shareholders and limited liability companies). Shareholders are advised to consult their own tax advisors concerning the overall tax consequences of their ownership of shares. The summary only addresses Norwegian tax laws.

Norwegian Shareholders

Taxation of dividends—Individual shareholders

Dividends distributed to Norwegian individual shareholders are taxable as general income. The taxable dividend, less a calculated tax-free allowance, is grossed up to 144%, which amount is taxed at the general income tax rate of 22% (resulting in an effective tax rate of 31.68%). The tax-free allowance shall be calculated on a share by share basis, and the allowance for each share will be equal to the cost price of the share, multiplied by a risk-free interest rate. This risk-free interest rate is set in January of the year following the income year. Any part of the calculated allowance one year exceeding the dividend distributed on the share will be carried forward to the following years and reduce the taxable dividend income. Unused allowance will also be included in the basis for calculating the tax-free allowance later years. The tax-free allowance is calculated for each calendar year and allocated solely to Norwegian individual shareholders holding shares at the expiry of the relevant income year.

Taxation of dividends—Corporate shareholders (Limited liability companies)

Dividends distributed to a shareholder, which is a limited liability company residentresidents in Norway for tax purposes or Norwegian corporate shareholders, and holding more than 90% of the shares and votes in the distributing company, are fully exempt from taxation. To other corporate shareholders 3% of the dividends shall be subject to general income tax at the 22% rate (resulting in an effective tax rate of 0.66%

(“Non-resident
Shareholders”).

Taxation on realization of shares—Individual shareholders

Sale, redemption or other disposal of shares is considered a realization for Norwegian tax purposes. A capital gain or loss generated by a Norwegian individual shareholder through a disposal of shares is taxable or tax deductible in Norway. Such capital gain or loss is included in or deducted from the basis for computation of general income in the year of disposal. The gain is subject to tax and the loss is tax deductible irrespective of the duration of the ownership and the number of shares disposed of.

The capital gain is calculated on the consideration received less the cost price of the share and transactional expenses. The taxable gain, less any unused calculated tax-free allowance, is grossed up to 144%, which amount is taxed at the general income tax rate of 22% (resulting in an effective tax rate of 31.68%). The tax-free allowance for each share is equal to the total of any unused tax-free allowance amounts calculated for this share for previous years (see “—Taxation of dividends—Individual shareholders” above), which exceeded dividends distributed on this share. The calculated tax-free allowance may only be deducted in order to reduce a taxable gain calculated upon the realization of the share and may not be deducted in order to produce or increase a loss for tax purposes.

If the shareholder owns shares acquired at different points in time, the shares that were acquired first will be regarded as the first to be disposed of, on a first-in first-out basis.

Non-resident

Taxation on realization of shares—Corporate shareholders (Limited liability companies)

Norwegian corporate shareholders are not subject to tax on capital gains related to realization of shares in a Norwegian company, and losses related to such realization are not tax deductible.

Taxation related to independent subscription rights—Individual shareholders

A Norwegian individual shareholder’s subscription for independent subscription rights is not subject to tax in Norway. Costs related to the subscription for independent subscription rights will be added to the cost price of the independent subscription right.

Exercise of independent subscription rights is not taxable; the cost price of the subscription right shall be added to the tax base of the shares acquired.

Sale and other transfer of subscription rights is considered as realization for Norwegian tax purposes. A capital gain or loss generated by a Norwegian individual shareholder through a realization of independent subscription rights is taxable or tax deductible in Norway. Such capital gain or loss is generally included in or deducted from the basis for computation of general income in the year of disposal. The general income grossed up to 144% and taxed at the rate of 22% (resulting in an effective tax-rate of 31.68%).

However, please note that the realized gains related to independent subscription rights granted to Norwegian employees as a consequence of their employment will be included in the basis for calculating their salary payments. Such salary payments are subject to taxation at a marginal tax rate of 46.4%. In addition, the employer will be obligated to pay social security contributions at a rate normally of 14.1%.

Taxation related to independent subscription rights—Corporate shareholders

A Norwegian corporate shareholder’s subscription for independent subscription rights is not subject to taxation in Norway. Costs related to the subscription for independent subscription rights will be added to the cost price of the independent subscription rights.

Norwegian corporate shareholders are generally exempt from tax on capital gains upon the sale or other realization of independent subscription rights to shares in a Norwegian company, and losses are not tax deductible.

Net wealth tax

The value of shares is included in the basis for the computation of wealth tax imposed on Norwegian individual shareholders. The marginal wealth tax rate is 0.85% of the value assessed. The value for assessment purposes for shares on Oslo Børs is 65% (from January 1, 2020) of the listed value as of January 1 in the year of assessment. Norwegian corporate shareholders are not subject to net wealth tax.

Inheritance tax

Effective January 1, 2020, there is no inheritance tax in Norway.

Non-Resident Shareholders

This section summarizes Norwegian tax rules relevant to shareholders who are not resident in Norway for tax purposes, or Non-resident shareholders. Non-resident shareholders’Shareholders’ tax liabilities in their home country or other countries will depend on applicable tax rules in the relevant country.

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Taxation of dividends

Dividends distributed to shareholders who are individuals not resident in Norway for tax purposes, or
Non-resident individual shareholders, are
Shareholders, as a general rule, are subject to withholding tax at a rate of 25%. The withholding tax rate of 25% is normally reduced through tax treaties between Norway and the country in which the shareholder
Non-resident
Shareholders resides. As of the date of this Annual Report, a withholding rate of 15% is resident. Theapplicable to dividends distributed by a Norwegian company to a U.S. taxpayer, pursuant to tax treaty. In the event the Company were to declare a dividend, IDEX has a statutory withholding obligation lies withobligation.
Non-resident
Shareholders residing within the company distributingEEA area are subject to ordinary withholding tax but are entitled to apply for a partial refund of the dividends.

withholding tax.

The above generally applies also to shareholders who
Non-resident
Shareholders that are limited liability companies not resident in Norway for tax purposes, or Non-resident corporate shareholders.companies. However, dividends distributed to such
Non-resident corporate shareholders
Shareholders resident within the EEA for tax purposes are exempt from Norwegian withholding tax, provided the shareholder genuinely
Non-resident
Shareholder is established and conducts business activity within the EEA.

Non-resident individual shareholders resident within

Ordinary Shares or ADSs registered in the EEA area are subject to ordinary withholding tax, but entitled to apply forname of a partial refund of the withholding tax, equal to a calculated tax-free allowance similar to the calculated allowance used by Norwegian individual shareholders, ref above.

Nominee registered sharesnominee will be subject to withholding tax at a rate of 25%, unless the shareholderbeneficial owner has fulfilled specific documentation requirements, and the nominee has obtained approval from the Norwegian Tax Administration for the dividend to be subject to a lower withholding tax rate.

Non-resident shareholders
Shareholders that have sufferedincurred a higher withholding tax than set out by an applicable tax treaty or the Norwegian Tax Act may apply to the Norwegian tax authoritiesTax Administration for a refund of the excess withholding tax deducted.

If a
Non-resident shareholder
Shareholder is carrying on business activities in Norway, and the sharesholding of Ordinary Shares or ADSs are effectively connected with such activities, the shareholder
Non-resident
Shareholder will be subject to the same taxation as Norwegian shareholders, as described above.

Taxation on realization of shares or independent subscription rights

Realization of shares or independent subscription rights by a
Non-resident
individual or corporate shareholder will not be subject to taxation in Norway unless the
Non-resident
shareholder is holding the shares or warrants in connection with the conduct of a trade or business in Norway, in which case the tax treatment is as described for Norwegian shareholders.

Net wealth tax

Generally,
Non-resident
Shareholders not resident in Norway for tax purposes are not subject to Norwegian net wealth tax. Foreign individual shareholdersHowever,
Non-resident
Shareholders can however be taxablesubject to tax if the shareholding is effectively connected toholdings of Ordinary Shares or ADSs are associated with the conduct of trade or business in Norway.

VAT and transfer taxes

No VAT, stamp or similar duties are currently imposed in Norway on the transfer of shares whether on acquisition or disposal.

F.

Dividends and Paying Agents

Agents.

Not applicable.

G.

Statement by Experts

Experts.

Not applicable.

H.

Documents on Display

Display.

We are subject to the information reporting requirements of the Exchange Act applicable to foreign private issuers and under those requirements will file reports with the SEC. Those reports may be inspected without charge at the locations described below. As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our
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Directors, officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as United States companies whose securities are registered under the Exchange Act. Nevertheless, we intend to file with the SEC annual reports on Form
20-F
containing financial statements that have been examined and reported on, with and opinion expressed by an independent registered public accounting firm.

We maintain a corporate website at www.idexbiometrics.com.www.idexbiometrics.com. Information contained in, or that can be accessed through, our website is not a part of, and shall not be incorporated by reference into, this report. We have included our website address in this report solely as an inactive textual reference.

The Securities and Exchange CommissionSEC maintains a website (www.sec.gov) that contains reports proxy and information statements and other informationfilings regarding registrants, such as IDEX Biometrics ASA, that file electronically with the SEC.

With respect to references made in this annual reportAnnual Report to any contract or other document of our company,the Company, such references are not necessarily complete and youreaders should refer to the exhibits attached or incorporated by reference to this annual reportAnnual Report for copies of the actual contract or document.

I.

Subsidiary Information

Information.

Not required.

Item 11.

Quantitative and Qualitative Disclosures About Market Risk.

Foreign Currency Exchange Risk

Our

The Company’s transactions are commonly denominated in U.S. Dollars.Dollars (“USD”), the Company’s functional currency. However, we incurthe Company incurs a portion of ourits expenses in other currencies, primarily Norwegian Krone (“NOK”), British Pounds Norwegian Krone, Euros(“GBP”), and Chinese Yuan (“CNY”), and areis exposed to changes in the effectsrates of exchange between the USD and these exchange rates. We seekcurrencies. IDEX seeks to minimize this exposure by maintaining currency cash balances at targeted levels appropriate to meet foreseeable short to
mid-term
expenses in these other currencies. Excess cash and cash equivalents have been kept in Norwegian Krone. Starting 2021, excess cash and cash equivalents are held in US Dollar. We doThe Company does not use forward exchange contracts or other hedging strategies to manage exchange rate exposure. Excess cash balances are generally held in
USD-denominated
accounts.
A 10% change in the relative value of USD to NOK would not have had a material effect on the carrying value of the Company’s net financial assets and liabilities in foreign currencies at December 31, 2021. A 10% increase in the value of the Norwegian KroneNOK relative to the U.S. dollar or other currenciesUSD would have had a corresponding effect on the carrying value of our net financial assets and liabilities in foreign currencies at December 31, 2020, and 2019. The amount would have been $0.7 million,December 31, 2019, of approximately $700 thousand and $1.4 million, respectively.

Interest Rate Risk

As of December 31, 20202021, and 2019,2020, we had cash and cash equivalents of $33.8 million and $7.3 million, respectively. As IDEX emphasizes capital preservation and $14.1 million, respectively. Ourliquidity in managing its cash, the Company’s exposure to interest rate sensitivity is impactedinfluenced primarily by changes in the underlying bank interest rates in Norway. Our surplusNorway, where the Company’s cash and cash equivalentsaccounts are investedconcentrated. Cash is held in
non-interest-bearing
transactional accounts and interest-bearing savings accounts, with terms up to three months. We have not entered into investments for trading or speculative purposes. Our depositsall of which are considered highly liquid. Accordingly, an immediate one percentage point change in interest rates would not gain or losehave a material effect on the fair market value onthe Company’s cash accounts.
As the Company has no debt to third-party lenders, it is not exposed interest rate changes. Interest income would changerisks associated with variable rate debt. In calculating the recorded and carrying values of leases, interest rate.

rates are a variable in the calculations of these values, but do not represent a meaningful level of risk of material changes in these values.

We have

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Credit and Liquidity Risk
IDEX extends customary credit terms to customers, reflecting its assessment of their individual creditworthiness. The Company does not believe it was exposed to significant credit risk associated with its Accounts receivable, trade, balance as of December 31, 2021. (See Note 11—Accounts receivable.) If revenue continues to increase, such balances from a broadening customer base will expand, potentially increasing the Company’s exposure to credit risk.
The Company believes it faces minimal liquidity risk, as IDEX’s cash is on deposit with reputable, well-capitalized financial institutions in Norway, the United Kingdom, and the United States. The Company has no debt to financial institutions or other interest-bearing debt. Consequently we have no interest rate risk on debt.

Credit and Liquidity Risk

We have a relatively short commercial history and limited revenue in the periods presented. We do not believe we had significant credit risk relating to our trade receivables as of December 31, 2020 and 2019. Our cash and bank deposits are on deposit with financial institutions with a credit rating equivalent to the main Norwegian clearing banks. We have no debt to financial institutions. We maintainmaintains adequate bank balances to meet anticipated liabilities as they fallbecome due throughfor at least twelve months from the second quarterdate of 2022 .

this report.

Inflation Risk

We do not believe thatprice inflation has had a material effect, to date, on our business, operational performance, or financial conditionposition. However, during the fourth quarter of 2021, certain vendors notified the Company of price increases, either immediate or results of operations.to be phased in during 2022. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases.increases for our products. Our inability or failure to do so could harm our business, operational performance, or financial condition and results of operations.

position.
Item 12.

Description of Securities Other than Equity Securities.

A.

Debt Securities

Not applicable.

B.

Warrants and Rights

Not applicable.

C.

Other Securities

Not applicable.

D.

American Depositary Shares

The Bank of New York Mellon, as depositary,Depositary, registers and delivers American Depositary Shares, also referred to as ADSs. Each ADS represents 75 Ordinary Shares (or a right to receive 75 Ordinary Shares) deposited with Nordea Bank Norge, ASA, which serves as custodian in Norway for the depositary in the Kingdom of Norway. Each ADS will also represent any other securities, cash or other property that may be held by the depositary.Depositary. The deposited shares together with any other securities, cash or other property held by the depositary are referred to as the deposited securities. The depositary’sDepositary’s office at which the ADSs will beare administered and its principal executive office are located at 240 Greenwich Street, New York, New York 10286.

You

An investor may hold ADSs either (A) directly, (i) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate evidencing a specific number of ADSs, registered in yourthe investor’s name, or (ii) by having uncertificated ADSs registered in yourthe investor’s name, or (B) indirectly, by holding a security entitlement in ADSs through youra broker or other financial institution that is a direct or indirect participant in The Depository Trust Company, also called DTC. If you hold ADSs directly, you are a registered ADS holder, also referred to as an ADS holder. This description assumes you are an ADS holder. If you holdinvestor holds the ADSs indirectly, youthat investor must rely on the procedures of youra broker or other financial institution to assert the rights of ADS holders described in this section. YouAn investor should consult with youra broker or financial institution to find out what those procedures are.

Registered holders of uncertificated ADSs will receive statements from the depositaryDepositary confirming their holdings.

As an ADS holder, we

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An investor holding our ADSs will not treat yoube treated as one of our shareholders and you will not have shareholder rights.the rights available to our holders of our Ordinary Shares. Norwegian law governs shareholder rights. The depositaryDepositary will be the holder of the sharesOrdinary Shares underlying your ADSs. As aA registered holder of ADSs you will have ADS holder rights. A deposit agreement among us, the depositary,Company, the Depositary, ADS holders, and all other persons indirectly or beneficially holding ADSs sets out such ADS holder rights, as well as the rights and obligations of the depositary.Depositary. New York law governs the ADSs and the deposit agreement, except with respect to its authorization and execution by us, which shall be governed by the laws of Norway.

When required in order to comply with applicable laws and regulations or the articlesour Articles of associationAssociation or similar document of ours (as in effect from time to time) or the rules and regulations of the Oslo Børs, the Nasdaq Stock Market LLC, or of any other stock exchange on which the sharesOrdinary Shares or ADSs are registered, traded, or listed, or any book-entry settlement system, we may from time to time request, and may from time to time request the depositaryDepositary to request, certain information from youan ADS holder relating to: (a) the capacity in which you hold ADSs are held, (b) the identity of any Holdersholders or other persons or entities then or previously interested in those American Depositary SharesADSs and the nature of those interests, (c) if for any reason, the proportion of the shares you ownOrdinary Shares or ADSs owned reaches, exceeds, or falls below the thresholds specified under Norwegian law, and (d) any other matter wherefor which disclosure of such matter is, in our reasonable opinion, required for that compliance.

As an ADS holder, you agreean investor agrees to comply with the laws and regulations of United States and Norway (if and to the extent applicable) with respect to the disclosure requirements regarding beneficial ownership of shares,Ordinary Shares, all as if the ADSs were the Ordinary Shares represented thereby, including requirements to make notifications and filings within the required timeframes to us, the U.S. Securities and Exchange Commission,Company, the SEC, the Financial Supervisory Authority of Norway, and any other authorities in the United States or in Norway

Norway.

ADS Fees and Expenses

Persons depositing or withdrawing shares or ADS holders must pay:For:

$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)

Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property

Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates

$.05 (or less) per ADS

Any cash distribution to ADS holders

A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs

Distribution of securities distributed to holders of deposited securities (including rights) that are distributed by the depositary to ADS holders

$.05 (or less) per ADS per calendar year

Depositary services

Registration or transfer fees

Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares

Expenses of the depositary

Cable (including SWIFT) and facsimile transmissions (when expressly provided in the deposit agreement)

Converting foreign currency to U.S. dollars

Taxes and other governmental charges the depositary or the custodian has to pay on any ADSs or shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes

As necessary

Any charges incurred by the depositary or its agents for servicing the deposited securities

As necessary

The depositaryDepositary collects its fees for delivery and surrender of ADSs directly from investors depositing sharesOrdinary Shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositaryDepositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositaryDepositary may collect its annual fee for depositaryDepositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositaryDepositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated to pay those fees. The depositaryDepositary may generally refuse to providefee-attracting services until its fees for those services are paid.

From time to time, the depositaryDepositary may make payments to usthe Company to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program, waive fees and expenses for services provided to us by the depositaryDepositary, or share revenue from the fees collected from ADS holders. In performing its duties under the deposit agreement, the depositaryDepositary may use brokers, dealers, foreign currency dealers, or other service providers that are owned by or affiliated with the depositaryDepositary and that may earn or share fees, spreads, or commissions.

The depositaryDepositary may convert currency itself or through any of its affiliates, or the custodian or we may convert currency and pay U.S. dollars to the depositary.Depositary. Where the depositaryDepositary converts currency itself or through any of its affiliates, the depositaryDepositary acts as principal for its own account and not as agent, advisor, broker, or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account. The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement and the rate that the depositaryDepositary or its affiliate receives when buying or selling foreign currency for its own account. The depositaryDepositary makes no representation that the exchange rate used or obtained by it or its affiliate in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that the method
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by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’sDepositary’s obligation to act without negligence or bad faith. The methodology used to determine exchange rates used in currency conversions made by the depositaryDepositary is available upon request. Where the custodian converts currency, the custodian has no obligation to obtain the most favorable rate that could be obtained at the time or to ensure that the method by which that rate will be determined will be the most favorable to ADS holders, and the depositaryDepositary makes no representation that the rate is the most favorable rate and will not be liable for any direct or indirect losses associated with the rate. In certain instances, the depositaryDepositary may receive dividends or other distributions from the U.S. dollarsDollars that represent the proceeds of a conversion of foreign currency or translation from foreign currency at a rate that was obtained or determined by us and, in such cases, the depositaryDepositary will not engage in, or be responsible for, any foreign currency transactions and neither it nor we make any representation that the rate obtained or determined by us is the most favorable rate and neither it nor we will be liable for any direct or indirect losses associated with the rate.

Payment of Taxes

You

An ADS holder will be responsible for any taxes or other governmental charges payable on yourheld ADSs or on the deposited securities represented by any of yoursuch ADSs. The depositaryDepositary may refuse to register any transfer of youran investor’s ADSs or allow you to withdrawthe withdrawal of the deposited securitiesOrdinary Shares represented by yourthose ADSs until those taxes or other charges are paid. It may apply payments owed to youan investor or sell deposited securitiesOrdinary Shares represented by youran investor’s ADSs to pay any taxes owed, and youthat investor will remain liable for any deficiency. If the depositaryDepositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send to ADS holders any property, remaining after it has paid the taxes.

107

PART II

Item 13.

Defaults, Dividend Arrearages and Delinquencies.

Not applicable.

Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds.

Not applicable.

Item 15.

Disclosure Controls and Procedures.

We qualify as an “emerging growth company” as defined in the U.S. Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. This includes an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002. We may take advantage of this exemption for up to five years or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company if we have more than $1.07 billion in total annual gross revenue, have more than $700.0 million in market value of our Ordinary Shares held by
non-affiliates
or issue more than $1.0 billion of
non-convertible
debt over a three-year period.
A.

Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rules
13a-15(e)
and
15d-15(e)
under the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our chief executive officerChief Executive Officer (
principal executive officer
) and chief financial officerChief Financial Officer (
principal financial officer
), as appropriate, to allow timely decisions regarding required disclosure.

Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules
13a-15(e)
and
15d-15(e)
of the Exchange Act) as of December 31, 2020,2021, have concluded, that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level, having implemented the remediation actions described further below.

level.
B.

Management’s Annual Report on Internal Control Over Financial Reporting

This annual report does not include a report

The Company’s management is responsible for establishing and maintaining an adequate system of management’s assessment regarding internal control over financial reporting.
Internal control over financial reporting dueis a process designed to a transition period established by rulesprovide reasonable assurance regarding the reliability of the SecuritiesCompany’s financial reporting and the preparation of financial statements in accordance with IFRS. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the Board of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the Company’s Consolidated Financial Statements.
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Based on an evaluation of the effectiveness of the Company’s disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer have concluded, as of December 31, 2021, such disclosure controls and procedures are effective to ensure that information required to be disclosed within a Company filing made pursuant to the Exchange Commission for newly public companies.

Act is recorded, processed, and reported within the time period specified in the rules and forms of the SEC.
C.

Attestation Report of the Registered Public Accounting Firm

This annual reportAnnual Report does not include an attestation report of the company’sCompany’s internal control over financial reporting by the Company’s registered public accounting firm, dueas the Company currently is exempt from the attestation requirement, pursuant to a transition period established by rulesthe provisions of the Securities and Exchange Commission for newly public companies.

JOBS Act.
D.

Changes in Internal Control Over Financial Reporting

There hashave been no changechanges in ourthe Company’s internal control over financial reporting duringidentified in connection with the year ended December 31, 2020evaluation described above that hashave materially affected, or isare reasonably likely to materially affect, ourthe company’s internal control over financial reporting.

Item 16A.

Audit Committee Financial Expert.

Our board of directorsBoard has determined that Stephen A. Skaggs is an “audit committee financial expert” as defined by SEC rules and regulations and has the requisite financial sophistication under the applicable Nasdaq rules and regulations of the Nasdaq Stock Market.regulations. Our board of directorsBoard has determined that Mr. Skaggs is independent, as such term is defined in Rule
10A-3
under the Exchange Act and under theNasdaq listing standards of the Nasdaq Stock Market.

II-1

standards.


Item 16B.

Code of Conduct and Code of Ethics.

We have adopted a Code of Conduct and Code of Ethics applicable to all of our employees, senior managementongoing individual contractors, and directors. Theour Board. Our Code of Conduct and Code of Ethics is available on our website at www.idexbiometrics.com.

www.idexbiometrics.com.
Item 16C.

Principal Accountant Fees and Services.

The following table sets out the aggregate fees related to professional services rendered by our external auditor, Ernst & Young AS (“EY”), for the fiscalcalendar years 20202021 and 2019:

   Year Ended December 31, 
       2020           2019     

Audit services

  $243   $476 

Audit-related services

   —      —   

  Tax services

   —      8 

Other services

   12    5 
  

 

 

   

 

 

 
  $255   $489 
  

 

 

   

 

 

 

2020:

   
Year Ended December 31,
 
($000s)  
2021
   
2020
 
Audit services
  $352   $235 
Audit-related services
   22    8 
Tax services
   7    —   
Other services
   24    12 
  
 
 
   
 
 
 
  $405   $255 
  
 
 
   
 
 
 
Audit fee is defined asservices
represents the feefees for standardthe audit work that must be performed every yearby EY in order to issue an opinion on our Consolidatedconsolidated financial statements and to issue reports on theour statutory financial statements. ItThe definition also includes fees for certain other audit services, which are services that only the designated independent auditor reasonably can reasonably provide, such as the auditing of
non-recurring
transactions, and the application of new accounting policies, and limited reviews of our quarterly financial results.

Audit-related services
 represents fees include for other assurance and related services provided by auditors,EY, but not limited to those that can only reasonably can be provided by the external auditor who signs the audit report, thatEY, which are reasonably related to the performance of the audit.

109

Tax services
and
Other services
represent fees,
 include approved by our Audit Committee, for services if any,not related to the audit provided by EY, pursuant to the auditors within the frameworkprovisions of the Sarbanes-Oxley Act, i.e. certain agreed procedures.

Act.
Item 16D.

Exemptions from the Listing Standards for Audit Committees.

Not applicable.

Item 16E.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

Not applicable.

Item 16F.

Change in Registrant’s Certifying Accountant.

Not applicable.

Item 16G.

Corporate Governance.

The Norwegian Public Limited Liability Companies Act (the “Companies Act”) provides the legal and regulatory framework, including provisions for corporate governance, for Norwegian listed companies such as IDEX. The Company adheres to the Norwegian Code of Practice for Corporate Governance (the “Code of Practice”), published by the Norwegian Committee for Corporate Governance, a self-regulating body of eight member organizations (the Confederation of Norwegian Enterprise (and the Owners’ Forum thereof), Finance Norway, the Norwegian Association of Financial Analysts, The Norwegian Auditors’ Association, the Norwegian Securities Funds Association, the Oslo Børs, and the Pension Fund Association).
The Issuer Rules of the Oslo Børs, on which our Ordinary Shares are listed, stipulate that listed companies, such as IDEX, must annually publish a statement on their principles of corporate governance in accordance with the Code of Practice. We present this statement each year in the Annual Report we deliver to shareholders and file with the Oslo Børs.
Although Norway is not a member of the EU, it is a member of the European Economic Area and has implemented relevant directives of the European Commission into national law, so that the corporate governance framework applicable to Norwegian companies is substantially similar to the framework in place across the EU.
However, Norwegian corporate governance regulations and principles differ from those generally applicable to public companies listed on Nasdaq. Nasdaq Rule 5615(a)(3) provides thatpermits a foreign private issuer, such as us, maythe Company, to rely on home country corporate governance practices, in lieu of certain of the rules in the Nasdaq Rule 5600 Series and Rule 5250(d), provided that wethe foreign private issuer nevertheless complycomplies with Nasdaq’s Notification of Noncompliance requirement (Rule 5625), the Voting Rights requirement (Rule 5640), and that we haveit maintains an audit committee that satisfiesmeeting the requirements of Rule 5605(c)(3), consisting of committee members that meetof the Board meeting the independence requirements of Rule 5605(c)(2)(A)(ii). We comply with the Nasdaq corporate governance rules applicable to foreign private issuers, which means that we

II-2


are permitted to follow

For additional information regarding our reliance on certain corporate governance rules that conform to Norwegian requirements in lieu of many of the Nasdaq corporate governance rules. Accordingly, our shareholders do not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq. We follow Norwegianhome country corporate governance practices, in lieu of Nasdaq corporate governance rules as follows:

We do not intendpursuant to comply with Nasdaq Rule 5605(b)(1)5615(a)(3), which requires that our board of directors be comprised of a majority of independent directors. Such requirements are not required under the laws of Norway. However, the Code of Practice recommends that the majority of the board of directors be independent of the company’s executive personnel and material business contacts, and that at least two of the members of the board of directors be independent of the company’s main shareholders. Therefore, we do make an assessment of the independence of our directors under Norwegian corporate governance practices and have concluded that the majority of our directors are independent based upon those standards.

We do not intend to follow Nasdaq Rule 5605(d)(1) regarding the compensation committee charter or Nasdaq Rule 5605(d)(2) regarding compensation committee composition. Such requirements are not required under the laws of Norway. However, we do maintain a compensation committee in line with Norwegian law. See the section entitledsee “Item 6.C.6. Section C. Board Practices—Committees of Our Board of Directors—Compensation Committee” for additional information.

Practices.”

We do not intend to follow Nasdaq Rule 5605(e)(1)(A) with respect to having director nominees selected by independent directors constituting a majority of our board’s independent directors in a vote in which only independent directors participate or Nasdaq Rule 5605(e)(2) regarding the adoption of a formal written charter or board resolution, as applicable, addressing the nominations process. Such requirements are not required under the laws of Norway. However, we do maintain a nomination committee in line with Norwegian law. The establishment of our nomination committee was resolved by our annual general meeting on May 15, 2012, in accordance with the Code of Practice, and the guidelines for such committee were resolved and adopted by the same annual general meeting, which guidelines address the nominations process, among other things. See the section entitled “Item 6.C. Board Practices—Committees of Our Board of Directors—Nomination Committee” for additional information.

We do not intend to comply with Nasdaq Rule 5610, which requires disclosure within four business days of any determination to grant a waiver of the code of business conduct and ethics to directors and officers.

We do not intend to follow Nasdaq Rule 5620(c) regarding quorum requirements applicable to meetings of shareholders. Such quorum requirements are not required under the laws of Norway. In Norway, only a limited number of shareholder decisions require unanimity, which effectively imposes a quorum requirement of 100% on such decisions.

We do not intend to follow Nasdaq Rule 5635 regarding shareholder approval requirements in connection with certain corporate actions, such as a change of control of the company. However, under Norwegian law, any issuance of shares requires shareholder approval or must be resolved by the board of directors in accordance with a board authorization from the general meeting of shareholders. Shareholder approval is also required for share-based compensation to the board of directors and certain major agreements between the company and an affiliated party.

We may utilize these exemptions for as long as we continue to qualify as a foreign private issuer.

Item 16H.

Mine Safety Disclosure.

Not applicable.

II-3

Item 16I.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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PART III

Item 17.

Financial Statements.

See pages
F-1
through
F-30
of this annual report.

Annual Report. Our independent public accounting firm is Ernst & Young AS, Oslo, Norway, PCAOB Auditor ID:
1572
.
Item 18.

Financial Statements.

Not applicable.

Item 19.

Exhibits.

      Incorporation by Reference
Exhibit  Description  Schedule/
Form
  File
Number
  Exhibit  File Date
    1.1*  Amended and Restated Articles of Association of IDEX Biometrics ASA        
    2.2  Deposit Agreement  F-6  333-250744  (a)  11/20/20
    2.3  Form of American Depositary Receipt  F-6  333-250744  (a)  11/20/20
    2.4*  Description of Share Capital and Articles of Association        
    2.5*  Description of American Depositary Shares        
    4.1†  IDEX Biometrics ASA 2021 Subscription Rights Incentive Plan  S-8  333-259210  99.1  08/31/21
    4.2†  IDEX Biometrics ASA 2021 Employee Share Purchase Plan  S-8  333-259210  99.2  08/31/21
    4.3  Supply Agreement, by and between IDEX Biometrics ASA and IDEMIA France SAS, dated as of February 13, 2020  F-1  333-250186  10.3  11/19/20
    4.4#  Master Services Agreement, by and between IDEX Biometrics ASA and Bloomberg L.P., dated as of April 4, 2019  F-1  333-250186  10.4  11/19/20
    4.5  Form of Indemnity Agreement between the registrant and its Executive Officers and Directors  F-1  333-250186  10.5  11/19/20
    8.1  Subsidiaries of IDEX Biometrics ASA  F-1  333-250186  21.1  11/19/20
  12.1*  Certification by the Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002        
  12.2*  Certification by the Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002        
111

Table of Contents
      
Incorporation by Reference
Exhibit
  

Description

  
Schedule/

Form
  
File

Number
  
Exhibit
  
File Date
 1.1*Amended and Restated Articles of Association of IDEX Biometrics ASA
    2.2***Deposit AgreementF-6   333-250744(a11/20/20 
    2.3*
  13.1***
  Form of American Depositary ReceiptF-6333-250744(a11/20/20
    2.4*Description of Share Capital and Articles of Association
    2.5*Description of American Depositary Shares
    4.1†***IDEX Biometrics ASA 2020 Subscription Rights Incentive PlanF-1333-25018610.111/19/20
    4.2†***IDEX Biometrics ASA 2020 Employee Share Purchase PlanF-1333-25018610.211/19/20
    4.3***Supply Agreement, by and between IDEX Biometrics ASA and IDEMIA France SAS, dated as of February 13, 2020F-1333-25018610.311/19/20
    4.4#***Master Services Agreement, by and between IDEX Biometrics ASA and Bloomberg L.P., dated as of April 4, 2019F-1333-25018610.411/19/20
    4.5***Form of Indemnity Agreement between the registrant and its executive officers and directorsF-1333-25018610.511/19/20
    8.1***Subsidiaries of IDEX Biometrics ASA3F-1333-25018621.111/19/20
  12.1*Certification by the Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  12.2*Certification by the Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  13.1**
        

III-1


    Incorporation by Reference 
Exhibit

Description

Schedule/
Form
File
Number
ExhibitFile Date
  13.2**
  Certification by the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002        
 
15.1*
  Consent of Ernst & Young AS, the registrant’s independent registered public accounting firm        
101.INS*
  XBRL Instance Document

 
101.SCH*
  XBRL Taxonomy Extension Schema Document

 
101.CAL*
  XBRL Taxonomy Extension Calculation Linkbase Document

 
101.DEF*
  XBRL Taxonomy Extension Definition Linkbase Document

 
101.LAB*
  XBRL Taxonomy Extension Label Linkbase Document

 
101.PRE*
  XBRL Taxonomy Extension Presentation Linkbase Document

 
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*

Filed herewith.

**

Furnished herewith.

***

Previously filed.

Indicates a management contract or any compensatory plan, contract or arrangement.

#

Certain portions of this exhibit have been omitted because they are not material and would likely cause competitive harm toare the type the registrant if disclosed.

treats as private or confidential.

III-2

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Table of Contents

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form
20-F
and that it has duly caused and authorized the undersigned to sign this annual reportAnnual Report on its behalf.

 
IDEX BIOMETRICS ASA
By: 
/s/ Vincent Graziani
Name: Vincent Graziani
Title: Chief Executive Officer

Date: April 23, 2021

III-3

29, 2022

113

Table of Contents

F-1

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of IDEX Biometrics ASA

Opinion on the Financial Statements

We have audited the accompanying consolidated statement
s
of financial positionsposition of IDEX Biometrics ASA (the Company) as of December 31, 20202021 and 2019,2020, the related consolidated statements of profit and loss, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2020,2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20202021 and 2019,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020,2021, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and in conformity with IFRS as adopted by the European Union.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/
Ernst & Young AS

We have served as the Company’s auditor since 2001.

200

0
.
Oslo, Norway

April 23, 2021

2
9

, 2022

F-2

CONSOLIDATED FINANCIAL STATEMENTS

IDEX Biometrics ASA

Consolidated Statements of Profit and Loss (In thousands,($000s, except per share amounts)

      Year Ended December 31, 
   Note  2020  2019  2018 

Revenue:

      

Product

    $1,013  $159  $268 

Service

     82   265   172 
    

 

 

  

 

 

  

 

 

 

Total revenue

  3   1,095   424   440 

Operating expenses:

      

Purchases, net of inventory variation

     275   62   185 

Payroll expenses

  4   17,672   21,750   19,770 

Research and development expenses

  5, 6   1,895   4,385   5,631 

Other operating expenses

  20   5,936   4,641   3,919 

Amortization and depreciation

  10,11,12   1,719   1,633   842 
    

 

 

  

 

 

  

 

 

 

Total operating expenses

     27,497   32,471   30,347 
    

 

 

  

 

 

  

 

 

 

Loss from operations

     (26,402  (32,047  (29,907

Finance income

     26   135   134 

Finance cost

  18   (477  (351  (411
    

 

 

  

 

 

  

 

 

 

Loss before tax

     (26,853  (32,263  (30,184

Income tax benefit (expense)

  8   99   (160  (41
    

 

 

  

 

 

  

 

 

 

Net loss for the year

    $(26,754 $(32,423 $(30,225
    

 

 

  

 

 

  

 

 

 

Loss per share, basic and diluted

  9  $(0.03 $(0.05 $(0.06
    

 

 

  

 

 

  

 

 

 

       
Year Ended December 31,
 
   
Note
   
2021
  
2020
  
2019
 
Revenue:
      
Product       $2,837  $1,013  $159 
Service        3   82   265 
                   
Total revenue        2,840   1,095   424 
Operating expenses:                  
Cost of materials, net of inventory change        1,254   275   62 
Compensation and benefits   4    21,107   17,672   21,750 
Research and development   5, 6    2,680   1,895   4,385 
Other operating expenses    18    7,347   5,936   4,641 
Amortization and depreciation   8, 9, 10    1,802   1,719   1,633 
                   
Total operating expenses        34,190   27,497   32,471 
                   
Loss from operations        (31,350  (26,402  (32,047
Finance income        11   26   135 
Finance cost        (1,123  (477  (351
                   
Loss before tax        (32,462  (26,853  (32,263
Income tax expense (benefit)   6    90   (99  160 
Net loss for the year       $(32,552 $(26,754 $(32,423
                   
Loss per share, basic and diluted   7   $(0.04 $(0.03 $(0.05
                   
Consolidated Statements of Comprehensive Income

       Year Ended December 31, 
   Note   2020  2019  2018 

Net loss for the year

    $(26,754 $(32,423 $(30,225

Other comprehensive income that may be reclassified to profit (loss) in subsequent periods:

      

Foreign currency translation adjustment

     670   (662  (455
    

 

 

  

 

 

  

 

 

 

Total comprehensive income (loss) for the period (net of tax)

    $(26,084 $(33,085 $(30,680
    

 

 

  

 

 

  

 

 

 

       
Year Ended December 31,
 
   
Note
   
2021
  
2020
  
2019
 
Net loss for the year       $(32,552 $(26,754 $(32,423
Other comprehensive income that may be reclassified to profit (loss) in subsequent periods:                  
Foreign currency translation adjustment        10   670   (662
                   
Total comprehensive income (loss) for the period (net of tax)       $(32,542 $(26,084 $(33,085
                   
The accompanying notes are an integral part of these consolidated financial statements.

F-3

IDEX Biometrics ASA

Consolidated Statements of Financial Position (In thousands)

   Note  December 31,
2020
  December 31,
2019
 

Assets

     

Non-current assets:

     

Goodwill

  10  $968  $941 

Intangible assets

  10   2,442   2,605 

Property, plant and equipment

  11   1,667   2,013 

Right-of-use assets

  12   1,016   1,375 

Non-current receivables

     75   152 
    

 

 

  

 

 

 

Total non-current assets

     6,168   7.086 

Current assets:

     

Inventory

  19   859   686 

Trade receivables

  17   487   31 

Prepaid expenses

     1,031   769 

Other current receivables

  17   1,163   772 

Cash and cash equivalents

  13   7,298   14,126 
    

 

 

  

 

 

 

Total current assets

     10,838   16,384 
    

 

 

  

 

 

 

Total assets

    $17,006  $23,470 
    

 

 

  

 

 

 

Equity and liabilities

     

Paid-in capital:

     

Share capital (NOK 0.15 par value per share, 832,146,748 and 717,988,732 shares issued and outstanding at December 31, 2020 and 2019, respectively.

    $17,251  $15,445 

Share premium

     3,608   197,639 

Other paid-in capital

     18,664   15,903 
    

 

 

  

 

 

 

Total paid-in capital

  15,16   39,523   228,987 

Foreign currency translation effects

     (12,322  (12,992

Accumulated loss

     (14,687  (198,183
    

 

 

  

 

 

 

Total equity

     12,514   17,812 

Non-current liabilities:

     

Deferred tax liabilities

  8   —     31 

Non-current lease liabilities

  12   327   610 
    

 

 

  

 

 

 

Total non-current liabilities

     327   641 

Current liabilities:

     

Accounts Payable

  18   631   463 

Income tax payable

  8   —     129 

Current lease liabilities

  18   731   788 

Public duties payable

     320   357 

Other current liabilities

  18   2,483   3,280 
    

 

 

  

 

 

 

Total current liabilities

     4,165   5,017 
    

 

 

  

 

 

 

Total liabilities

     4,492   5,658 
    

 

 

  

 

 

 

Total equity and liabilities

    $17,006  $23,470 
    

 

 

  

 

 

 

($000s)

   
Note
   
December 31,

2021
  
December 31,

2020
 
Assets
     
Non-current
assets:
     
Goodwill   8   $968  $968 
Intangible assets   8    1,965   2,442 
Property, plant, and equipment   9    1,301   1,667 
Right-of-use
assets
   10    357   1,016 
Non-current
receivables
        87   75 
               
Total
non-current
assets
        4,678   6,168 
Current assets:              
Prepaid expenses        851   1,031 
Inventory   13    1,234   859 
Accounts receivable, other   11    703   1,163 
Accounts receivable, trade   11    801   487 
Cash and cash equivalents   14    33,759   7,298 
               
Total current assets        37,348   10,838 
               
Total assets       $42,026  $17,006 
               
Equity and liabilities
              
Paid-in
capital:
              
Share capital (NOK 0.15 par value per share, 1,010,388,454 and 832,146,748 shares issued and outstanding at December 31, 2021 and 2020, respectively
)
       $20,410  $17,251 
Share premium        9,452   3,608 
Other
paid-in
capital
        21,414   18,664 
               
Total
paid-in
capital
   15    51,276   39,523 
Foreign currency translation effects        (12,312  (12,322
Accumulated loss        (1,239  (14,687
               
Total equity        37,725   12,514 
Non-current
liabilities:
              
Non-current
lease liabilities
   10    11   327 
               
Total
non-current
liabilities
        11   327 
Current liabilities:              
Accounts payable   12    685   631 
Current lease liabilities   10    362   731 
Public duties payable        393   320 
Other current liabilities   12    2,850   2,483 
               
Total current liabilities        4,290   4,165 
               
Total liabilities        4,301   4,492 
               
Total equity and liabilities       $42,026  $17,006 
               
The accompanying notes are an integral part of these consolidated financial statements.

F-4

IDEX Biometrics ASA

Consolidated Statements of Changes in Equity (In thousands)

   Share
Capital
   Share
Premium
  Other
Paid-in
Capital
   Foreign
Currency
Translation
Effect
  Accumulated
Loss
  Total
Equity
 

Balance at December 31, 2017

  $12,467   $165,618  $10,404   $(11,875 $(135,535 $41,079 

Share issuance

   29    801   —      —     —     830 

Share-based compensation

   5    —     2,949    —     —     2,954 

Loss for the year

   —      —     —      —     (30,225  (30,225

Other comprehensive income

   —      —     —      (455  —     (455
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Balance at December 31, 2018

   12,501    166,419   13,353    (12,330  (165,760  14,183 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Share issuance

   2,940    31,220   —      —     —     34,160 

Share-based compensation

   4    —     2,550    —     —     2,554 

Loss for the year

   —      —     —      —     (32,423  (32,423

Other comprehensive income

   —      —     —      (662  —     (662
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Balance at December 31, 2019

   15,445    197,639   15,903    (12,992  (198,183  17,812 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Share issuance

   1,729    16,219   —      —     —     17,498 

Share-based compensation

   77    —     2,761    —     —     2,838 

Loss for the year

   —      —     —      —     (26,754  (26,754

Allocation of share premium

   —      (210,250  —      —     210,250   —   

Other comprehensive income

   —      —     —      670   —     670 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Balance at December 31, 2020

  $17,251   $3,608  $18,664   $(12,322 $(14,687 $12,514 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

($000s)

   
Share
Capital
   
Share
Premium
  
Other
Paid-in

Capital
   
Foreign
Currency
Translation
Effect
  
Accumulated
Loss
  
Total
Equity
 
Balance at December 31, 2018  $12,501   $166,419  $13,353   $(12,330 $(165,760 $14,183 
Share issuance   2,940    31,220   —      —     —     34,160 
Share-based compensation   4    —     2,550    —     —     2,554 
Net loss for the year   —      —     —      —     (32,423  (32,423
Other comprehensive income   —      —     —      (662  —     (662
                            
Balance at December 31, 2019  $15,445   $197,639  $15,903   $(12,992 $(198,183 $17,812 
                            
Share issuance   1,729    16,219   —      —     —     17,498 
Share-based compensation   77    —     2,761    —     —     2,838 
Net loss for the year   —      —     —      —     (26,754  (26,754
Allocation of share premium   —      (210,250  —      —     210,250   —   
Other comprehensive income   —      —     —      670   —     670 
                            
Balance at December 31, 2020  $17,251   $3,608  $18,664   $(12,322 $(14,687 $12,514 
                            
Share issuance   3,107    51,205   —      —     —     54,312 
Share-based compensation   52    639   2,750    —     —     3,441 
Net loss for the year   —      —     —      —     (32,552  (32,552
Allocation of share premium   —      (46,000  —      —     46,000   —   
Other comprehensive income   —      —     —      10   —     10 
                            
Balance at December 31, 2021  $20,410   $9,452  $21,414   $(12,312 $(1,239 $37,725 
                            
Refer also to Note 15 to the consolidated financial statements

statements.

The accompanying notes are an integral part of these consolidated financial statements.

F-5

IDEX Biometrics ASA

Consolidated Statements of Cash Flow (In thousands)

       Year Ended December 31, 
   Note   2020  2019  2018 

Operating activities

      

Profit (loss) before tax

    $(26,853 $(32,263 $(30,184

Amortization and depreciation expense

   10,11,12    1,719   1,633   842 

Share-based compensation expense

   4    2,755   2,531   2,969 

Change in inventories

   19    (139  470   (112

Change in accounts receivable

   17    (414  8   26 

Change in accounts payable

   18    141   (124  252 

Change in other working capital items

     (618  895   (280

Other operating activities

     579   43   119 

Interest expense

     (27  103   103 

Other financial items

     —     (238  (314

Taxes paid

     (437  (226  (196
    

 

 

  

 

 

  

 

 

 

Net cash flow from operating activities

     (23,294  (27,168  (26,775
    

 

 

  

 

 

  

 

 

 

Investing activities

      

Purchases of property, plant and equipment

   11    (152  (850  (1,104

Purchases of intangible assets

   10    (181  —     —   

Payments of non-current receivables

   17    75   (6  —   

Interest received

     26   135   134 
    

 

 

  

 

 

  

 

 

 

Net cash flows from investing activities

     (232  (721  (970
    

 

 

  

 

 

  

 

 

 

Financing Activities

      

Net proceeds from issue of shares

   15,16    18,731   34,164   835 

Payments on lease liabilities

   12    (793  (675  —   

Payment related to a financed asset purchase

   18    (500  (500  —   

Net cash flow from financing activities

     17,438   32,989   835 
    

 

 

  

 

 

  

 

 

 

Net change in cash and cash equivalents

     (6,088  5,100   (26,910

Effect of foreign exchange rate changes

     (740  (609  (274

Opening cash and cash equivalents balance

     14,126   9,635   36,819 
    

 

 

  

 

 

  

 

 

 

Cash and cash equivalents at December 31

   13   $7,298  $14,126  $9,635 
    

 

 

  

 

 

  

 

 

 

($000s)

       
Year Ended December 31,
 
   
Note
   
2021
  
2020
  
2019
 
Operating activities
      
Profit (loss) before tax       $(32,462 $(26,853 $(32,263
Amortization and depreciation expense   8, 9, 10    1,802   1,719   1,633 
Share-based compensation expense   16    2,750   2,755   2,531 
Other
non-cash
operating expenses
        95   579   43 
(Increase) decrease in inventories   13    (375  (139  470 
(Increase) decrease in accounts receivable   11    (314  (414  8 
Increase (decrease) in accounts payable   12    53   141   (124
Change in other working capital items        482   (618  895 
Interest expense        (11  (27  103 
Other financial items        —     —     (238
Change in income taxes        447   (437  (226
                   
Net cash flows from operating activities        (27,533  (23,294  (27,168
                   
Investing activities
                  
Purchases of property, plant, and equipment   9    (141  (152  (850
Purchases of intangible assets   8    0     (181  —   
(Payment) collection of
non-current
receivables
   11    (13  75   (6
Interest received        11   26   135 
                   
Net cash flows from investing activities        (143  (232  (721
                   
Financing Activities
                  
Net proceeds from issuance of shares   15    54,992   18,731   34,164 
Payments on lease liabilities   10    (844  (793  (675
Payment related to a financed asset purchase   9    —     (500  (500
Net cash flows from financing activities        54,148   17,438   32,989 
                   
Net change in cash and cash equivalents        26,472   (6,088  5,100 
Effect of foreign exchange on cash balances        (11  (740  (609
Opening cash and cash equivalents balance        7,298   14,126   9,635 
                   
Cash and cash equivalents at December 31   14   $33,759  $7,298  $14,126 
                   
The accompanying notes are an integral part of these consolidated financial statements.

F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except per share amounts)

1. Nature of the Business and Basis of Presentation

Corporate Information

IDEX Biometrics ASA and its wholly-owned subsidiaries (collectively, “IDEX” or the “Company”) is a biometrics company specializingspecialize in the design, development, and sale of fingerprint identification and authentication solutions. The Company’s fingerprint sensors and biometricauthentication solutions are used primarily in touch-freecontactless smart cards, including financial payment cards, access control cards, and electronic devices. card-based devices for the storage of digital currencies.
IDEX Biometrics ASA, (the “parent company”)the parent company, is a public limited liability company incorporated in 1996 in Norway. The address of the head office is Dronning Eufemias gate 16,
NO-0191
Oslo, Norway. IDEX Biometrics ASA’s sharesThe Company’s Ordinary Shares, representing the only class of equity securities issued and outstanding, are listed aton the Oslo Børs, the stock exchange in Oslo, withNorway, under the ticker codesymbol IDEX. IDEX Biometrics ASA ADSs have beenThe Company’s American Depositary Shares (“ADSs”), each ADS representing 75 Ordinary Shares, are listed on the Nasdaq, Capital Market in New York since March 1, 2021. Each ADS represents 75 IDEX shares andunder the ticker code issymbol IDBA.

IDEX is comprised of the Norwegian parent company and its subsidiaries in the United States of America, IDEX(IDEX Biometrics Holding Company Inc. and IDEX Biometrics America Inc. (“IDEX(together, “IDEX America”)), the United Kingdom (UK), IDEX(IDEX Biometrics UK Ltd. (“IDEX UK”)), and the People’s Republic of China IDEX(IDEX Electronics (Shanghai) Co., Ltd. (“IDEX China”)). All subsidiaries are wholly-owned. The parent company holdsis the owner of all intellectual property of IDEX and is the contractual party to all customer and manufacturing partner agreements. All sales are recorded by the parent company. The subsidiaries provide various services to the parent company, mainly within the technical development,associated with engineering, supply-chain administration, and customer interfacing and marketingservice functions.

2. Basis of Presentation
The consolidated financial statements of IDEX have been preparedCompany prepares its Consolidated Financial Statements in accordance with International Financial Reporting Standards (IFRS)(“IFRS”) as issued by the International Accounting Standards Board and IFRS as adopted by the European Union.(“IASB”). The consolidated financial statements have beenare presented in U.S. Dollars (“USD”), and all values are rounded to the nearest thousand ($000), except when otherwise indicated. As of January 1, 2020, the parent company changed its presentation currency from the Norwegian Krone (“NOK”) to USD, and, as of January 1, 2021, the parent company changed its functional currency from NOK to USD.
The change of functional currency from NOK to USD, was determined by to be appropriate, given that the parent company’s operational transactions had come to be primarily dominated in
USD. . 
The Consolidated Financial Statements, prepared on a historical cost basis. Thebasis, include the accounts of the parent company and its subsidiaries, with all intercompany transactions, balances, revenue, expenses, and unrealized internal profit or losses eliminated upon consolidation.
Consistent with IFRS requirements, a going concern assumption has been applied when preparingin the preparation of the consolidated financial statements. The companyCompany’s Board of Directors (the “Board”) confirms the conditions for the going concern assumption have been met, as the Board has concluded the Company has adequate working capital to meet its operating commitments for at least twelve months from the date of this report. The company’s board of directors confirms that the conditions for the going concern assumption are met.

The consolidated financial statements for the year ended December 31, 20202021, presented herein, were approved by the boardBoard on April 
20 2021.

2. Summary of

, 2022.
3. Significant Accounting Policies Changes in accounting policies

IFRS 3 Business Combinations

The amendments to IFRS 3, issued in October 2018 and effective from 1 January 2020, introduce clarification to the definition of a business. The amendments clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs, and they narrow the definitions of a business and of outputs by focusing on goods and services provided to customers and by removing the reference to an ability to reduce costs. The amendments also establish an optional test to identify a concentration of fair value that, if applied and met, would lead to the conclusion that an acquired set of activities and assetsCompany is not a business. IDEX has implemented the amendments effective from 1 January 2020. The amendments are applied for relevant transactions that occur on or after the implementation date but have no effect on the financial statements prior to the implementation. Other changes in standards did not have any material impact on the financial statements.

Standards and interpretations issued but not yet effective:

IDEXaware of, nor does not expect thatit anticipate, any newly issued, but not yet effective, accounting standards, amendments, andor interpretations willthat would have a significant impact on the consolidated financial

F-7

statements or notes for IDEX’s current activity and assets

presented herein. However, any newly issued, but not yet effective, accounting standards, amendments, or interpretations may affectinfluence the accounting for future transactions or arrangements. IDEXarrangements, as well as the future presentation of the Company’s Consolidated Financial Statements. The Company will implement thesuch new accounting standards, andamendments, or interpretations, if any, as they become effective.

Significant

Accounting policies that are significant to the Company’s results and financial position, in terms of materiality of the items to which the policy is applied, are discussed below.
Accounting judgments, based on the use of estimates and assumptions
The application of certain accounting judgments and estimates

The preparation of consolidated financial statements in conformity with IFRSstandards requires management to makeconsiderable judgment based upon estimates and assumptions that affectmay involve high levels of uncertainty at the reported amounts of assets, liabilities, expenses,time the estimates are made. Judgments and disclosures. The judgments, estimates are continually evaluated and related assumptions have beenare based on management’s best understanding of the situation, knowledge of past and recent events,historical experience and other factors, whichincluding expectations of future events that are consideredbelieved to be reasonable under the circumstances. Actual resultsoutcomes may deviate from such assumptions. Estimatesestimates.

Changes in assumptions and underlyingdeviations between estimates and final outcomes may have a material influence on the financial statements in the periods when assumptions are evaluated continuously.

Significantchanged or when uncertainty is resolved. The following represent the notable accounting judgmentsitems requiring management’s judgement, based on the use of estimates and assumptions.

Goodwill
The carrying value of goodwill is recorded initially as the fair value of the consideration paid for IDEX

the assets acquired, less the capitalized value of the identifiable assets and initial impairment charges, if any. As goodwill represents the future economic value of assets acquired in a business combination above the separately recorded values of those assets, subsequent impairment testing involves quantitatively comparing these separately recorded values to the value of the business unit to which the goodwill is assigned. As of December 31, 2021, such comparison indicated the carried value of goodwill was appropriate, and 0 impairment was recorded.

Intangible assets: Research costs are expensed as incurred.
IDEX’s patents and other intellectual property rights created by IDEXthe Company are capitalized and heldrecorded in the consolidated statementsConsolidated Statements of financial positionFinancial Position only when they satisfy the criteria for capitalization. No development costs have been capitalized in 2021, 2020, or 2019, thus all development costs and internal costs related to the creation of intellectual property have been expensed as incurred. 2019.
Acquired intangible assets are capitalized initially at fair value, normally the price allocated to the various assets based on estimated fair value.purchase price. Intangible assets are amortized over their useful economic lives. An assessment of impairment losses on
non-current
assets is made when there is an indication of a decrease in value. Goodwill is tested at minimum annually. If an intangible asset’s carrying amount is higher than the asset’s recoverable amount, an impairment loss will be recognized in the consolidated statements of profit and loss. The recoverable amount is the higher of the fair value less(less costs to sell andto an independent third party) or the calculated value based on the discounted cash flow from continued use. The fair value less costs to sell is the net amount that can be obtained from a sale to an independent third party. TheA recoverable amount is determined separately for each asset. Impairment losses recognized in the consolidated statements of profit and loss for previous periods are reversed when such reversal is evidenced.supported by specific circumstances. Reversal is limited to the lower of the updated recoverable amount and the carrying amount that would have been recognized had no impairment losses been recognized for the asset in prior years. Impairment charges on goodwill are not reversed.

subject to reversal.

IFRS requires that certain intangible assets be tested for impairment annually or when circumstances indicate such assets may be impaired. The carrying value of other (i.e., tangible) assets is tested only when circumstances indicate such assets may be impaired. As of December 31, 2021, the Company determined that there were 0 indicators of impairment, and no impairment was recorded.
F-8

Inventory: Raw
Inventories consist of raw materials, which are part of the trade or manufacturing flow in the sense that the item is embedded in or otherwise becomes a part of the physical delivery to the customer (workwork in process, and finished goods) are inventoried.goods. Materials and components forconsumed in research orand development activities are expensed at the time of purchase and not included asexcluded from inventory. Inventory is heldrecorded at the lower of cost and net realizable value, less impairment, if any. Impairment is assessed quarterly, based on management’s estimates of future consumption of inventories by category. The determination of net realizable value is subject to considerable judgment, as reselling components or other commodity raw materials at any value may not be easily achieved, and the Company’selements of work in progress and finished goods, if impaired (i.e., considered excess or obsolete inventory), generally have no resale value and are part of a new market with varying margins.

Significant accounting estimatesheld for IDEX

Share baseddisposal.

Share-based compensation:
IDEX estimates the fair value of incentive subscription rights (SRs)(“SRs”) at the grant date by using the Black-Scholes option pricing model. The valuation is based on share price and exercise price, share price volatility, interest rates, and durationthe estimated term of the SRs, based on historical assessments of exercise patterns, forfeiture, and assumptions of staff attrition and the likelihood of early exercise. The share-basedattrition. Share-based compensation is expensed, as earned, over the vesting period.period of the underlying SRs. The accrued cost of the employer’s social security tax onCompany’s employment taxes associated with the earned intrinsic value of the SRs is calculated at each consolidated statement of financial position date

Impairment evaluation of goodwill: Goodwill amounts toand recorded concurrently with the related share-based payment expense.

IDEX estimates the fair value of the consideration forEmployee Share Purchas Plan (“ESPP”) at the assets lessgrant date, i.e. the capitalized valuefirst date of the identifiable assets and any impairment charges, if any. Impairment testing of goodwill is based on the estimated fair value or the value in use of the business. The Company considers the relationship between its market capitalization (recoverable amount) and its carrying amount, among other factors, when reviewing for indicators of impairment. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the forecast for the next five years. The recoverable amount is sensitive to the

discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

Financial risk, market risk and capital management

The business risk may be summarized in five points: (i) IDEX has to date earned insufficient revenues compared to costs. IDEX has reported accumulating losses and expects future losses in the short term. (ii) IDEX’s business plan assumes revenue from products which IDEX has traded commercially in large volumes but not in mass production volumes. (iii) Revenue from IDEX’s products depends, among other things, on market factors, which are not controlledcontribution period, by IDEX. (iv) Competitive products may outperform IDEX’s product offering. (v) Some of IDEX’s intended markets remain immature and all are undergoing rapid technological changes.

IDEX’s trade receivables and other receivables have moderate to low credit risk.

IDEX does not actively manage liquid funds, which means that funds are placed in floating-interest rate bank accounts. Investments in property, plant and equipment are only made when mandatory for the needs of the core business. IDEX has been funded by equity since 2010. IDEX will prepare and implement comprehensive capital management and funding policies as and when needed.

Market risk arises from the Company’s exposure to fluctuation in interest rates and currency exchange rates. These risks are managed by maintaining an appropriate mix of cash deposits in the currencies IDEX operates in, placed with a variety of financial institutions for varying periods according to expected liquidity requirements.

Interest Rate Risk

As of December 31, 2020, IDEX had cash and cash equivalents of $7.3 million. The Company’s exposure to interest rate sensitivity is impacted primarily by changes in the underlying bank interest rates in Norway. IDEX’s cash and cash equivalents are invested in interest-bearing savings accounts. The Company has not entered into investments for trading or speculative purposes. Due to the conservative nature of IDEX’s investment portfolio, which is predicated on capital preservation of investments with short-term maturities, an immediate one percentage point change in interest rates would not have a material effect on the fair market value of its portfolio, and therefore the Company does not expect its operating results or cash flows to be significantly affected by changes in market interest rates.

Currency Risk

IDEX’s transactions are commonly denominated in U.S. dollars. However, the Company incurs a portion of its expenses in other currencies, primarily British pounds, Norwegian krone, Euros and Chinese yuan and is exposed to the effects of these exchange rates. IDEX seeks to minimize this exposure by maintaining currency cash balances at levels appropriate to meet foreseeable short to mid-term expenses in these other currencies, with cash being kept in Norwegian krone. The Company does not use forward exchange contracts to manage exchange rate exposure. A 10% increase in the value of the Norwegian krone relative to the U.S. dollar or other currencies would not have had a material effect on the carrying value of IDEX’s net financial assets and liabilities in foreign currencies at December 31, 2020.

Credit and Liquidity Risk

IDEX has a relatively short commercial history and limited revenue in the periods presented. The Company does not believe it had significant credit risk relating to its trade receivables as of December 31, 2019 and 2020.

IDEX’s cash and bank deposits are on deposit with financial institutions with a credit rating equivalent to, or above, the main Norwegian clearing banks. IDEX invests its liquid resources based on the expected timing of expenditures

to be made in the ordinary course of our activities. The Company has no debt to financial institutions and maintains adequate bank balances to meet liabilities as they fall due through for at least twelve months from the date of this report.

COVID-19

The future progression of the pandemic and its effects on the Company’s business and operations are uncertain. The Company continues to monitor the potential impact of COVID-19 on its business and consolidated financial statements. Effective March 2020, all travel and face-to-face meetings ceased and most staff were asked to work from home. Staff that needed to work at an IDEX facility did so in compliance with local government guidelines. There have not been any significant delays in development projects. However, the pandemic has caused certain customer delays in the short-term, including contact-related activities such as biometric card pilots. In addition, the company took actions during the pandemic to reduce costs and the cash burn rate, including temporary payroll reductions which have now been restored.

Significant accounting policies

Consolidation

The Company’s consolidated financial statements comprise IDEX Biometrics ASA and companies in which IDEX Biometrics ASA has a controlling interest. Controlling interest means that IDEX is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Intercompany transactions, balances, revenues and expenses and unrealized internal profit or losses are eliminated upon consolidation.

Revenue

Revenue from contracts with customers is recognized upon satisfaction of the performance obligations for the transfer of goods and services. The revenue amounts that are recognized reflect the consideration to which IDEX is entitled to. Service revenue from services is recognized over time pursuant to the terms and conditions in the agreements. Payment for delivery of products and services is generally due within 30-45 days from delivery or occasionally due in advance. The Company does not have any significant financing components or obligations for warranties, returns, or refunds.

When a contract contains multiple, distinct performance obligations, the transaction price is allocated to each performance obligation based on relative stand-alone selling prices. The Company has historically had directly observable stand-alone selling prices in such contracts. In contracts covering both services and sale of products, the Company has evaluated the development service and the sale of products as distinct performance obligations.

Sale of products: The Company sells completed biometric fingerprint sensors or modules to its customers. Each sensor or module contains embedded software. The hardware and the embedded software are interdependent – that is, each needs the other to provide the intended function to the customer. Revenue is recognized at the point in time in which the customer obtains control of the products, which normally is when title passes at point of delivery, based on the contractual terms of the agreements.

Development and other engineering services: The Company provides development and engineering services to its customers. Revenue from services is recognized over time, where progress and recognition of services performed is measured based on completion of multiple results-based substantive contractual milestones and acceptance clauses being met. The variable consideration related to these milestones and acceptance clauses meets the criteria to be constrained from the transaction price until the related uncertainty is resolved, when it is probable that a significant reversal of revenue will not occur.

Trade receivables

A receivable is recognized for the unconditional consideration that is due from the customer (i.e., only the passage of time is required before payment of the consideration is due). The Company uses the simplified approach measuring expected credit losses.

Purchases, net of inventory variation

Purchases, net of inventory variation, primarily consist of the cost of raw materials, contract manufacturing, and transportation, net of inventory variation.

Foreign currencies

The Company’s consolidated financial statements are presented in U.S. dollars. IDEX elected to change its presentation currency from Norwegian krone (NOK) to U.S. dollars with effect from January 1, 2020. This change was made as the Company expanded its global investor base and became listed on the U.S. OTC market, and began preparations for a listing on the Nasdaq Capital Market. Figures have been re-presented from January 1, 2018 to reflect the change in presentation currency. The change in presentation currency does not impact the valuation of assets, liabilities, equity or any ratios between these measures.

The functional currency for the foreign subsidiaries is their local currency. Assets and liabilities in foreign operations, including goodwill and fair value adjustments, are translated into U.S. dollars, being the Company’s presentation currency, using the exchange rates on the consolidated statement of financial position date. Equity transactions in the parent company, whose functional currency was NOK through December 31, 2020, has been converted to the presentation currency using the historical exchange rates for each transaction date. Income and expenses are translated into U.S. dollars using the average exchange rates for the period presented, with certain significant transactions translated using the rate on the transaction date.

Foreign exchange differences arising on translation from functional currency to presentation currency are recognized separately in other comprehensive income (OCI). Translation differences previously recognized in comprehensive income are reversed and recognized in the net result of the year if and when the foreign operations are disposed of.

Research and development (R&D) expenses

Research costs are expensed as incurred. Development expenses that do not meet the criteria of capitalization are expensed as incurred. Development expenses are capitalized when it is probable that IDEX will realize future economic benefits from the asset, IDEX has committed itself to complete the asset, the technically feasibility of completing the asset has been demonstrated, and that the cost can be measured reliably. The assets are amortized over their expected useful life once the asset is available for use. Maintenance and training costs are expensed as incurred. Research and development expenses consist primarily of consumed materials costs and certain outsourced development costs. Payroll costs related to research and development employees are classified as payroll expenses as opposed to research and development expenses on the consolidated statements of profit and loss.

Property, plant and equipment

Property, plant and equipment is held at cost less accumulated depreciation and impairment charges. When assets are sold or retired the assets are derecognized. Any gain or loss on the sale or retirement is recognized in the consolidated statements of profit and loss.

The capitalized amount of property, plant and equipment is the purchase price including freight, installation, duties, taxes and direct acquisition costs related to making the asset ready for use. Costs related to training and

commissioning are expensed as incurred. Subsequent costs, such as repair and maintenance expenses, are recognized in the consolidated statements of profit and loss as incurred. Subsequent enhancements giving future economic benefits are recognized in the consolidated statements of financial position as additions to property, plant and equipment.

The assets are depreciated using the straight-line method over each asset’s useful life. The depreciation period and method are assessed each year to ensure that the method and period used is consistent with the status of the non-current asset. The same applies to the residual value.

Intangible assets and goodwill

Acquired identifiable intangible assets are held at cost less accumulated amortization and impairment charges. Goodwill recognized is the difference between the consideration paid and net value of identifiable assets acquired and held, less impairment charges.

Impairment of intangible assets, fixed assets and other non-current assets

An assessment of impairment losses on non-current assets is made when there is an indication of a decrease in value. Goodwill is tested at minimum annually. If an asset’s carrying amount is higher than the asset’s recoverable amount, an impairment loss will be recognized in the consolidated statements of profit and loss. The recoverable amount is the higher of the fair value less costs to sell and the discounted cash flow from continued use. The fair value less costs to sell is the net amount that can be obtained from a sale to an independent third party. The recoverable amount is determined separately for each asset. IDEX has one operating segment, fingerprint imaging and recognition technology.

Impairment losses recognized in the consolidated statements of profit and loss for previous periods are reversed when such is evidenced. Reversal is limited to the lower of the updated recoverable amount and the carrying amount that would have been recognized had no impairment losses been recognized for the asset in prior years. Impairment charges on goodwill are not reversed.

Inventory

Inventory, consisting of raw materials, work in progress and finished goods, is held at the lower of average full acquisition cost and net realizable value.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less.

Accounts payable

Payables are carried at amortized cost. The interest element is disregarded if it is insignificant.

Finance cost

Finance cost consist of interest expenses and net currency losses.

Finance income

Finance income consist of interest income.

Provisions

Provisions are recognized when and only when the Company has a present obligation (legal or constructive) as a result of events that have taken place and it is more probable than not that a financial settlement will take place as a result of the event(s), and that the amount can be measured reliably. Provisions are reviewed on each consolidated statement of financial position date and the amount adjusted to the best estimate of the liability.

When the effect of time is significant, the provision is measured at the present value of future payments. Any increase in the provision due to time is recorded as interest expense.

Income taxes

The income tax expense consists of the tax payable and changes in deferred tax. Deferred tax has been calculated at the applicable tax rate on the temporary differences between the recorded and tax values, as well as on any tax loss carryforward at the consolidated statement of financial position date. Any temporary differences increasing or decreasing tax that will or may reverse in the same period, have been netted.

A deferred tax asset will be recognized when it is probable that the Company will have a sufficient profit for tax purposes to apply the tax loss carryforward. At each consolidated statement of financial position date, IDEX reviews its deferred tax assets and the amount to be recognized or not. The Company recognizes an unrecognized deferred tax asset to the extent that is has become probable that the Company can utilize the deferred tax asset. Similarly, the Company will reduce its deferred tax asset to the extent that it can no longer utilize it. Deferred tax and deferred tax assets are calculated at the expected future tax rates. The effect of time is not taken into account.

Other taxes

Any other taxes such as turnover taxes, and other taxes that are unrelated to taxable income or profit, are reported on the other operating expense line of the consolidated statements of profit and loss, and not on the income tax line.

Contingent liabilities and assets

Contingent liabilities are possible liabilities resulting from past events whose existence depends on future events, liabilities that are not recognized because it is not probable that they will lead to an outflow of resources, and liabilities that cannot be measured with sufficient reliability. Contingent liabilities are not recognized in the consolidated financial statements but will be disclosed in the notes as appropriate.

Contingent assets are not recognized in the consolidated financial statements but are disclosed in the notes if it is probable that a benefit will accrue to IDEX.

Share-based compensation

Subscription rights granted to employees and others are recognized as equity-settled share-based compensation, with the employer’s tax cost recognized as a cash-settled element. The cost of equity-settled compensation is the fair value at grant, which is charged to the consolidated statements of profit and loss as earned over the vesting period(s). The fair value is determined using the Black-Scholes option pricing model. The accrued employer’s tax liabilityvaluation is calculatedbased on share price and exercise price, share price volatility, interest rates, and the earned intrinsic valueterm of the subscription rights.contribution period. The liabilityshare-based compensation is remeasured at each consolidated statement of financial position date.

expensed across the contribution period. Employment taxes, if any, are expensed when incurred.

Leasing agreements rentals

Where

Pursuant to IFRS 16
Leases
(effective January 2019), if the Company is the lessee, management is required to make judgments about whether an arrangement contains a lease, as defined in IFRS 16, the term of the lease, term and the appropriate discount rate to calculate the present value of lease payments.

If the rate implicit in the lease cannot be readily determined, management uses the incremental borrowing rate, which represents the rate that the Company would have to pay to borrow the funds necessary to obtain an asset of similar value to the

right-of-use
asset in a similar economic environment, with similar terms, security interests, and conditions.

Extension The values of the lease liability and the associated

right-of-use
asset are capitalized on the Consolidated Statements of Financial Position.
Lease extension options (or occupancy periods after termination options) are only included in the lease term if it is reasonably certain that the lease will be extended (or not terminated)terminated, as the case may be) and, as such, included within lease liabilities.

The lease term is reassessed ifin the event such an option is actually exercised (or not exercised)exercised, as the case may be) or the Company becomes obliged to exercise (or not exercise) it.such an option. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment and is within the lessee’s control for example,(e.g., when significant investment in the facility is made which has a useful life beyond the current lease term.

term).

In the consolidated statementsConsolidated Statements of Profit and Loss, period lease payments are recorded as a periodic depreciation expense and a periodic interest expense. The initial values of the lease liability and the associated
right-of-use
asset are amortized over the term of the lease liability. Given the inclusion of an interest charge on the liability balance in such amortization, the Company records higher expenses early in the term of a lease and lower expenses late in the term of a lease, in contrast to the amount of the actual lease payments, which generally are fixed for the term of a lease.
In the Consolidated Statements of Cash Flows, the interest portion of the Company’s payments under its lease liabilities is classified as a financing cost within cash flows the cashfrom operating activities. The remaining portion of such payments for the principal areis classified as a reduction of lease liabilities within cash flows from financing activities.
F-9

Climate Change
As of December 31, 2021, the possible future financial impact to the Company resulting from climate change is uncertain. Given the nature of the Company’s operations and products, any such impact is currently believed to not be material. The Company is monitoring current and expected climate change effects, as well as measures considered or implemented by government and industry, in order to minimize any negative impact and to take advantage of any favorable opportunities that may arise.
COVID-19
The
COVID-19
pandemic, including the global emergence of new variants, continues to cause business and economic uncertainties. The full impact of
COVID-19
on the Company’s business, results of operations, and financial condition may depend on numerous evolving factors that are highly uncertain and cannot be accurately predicted. The Company will continue to monitor the evolving situation and will assess modifying its response to the pandemic, as well as any relevant implications for its operations or financial reporting.
In the first quarter of 2020, the World Health Organization declared
COVID-19
a global pandemic. The Company quickly adopted the guidelines, outlined by the relevant governments where the Company operates, to ensure the health of staff members and their families. The Company established an internal virus response team, and, effective March 16, 2020, all travel and
face-to-face
meetings were stopped, and most staff members were directed to work from home. Staff members with specific roles required to be
on-site
at one of our facilities are being supported in line with local government guidelines. As certain countries relaxed restrictions, many staff members have returned to working
on-site
and have resumed travel. The Company’s management and Board continue to monitor the situation closely and will take further action as appropriate.
The Company has not experienced significant delays in its development projects, and it has not incurred additional costs as a result of its response to the pandemic. Disruption of supply chains, particularly the semiconductor supply chain, has been attributed to the pandemic. While the Company did not experience supply chain disruptions that were material to its operations or financial results during 2021, operational planning and management of inventory levels were challenging, given uncertainties associated with vendor capacity availability and allocations to the Company of such capacity. Because management expects such uncertainties will continue through 2023, the Company may place orders for, and hold balances of, inventory at higher levels than would be expected if such uncertainties did not exist.
Management believes the pandemic has had an adverse influence on the timing of activities of smart card manufacturers and issuers, including delaying product development and the initiation of trials and pilots involving smart cards incorporating our fingerprint authentication solutions.
The Company considered the impact of
COVID-19
on its judgements, estimates, and assumptions, and, as of the date of issuance of these financial statements, it is not aware of any specific event or circumstance that would require the Company to update its judgements, estimates, and assumptions or revise the carrying value of its assets or liabilities. The full impact of
COVID-19
on the Company’s business, results of operations, and financial condition may depend on numerous evolving factors that are highly uncertain and cannot be accurately predicted. As additional information is obtained, the Company may be required to update its judgements, estimates, and assumptions. Actual results could differ from prior judgements, estimates, and assumptions, and any such differences may be material to the Company’s financial statements. The Company will continue to monitor evolving circumstances and will identify and assess any relevant implications for its financial statements.
Financial risks
IDEX emphasizes capital preservation and liquidity in managing its cash, which is held in bank accounts, which are denominated in USD, NOK, GBP, and CNY.

F-10

Short-term capital requirements include funding operating losses and supporting net working capital requirements. Reflecting the Company’s operating model, investments in property, plant, and equipment are modest, and have been funded with proceeds from issuance of the Company’s Ordinary Shares. IDEX has been funded through the issuance of Ordinary Shares since it was established in 1996.
Interest Rate Risk
As of December 31, 2021, IDEX had cash of $33.8 million. The Company’s exposure to interest rate sensitivity is influenced primarily by changes in the underlying bank interest rates in the various currencies. IDEX’s cash is held in bank accounts, all of which are considered highly liquid. Accordingly, an immediate one percentage point change in interest rates would not have a material effect on the fair market value the Company’s cash accounts. As the Company has no debt to financial lenders, it is not exposed interest rate risks associated with variable rate debt. In calculating the recorded and carrying values of leases, interest rates are a variable in the calculations of these values, but do not represent a meaningful level of risk of material changes in these values.
Currency Risk
The Company’s transactions are commonly denominated in USD. However, the Company incurs a portion of its expenses in other currencies, primarily NOK, British Pounds (“GBP”), and Chinese Yuan (“CNY”), and is exposed to changes in the lease liabilityrates of exchange between the USD and these currencies. While the Company seeks to minimize this exposure by maintaining currency cash balances at targeted levels appropriate to meet foreseeable short to mid-term expenses in these other currencies, it does not use forward exchange contracts or other hedging strategies to manage exchange rate exposure.
Credit and Liquidity Risk
IDEX extends customary credit terms to customers, reflecting its assessment of their individual creditworthiness. The Company does not believe it was exposed to significant credit risk associated with its Accounts receivable, trade, balance as of December 31, 2021. (See Note 11 – Accounts receivable.) If revenue continues to increase, such balances from a broadening customer base will expand, potentially increasing the Company’s exposure to credit risk.
The Company believes it faces minimal liquidity risk, as IDEX’s cash is classified within cash flowson deposit with reputable,
well-capitalized
financial institutions. The Company has no debt to financial institutions and maintains adequate bank balances to meet anticipated liabilities as they become due for at least twelve months from operating activities.

Loss per share

Loss per sharethe date of these Consolidated Financial Statements.

Other accounting policies
Consolidation
The Company’s Consolidated Financial Statements are comprised of the financial statements of IDEX Biometrics ASA and its wholly-owned subsidiaries, with all intercompany transactions, balances, revenue, expenses, and unrealized internal profit or losses eliminated upon consolidation.
Revenue recognition
Revenue is calculated by dividingrecognized when control of the losspromised goods or services is transferred to a customer, in an amount reflecting the consideration the Company expects to be entitled to in exchange for those goods or services. Sales, value add, and other taxes incurred concurrent with revenue producing activities are excluded from revenue. Shipping and handling charges to customers are included in revenue, and costs incurred associated with outbound freight after control over a product has transferred to a customer are accounted for as revenue reductions.

F-11

The Company’s primary source of revenue comes from the sale of its products, which principally are biometric fingerprint modules, consisting of a sensor and an ASIC in a single package. Each module also contains embedded software. The hardware and the embedded software are interdependent, in that each needs the other to provide the intended fingerprint authentication function to the customer. The primary customers for the periodCompany’s products are smart card manufacturers and similar solution integrators. The Company currently does not utilize distributors for the resale of its products.
The Company, from time to time, licenses its intellectual property under right to use licenses, in which royalties due to the Company are based upon a percentage of the licensee’s sales and/or unit volumes. For the years ended December 31, 2021, 2020, and 2019, the Company recognized 0 revenue from licensing its intellectual property.
Certain contracts with customers contain multiple performance obligations, which typically may include a combination
of non-recurring engineering
(“NRE”) services, prototype units, and production units. For these contracts, if the individual performance obligations are distinct, they are accounted for separately. Generally, the Company has determined the NRE services and prototype units represent one distinct performance obligation, and the production units represent a separate distinct performance obligation. For such arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price, based on prices charged to other customers or based on expected cost plus a customary profit margin. The Company generally recognizes revenue for NRE services and prototype units at the point in time when a defined milestone under the arrangement is completed and control is transferred to the customer, which is generally the shipment or delivery of the prototype units. Revenue for production units is recognized upon shipment or delivery, consistent with product revenue recognition summarized above.
The Company also recognizes revenue from contracts with customers associated with the delivery of certain services, ranging from standalone NRE to advisory services. Generally, these contracts include a single performance obligation (i.e., service element), and revenue is recognized upon the completion of the defined service element and final acceptance by the weightedcustomer of the project deliverable, if any. However, revenue from services may be recognized over time, if recognition of multiple service elements is based on completion of substantive and results-based contractual milestones, and acknowledgement by the customer of such completion.
The Company does not have material obligations or reserves for warranties, returns, or customer refunds.
Cost of materials, net of inventory change
Cost of materials, net of inventory change, primarily consists of the costs of raw materials, contract manufacturing, and transportation associated with production and
storage
of products
,
net of inventory
change
.
Foreign currencies
The Company’s
Consolidated Financial Statements
are presented in USD. The functional currency of the parent company is USD, while the functional currency for
each
foreign
subsidiary
is
its
local currency. Transactions involving the translation to
the respective functional currencies
of values denominated in foreign currencies are classified as monetary or non-monetary, thereby defining the measurement and recognition of foreign currency translation gains and losses applicable to a transaction.
Monetary assets and liabilities generally have values fixed by explicit or implicit contract. Examples include
bank deposits, debt,
accounts receivable
,
and accounts payable. Monetary assets and liabilities
subject to foreign currency adjustments
are measured on the initial transaction date using the exchange rates in effect at that date. At each subsequent reporting date and through the date of settlement (i.e., payment) or derecognition,
such
monetary assets and liabilities are remeasured using the then-current exchange rate, and any foreign currency translation gains or losses are recorded
by the entity
within Financial income or Financial cost.

F-12

Non-monetary
assets and liabilities generally are those assets and liabilities for which the recorded values are not subject to contractual or other formal definitions (i.e., those assets and liabilities that are not classified as monetary assets or liabilities).
Non-monetary
assets and liabilities are not subject to foreign currency adjustments at entity level.
Assets and liabilities in entities with another functional currency than the USD, including goodwill and fair value adjustments, if any, are translated into USD using the exchange rates in effect at the reporting date of the Consolidated Statements of Financial Position. Amounts reported on the Consolidated Statements of Profit and Loss are translated to USD using the average exchange rates in effect for the reporting period. Significant, large transactions may be translated using the rate at the transaction date.
Foreign exchange differences arising on translation from functional currency to presentation currency are reported in Other comprehensive income (“OCI”). Translation gains or losses previously recognized in OCI are reversed and recognized in the Consolidated Statements of Profit and Loss, if and when the entity is disposed.
Research and development expenses
Expenses in this category consist primarily of the costs of services and materials used in engineering activities and certain outsourced development activities. In accord with IFRS standards, payroll costs related to research and development employees are classified as Compensation and benefit expenses, not as research and development expenses, on the Consolidated Statement of Profit and Loss. However, the compensation paid to individual contractors serving in engineering roles is included in Research and development expenses. As of December 31, 2021, 2020, and 2019, the number of ordinary shares outstandingindividual contractors in engineering roles was nine, six, and six, respectively.
Research costs are expensed as incurred. Development expenses that do not meet the criteria of capitalization are expensed as incurred. Development expenses are capitalized when (i) the technical feasibility of completing development has been demonstrated, (ii) the costs of development can be measured reliably, (iii) it is probable IDEX will realize future economic benefits from the asset, and (iv) IDEX has committed to complete the development. Once the development is complete and the resulting asset is available for use, the capitalized development cost (i.e., the asset value) is amortized over its expected useful life.
The Company applies for and has received government grants associated with certain research and development projects. The earned (i.e., recognized) value, if any, of government grants applicable to research and development activities are credited against costs. Generally, the courseapplications or claims for such grants are submitted after completion of the period. Loss per share fully dilutedqualifying activities. When it is calculated based on the result for the year divided by the average number of shares fully diluted. Dilutive shares are not assumed to have been issued if their effect is anti-dilutive.

Cash flow

The consolidated statements of cash flow have been prepared by the indirect method with cash flows classified in operating, investing and financing activities.

Government grants

Government grants are recognized when there is reasonable assurancerealistic that the grantapplication or claim will be receivedsuccessful and all attached conditions willthe amount can be complied with. Whendetermined reliably, we credit the value of the grant relatesagainst research and development expenses for that reporting period. Due to an expense item,the timing difference between the completion of the qualifying activities, the approval of our grant application or claim, and the receipt of the funds associated with the grant, iswe may record, pending receipt of funds, the value of the grant as an Account receivable, other.

Finance income and finance cost
Finance income and finance cost consists of interest income, interest expense, and net foreign exchange losses (gains) arising from settlement of obligations denominated in foreign currencies during the period and foreign currency translation adjustments recognized as a reduction in expense.

at

period-end.
Segment reporting

IDEX manages its operations as a single segment for the purposes of assessing performance and making operating decisions. IDEX operates as one operating segment, fingerprint imaging and recognitionauthentication technology. IDEX has determined that its chief operating decision maker is its Chief Executive Officer. The Company’s chief operating decision maker reviews the Company’s financial information on an aggregated basis for the purposes of allocating resources and assessing financial performance.
F-13

IDEX categorizes customers by geographic region utilizing the addresses to which we
invoice
our products or services. The Company’s product and service revenue by geographic region is as follows:
   
Year Ended December 31,
 
($000s)
  
2021
   
2020
   
2019
 
Product Revenue:
               
Europe, Middle East, and Africa  $2,807   $952   $47 
Americas   —      5    5 
Asia-Pacific   30    56    107 
                
Total product revenue   2,837    1,013    159 
                
Service Revenue:               
Europe, Middle East, and Africa   3    2    —   
Americas   —      77    265 
Asia-Pacific   —      3    —   
                
Total service revenue   3    82    265 
                
Total Revenue  $2,840   $1,095   $424 
                
The Company’s revenue has historically come from a limited number of customers. During 2021, the top two customers accounted for approximately 85% and 9% of the Company’s revenue, respectively, and in 2020, the top two customers accounted for approximately 81% and 4% of the Company’s revenue, respectively, inrespectively. In 2019, the top two customers accounted for 69%, and 10% of revenue, respectively. In 2018,
4. Compensation and benefits
Compensation and benefits expenses consist of costs for direct employees of the top three customers accounted for 39%, 36%Company. Compensation of individual contractors is reported as Research and 13% of revenue, respectively.

Revenue from contracts with customers by geographical area

IDEX has business operations in four countries. All sales revenues are recorded at IDEX Biometrics ASA, the Norwegian parent company. Sales by geographic region in Note 3 – Revenues from contracts with customers, aredevelopment expenses or Other operating expenses, as applicable, based on the countryroles assigned to the individuals.


   
Year Ended December 31,
 
($000s)
  
2021
   
2020
   
2019
 
Salary, payroll tax, benefits, other  $ 18,197   $14,917   $19,219 
Share-based compensation   2,910    2,755    2,531 
                
Total  $21,107   $17,672   $21,750 
                
The table below sets forth the number of employees and individual contractors by their function. Certain individuals are classified as contractors because they live in countries in which the entity being billedCompany does not have a formal business presence.
   
December 31, 2021
   
December 31, 2020
   
December 31, 2019
 
   
Employees
   
Contractors
   
Employees
   
Contractors
   
Employees
   
Contractors
 
Research and development   77    8    75    6    81    8 
Marketing and sales   6    9    6    5    10    6 
General and administrative   8    1    7    1    9    —   
Supply chain and distribution   2    —      2    —      2    —   
                               
Total staff   93    18    90    12    102    14 
The average number of employees for products and/or services.

Non-current operating assets by country

   Year Ended December 31, 
   2020   2019   2018 
   (in thousands) 

Non-current operating assets:

      

Norway

  $4,014   $4,256   $4,072 

United States

   1,313    1,648    1,451 

United Kingdom

   723    1,025    180 

China

   118    5    7 
  

 

 

   

 

 

   

 

 

 

Total:

  $6,168   $6,934   $5,701 
  

 

 

   

 

 

   

 

 

 

Non-current operating assets for this purpose consist of property, plant and equipment, right-of-use assets, goodwill and other intangible assets.

3. Revenues from contracts with customers

The balances of trade receivables at December 31,the years 2021, 2020, and 2019 were $48795, 93, and $31,109

full-time equivalents
, respectively. There were no contract asset or contract liability balances at December 31, 2020 or 2019.

   Year Ended December 31, 
   2020   2019   2018 
   (in thousands) 

Product Revenue:

      

Europe, Middle East and Africa

  $952   $47   $159 

Americas

   5    5    3 

Asia-Pacific

   56    107    106 
  

 

 

   

 

 

   

 

 

 

Total product revenue

   1,013    159    268 
  

 

 

   

 

 

   

 

 

 

Service Revenue:

      

Europe, Middle East and Africa

   2    —      —   

Americas

   77    265    169 

Asia-Pacific

   3    —      3 
  

 

 

   

 

 

   

 

 

 

Total service revenue

   82    265    172 
  

 

 

   

 

 

   

 

 

 

Total Revenue

  $1,095   $424   $440 
  

 

 

   

 

 

   

 

 

 

4. Payroll expenses and compensation

   Year Ended December 31, 
   2020   2019   2018 
   (in thousands) 

Salary, payroll tax, benefits, other

  $14,917   $19,219   $16,801 

Share-based compensation

   2,755    2,531    2,969 
  

 

 

   

 

 

   

 

 

 

Total

  $17,672   $21,750   $19,770 
  

 

 

   

 

 

   

 

 

 

F-14

The entities in the groupCompany provides health and other insurances generally in linebenefits to employees consistent with common practice in their respective jurisdictions.

the countries in which it operates. No such benefits are provided to individual contractors.

The parent company providescontributes to a contribution-based pension insurance plan for all its Norwegian employees. The plan satisfies the Norwegian mandatory service pension rules (obligatorisk tjenestepensjon, OTP). The contribution is 2% and 10% of the employee’s annual eligible salary.rules. The pension plan is a fully insured, defined contribution plan.

Employees of IDEX America may participate in an insureda health, dental, and vision insurance plan. IDEX America also offers employer-funded plans for life insurance, short-term disability, and long-term disability. IDEX America does not offer or plan to offer any pension plans, except for a 401(k) defined contributiondefined-contribution plan.

The Company currently does not match participant contributions to this plan.

IDEX China contributes to the mandatory social security plans in China, including contribution of 21% of eligible salary to each employee’s personal retirement fund. The pension contribution is included in the social security cost.

IDEX UK contributes between 4% andup to 6% of basican employee participant’s base salary to employees enrolled in IDEX UK’s pension plan, subject to the employee contributing the same percentage through a salary sacrificereduction arrangement. The contribution satisfies the UK automatic enrollment rules. The pension plan is a fully insured, defined contributiondefined-contribution plan.

In 2020, IDEX had two

Share-based compensation includes
non-cash
expenses associated with the recognition of the costs of share-based compensation programs: Incentiveawards granted pursuant to the Company’s subscription rights (SRs),plans and anits employee share purchase plan (ESPP)(“ESPP”). In 2019, the company operated only an SR program. The notional cost of SRs is based on the fair value of SRs at grant. The cost is expensed over the vesting period per tranche of grant, which means the cost is front-loaded over the full duration. The expense is non-cash, and the same amount is added to equity. The potential employer’s tax liability is calculated on the intrinsic value of the pro-rata earned subscription rights at year end, and the net change from the year before is expensed or reversed. Upon exercise, the notional cost remains as recognized, while actual employer’s tax, if any, on exercise is recognized by the relevant entity when incurred. The cost of ESPP is the discount from the fair market value on the date the shares are subscribed for, and the price paid by the employee. This cost is recognized by the parent company on the subscription date. Any related employer’s tax is recognized on the date the employer’s tax is incurred, which date varies by jurisdiction and employee disposition.

See Note 16.

Compensation of Key Management

Key

For 2021, key management consisted of the Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), Chief Technology Officer (“CTO”), and Chief Commercial Officer (“CCO”). For 2020, key management consisted of the CEO, CFO, and CTO, in 2020, andwhile, for 2019, key management consisted of the CEO, CFO, CIOCTO, and CTO in 2019. Note there was a change of CEO in 2020 and a change of CFO in 2019.the Chief Innovation Officer (“CIO”). The following amounts were recognized as an expense incompensation for key management for the periods. Employers’years shown. Related employment tax isobligations paid by the Company are not included:

   Year Ended December 31, 
   2020   2019   2018 
   (in thousands) 

Short-term employee benefits

  $906   $1,367   $1,405 

Medical and similar benefits, contributions to pension schemes

   66    52    26 

Share-based compensation

   449    840    1,616 
  

 

 

   

 

 

   

 

 

 

Total compensation of key management

  $1,421   $2,259   $3,047 
  

 

 

   

 

 

   

 

 

 
included.

Subscription

   
Year Ended December 31,
 
   
2021
   
2020
   
2019
 
   (in thousands) 
Compensation and short-term benefits  $ 1,425   $906   $ 1,367 
Medical and similar benefits, contributions to pension schemes   73    66    52 
Share-based compensation   443    449    840 
                
Total compensation of key management  $1,941   $1,421   $2,259 
Key management, as defined, held the following subscription rights to shares held by key managementOrdinary Shares under the subscription rights incentive plans havewith the following expiryexpiration dates and exercise prices:

          Number outstanding as of December 31, 

Grant Date

  Expiry Date  Exercise
Price

(NOK per
share)
   2020   2019   2018 

September 15, 2014

  May 7, 2019   4.45        350,000 

February 26, 2016

  May 12, 2020   8.10        375,000 

August 10, 2016

  May 11, 2021   7.79    —      775,000    500,000 

November 9, 2016

  May 11, 2021   6.59    —      1,400,000    1,400,000 

February 24, 2017

  May 11, 2021   6.59    —      750,000    750,000 

August 9, 2017

  May 12, 2022   7.76    —      515,000    830,000 

February 21, 2018

  May 12, 2022   4.67    —      4,500,000    4,500,000 

May 9, 2018

  May 9, 2023   4.28    —      2,250,000    3,000,000 

August 14, 2019

  May 9, 2024   1.65    2,327,800    3,774,000    —   

February 26, 2020

  May 9, 2024   1.11    5,000,000    —      —   

June 17, 2020

  May 15, 2025   1.71    1,125,000    —      —   

           
Number outstanding as of December 31,
 
Grant Date
  
Expiration Date
   
Exercise Price
(NOK)
   
2021
   
2020
   
2019
 
August 10, 2016   May 11, 2021    7.79              775,000 
November 9, 2016   May 11, 2021    6.59              1,400,000 
February 24, 2017   May 11, 2021    6.59              750,000 
August 9, 2017   May 12, 2022    7.76              515,000 
February 21, 2018   May 12, 2022    4.67              4,500,000 
May 9, 2018   May 9, 2023    4.28              2,250,000 
August 14, 2019   May 9, 2024    1.65    
327,800
    2,327,800    3,774,000 

F-15

    
Number outstanding as of December 31,
 
Grant Date
  
Expiration Date
   
Exercise Price
(NOK)
   
2021
   
2020
   
2019
 
February 26, 2020
   May 9, 2024    1.11    5,000,000    5,000,000    —   
June 17, 2020
   May 15, 2025    1.71    1,125,000    1,125,000    —   
April 20, 2021
   May 15, 2025    2.71    2,750,000           
June 3, 2021
   May 12, 2026    2.38    2,000,000           
August 11, 2021
   May 12, 2026    2.40    1,668,100           
Total
             12,870,900    8,452,800    8,452,800 
Compensation paid to the board of directorsBoard is presented in Note 7.

17.


5. Research and development (R&D) expenses

Research costs are expensed when incurred. Development costs are capitalized and held in the balance sheet only if they satisfy the criteria for capitalization. The same applies to IDEX’s patents and other intellectual property rights created by IDEX. IDEX has not capitalized any development costs in 2021, 2020 2019 or 2018.2019. Development costs related to creation of intellectual property have been expensed when incurred. Grants
Research and development expenses include the cost of independent contractors assigned to engineering roles.
Government grants earned by the Company in support of research and development activities are credited against costs.

   Year Ended December 31, 
   2020   2019   2018 
   (in thousands) 

Gross R&D expenses

  $4,196   $4,953   $6,245 

Government grants credited to cost

   (2,301   (568   (614
  

 

 

   

 

 

   

 

 

 

Net R&D expenses

  $1,895   $4,385   $5,631 
  

 

 

   

 

 

   

 

 

 

6. Government grants

   Year Ended December 31, 
   2020   2019   2018 
   (in thousands) 

Norway—SkatteFunn

  $506   $568   $614 

UK—R&D relief grant for SME

   1,795    —      —   
  

 

 

   

 

 

   

 

 

 

Total

  $2,301   $568   $614 
  

 

 

   

 

 

   

 

 

 

The Norwegian SkatteFunn support for research and development costs when it is delivered throughrealistic that the tax administration. application or claim will be successful and the amount can be determined reliably.

   
Year Ended December 31,
 
($000s)  
2021
   
2020
   
2019
 
Gross research and development expenses  $    3,356   $4,196   $4,953 
Government grants credited   (676   (2,301   (568
                
Net research and development expenses   2,680   $    1,895   $    4,385 
                
Government grants
   
Year Ended December 31,
 
($000s)  
2021
   
2020
   
2019
 
Norway  $538   $506   $568 
United Kingdom   138    1,795    —   
                
Total  $    676   $    2,301   $    568 
                
The schemeNorwegian SkatteFUNN is a direct, cash grant to pre-approvedgovernment program supporting research and development activities in Norway. Under the program, the Company, in its current loss position, is eligible for a cash grant in support of approved projects, subject to approved annual or completion reports tomeeting the requirements of the Research Council of Norway, as well as audited confirmation of costs. Norway.
The recognized amountCompany’s IDEX UK subsidiary participates in 2020 represents IDEX’s claim based ona program by which the costgovernment of the approved project applications. The 2019 grant was received in 2020.

The UK R&D grantUnited Kingdom offers financial support for small and medium-sized enterprises is also a grant scheme that is administered through the tax system. IDEX has in 2020 claimedqualifying research and development grantsactivities of small and

medium-sized
enterprises. Under the program, the Company, in its current loss position, is eligible for a cash grant in support of approved projects, subject to approvals and meeting program requirements.
F-16

6. Income tax provision
The Company is subject to income taxes in the UK relating to 2017, 2018 and 2019, and accrued the expected grant for 2020. The 2017-2019 grants were receivedjurisdictions in 2020.

7. Related Party Transactions

which it operates. The Company’s significant shareholders, board membersprovision for income taxes (i.e., expense (benefit)) is based on income tax rates in the tax jurisdictions in which it operates, tax credits available in these jurisdictions, and management,reconciliation of differences between financial reporting values and tax reporting values.

Grants awarded under government programs in Norway and the United Kingdom supporting research and development activities are recorded as well as related partiesa credit against research and development expenses and are not included in the calculation of these are considered related parties.

Compensationthe Company’s provision for income tax.

As of key managementDecember 31, 2021, the Company has been discloseda tax loss carryforward balance in Note 4.

There were no overdue balances with any related partiesNorway of $251.1 million, representing a potential deferred tax asset, if recognized and calculated at the endcurrent corporate tax rate of 2020, 2019 or 2018. See22.0%, of $55.2 million. The Company also Note 17.

Board

Board remuneration is paidhas a tax loss carryforward balance in arrears after being approved by the shareholders, normally
United Kingdom of $1.9 million, representing a potential deferred tax asset, if recognized and calculated
at the annual general meetingcurrent corporate tax rate of 19.0%, of $361 thousand. The Company also has a tax loss carryforward balance in China of $771 thousand, representing a potential deferred tax asset, if recognized and calculated at the parent company. The following board compensation has been paid in 2020, 2019 and 2018:

   Year Ended December 31, 2020 
   Cash
Compensation
   Shared-based
Compensation
   Total 
   (in thousands) 

Morten Opstad, chair

  $40   $—     $40 

Lawrence John Ciaccia, deputy chair (1)

   38    —      38 

Deborah Davis (2)

   10    36    46 

Hanne Hovding

   32    —      32 

Stephen A. Skaggs

   4    34    38 
  

 

 

   

 

 

   

 

 

 
  $124   $70   $194 
  

 

 

   

 

 

   

 

 

 

   Year Ended December 31, 2019 
   Cash
Compensation
   Shared-based
Compensation
   Total 
   (in thousands) 

Morten Opstad, chair

  $43   $—     $43 

Lawrence John Ciaccia, deputy chair

   34    —      34 

Deborah Davis

   7    34    41 

Hanne Hovding

   16    23    39 

Andre James MacLeod (3)

   7    34    41 

Stephen A. Skaggs (4)

   —      —      —   
  

 

 

   

 

 

   

 

 

 
  $107   $91   $198 
  

 

 

   

 

 

   

 

 

 

   Year Ended December 31, 2018 
   Cash
Compensation
   Shared-based
Compensation
   Total 
   (in thousands) 

Morten Opstad, chair

  $20   $25   $45 

Lawrence John Ciaccia, deputy chair

   2    45    47 

Deborah Davis

   —      47    47 

Hanne Hovding

   37    —      37 

Andre James MacLeod

   10    35    45 
  

 

 

   

 

 

   

 

 

 
  $69   $152   $221 
  

 

 

   

 

 

   

 

 

 

(1)

Mr. Ciaccia is a member of the Compensation Committee since 2019

(2)

Ms. Davis is chair of the Compensation Committee since 2019

(3)

Mr. MacLeod left the board on May 9, 2019

(4)

Mr. Skaggs was elected to the board on May 9, 2019

Followingcurrent corporate tax rate of 2.5%, of $18 thousand. In the annual general meeting of IDEX on May 15, 2020, board members Deborah Davis and Steve Skaggs elected to receive part of the board remuneration in shares. Board member Deborah Davis acquired 227,073 shares against payment of NOK 0.15 per share, instead of $30 of the board remuneration. Ms. Davis took the remainder of the board remuneration in cash. Board member Steve Skaggs acquired 214,909 shares against payment of NOK 0.15 per share, instead of $28 of the board remuneration. Mr. Skaggs took the remainder of the board remuneration in cash.

The chair of the board is a partner at Advokatfirmaet Ræder AS. The law firm provided services toUnited States, the Company amountinghas tax credits, associated with research and development activities in the United States, totaling $1.6 million.    

Because the Company has concluded there is not sufficiently convincing evidence the Company will generate sufficient taxable profit, against which the unused tax losses could be applied, the Company has not recognized to $477date any deferred tax assets in 2020, $470 in 2019 and $333 in 2018. Theits statement of financial position, consistent with IFRS standards. A deferred tax asset will be recognized amounts include accruals for services received butwhen the Company determines it is more likely than not yet billed.

Lawrence John Ciaccia, who was elected board member atit will have sufficient future taxable profit to apply the annual general meeting on May 12, 2015, has served on IDEX’s Strategy Advisory Committee (SAC) since January 2014 and continues his tenure on the SAC. Mr. Ciaccia also provides consulting services to IDEX. The combined fee for SAC service and consulting services amounted to $65 in 2020, $65 in 2019 and $65 in 2018.

Since 2016, former board member Andrew MacLeod had provided consulting services beyond board duty to IDEX. The fees amounted to $26 in 2019 and $73 in 2018. Mr. MacLeod’s service agreement ended on March 27, 2019, and he left the board on May 9, 2019.

Subscription rights to shares held by the board members under the subscription rights incentive plans have the following expiry dates and exercise prices. For further information refer to Note 16 for the plans. These grants have been made to the board members in their capacity of service providers beyond board duty and not as board compensation.

          Subscription rights outstanding as
of December 31,
 

Grant Date

  Expiry Date  Exercise Price
(NOK per share)
   2020   2019   2018 

February 26, 2016

  May 12, 2020   8.10    —      —      500,000 

August 15, 2018

  May 9, 2023   5.10    —      600,000    600,000 

June 17, 2020

  May 15, 2025   1.71    600,000    —      —   

The subscription rights granted on August 15, 2018 were replaced the grant on June 17, 2020 as part of a board approved SR exchange.

8. Income tax expense

loss carryforward against future income taxes.

The major components of income tax expenseprovision for the years endedshown are:

Tax expense (benefit) for the year  Year Ended December 31, 
   2020   2019   2018 
   (in thousands) 

Taxes payable on the result of the year

  $44   $160   $41 

Adjustment in respect to prior years

   (112   —      —   

Change in deferred tax asset/liability

   (31   —      —   
  

 

 

   

 

 

   

 

 

 

Income tax expense (benefit)

  $(99  $160   $41 
  

 

 

   

 

 

   

 

 

 

Specification of deferred tax  Year Ended December 31, 
   2020   2019   2018 
   (in thousands) 

Employer’s tax on share-based compensation

  $(216  $(3  $—   

Fixed Assets

   675    62    (52

Inventory

   (213   (1,154   (853

Accruals US

   (1,144   —      —   

US SME credits, net

   (1,787   —      —   

Losses carried forward

   (225,951   (193,497   (164,537
  

 

 

   

 

 

   

 

 

 

Basis for deferred taxes

   (228,636   (194,592   (165,632

Calculated net deferred tax income, local tax rates 5-22%

   51,251    (42,772   (36,365

Unrecognized deferred tax asset *

   (51,251   42,803    36,391 
  

 

 

   

 

 

   

 

 

 

Deferred tax liability in the balance sheet

  $—     $(31  $(26
  

 

 

   

 

 

   

 

 

 

Reconciliation of tax expense (benefit)  Year Ended December 31, 
   2020   2019   2018 
   (in thousands) 

Result (loss) before tax

  $(26,853  $(32,263  $(30,184
  

 

 

   

 

 

   

 

 

 

Norway statutory tax rate of 22%

   (5,908   (7,412   (7,127

Difference in local tax rates from 22%

   22    160    41 

Tax on permanent differences

   389    640    571 

Effect on deferred tax from change in future tax rate from 23%

   —      —      1,763 

Adjustment in respect to prior years

   (112   —      —   

Change in deferred tax asset not recognized on December 31 **

   5,510    6,772    4,793 
  

 

 

   

 

 

   

 

 

 

Actual tax expense (benefit)

  $(99  $160   $41 
  

 

 

   

 

 

   

 

 

 

Tax expense (benefit) for the year
  
Year Ended December 31,
 
($000s)  
2021
   
2020
   
2019
 
Taxes payable on the result of the year  $90   $44   $160 
Adjustment in respect to prior years   —      (112   —   
Change in recorded deferred tax liability   —      (31   —   
                
Income tax expense (benefit)  $    90   $    (99  $    160 
                
Elements of deferred tax
  
Year Ended December 31,
 
($000s)  
2021
   
2020
   
2019
 
Employer’s tax on share-based compensation  $(371  $(216  $(3
Fixed Assets
 
differences
   1,154    675    62 
Inventory
 
differences
   (5   (213   (1,154
Accruals
 
differences
   (1,152   (1,144   —   
Research and development tax
credits
   (1563   (1,787   —   
Losses carried forward   (253,300   (225,951   (193,497
                
Basis for calculation of deferred tax asset   (255,237   (228,636   (194,592
Calculated net deferred tax benefit, local tax rates
5-22%
   (55,953   (51,251   (42,772
Unrecognized deferred tax asset *   55, 953    51,251    42,803 
                
Deferred tax liability in the balance sheet  $—     $—     $(31
                

F-17

Reconciliation of tax expense (benefit)
  
Year Ended December 31,
 
($000s)  
2021
   
2020
   
2019
 
Loss before tax  $(32,552  $(26,853  $(32,263
                
Norway statutory tax, calculated at rate of 22%   (7,132   (5,908   (7,412
Difference in subsidiary taxes, using local rates
 
vs 22%
   (179   22    160 
Estimated tax on permanent differences   (568   389    640 
Prior year adjustments   
    (112    
Change in unrecognized deferred tax asset **   7,969    5,510    6,772 
                
Income tax expense (benefit)  $            90   $            (99  $            160 
                
*

The accumulated unrecognized deferred tax assets amounting to $45,132 and $42,772 atAs of December 31, 2020 and 2019, respectively, are related to tax losses carry forward in Norway and the UK. IDEX Biometrics ASA has not generated taxable profits in prior years. At December 31, 20202021, there was not sufficiently convincing evidence thatthe Company will generate sufficient taxable profit, will be generated, against which the unused tax losses could be applied. Consequently, no deferred tax asset has been recognized. There are no restrictions as to how long tax losses may be carried forward in Norway.

Norway or the United Kingdom. In China, tax loss carryforwards expire after five years and $135 thousand will expire at the end of 2022. Tax credits associated with research and development activities in the United States, totaling $1.6 million as of December 31, 2021, can be applied against taxable income for the following for 20 years.
**

The various deferred tax assets that have not been recognized are denominated in their respective local currencies. As such, the change in the
year-end
value in USD of these unrecognized deferred tax asset not recognized containsassets includes foreign currency translation adjustments arising from changes in the exchange effects onrates between USD and these local currencies from the loss carry forward in Norway, denominated in NOK.

prior
year-end.

There are no deferred tax charges toincluded in other comprehensive income in 2021, 2020, 2019, or 2018.

2019.

9.

7. Loss per share

calculation

The loss per share is calculated by dividing the profit orquotient of the net loss for the period divided by thet
h
e weighted average number of ordinary sharesOrdinary Shares outstanding in the year. The profit (loss) per fully diluted share shall be calculated based on the result for the year divided byyear.
   
Year Ended December 31,
 
($000s)  
2021
  
2020
  
2019
 
Net loss for the year
 
  $(32,552  $(26,754  $(32,423
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of ordinary shares issued at December 31   1,010,388,454    832,146,748    717,988,732 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average basic number of ordinary shares   918,847,427    767,069,645    598,392,108 
Assumed exercise of share equivalents   21,586,108    6,323,417    1,759,991 
                
Weighted average diluted number of shares   940,433,535    773,393,062    600,152,099 
Loss per share for the year (basic and diluted*)  $(0.04  $(0.03  $(0.05
*
The effects of potentially dilutive
O
rdinary
S
hares issuable upon exercise of outstanding subscription rights are not included in the calculation due to the Company’s net losses for the periods presented, as their effect would be anti-dilutive.

F-18

8. Goodwill and other intangible assets
Goodwill is the weighted average numberrecorded difference between the consideration paid and the net value of fully diluted shares. The effectsidentifiable assets acquired and held, less impairment charges, if any. Goodwill balances as of potentially dilutive ordinary shares are not included in the calculation of diluted EPS because their effect would be anti-dilutive.

   Year Ended December 31, 
   2020   2019   2018 

Net loss for the year (in thousands)

  $(26,754  $(32,423  $(30,225
  

 

 

   

 

 

   

 

 

 

Number of ordinary shares issued at December 31

   832,146,748    717,988,732    544,314,537 
  

 

 

   

 

 

   

 

 

 

Weighted average basic number of ordinary shares

   767,069,645    598,392,108    542,795,969 

Assumed exercise of share equivalents

   6,323,417    1,759,991    321,955 
  

 

 

   

 

 

   

 

 

 

Weighted average diluted number of shares

   773,393,062    600,152,099    543,117,924 
  

 

 

   

 

 

   

 

 

 

Basic and diluted loss per share in the year

�� $(0.03  $(0.05  $(0.06
  

 

 

   

 

 

   

 

 

 

10. Intangible assets

Goodwill activity consisted ofDecember 31, 2021, and December 31, 2020, reflected the following during 2020 and 2019:

   Year Ended December 31, 
   2020   2019 
   (in thousands) 

Cost at the beginning of the year

  $941   $951 

Additions

   —      —   

Disposals at cost

   —      —   

Impact of currency translation

   27    (10
  

 

 

   

 

 

 

Cost at the end of the year

  $968   $941 
  

 

 

   

 

 

 

activity:

   
Year Ended December 31,
 
($000s)  
    2021    
   
    2020    
 
Cost at the beginning of the year  $968   $941 
Impact of currency translation   —      27 
           
Cost at the end of the year  $    968   $    968 
           
There is only one cash generating unit in the Company and goodwill is allocated to this. IDEX performed the annual impairment test on December 31, 2020. The Company considers the relationship between its market capitalization (recoverable amount) and its carrying amount, among other factors, when reviewing for indicators of impairment. The recoverable amount has been determined based on the fair value of the equity of IDEX.2021. Based on the 20202021 assessment, no0 impairment charge has been made. There were no reasonable possible changes to any key assumptions that would cause an impairment.

Acquired identifiable intangible assets, consisting primarily of patents, are held at cost, less accumulated amortization and impairment charges. Other intangible asset (patents) activity consistedbalances as of December 31, 2021, and December 31, 2020, reflected the following during 2020 and 2019

   Year Ended December 31, 
   2020   2019 
   (in thousands) 

Amortization period (straight-line, in years)

   10 - 17    10 - 17 

Cost at the beginning of the year

  $4,835   $4,919 

Additions

   181    —   

Disposals at cost

   —      (33

Impact of currency translation

   157    (51
  

 

 

   

 

 

 

Cost at the end of the year

  $5,173   $4,835 
  

 

 

   

 

 

 

Accumulated Amortization at the beginning of the year

  $2,230   $1,839 

Amortization and impairment

   396    415 

Accumulated impairment of disposed items

   —      (6

Impact of currency translation

   104    (18
  

 

 

   

 

 

 

Accumulated Amortization at the end of the year

   2,731    2,230 
  

 

 

   

 

 

 

Carrying amount at the end of the year

  $2,442   $2,605 
  

 

 

   

 

 

 

activity:

 
   
Year Ended December 31,
 
($000s)  
    2021    
   
    2020    
 
Amortization period (straight-line, in years)
  
 
10 - 17
 
  
 
10 - 17
 
Cost at the beginning of the year
  $5,173   $4,835 
Additions
   0      181 
Impact of currency translation
   0      157 
   
 
 
   
 
 
 
Cost at the end of the year
  $5,173   $5,173 
   
 
 
   
 
 
 
Accumulated Amortization at the beginning of the year
  $2,731   $2,230 
Amortization
   477    396 
Impact of currency translation
   0      104 
   
 
 
   
 
 
 
Accumulated Amortization at the end of the year
   3,208    2,731 
   
 
 
   
 
 
 
Carrying amount at the end of the year
  $1,965   $2,442 
   
 
 
   
 
 
 
Patents acquired in earlier years have beenare capitalized and are amortized over the estimated useful life, which is the lifetime of the respective patent(s).

11.

9. Property, plant, and equipment

Property, plant, and equipment is held at cost, less accumulated depreciation and impairment charges. When assets are sold or retired, such assets are no longer recorded in the Consolidated Statements of Financial Position. Any gain or loss on the sale or retirement is recognized in the Consolidated Statements of Profit and Loss.
The significant subsetscapitalized amount of property, plant, and equipment hasis the purchase price, including freight, installation, duties, taxes, and direct acquisition costs related to preparing the asset for use. Costs related to training and commissioning are expensed as incurred. Subsequent costs, such as expenses for repair and maintenance, are recognized as incurred in the Consolidated Statements of Profit and Loss. Subsequent enhancements creating future economic benefits are recognized in the Consolidated Statements of Financial Position as additions to property, plant, and equipment.
These assets are depreciated using the straight-line method over each asset’s useful life. The depreciation period and method are assessed each year to ensure that the method and period used is consistent with the status of the
non-current
asset.

F-19

Property, plant, and equipment balances as of December 31, 2021, and December 31, 2020, reflected the following activity during 2020 and 2019:

2020

 

(In USD thousands)

  Plant and
machinery,
fixtures and
fittings
   Office
furniture and
office
equipment
   Instruments
and lab
equipment,
software
tools
   Total 

Depreciation period (straight line, in years)

   3-5    3-5    3-5   

Accumulated cost at 31 December 2019

  $812   $701   $2,076   $3,589 

Additions

   21    6    125    152 

Impact of currency translation

   22    3    16    41 
  

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated cost at 31 December 2020

   855    710    2,217    3,782 
  

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation at 31 December 2019

  $104   $453   $1,019   $1,576 

Depreciation

   119    115    275    509 

Impact of currency translation

   13    4    13    30 
  

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation at 31 December 2020

   236    572    1,307    2,115 
  

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amount at 31 December 2020

  $619   $138   $910   $1,667 
  

 

 

   

 

 

   

 

 

   

 

 

 

activity: 

2019

 

(In USD thousands)

  Plant and
machinery,
fixtures and
fittings
   Office
furniture and
office
equipment
   Instruments
and lab
equipment,
software
tools
   Total 

Depreciation period (straight line, in years)

   3-5    3-5    3-5   

Accumulated cost at 31 December 2018

  $160   $686   $1,997   $2,843 

Additions

   664    86    100    850 

Disposals at cost

   (13   (73   (26   (112

Impact of currency translation

   1    2    5    8 
  

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated cost at 31 December 2019

   812    701    2,076    3,589 
  

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation at 31 December 2018

  $61   $
 
 
373
 
 
  $725   $
 
 
1,159
 
 

Depreciation

   56    152    312    520 

Accumulated depreciation of disposed items

   (13   (73   (23   (109

Impact of currency translation

   —      1    5    6 
  

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation at 31 December 2019

   104    453    1,019    1,576 
  

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amount at 31 December 2019

  $708   $248   $1,057   $2,013 
  

 

 

   

 

 

   

 

 

   

 

 

 

2021
($000s)
  
Plant and
machinery,
fixtures and
fittings
   
Office
furniture and
office
equipment
  
Instruments
and lab
equipment,
software
tools
  
Total
 
Depreciation period (straight line, in years)
   3-5    3-5    3-5      
Accumulated cost at December 31, 2020  
$855   
$710   
    $2,217   
$3,782 
Additions       74    67    141 
Impact of currency translation       (2   (3   (5
                     
Accumulated cost at December 31, 2021   855    782    2,281    3,918 
                     
Accumulated depreciation at December 31, 2020  
$236   
$572   
$1,307   
$2,115 
Depreciation   131    101    275    507 
Impact of currency translation       (2   (3   (5
                     
Accumulated depreciation at December 31, 2021   367    671    1,579    2,617 
                     
Carrying amount at December 31, 2021  
 

    $488   
 

    $111   
 

$712   
 

    $1,301 
                     
2020
(In $000)
  
Plant and
machinery,
fixtures and
fittings
   
Office
furniture and
office
equipment
   
Instruments
and lab
equipment,
software
tools
   
Total
 
Depreciation period (straight line, in years)
  
 
3-5
 
  
 
3-5
 
  
 
3-5
 
     
Accumulated cost at December 31, 2019  
$812   
$701   
$2,076   
$3,589 
Additions   21    6    125    152 
Impact of currency translation   22    3    16    41 
                     
Accumulated cost at December 31, 2020   855    710    2,217    3,782 
                     
Accumulated depreciation at December 31, 2019  
$104   
$453   
$1,019   
$1,576 
Depreciation   119    115    275    509 
Impact of currency translation   13    4    13    30 
                     
Accumulated depreciation at December 31, 2020   236    572    1,307    2,115 
                     
Carrying amount at December 31, 2020  
 

$619   
 

$138   
 

$910   
 

$1,667 
                     
There were no assetswere0assets under construction at the end of 20202021 or 2019.

12.2020.

F-20

10. Leases

The Company’s leases are for office and laboratory space.space occupied by employees. Activity during 20202021 and 20192020 related to
right-of-use
assets was as follows. There are no amounts related to 2018 because IFRS 16 – Leases was implemented effective 2019:

Right-of-use assets

   Year Ended December 31, 
       2020           2019     
   (in thousands) 

Depreciation period (straight-line, in years)

   3-5    3-5 

Cost at the beginning of the year

  $2,081   $1,140 

Additions

   417    910 

Impact of currency translation

   45    31 
  

 

 

   

 

 

 

Cost at the end of the year

  $2,543   $2,081 
  

 

 

   

 

 

 

Accumulated Depreciation at the beginning of the year

  $706   $—   

Depreciation

   810    698 

Impact of currency translation

   11    8 
  

 

 

   

 

 

 

Accumulated Depreciation at the end of the year

   1,527    706 
  

 

 

   

 

 

 

Book value at the end of the year

  $1,016   $1,375 
  

 

 

   

 

 

 

shown below.

 
   
Year Ended December 31,
 
($000s)
  
2021
   
2020
 
Depreciation periods (straight-line, in years)
  
 
3-5
 
  
 
3-5
 
Cost at the beginning of the year  $2,543   $2,081 
Additions   158    417 
Impact of currency translation   (10   45 
           
Cost at the end of the year  $2,691   $2,543 
           
Accumulated depreciation at the beginning of the year  $1,527   $706 
Depreciation   818    810 
Impact of currency translation   (11   11 
           
Accumulated depreciation at the end of the year   2,334    1,527 
           
Recorded value at the end of the year  $357   $1,016 
           
Costs related to
right-of-use
assets included in the consolidated statementsConsolidated Statements of profitProfit and lossLoss include the following:

Leases in the statementsConsolidated Statements of income

   Year Ended December 31, 
       2020           2019     
   (in thousands) 

Depreciation

  $810   $698 

Finance cost

   63    50 

Profit and Loss

   
Year Ended December 31,
 
($000s)
  
2021
   
2020
   
2019
 
Depreciation  $818   $810   $698 
Finance cost   31    63    50 
Lease liabilities included in the consolidated statementsConsolidated Statements of financial positionFinancial Position and related activity in the consolidated statementsConsolidated Statements of profitProfit and lossLoss and consolidated statementsConsolidated Statements of cash flowsCash Flows include the following:

Leases in the statementsConsolidated Statements of Financial Position
($000s)
  
2021
   
2020
 
Balance at January 1  $1,058   $1,398 
Additions   158    317 
Accretion of interest   31    136 
Payments   (874   (793
           
Balance at December 31   373    1,058 
           
Non-current
   11    327 
Current   362    731 
           
Total lease liabilities  $373   $1,058 
           
11. Accounts receivable
Accounts receivable, trade, includes amounts billed and currently due from customers. The amounts due are stated at their estimated realizable value. The Company’s payment terms vary by the type and location of its customers and the products or services offered, although terms generally include a requirement of payment

F-21

within 30 to 60 days. When necessary, the Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments, based on assessments of customers’ credit-risk profiles and payment histories. If the financial position

   2020   2019 
   (in thousands) 

Balance at January 1

  $1,398   $1,140 

Additions

   317    846 

Accretion of interest

   136    87 

Payments

   (793   (675
  

 

 

   

 

 

 

Balance at December 31

   1,058    1,398 
  

 

 

   

 

 

 

Non-current

   327    610 

Current

   731    788 
  

 

 

   

 

 

 

Total lease liabilities

  $1,058   $1,398 
  

 

 

   

 

 

 

condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company does not require collateral from its customers, although there have been circumstances when the Company has required cash in advance (i.e., a partial down-payment) to facilitate orders in excess of a customer’s established credit limit. To date, such amounts have not been material.

The balances reported as Accounts receivable, other, consist primarily of amounts due to the Company associated with Value Added Tax refund activity and amounts due to the Company from governments associated with approved research and development grants.
Balances of accounts receivable at December 31, 2021, and December 31, 2020, are as follows:
Year ended December 31, 2021
   
Maturity
 
($000s)
 
  
Less than 3 months
   
3-6 months
   
6-12 Months
   
Total
 
Accounts receivable, trade  $801   $0     $0     $801 
Accounts receivable, other   133    31    539    703 
                     
   $934   $31   $539   $1,504 
                     
Year ended December 31, 2020 
   
Maturity
 
($000s)
 
  
Less than 3 months
   
3-6 months
   
6-12 Months
   
Total
 
Accounts receivable, trade  $460   $25   $2   $487 
Accounts receivable, other   303    303    557    1,163 
                     
   $763   $328   $559   $1,650 
                     
There
 were 0 provisions for bad debts at December 31, 2021, and December 31,
2020
.
12. Accounts payable and other
financial
liabilities
The Company did not have any liabilities at December 31, 2021, or December 31, 2020, which represented debt to financial institutions. The Company’s monetary liabilities at December 31, 2021, and
December 31,
2020
,
were as follows:
Year ended December 31, 2021
   
Maturity
 
($000s)
 
  
Less
than
3 months
   
3-6 months
   
6-12

months
   
1-5 years
   
Total
 
Non-current
lease liabilities
  $—     $—     $—     $11   $11 
Accounts payable   685    —      —      —      685 
Current lease liabilities   132    107    123    —      362 
Other liabilities   1,640    251    588    371    2,850 
                          
   $2,457   $358   $711   $382   $3,908 
                          
F-22

Year ended December 31, 2020
   
Maturity
 
($000s)
 
  
Less
than
3 months
   
3-6 months
   
6-12

months
   
1-5 years
   
Total
 
Non-current
lease liabilities
  $—     $—     $—     $327   $327 
Accounts payable   631    —      —      —      631 
Current lease liabilities   214    187    330    —      731 
Other liabilities   1,619    121    527    —      2,267 
                          
   $2,464   $308   $857   $327   $3,956 
                          
Other current liabilities include accruals for earned compensation, earned vacation days not taken, potential employer’s tax on share-based compensation, and accruals for goods and services received but not yet invoiced by the supplier.
The estimated employer’s payroll tax liability related to share-based compensation amounted to $371 on December 31, 2021, and $216 on December 31, 2020. It will be due only when the associated subscription rights are exercised. The exercise will, in all likely circumstances, fund the payable employer’s payroll tax.
Interest expense including interest on lease liabilities in the Consolidated Statement of Profit and Loss in Finance expense was $31 in 2021 and $63 in 2020.
IDEX had no other significant current or
non-current
monetary obligations at the end of 2021 or 2020. Also, the Company had 0 contingent liabilities at the end of 2021 or 2020.

13. Inventory
Inventories consist of raw materials, work in process, and finished goods. Materials and components purchased for use in research and development activities are expensed at the time of purchase and excluded from inventory. Inventory is recorded at the lower of cost and net realizable value, less impairment, if any. Impairment is assessed quarterly, based on management’s estimates of future consumption of inventories by category.
   
December 31,
 
   
2021
   
2020
 
($000s)  
Cost
   
Reserves
  
Net
   
Cost
   
Reserves
  
Net
 
Raw materials  $562   $0    $562   $460   $(114 $346 
Work in progress   107    0     107    25    0     25 
Finished goods   570    (5  565    588    (100  488 
                             
Total Inventory  $1,239   $(5 $1,234   $1,073   $(214 $859 
                             
In 2021, 2020, and 2019, materials with values of $138, $32, and $1,079, respectively, were consumed in new product development and charged to development expense.
F-23

14. Cash and cash equivalents
USD-valued
cash and cash equivalent balances by currency were as follows:

   Year Ended December 31, 
       2020           2019     
   (in thousands) 

Denominated in NOK

  $5,298   $11,799 

Denominated in USD

   1,295    1,823 

Denominated in GBP

   532    352 

Denominated in CNY

   173    152 
  

 

 

   

 

 

 

Total

  $7,298   $14,126 
  

 

 

   

 

 

 

   
Year Ended December 31,
 
($000s)  
    2021    
   
    2020    
 
Denominated in USD
  $28,217   $1,295 
Denominated in NOK
   3,707    5,298 
Denominated in GBP
   978    532 
Denominated in CNY
   857    173 
   
 
 
   
 
 
 
Total
  $33,759   $7,298 
   
 
 
   
 
 
 
Of the amounts above, employees’ withheld payroll tax deposits amounted to $21$31 and $44$21 at the end of 20202021 and 2019,2020, respectively. Only the withheld payroll tax deposits were restricted. Deposits for facilities rent or utilities have not been included in cash equivalents.

14. Restricted assets

For certain facilities, the Company has placed an amount corresponding to about 3 months’ rent and allocations of its leasehold facilities in escrow accounts in the landlord’s name for the benefit of the respective landlords. Such escrow accounts and other deposits amounted to $75 at the end of 2020 and $152 at the end of 2019.

No other assets have been pledged as security or are otherwise restricted.

15. Share capital

There is one class of shares, and all sharessuch Ordinary Shares have equal rights and are freely negotiable. The share capital is fully paid in.rights. The par value of the shares
an Ordinary Share
is NOK 0.15 per share. IDEX does not hold any of its own shares.

Ordinary
Shares
.
   
Number of
shares

Ordinary Shares
 

Balance at December 31, 2017

542,383,105

Share issue (in lieu of cash board compensation)

300,182

Exercise of incentive subscription rights on several dates

1,631,250

Balance at December 31, 2018

544,314,537

Private placement of shares on February 27th

53,437,500

Share issue on May 31st

236,695

Private placement of shares on December 2nd

55,425,407

Private placement of shares on December 24th

64,574,593

Balance at December 31, 2019

   717,988,732 
  

 

Private placement of shares
Ordinary Shares
on May 11
th

   65,341,413 

Share issue on May 29th

(in lieu of Board compensation)
   441,982 

Share issue on July 1st

(in lieu of cash compensation)
   4,318,523 

Private placement of shares
Ordinary Shares
on November 9
th

   42,528,181 

EmployeeShare issue (Employee Share Purchase Plan on December 2nd

Plan)
   1,527,917 
  

 

Balance at December 31, 2020

   832,146,748 
  

Private placement of
Ordinary Shares
on Feb 15
th
83,214,674
Share issue (exercise of subscription rights)1,767,606
Share issue (in lieu of Board compensation)535,583
Private placement of
Ordinary Shares
on November 12
th
89,777,824
Share issue (Employee Share Purchase Plan)2,946,019
Balance at December 31, 20211,010,388,454
 

Costs related to share issuance have been charged against equity and amounted to $2,827 in 2021, $689 in 2020, and $899 in
2019 and $4 in 2018.

.
16. Share-based compensation

Incentive subscription

Subscription rights

plans

IDEX hasfollows the practice of renewing its incentive subscription rights programplan at each annual general meeting,Annual General Meeting, when the preceding programplan is closed for further grants and a new program opened. In 2020,plan is established. On May 12, 2021, at the board granted incentiveAnnual General Meeting, the shareholders resolved to adopt the 2021 Subscription Rights Incentive Plan (the “2021 Plan”). The Board is responsible for administration of subscription rights to employeesplans and individual contractors under the 2019 program in the period January 1—May 14, 2020 and madeapproves grants under the 2020 program inplans and the period May 15—December 31, 2020.

terms of each grant.

Under the 2020 subscription rights-based incentive program approved at2021 Plan, the annual general meeting on May 15, 2020, the boardBoard may grant up to 71,798,873 incentive91,672,048 subscription rights, but limited in such a way thatprovided the total number of subscription rights outstanding under all programs maygrants does not exceed 10 percent of the number of shares. The subscriptionregistered (i.e., issued and outstanding)
O
rdinary
S
hares.
F-24

Subscription rights may be granted to employees and individual contractors performing similar work in IDEX.individuals rendering services to the Company. The exercise price shall be, at a minimum, the higher of the average closing price of an Ordinary Share, as reported on the IDEX shares onOslo Børs, for the ten trading days preceding the date of the grant, or the closing price of an Ordinary Share, as reported on the IDEX sharesOslo Børs, on the trading day preceding the date of the grant. Unless resolved otherwise by the board,Board, 25 percent
%
 of each grant of subscription rights vestvests per year. The annual vesting dates are the latest of the following dates before the date of grant of the subscription rights; (i) January 15, (ii) April 15, (iii) July 15 or (iv) October 15. The subscription rights lapseexpire on the fifth anniversary afterof the annual general meeting that approvedAnnual General Meeting at which the program. Grantsshareholders resolved to establish the plan under programs for prior years have similar pricing rules, vesting schedules and durations.which the subscription rights were granted. Unvested subscription rights terminate on the holder’s last day of employment.employment or, in the case of
non-employees,
the last day of the individual’s service to the Company. Vested subscription rights may be exercised up to 90 days after the holder’s last day of employment.employment or, in the case of
non-employees,
the last day of the individual’s service to the Company. There are no cash settlement alternatives.

alternatives for exercising subscription rights.

The fair value of the subscription rights granted is calculated, for recognition of share-based compensation expenses, using the Black-Scholes option pricing model, applying the following assumptions:
  
Year Ended December 31,
 
  
2021
   
2020
   
2019
 
Exercise price (NOK)   2.38
 
 
3.10
    1.10 – 1.80    0.15 – 3.88 
Weighted average exercise price per share   2.53    1.62    1.38 
Weighted average share price at date of grant   2.45    1.42    1.49 
Expected term (years)   4.62    4.77    4.93 
Weighted average term (years)   3.35    2.96    3.21 
Share price volatility (percent)   85
-
112
    78 – 113    63 – 80 
Risk-free interest rate   0.983    0.354    1.16 
Expected dividend payment   0    0    0 
Forfeiture   None    None    None 
Replacement of subscription rights

On June 17, 2020, the Board approved a subscription rights (SR) replacement planprogram whereby eligible employees could replaceexchange existing incentive SRssubscription rights, granted under the 2016-2018 SR plansSubscription Rights Incentive Plans from 2016 to 2018, that were of no value, with SRsnew subscription rights granted under the 2020 SR plan.Subscription Rights Incentive Plan. On October 2, 2020, a combined total of 25,962,800 incentive subscription rights under the Company’s 2020 Subscription Rights Incentive Plan were issued. Thegranted at an exercise price of the Replacement SRs is NOK 1.71 per share, andshare. The subscription rights vest by 1/3 on
each of the Replacement SRs vest on
April 15, 2021, 2022, and 2023. All replacement SRs2023, and expire on May 15, 2025.

   Number of
Subscription
Rights
   Weighted
Average
Exercise Price
(in NOK)
 

Outstanding as of December 31, 2018

   34,471,050    5.52 

Granted

   20,414,143    1.38 

Exercised

   —      —   

Forfeited

   (3,236,375   4.34 

Expired

   (1,773,775   5.27 
  

 

 

   

 

 

 

Outstanding as of December 31, 2019

   52,875,043    4.01 

Granted

   36,414,800    1.62 

Exercised

   (52,150   1.65 

Cancelled

   (25,962,800   5.40 

Forfeited

   (4,363,500   4.28 

Expired

   (2,567,300   7.32 
  

 

 

   

 

 

 

Outstanding as of December 31, 2020

   56,344,093    1.66 
  

 

 

   

 

 

 

Subscription Rights exercisable as of December 31, 2020

   5,024,700    3.03 

Subscription Rights exercisable as of December 31, 2019

   13,783,275    6.13 

   Number of
Subscription
Rights
   Weighted
Average

Fair
Value (in
NOK)
 

Subscription Rights granted in 2020

   36,414,800    0.79 

Subscription Rights granted in 2019

   20,414,143    0.79 

The fair value

F-25
Subscription rights granted in theoutstanding at year has been calculated using the Black-Scholes option pricing model applying the following assumptions in 2020end
   
Number of
Subscription
Rights
   
Weighted
Average
Exercise Price
(NOK)
 
Outstanding as of December 31, 2019   52,875,043    4.01 
Granted   36,414,800    1.62 
Exercised   (52,150   1.65 
Cancelled   (25,962,800   5.40 
Forfeited   (4,363,500   4.28 
Expired   (2,567,300   7.32 
           
Outstanding as of December 31, 2020   56,344,093    1.66 
Granted   21,885,200    2.53 
Exercised   (1,767,879   1.33 
Forfeited   (3,165,015   1.97 
Expired   (1,540,000   5.22 
           
Outstanding as of December 31, 2021   56,344,093    1.84 
           
Composition of outstanding and 2019:

   Year Ended December 31, 
   2020   2019   2018 

Exercise price (NOK)

   1.10 – 1.80    0.15 – 3.88    4.28 –5.12 

Weighted average per share

   1.62    1.38    4.55 

Weighted average actual share price at date of grant (per share)

   1.42    1.49    4.55 

Expected duration up to (years)

   4.77    4.93    4.93 

Weighted average (years)

   2.96    3.21    3.32 

Volatility of share price based on share price history (percent)

   78 – 113    63 – 80    48 – 66 

Weighted average risk-free interest rate

   0.354    1.16    1.16 

Expected dividend payment

   0    0    0 

Actual population of subscription rights holders

   No attrition    No attrition    No attrition 

Outstanding and vested incentiveexercisable subscription rights at December 31, 2021

Outstanding Subscription Rights
  
Vested (Exercisable) Subscription Rights
 
Exercise Price (in NOK)
 Number of
Subscription
Rights
Outstanding
  Weighted
Average
Exercise
Price (NOK)
  Weighted
Average
Remaining
Term (Years)
  Weighted
Average
Remaining
Time to
Vest (Years)
  Number of
Vested
Subscription
Rights
  Weighted
Average
Exercise
Price (NOK)
  Weighted
Average
Remaining
Term
(Years)
 
0.00
-
0.50
   4,330,366    0.15    2.36    0.04    2,165,186    0.15    2.36 
0.50
-
1.00
   720,800    0.71    2.36    1.29    310,400    0.71    2.36 
1.00
-
1.50
   5,542,500    1.11    2.36    1.04    1,385,625    1.11    2.36 
1.50
-
2.00
   38,760,433    1.70    3.14    0.96    14,045,131    1.69    3.14 
2.00
-
3.00
   20,588,700    2.51    4.24    2.04    —      —      4.24 
3.00
-
5.00
   1,238,600    3.29    3.05    1.32    175,775    3.94    3.05 
5.00
-
10.00
   575,000    5.53    1.23    —      575,000    5.53    1.23 
                                    
Total   71,756,399    1.84    3.32    1.22    18,657,117    1.59    3.32 
                                    
Composition of outstanding and exercisable subscription rights at December 31, 2020 and 2019:

As of December 31, 2020

   As of December 31, 2020 

Outstanding Subscription Rights

   Vested Subscription Rights 

Exercise Price (in NOK)

  Number of
Subscription
Rights
Outstanding
   Weighted
Average
Exercise
Price (in
NOK)
   Weighted
Average
Remaining
Duration
   Weighted
Average
Remaining
Time to
Vest (in
years)
   Number of
Vested
Subscription
Rights
   Weighted
Average
Exercise
Price (in
NOK)
   Weighted
Average
Remaining
Duration
(in years)
 

0.00 – 0.50

   4,938,543    0.15    3.36    0.54    —      —      —   

0.50 – 1.00

   868,100    0.71    3.36    1.34    217,025    0.71    3.35 

1.00 – 1.50

   5,542,500    1.11    3.36    1.79    —      —      —   

1.50 – 2.00

   42,245,000    1.70    4.10    1.35    2,843,925    1.65    3.35 

3.50 – 4.00

   208,00    3.70    3.36    0.87    52,000    3.70    3.02 

4.00 – 4.50

   1,339,450    4.28    1.04    0.14    871,750    4.28    1.01 

5.00 – 5.50

   660,000    5.09    2.12    0.05    620,000    5.09    2.11 

7.50 – 8.00

   467,500    7.76    0.86    0.12    363,750    7.76    0.87 

8.00 – 8.50

   75,000    8.42    1.37    0.07    56,250    8.42    1.36 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   56,344,093    3.82    1.66    1.24    5,024,700    3.03    2.59 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of December 31, 2019

 

Outstanding Subscription Rights

   Vested Subscription Rights 

Exercise Price (in NOK)

  Number of
Subscription
Rights
Outstanding
   Weighted
Average
Exercise
Price (in
NOK)
   Weighted
Average
Remaining
Duration
   Weighted
Average
Remaining
Time to
Vest (in
years)
   Number of
Vested
Subscription
Rights
   Weighted
Average
Exercise
Price (in
NOK)
   Weighted
Average
Remaining
Duration
(in years)
 

0.00 – 0.50

   4,938,543    0.15    4.36    1.54    —      —      —   

0.50 – 1.00

   1,253,700    0.71    4.36    2.29    —      —      —   

1.50 – 2.00

   12,138,200    1.65    4.36    2.04    —      —      —   

3.50 – 4.00

   896,500    3.82    3.71    1.63    —      —      —   

4.00 – 4.50

   11,022,200    4.28    3.14    0.91    2,987,300    4.28    2.96 

4.50 – 5.00

   5,160,000    4.67    2.37    0.78    1,290,000    4.67    2.36 

5.00 – 5.50

   6,265,900    5.09    3.16    0.93    2,338,475    5.09    3.03 

6.50 – 7.00

   3,975,000    6.59    1.33    0.28    2,406,250    6.59    1.30 

7.50 – 8.00

   5,075,000    7.77    1.84    0.35    3,135,000    7.78    1.73 

8.00 – 8.50

   1,970,000    8.24    1.11    0.16    1,446,250    8.21    0.86 

9.00 – 9.50

   105,000    9.23    0.27    —      105,000    9.23    0.27 

9.50 – 10.00

   75,000    9.85    0.37    —      75,000    9.85    0.36 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   52,875,043    4.01    3.15    1.13    13,783,275    6.13    2.09 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Outstanding Subscription Rights
  
Vested (Exercisable) Subscription Rights
 
Exercise Price (in NOK)
 Number of
Subscription
Rights
Outstanding
  Weighted
Average
Exercise
Price (NOK)
  Weighted
Average
Remaining
Term (Years)
  Weighted
Average
Remaining
Time to
Vest (Years)
  Number of
Vested
Subscription
Rights
  Weighted
Average
Exercise
Price (NOK)
  Weighted
Average
Remaining
Term
(Years)
 
0.00 – 0.50   4,938,543    0.15    3.36    0.54    —      —      —   
0.50 – 1.00   868,100    0.71    3.36    1.34    217,025    0.71    3.35 
1.00 – 1.50   5,542,500    1.11    3.36    1.79    —      —      —   
1.50 – 2.00   42,245,000    1.70    4.10    1.35    2,843,925    1.65    3.35 
3.50 – 4.00   
208,00
    3.70    3.36    0.87    52,000    3.70    3.02 
4.00 – 4.50   1,339,450    4.28    1.04    0.14    871,750    4.28    1.01 
5.00 – 5.50   660,000    5.09    2.12    0.05    620,000    5.09    2.11 
7.50 – 8.00   467,500    7.76    0.86    0.12    363,750    7.76    0.87 
8.00 – 8.50   75,000    8.42    1.37    0.07    56,250    8.42    1.36 
                                    
Total   56,344,093    3.82    1.66    1.24    5,024,700    3.03    2.59 
                                    
F-26

Employee Share Purchase Plan

The ESPP was approved by shareholders at the 2020 annual general meeting.2021 Annual General Meeting. Under the ESPP, an IDEX employeesemployee based in Norway, the United Kingdom, or the United States may contribute up to 20% (subject to statutory limits) of thehis or her annual base salary. The contribution periods are March-May, June-August, September-November, and December-February. Onsalary, through payroll deductions, toward periodic purchases of newly issued Ordinary Shares. Under the ESPP, an option for the purchase of an Ordinary Share is granted to a participating employees on the first trading day after the close of a contribution period, employeessemiannual “offering period” to purchase new issue shares at 85% of the lower of the closing share price at the first and last trading day of the contribution period. The shares are restricted for three months.

The first contribution period under the program was September-November 2020. On December 1, 2020, IDEXnewly issued 1,527,917 shares at NOK 1.43 per share.

17. Receivables

Aging in 2020 and 2019 is as follows:

Year ended December 31, 2020

   Maturity 
   Less than 3 months   3-6 months   6-12 Months   Total 

Trade receivables

  $460   $25   $2   $487 

Other current receivables

   303    303    557    1,163 
  

 

 

   

 

 

   

 

 

   

 

 

 
  $763   $328   $559   $1,650 
  

 

 

   

 

 

   

 

 

   

 

 

 

Year ended December 31, 2019

   Maturity 
   Less than 3 months   3-6 months   6-12 Months   Total 

Trade receivables

  $31   $—     $—     $31 

Other current receivables

   203    —      569    772 
  

 

 

   

 

 

   

 

 

   

 

 

 
  $234   $—     $569   $803 
  

 

 

   

 

 

   

 

 

   

 

 

 

Trade receivables amounting to $5 were overdue and the loss had been accrued forOrdinary Shares at the end of that offering period at a purchase price equal to 85% of the lesser of the fair market value, based on the closing price of an Ordinary Share reported by the Oslo Børs, on either the first day or the last day of that offering period. The offering periods occur from March through August, and from September through February.

The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the U.S. Internal Revenue Code, thereby affording certain tax advantages to employees who are taxpayers in the United States. There are no tax advantages for ESPP participants who are taxpayers in Norway or the United Kingdom.
For the three offering periods completed within 2021, an average of 53 employees participated in the ESPP and purchased 2,946,019
O
rdinary
S
hares at a weighted average price of NOK 2.00.
17. Related party transactions
The Company’s significant shareholders, Board members, and management, as well as their related parties, are considered related parties of the Company.
Compensation of key management is disclosed in Note 4 – Compensation and benefits.
Board compensation
Board compensation is paid in arrears after being approved by the shareholders, generally at the Annual General Meeting. The following amounts were paid in 2021, 2020 sameand 2019:
   
Year Ended December 31, 2021
 
($000s)
 
  
Cash
Compensation
   
Shared-based
Compensation
   
Total
 
Morten Opstad, Board chair  $59   $—     $ 59 
Lawrence J. Ciaccia, Board deputy chair   28    33    61 
Deborah Davis   67    0      67 
Hanne Hovding   52    —      52 
Annika Olsson   —      —      —   
Thomas M. Quindlen   2    32    34 
Stephen A. Skaggs   4    58    62 
                
   $212   $123   $ 335 
                
   
Year Ended December 31, 2020
 
($000s)
  
Cash
Compensation
   
Shared-based
Compensation
   
Total
 
Morten Opstad, Board chair  $40   $—     $40 
Lawrence J. Ciaccia, Board deputy chair    38    —      38 
Deborah Davis    10    36    46 
Hanne Hovding   32    —      32 
Stephen A. Skaggs   4    34    38 
                
   $124   $70   $194 
                
F-27

   
Year Ended December 31, 2019
 
($000s)  
Cash
Compensation
   
Shared-based
Compensation
   
Total
 
Morten Opstad, Board chair  $43   $—     $43 
Lawrence J. Ciaccia, Board deputy chair   34    —      34 
Deborah Davis   7    34    41 
Hanne Hovding   16    23    39 
Andre James MacLeod
1
   7    34    41 
Stephen A. Skaggs    —      —      —   
                
   $107   $91   $198 
                
1
Mr. 
MacLeod resigned from
the
Board on May 9,
2019.
Outstanding subscription rights awarded to members of the Board under the Company’s subscription rights plans have the following expiration dates and exercise prices. For further information describing these plans, see Note 16 – Share-based compensation.
       
Subscription rights outstanding as
of December 31,
 
Grant Date
 
Expiration Date
 
Exercise Price
(NOK per share)
  
     2021     
  
     2020     
  
     2019     
 
August 15, 2018  May 9, 2023   5.10    —      —      600,000 
June 17, 2020  May 15, 2025   1.71    600,000    600,000    —   
The subscription rights granted on August 15, 2018, were replaced by the grant on June 17, 2020, as part of an exchange of subscription rights approved at the 2020 Annual General Meeting. This exchange was offered to all eligible holders.
Related party transactions
Morten Opstad, Board chair, is a partner at Advokatfirmaet Ræder AS, the Company’s primary law firm, which provided services to the Company resulting in charges of $338 in 2021, $477 in 2020, and $470 in 2019.
Lawrence J. Ciaccia, who was elected to the Board at the Annual General Meeting on May 12, 2015, has served on the Company’s Strategy Advisory Committee since January 2014. From time to time, Mr. Ciaccia also provides consulting services to IDEX. The fees paid to Mr. Ciaccia for his services totaled $65 in 2021, $65 in 2020, and $65 in 2019.
There were no overdue balances with any related parties at the end of 2021, 2020 or 2019. There were no other provisions
18. Other Operating Expenses
   
Year Ended December 31,
 
($000s)  
2021
   
2020
   
2019
 
Sales and marketing activities
  $1,287   $764   $850 
Legal, audit, accounting and other services
   2,332    2,906    1,618 
IT expenses
   2,047    1,621    1,367 
Travel expenses
   132    125    635 
Other operating expenses
   1,449    520    170 
   
 
 
   
 
 
   
 
 
 
Total other operating expenses
  $7,347   $5,936   $4,641 
   
 
 
   
 
 
   
 
 
 
F-28

Auditor renumeration
The following table sets out the aggregate fees related to professional services rendered by the Company’s
independent
auditor, Ernst & Young AS (“EY”), for expected credit losses inthe calendar years 2021, 2020, and 2019. No2019:
   
Year Ended December 31,
 
($000s)  
2021
   
2020
   
2019
 
Audit services  $352   $235   $468 
Audit-related services   22    8    8 
Tax services   7    —      8 
Other services   24    12    5 
                
   $405   $255   $489 
                
Audit services
represents the fees for the audit that must be performed by EY in order to issue an opinion on the Company’s consolidated financial statements and to issue reports on the Company’s statutory financial statements. The definition also includes fees for certain other receivables were overdue ataudit services, which are services only the enddesignated independent auditor reasonably can provide, such as the auditing of 2020 or 2019. IDEX had no contingent assets at
non-recurring
transactions, the endapplication of 2020 or 2019. The maximum exposure to credit risk at the reporting date is the carrying valuenew accounting policies, and limited reviews of trade receivables. Other current receivables are comprised of VAT receivablesquarterly financial results.
Audit-related services
 represents fees for other assurance and amounts due for R&D grants.

18. Payables and Financial Liabilities

The Company did not have any liabilities at December 31, 2020 or 2019 which represented debt to financial institutions. The company’s liabilities at December 31, 2020, and 2019 were as follows:

Year ended December 31, 2020

   Maturity 
   Less
than
3 months
   3-6 months   6-12
months
   1-5 years   More than
5 years
   Total 

Non-current lease liabilities

  $—     $—     $—     $
 
 
327
 
 
  $—     $327 

Accounts payable

   631    —      —      —      —      631 

Current lease liabilities

   214    187    330    —      —      731 

Other Current liabilities

   1,619    121    527    —      —      2,267 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $2,464   $308   $857   $327   $—     $3,956 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Year ended December 31, 2019

   Maturity 
   Less
than
3 months
   3-6 months   6-12
months
   1-5 years   More
than
5 years
   Total 

Non-current lease liabilities

  $—     $—     $—     $610   $—     $610 

Accounts payable

   463    —      —      —      —      463 

Current lease liabilities

   197    197    394    —      —      788 

Other Current liabilities

   1,260    1,624    393    —      —      3.277 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $1,920   $1,821   $787   $610   $    $5,138 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other current liabilities include accruals for earned compensation, earned vacation days not taken, potential employer’s tax on share-based compensation, and accruals for goods andrelated services receivedprovided by EY, but not yet invoicedlimited to those that only reasonably can be provided by EY, which are reasonably related to the performance of the audit.

Tax services
and
Other services
represent fees, approved by the supplier. Other current liabilities also included a deferred payableCompany’s Audit Committee, for services not related to the seller for patents acquired in 2014, in an amountaudit provided by EY, pursuant to the provisions of $500 in 2019.

the Sarbanes-Oxley Act.

19. Subsequent Events
The estimated employer’s tax liability relatedBoard resolved on February 23, 2022, to share-based compensation amounted to $216 on December 31, 2020 and $3 on December 31, 2019. It will be due only if and when thegrant 8,350,900 incentive subscription rights are exercised. The exercise will, in all likely circumstances, fund the payable employer’s tax.

Interest expense including interest on lease liabilities in statement of profitto certain employees and loss in finance expense was $63 in 2020 and $48 in 2019. In 2019 there was also $54 imputed interest on a deferred payment. Remaining amount of finance expense is net currency losses.

IDEX had no other significant current or non-current financial obligations at the end of 2020 or 2019. IDEX had no contingent liabilities at the end of 2020 or 2019.

19. Inventory

   December 31, 
   2020   2019 
   Cost   Reserves  Net   Cost   Reserves  Net 
   (In thousands) 

Raw materials

  $460   $(114  346   $796   $(513  283 

Work in progress

   25    —     25    81    (70  11 

Finished goods

   588    (100  488    963    (571  392 
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

  

 

 

 

Total Inventory

  $1,073   $(214 $859   $1,840   $(1,154 $686 
  

 

 

   

 

 

  

 

 

   

 

 

   

 

 

  

 

 

 

Inventory, consisting mainly of fingerprint sensors which are manufactured for sale, is held at cost, which is less than recoverable value. Inventory value has been reduced to reflect aging, obsolescence and estimated shrinkage.

In 2020, 2019, and 2018, $32, $1,079, and $358, respectively, of materials used in new product development was charged to development expense.

20. Other Operating Expenses

   Year Ended December 31, 
   2020   2019   2018 
   (in thousands) 

Sales and marketing activities

  $764   $850   $193 

Legal, audit, accounting and other services

   2,906    1,618    1,036 

IT expenses

   1,621    1,367    1,247 

Travel expenses

   125    635    814 

Other operating expenses

   520    170    630 
  

 

 

   

 

 

   

 

 

 

Total other operating expenses

  $5,936   $4,641   $3,919 
  

 

 

   

 

 

   

 

 

 

The main reason for the increase from 2019 to 2020 was legal, audit and other services in connection with the company’s listing on the Nasdaq which commenced on March 1, 2021.

21. Subsequent Events

On February 15, 2021 IDEX completed a private placement of shares raising $27.2 million before expenses. Approximately 83.2 million new shares were issued at NOK 2.75 per share. The placement was conducted by a book building with professional investors after market close. The shares have been issued.

On February 24, 2021, the board resolved to issue 934,900 incentive subscription rights (SRs) to IDEX employees.individual contractors. The grant was made under the Company’s 2020 SR plan as resolved at the annual general meeting on May 15, 2020.2021 Subscription Rights Incentive Plan. The exercise price of the SRssubscription rights is NOK 3.102.08 per share. The subscription rightsgrants vest by 25% per year and expire on May 15, 2025.

On2026. Following the grants, there were 80,107,297 subscription rights outstanding.

The Board resolved on March 2, 2021, the board resolved1, 2022, to issue 1,060,179 ordinary shares1,765,791 Ordinary Shares at NOK 1.831.70 per share to employees who participateparticipating in the Company’s Employee Share Purchase Plan (ESPP).

ESPP.

On March 9, 2021,4, 2022, the boardBoard resolved to issue 298,884 ordinary sharesin total 394,409 Ordinary Shares at a price NOK 0.48 per share to IDEX employeesindividuals who recently had exercised vested subscription rights. The average purchase priceFollowing this share issuance, there were 1,012,548,654 Ordinary Shares issued and outstanding.
As of the shares was NOK 0.72 per share.

Followingdate of these Consolidated Financial Statements, the foregoing transactions,Company has not been affected by the company’s share capital is NOK 137,508,072.75 divided into 916,720,485 shares each with a nominal valueoutbreak of NOK 0.15war between Russia and there are a total of 57,032,259 SRs outstanding.

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Ukraine and the sanctions imposed by the Unites States and EU. The Company’s business, operational performance, and financial position may be adversely affected by the ongoing conflict or related future events.

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