q3 interim report

REALFICTION HOLDING Q3 INTERIM REPORT 2020 / 1

Q3 INTERIM REPORTRealfiction Holding AB (publ) | 559110-4616

1 JULY – 30 SEPTEMBER 2020

Q3, 2020 (01-07-2020 – 30-09-2020)

• Revenue: TSEK 2,038 (Q3, 2019: TSEK 4,296)

• Grossprofit:TSEK1,132(Q3,2019:TSEK1,969)

• Grossprofitmargin:55.5%(Q3,2019:45.8%)

• Resultafterfinancialitems:TSEK-2,293(Q3,2019:TSEK-4,817)

• Earningspershare:SEK-0.12(Q3,2019:SEK–0.31)

• Cashflowfromoperatingactivities:TSEK-2,873(Q3,2019:TSEK-3,942)

Q1-Q3, 2020 (01-01-2020 – 30-09-2020)

• Revenue:TSEK7,431(Q1-Q3,2019:TSEK17,145)

• Grossprofit:TSEK4,105(Q1-Q3,2019:TSEK9,100)

• Grossprofitmargin:55.2%(Q1-Q3,2019:53.1%)

• Resultafterfinancialitems:TSEK-7,800(Q1-Q3,2019:TSEK-10,901)

• Earningspershare:SEK-0.42(Q1-Q3,2019:SEK-0.77)

• Cashflowfromoperatingactivities:TSEK-2,793(Q1-Q3,2019:TSEK-8,661)

Q3 INTERIM REPORT

Picture on front page and above: Dreamoc displays used by Polytech at

China Wind Power 2020 in Beijing, China REALFICTION HOLDING Q3 INTERIM REPORT 2020 / 2


SIGNIFICANT EVENTS DURING Q3 2020

•On1September2020,RealfictionannouncedtheinitiationofastrategicreviewofitsSalesActivities(Magic-as-a-ServiceforRetail/ExhibitionsandExperiencehardwaresales)aswellasallnon-ECHOIPandhardwaredevelopment,includingthehighlyacclaimedDreamocandDeepFrameMixedRealityproductranges.Thestrategicreviewfollowsthestrongprogressachievedin2020inthedevelopmentofECHO.Potentialrecommendationsfromthestrategicreviewmayinclude,butarenotlimitedto,asale,jointventureorspin-outofany,allornoneoftheseassets.Realfictionhascontractedacorporatefinancefirmwithexpertiseinfacilitatingsuchstrategicreviewandtransactions.

•On24September2020,RealfictionannouncedthepublicationbytheWorldIntellectualPropertyOrganization(WIPO)ofthecompany’sECHOpatentapplicationandWIPO’sreportonitspatentability.ThereportreaffirmsRealfiction’sstatementinits2July2020pressreleasethatnopriortechniquethatputsthenoveltyoftheinventionintoquestionhasbeenfound.Withthepublicationofthefirstpatentapplication,and6additionalpatentapplicationsfiled,theECHOtechnologyhasastrongIPprotectionshieldpendingapprovals.

SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD•On7October2020,RealfictionheldalivevirtualeventfocusedonitsECHOdisplaytechnology.Duringavirtualpresentation,Realfiction’sDirectorofAdvancedDisplayTechnologySteenIversenexplainedthecoreprinciplesoftheECHOtechnology,aswellashowandwhyithasseveralmajoradvantagesoverthecurrentlightfieldtechnologyandholdsthepotentialforlow-costmassproduction.ThepresentationalsocoveredtheongoinginternationalpatentprocessforECHO.

•On18November2020,anExtraGeneralMeetingauthorizedtheBoardto,atoneorseveraloccasions,duringthetimeupuntilthenextAnnualGeneralMeeting,withorwithoutdeviationfromtheshareholders’preferentialrights,resolvetoissueshares,shareoptionrightsand/orconvertiblesuptoatotalof30percentofthetotalnumberofoutstandingsharesintheCompanyonthedaywhentheBoardutilizestheauthorizationthefirsttime.

•On19November2020,RealfictionannounceditsplanforcompletionoftheECHOintegrationlicensepackage,includingapotentialfurtheroptimizationforproductionwhichisexpectedtoresultinevenlowermanufacturingcostsandaslimmerformfactor.Thecompletionphaseisplannedtolast13-16monthsincollaborationwithacoupleofleadingEuropeanresearchinstitutesandfacilities.Byspring2021,Realfictionwillalsoactivelyseekaco-developmentagreementwithacommercialdisplaymanufacturertospeeduptimetomarket.


CEO COMMENTS

POSITIVE DEVELOPMENT PROGRESS COULD ENABLE EVEN CHEAPER AND SLIMMER ECHO DISPLAYS

ThedevelopmentofourECHO3Ddisplaytechnologycontinuestoprogressinaverysatisfactorymanner.Wehave recently identifiedaway topotentiallyoptimizeapartoftheECHOtechnology,pavingthewayforamore rapid integrationwitha shortertime tomarket,a slimmer form factorandcheapermanufacturing forboththeLCDandtheOLEDversions.AswearenowenteringthecompletionphaseofECHO,withtheaimtofinalize an integration licensepackage that will facilitateeasy commercialization,the first step is to conducta feasibility study to pre-validate these new findings.The feasibility study is co-funded by an InnoboostergrantfromInnovationsfondenin Denmark, and we expectto complete this study inJanuary 2021. During thespring of 2021, it is our goal to invite a strategicallyselected Asian display manufacturer to participate intheco-developmentofacentralsub-system:thedisplaybackplane.This isanaturalnextstep inmaturing thetechnologyandbringingitclosertomassproduction.

STRONG RESULTS FROM RETAIL MAAS CAMPAIGNS WITH EDEKA

Withseveralmonthsofthetestlaunchat25EDEKAstoresinGermanybehindus,wehavebeenabletodocumentagenerallypositiveeffectonsalesforproductsfeaturedinthecampaigns.Thisclearlyshowsthatourconceptworksanddeliversvaluetothecustomers.Forthreerecentlyconcludedcampaigns,wesawsignificantsalesupliftsforallthreecampaignsintherangeof290%forthe

leasteffectiveand980%forthemostsuccessful.DiscussionswithEDEKAregardingapotentialscale-uptoadditionalstoresin2021isinprocessbutisslightlydelayedduetotheongoingsecondCOVID-19waveinEurope.

MAAS FOR EXHIBITIONSInQ32020,thetrendfromthepreviousquartercontinued,withsomeinflowofordersdespiteCOVID-19restrictions.WehaveforexampleseensomeeventsinChinamaterializewhereRealfictioncustomerssuchasPolytechhaveparticipated.

However,thetotalsalesvolumesarestillmuchlowercomparedtopre-pandemiclevels.Therehasalsobeenatrendofsomecustomersconvertingtheirrentalorderstopurchaseorders,thusgivingthemmorecontrolandflexibilitywhichcanbeahugeplusduringthecurrentcircumstances.Anothergeneraltrend

isthatsalesprocessestakemuchlongertimetocompleteduetotheincreaseduncertaintyinthemarket,andweexpectthistocontinueatleastuntilthespringof2021dependingontheCOVID-19situation.

EXPERIENCE (HARDWARE)AsinQ22020,weareseeingmuchlowersalesvolumescomparedtobeforetheCOVID-19pandemic.Therearehoweversomehardwareorderscomingin,includingfromcustomersconvertingfromrentaltohardwareordersasstatedabove.JustasforourMaaSforExhibitionssegment,weexpecttheloweroverallsalesvolumestocontinueatleastuntilthespringof2021.

“W e have recently identified a

way to potentially optimize a

part of the ECHO technology, paving the

way for a more rapid integration with a

shorter time to market, a slimmer form

factor and cheaper manufacturing for both

the LCD and the OLED versions.”


SIGNIFICANTLY LOWERED COSTS REDUCES RISK LEVELS

EventhoughweareseeingobviousnegativeCOVID-19effectsinsomeofoursegments,wehavebeenabletorespondforcefullybysignificantlyreducingRealfiction’snetoperatingcostsby50%comparedtoQ3,2019,andby40%comparedtoQ1-Q3,2019.ThisismainlyduetosignificantstaffreductionsinourMaaSandExperience(Hardware)segments,butwearealsopausingallmajorinvestmentsinourinternationalMaaSexpansion.Theupsideofthisisthatourburnrateismuchlowercomparedto2019,despitethelowersaleslevels.Realfictionhasastrongfinancialpositionandexpectstohavetheliquiditynecessarytosustainallitsbusinessoperations,includingthedevelopmentofECHO,wellinto2021duetothecombinedpositiveimpactofcostsavingsinitiativesfromthesimplifiedgo-to-marketmodelandthegrantingofinstallment

deferralsin2021ontheloanwithVækstfonden,thussavingliquidityforthecontinueddevelopmentofECHO.WeexpecttocompletetheprocessofsecuringtheadditionalfundingrequiredfortheECHOcompletionphasebeforetheendof2020.

ConsideringourstrongcontinuedprogressinthedevelopmentofECHO,Iamcertainthatwearemovingintherightdirectionwhenitcomestobuildingavaluablecompanyforourshareholders,whilealsodeliveringonourpromisetobringexperiencespreviouslyjustseeninsciencefictionintoreality.

Clas DyrholmCEO,RealfictionHoldingAB


LEADING MIXED REALITY PRODUCTS AND SERVICES

Realfiction develops, sells and rents out market leading Mixed Reality (MR) products and services based on innovative, as well as patent and design protected, hardware platforms that have been developed over more than a decade. The Company’s MR displays are especially well-suited for social environments as they do not require special glasses or other accessories.

Realfiction’sMRsolutionscancreateinterestforabrandoraspecificproductinaveryvisualandengagingway.Basedonthisattention,concretevaluecanbedelivered,forexampleintheformofincreasedsalesofaproductand/ortheconversionofvisitorsintomembersofbonusorloyaltyprograms.

ECHO – A GROUNDBREAKING HOLOGRAPHIC 3D TECHNOLOGY

RealfictionisdevelopingECHO,agroundbreakingpatentpendingtechnologythatenablesanewgenerationof3Dexperiencesthroughfree-floatinghologramsthatdonotrequireglassesoranyothertypeoflensesbetweentheeyeandtheeffect.

FOCUS AREAS IN 2020

ECHO: Havingalreadydeliveredabasiclaboratoryproof-of-concept,wearenowfocusedonprovingandspecifyingthescalabilityandmanufacturabilitynecessaryforafuturemassproduction,whichistheinherentstrengthofourtechnologyandwherepreviousattemptsinthehistoryof3Dhavefailed.Wehaveidentifiedaone-digitnumberofsub-projects/modulesthatneedtobeinplacetobeabletofinalizeacompleteintegrationlicensepackagethatwecanoffertoLCDandOLEDdisplaymanufacturers.Certainuse-casesmayhoweverbeprioritizedandofferedsooner.Tocompletethesesub-projects/modules,wearepursuingcollaborationwithpotentialresearchpartners,includingaleadinginternationalresearchinstituteinOrganicElectronics.In2020,wehaveadded4updatedpatentapplicationstoourECHOIPportfolioofnow6pendingpatentswithmoretocome.Wherethe

2019patentapplicationsarea“pluginthebathtub”,comprisingalargesetofpotentialvariationsdescribedinbroaderterms,preventingcompetitorsfromcomingfirstandlockingthefieldwhilewearematuringthetechnology,the2020applicationscomprisetheworkwehaveputintopreferredembodimentstodocumentthedetailedinventivestepswebelievewearethefirsttohaveovercometoenablefuturemassproduction.

Magic-as-a-Service: Realfiction’sgo-tomarketmodelhasbeenrevisedthroughlearningsfromtheinitialroll-outinDenmarkandSweden,andtheCompanyhasrefocuseditsenergyandoperationalmodelintoaleanerandsimplerorganisationalsetupthatutilisesexternalcollaboratingpartnersandindustryagents.TherevisedMagic-as-a-Serviceconcepthasbeenimplementedinatestlaunchin25EDEKA(Germany’slargestdepartmentstorecompanywithover11,000stores)storesinGermany.RealfictionisconfidentthatitisatthebrinkofrealisingthetruepotentialoftheMagic-as-a-Serviceconcept,evenwiththeCOVID-19outbreak.Afterthetemporarypauseofthetestlaunchinthefirsthalfof2020,wehaverestartedthetestlaunchinJuly2020andwelookforwardtoreceivingmorefeedbackfromstakeholdersduringtheremainderof2020.

Experience (hardware sales): Realfiction’sglobalpartnernetworkcontinuestodeliverinthehardwaresalessegment.PartnersalesremainsasahighpriorityfortheCompanyandanimportantwaytocreateglobalvisibility.

REALFICTION’S BUSINESS AND CONCEPT


DISPLAY PORTFOLIO

DREAMOC – WORLD CLASS HOLOGRAPHIC EFFECTSDreamocisaseriesofMRdisplayswithadiamondshapedglasschamberwherepicturesand3Danimationsappeartobefloatingtogetherwithrealproducts.Thecontentcanbeseeneitherfromthefrontorfromseveraldirectionssimultaneously.

Dreamoc HD3 isthesmallestandmostflexiblemodelforsingleproductsthatcanbeexperiencedfromseveraldirectionssimultaneously. Dreamoc POP3 canonlybeexperiencedfromthefrontandisespeciallywellsuitedfordisplaysonshelvesandfordisplayingseveralobjectstogether.Dreamoc XL3, XL4 and Dreamoc XXL3 are,astheirnamessuggest,largermodelsthatmakeitpossibletocreateattentionforreallylargeobjects,forinstanceatairportsorinshoppingmalls.Dreamoc Diamond isoneofRealfiction’sbiggestDreamocdisplays,andthemostelegant.ADreamocDiamondcreatesanextraordinaryexperiencethatfitsbrilliantlyintoexclusiveboutiques.

DEEPFRAME – THE WORLD’S LARGEST MIXED REALITY DISPLAY

DeepFrameistheworld’slargestMRdisplayandcancreateunbelievablerealtimeexperienceswhereholographicimagesandanimationsareprojectedoverexistingsurfacesandobjects.Itwasawardedthe“CES2018InnovationAwardsHonoree”titleatCES,theworld’slargestconsumerelectronicsshow.

DeepFrame One isaplugandplaymodelintheDeepFrameseriesthatmakesitpossibletocreateunforgettableexperiencesforshoppingmallsandshowrooms,amusementparks,museums,conferences,eventsandcarshowrooms.Otherpossibleusecasesincludevisualizationineducationandresearchaswellasinarchitecture,manufacturingandconstruction.

Picture above: Realfiction’s display portfolio


INNOVATION

Since the beginning of our journey more than a decade ago, our vision has always been about creating experiences that bring people together. At the heart of this vision sits our innovation team, a group of dedicated, like-minded individuals all sharing the belief that our technology should be about enabling magical moments that can be collectively experienced and shared with others. Positioned in the so-called Mixed Reality field, Realfiction is on the verge of taking the next step beyond the current approach of head-mounted wearables, that we believe is just the first, primitive stage.

Wehaveintensifiedourinvestmentininnovation–andwenowbelievethatwehavefoundthetechnologythatwillallowustoinventtheholygrailof3Dexperiences;free-floatinghologramsthatrequirenoglasses,devicesorotherlensesbetweenthehumaneyeandtheeffect,andwhere3Dobjectscanbeviewedandinteractedwithfromdifferentangles.Thisdisplayhasformanyyearsexistedpurelyasanitemofsciencefiction,deemed

improbabletoeversurfaceinourpresentlifetime.However,withourpatentpendingdirectionalpixeltechnology,referredtoasECHO,Realfictionisfinallyonthepathtomaterializethisdreamandbringittomarket.ECHOiscurrentlythemainfocusofourdevelopmentdepartment,withpotentialtoprovidesignificantlicensingandjointcooperationopportunitiesinthefuture.

ECHO – TRANSFORMING SCIENCE FICTION INTO REALITY

Picture above: Illustration of ECHO in a museum


DEVELOPMENT IN Q3 AND Q1–Q3, 2020Income Statement

COVID-19continuestocausesignificantdeclineinsalesduringQ3.However,duetocostsavingsfromthesimplifiedgo-to-marketmodelandgovernmentalfinancialsupportpackages,theimpactontheresultandliquidityoftheGroupisnotasnegativeasifwehadnotimplementedsuchmeasures.

GroupnetrevenueamountstoTSEK2,038forQ3,2020,representingadeclineof53%fromQ3,2019(TSEK4,296),whileTSEK7,431forQ1-Q3,2020(TSEK17,145)representadeclineof57%comparedtoQ1-Q3,2019.ThemajorpartofnetrevenueinQ3andQ1-Q3,2020consistsofproductsalesfromtheDreamocandDeepFramecategory,whilesalesfromourMagic-as-a-ServiceconceptaccountforTSEK549(TSEK524)andTSEK1,453(TSEK2,842)respectively.Adjustedforcurrencyconversioneffects,theCompany’srevenueinthethirdquarterof2020declinedby61%toTDKK1,466comparedtotheaveragequarterlyrevenueof2019(TDKK3,776).

CostofgoodssoldamountstoTSEK906and3,326forQ3,2020andQ1-Q3,2020respectively,comparedtoTSEK2,327forQ3,2019and8,045forQ1-Q3,2019.Thus,ourgrossprofitinQ3,2020decreasedtoTSEK1,132from1,969inQ3,2019andresultedinanincreasedgrossprofitmargininQ3,2020of55.5%(45.8%)andinQ1-Q3,2020of55.2%(53.1%).TheincreaseinthegrossprofitmargininQ3,2020isattributabletothedecreaseinsalescombinedwithafewmoreprofitableorders.

InQ3,2020theCompanyhascapitalizeddevelopmentexpenditurerelatingtoECHOthatfulfilstherequirementsofthecapitalizationaccountingprinciple.Assuch,theQ3,2020operatingresultispositivelyimpactedbyTSEK693(TSEK980)fromthecapitalizationofsalaries

andinternalexpensesrelatingtoECHO,whiletheQ1-Q3,2020resultispositivelyimpactedbyTSEK2,579(TSEK2,242).

OtherexternalcostsdecreasedtoTSEK1,154inQ3,2020from2,723inQ3,2019,andtoTSEK4,289inQ1-Q3,2020from7,592inQ1-Q3,2019.Thedecreaseisprimarilyduetothesimplifiedandlowcostgo-to-marketmodelforourMaaSconcept,andduetolowerdevelopmentcostsasthefocusofourinnovationdepartmentistosucceedwiththeECHOtechnology.

Thesimplifiedgo-to-marketmodelforourMaaSconceptentailsthatwehavereducedtheworkforcefromDecember,2019totheendofJune2020.ThusresultinginsignificantlylowerpersonnelcostsofTSEK2,624inQ3,2020(TSEK4,703)andTSEK9,479(TSEK13,478)inQ1-Q3,2020.

Allinall,wereducedournetoperatingcostbyTSEK3,362inQ3,2020toTSEK3,330fromTSEK6,692inQ3,2019andbyTSEK7,679inQ1-Q3,2020toTSEK11,687fromTSEK19,366inQ1-Q3,2019.

GroupnetfinancialcostsconsistofinterestontheloanwithVækstfonden,whiletheQ1-Q3,2019financialcostsincludeinterestonabridgeloan.

ThenetresultfortheGroupinQ3,2020amountstoTSEK-1,892(TSEK-4,350)andTSEK-6,481(TSEK-9,660)inQ1-Q3,2020.

Supplementary Income Statement

Onpage17wepresentoursupplementaryincomestatementwithourtwomainactivities;Innovation&DevelopmentandSales.

InQ3,2020,wecontinuedinvestinginInnovation&DevelopmentActivities,withtheprimaryfocuson

FINANCIAL REVIEW


ECHO.TheECHOtechnologyaimsatinventingtheholygrailof3Dexperiences:Free-floatinghologramsthatrequirenoglasses,devicesorotherlensesbetweenthehumaneyeandtheeffect,andwhere3Dobjectscanbeviewedandinteractedwithfromdifferentangles.

OurgrossexpenditureinInnovation&DevelopmentActivitiesamountedtoTSEK1,099inQ3,2020comparedtoTSEK1,922inQ3,2019andTSEK3,785inQ1-Q3,2020comparedtoTSEK4,800inQ1-Q3,2019.TheQ3,2020operatingresultfromourSalesActivitiesimprovedtoalossofTSEK1,792comparedtoalossofTSEK3,798inQ3,2019,whiletheQ1-Q3,2020resultimprovedtoalossofTSEK6,384fromalossofTSEK7,753inQ1-Q3,2019.TheimprovementsinQ3andQ1-Q3,2020wereprimarilyduetocostsavingsfromthesimplifiedgo-to-marketmodel.

Balance Sheet

Realfiction’stotalassetsat30September2020amounttoTSEK32,079comparedtoTSEK37,834of31December2019.Inventoryat30September2020amountstoTSEK7,098comparedtoTSEK7,242at31December2019.

Tradereceivablesarelowerthanlastyearduetothedecreaseinsales.

Othershort-termreceivablesarelowerthanlastyearandcurrentliabilitiesdecreasedtoTSEK5,474at30September2020comparedtoTSEK6,519at31December2019duetoacombinationofanextensionofaninstallmentdeferralontheloanwithVækstfondenandfinancialsupportfromgovernmentalCOVID-19supportpackages.

Investments

InQ3,2020andQ1-Q3,2020,theCompanyhascapitalizedadditionaldevelopmentexpenditureofTSEK1,418(TSEK1,503)andTSEK4,808(TSEK3,179)respectively,relatingtothepatent-pendingECHOtechnology.Developmentprojectsthatfulfiltherequirementsofthecapitalizationaccountingprinciplearepresentedasintangibleassetsandaremeasuredatcost(orfairvalueiflower)untiltheprojecthasbeencompleted.

Cash Flow and Liquidity

Realfiction’sliquidityat30September2020amountstoTSEK9,738comparedtoTSEK17,240at31December2019.CashflowfromoperatingactivitiesforQ3,2020improvedtoTSEK-2,873comparedtoTSEK-3,942forQ3,2019andimprovedtoTSEK-2,793inQ1-Q3,2020fromTSEK-8,661inQ1-Q3,2019.TheimprovementsinQ3andQ1-Q3,2020areprimarilycausedbytheinvestmentsintheECHOtechnology,costsavingsduetothesimplifiedgo-to-marketmodelandgovernmentalCOVID-19supportpackages.

Realfictionhasastrongfinancialpositionandexpectstohavetheliquiditynecessarytosustainallitsbusinessoperations,includingthedevelopmentofECHO,wellinto2021.

The Share

RealfictionHoldingAB’ssharewaslistedonNasdaqStockholmFirstNorth14July2017.TheshareistradedwiththetickerREALFIanditsISIN-codeisSE0009920994.On30September2020,thenumberofsharesinRealfictionHoldingABamountsto15,610,613.TheCompanyhasoneshareclass.Allshareshaveequaldividendrights.


Group structure

RealfictionHoldingABhastwofullyownedsubsidiaries,RealfictionApSandRealfictionLabApS.Allbusinessactivitiesarecarriedoutinthesubsidiaries.InearlyJanuary2020,RealfictionLabApSpurchasedtheECHOtechnologyfromRealfictionApS.RealfictionHoldingABdoesnotownsharesinothercompanies.

Operational risks & uncertainties

TherisksanduncertaintiesthatRealfiction’soperationsareexposedtoareconcentratedinthe

categoriesofcompetition,technologydevelopment,patents,governmentrequirements,capitalrequirements,currenciesandinterestrates.Duringthecurrentperiod,nosignificantchangesregardingriskoruncertaintyfactorshaveoccurred.Formoredetailedreportingofrisksanduncertainties,refertothepreviouslypublishedCompanydescription,publishedinthe2019AnnualReport.

OWNERSHIP STRUCTURE ThetablebelowshowskeyshareholdersinRealfictionHoldingABat30September2020.

Name Number of shares Ownership (in %)

CerancoEquityS.C.S 3,194,447 20.46

ClapeHoldingApS1 2,725,000 17.46

AmTRANTechnologyCo.Ltd.2 1,983,768 12.71

Försäkringsaktiebolaget,AvanzaPension 841,669 5.39

Othershareholders(morethan4,200) 6,865,729 43.98

Total 15,610,613 100.00

1.50%ownedbyCEOandboardmemberClasDyrholmand50%ownedbyboardmemberPeterSimonsen.Inaddition,CLAPEHOLDINGApSowns280,000warrants.2.AmTRANisalargeOEMproducerofLCDTV’sandotherconsumerelectronics.


Audit/review

TheQ3InterimReporthashasnotbeenauditedorreviewedbytheCompany’sindependentauditors. TheAnnualReport2019forRealfictionApShasbeenaudited.

Accounting policies

RealfictionHoldingABappliestheAnnualAccountsActandtheBoardofDirectors’GeneralAdviceBFNAR2012.1(K3)inthepreparationofitsSwedishfinancialreports. Financial Calendar:

Year-endReport2020: 25March2021AnnualReport2020: 20May2021AnnualGeneralMeeting2021: 15June2021

TheabovereportswillbeavailablefordownloadfromtheCompany’swebsite(www.realfiction.com)[email protected].

Certified Adviser

MangoldFondkommissionABistheCompany’[email protected]+46850301550.

For further information, please contact:

ClasDyrholm,CEOTelephone:+4570206490E-mail:[email protected]

The Board of Directors and the CEO declare that to the best of their knowledge, the Q3 Interim Report 2020 presents a fair view of the financial position of the Company at 30 September 2020 as well as of the results of the Group operations

and cash flows for the period 1 January – 30 September 2020.

Helsingborg, 19 November 2020Realfiction Holding AB

Board of Directors and CEO

ThisinformationisinformationthatRealfictionHoldingABisobligedtomakepublicpursuanttotheSwedishSecuritiesMarketAct(Lagen(2007:528)omvärdepappersmarknaden).Theinformationwassubmittedforpublication,throughtheagencyofthecontactpersonsetoutabove,on19November2020.


ThedevelopmentintheCompany’squarterlyrevenue,grossprofitandgrossprofitmarginisillustratedbelow:

TheGroup’srevenueandgrossprofitisfullyearnedintheDanishsubsidiaryRealfictionApS.Assuch,andtoavoidthatcurrencyfluctuationsbetweenDKKandSEKdistortthepresentationofrevenueandgrossprofit,theaboveillustrationispreparedonthebasisofRealfictionApS’DKKfigures.

FINANCIAL HIGHLIGHTS AND KEY RATIOSSelected Financial Highlights and Key Ratios – Group

SEK ‘000

Q3-2020 01-07-2020

-30-09-2020 3 months

Q3-2019 01-07-2019

-30-09-2019 3 months

Q1-Q3-2020 01-01-2020

-30-09-2020 9 months

Q1-Q3-2019 01-01-2019

-30-09-2019 9 months

201901-01-2019-31-12-2019

12 months

Netrevenue 2,038 4,296 7,431 17,145 21,357

Grossprofit 1,132 1,969 4,105 9,100 11,367

Resultafterfinancialitems -2,293 -4,817 -7,800 -10,901 -14,792

TotalAssets 32,079 27,473 32,079 27,473 37,834

Cashflowfromoperatingactivities -2,873 -3,942 -2,793 -8,661 -11,013

Cashatbankandinhand 9,738 7,912 9,738 7,912 17,240

Solvencyratio(%) 68.1 62.9 68.1 62.9 74.7

Averagenumberofemployees 11 19 14 17 17

Grossprofitmargin(%) 55.5 45.8 55.2 53.1 53.2

Earningspershare(SEK) -0.12 -0.31 -0.42 -0.77 -1.00

Averagenumberofshares 15,610,613 14,057,908 15,554,700 12,567,976 12,943,521

Numberofsharesattheendoftheperiod 15,610,613 14,057,908 15,610,613 14,057,908 14,057,908

30%

35%

40%

45%

50%

55%

60%

-

1 000

2 000

3 000

4 000

5 000

6 000

Q1-2018

Q2-2018

Q3-2018

Q4-2018

Q1-2019

Q2-2019

Q3-2019

Q4-2019

Q1-2020

Revenue 4 435 4 510 4 064 4 207 5 033 4 094 3 014 2 961 2 488

Gross profit 1 744 2 266 2 067 2 215 2 827 2 242 1 382 1 595 1 343

Gross profit margin 39% 50% 51% 53% 56% 55% 46% 54% 54%

Gros

s pr

ofit m

argi

n

Reve

nue

and

Gros

s pr

ofit i

n TD

KK

30%

35%

40%

45%

50%

55%

60%

-

1 000

2 000

3 000

4 000

5 000

6 000

Q1-2018

Q2-2018

Q3-2018

Q4-2018

Q1-2019

Q2-2019

Q3-2019

Q4-2019

Q1-2020

Revenue 4 435 4 510 4 064 4 207 5 033 4 094 3 014 2 961 2 488

Gross profit 1 744 2 266 2 067 2 215 2 827 2 242 1 382 1 595 1 343


Gros

s pr

ofit m

argi

n

Reve

nue

and

Gros

s pr

ofit i

n TD

KK

30%

35%

40%

45%

50%

55%

60%

-

1 000

2 000

3 000

4 000

5 000

6 000

Q1-2018

Q2-2018

Q3-2018

Q4-2018

Q1-2019

Q2-2019

Q3-2019

Q4-2019

Q1-2020

Revenue 4 435 4 510 4 064 4 207 5 033 4 094 3 014 2 961 2 488

Gross profit 1 744 2 266 2 067 2 215 2 827 2 242 1 382 1 595 1 343


Gros

s pr

ofit m

argi

n

Reve

nue

and

Gros

s pr

ofit i

n TD

KK

30%

35%

40%

45%

50%

55%

60%

-

1 000

2 000

3 000

4 000

5 000

6 000

Q1-2018

Q2-2018

Q3-2018

Q4-2018

Q1-2019

Q2-2019

Q3-2019

Q4-2019

Q1-2020

Q2-2020

Q3-2020

Revenue 4 435 4 510 4 064 4 207 5 033 4 094 3 014 2 961 2 488 1 309 1 466Gross profit 1 744 2 266 2 067 2 215 2 827 2 242 1 382 1 595 1 343 755 815Gross profit margin 39% 50% 51% 53% 56% 55% 46% 54% 54% 58% 56%

Gros

s pro

fit m

argi

n

Reve

nue

and

Gros

s pro

fit in

TDK

K

Quarterly key earnings parameters

30%

35%

40%

45%

50%

55%

60%

-

1 000

2 000

3 000

4 000

5 000

6 000

Q1-2018

Q2-2018

Q3-2018

Q4-2018

Q1-2019

Q2-2019

Q3-2019

Q4-2019

Q1-2020

Q2-2020

Revenue 4 435 4 510 4 064 4 207 5 033 4 094 3 014 2 961 2 488 1 309Gross profit 1 744 2 266 2 067 2 215 2 827 2 242 1 382 1 595 1 343 755Gross profit margin 39% 50% 51% 53% 56% 55% 46% 54% 54% 58%

Gros

s pro

fit m

argi

n

Reve

nue

and

Gros

s pro

fit in

TDK

K


30%

35%

40%

45%

50%

55%

60%

-

1 000

2 000

3 000

4 000

5 000

6 000

Q1-2018

Q2-2018

Q3-2018

Q4-2018

Q1-2019

Q2-2019

Q3-2019

Q4-2019

Q1-2020

Q2-2020

Revenue 4 435 4 510 4 064 4 207 5 033 4 094 3 014 2 961 2 488 1 309Gross profit 1 744 2 266 2 067 2 215 2 827 2 242 1 382 1 595 1 343 755Gross profit margin 39% 50% 51% 53% 56% 55% 46% 54% 54% 58%

Gros

s pro

fit m

argi

n

Reve

nue

and

Gros

s pro

fit in

TDK

K



Income Statement (condensed) – Group

SEK ‘000

Q3-2020 01-07-2020

-30-09-2020 3 months

Q3-2019 01-07-2019

-30-09-2019 3 months

Q1-Q3-2020 01-01-2020

-30-09-2020 9 months

Q1-Q3-2019 01-01-2019

-30-09-2019 9 months

201901-01-2019-31-12-2019

12 months

Netrevenue 2,038 4,296 7,431 17,145 21,357

Costofgoodssold -906 -2,327 -3,326 -8,045 -9,990

Gross profit 1,132 1,969 4,105 9,100 11,367

Capitalizedownworkperformed 693 980 2,579 2,242 3,427

Otherexternalcosts -1,154 -2,723 -4,289 -7,592 -9,899

Personnelcosts -2,624 -4,703 -9,479 -13,478 -18,149

Depreciationoftangiblefixedassets -246 -372 -1,063 -891 -1,334

Otherincomeandexpenses 1 126 565 353 489

Operating result -2,198 -4,723 -7,582 -10,266 -14,099

Otherfinancialincome 7 27 50 76 91

Otherfinancialcosts -102 -121 -268 -711 -784

Result after financial items -2,293 -4,817 -7,800 -10,901 -14,792

Taxontheprofitoftheperiod 401 467 1,319 1,241 1,845

Net result for the period -1,892 -4,350 -6,481 -9,660 -12,947


Balance Sheet (condensed) - Group

SEK ‘000 30-09-2020 30-09-2019 31-12-2019

Assets

Non-current assets

Developmentprojectsunderconstruction 10,334 3,168 5,451

Total intangible assets 10,334 3,168 5,451

Otherproperty,plantandequipment 1,089 1,870 2,225

Total tangible assets 1,089 1,870 2,225

Otherlong-termreceivables 1,594 1,580 323

Total financial assets 1,594 1,580 323

TOTAL NON-CURRENT ASSETS 13,017 6,618 7,999

Current assets

Inventories 7,098 8,027 7,242

Total inventories 7,098 8,027 7,242

Tradereceivables 1,298 2,453 2,275

Othershort-termreceivables 508 869 930

Prepaidexpenses 420 617 327

Taxreceivable 0 977 1,821

Total short-term receivables 2,226 4,916 5,353

Cash at bank and in hand 9,738 7,912 17,240

TOTAL CURRENT ASSETS 19,062 20,855 29,835

TOTAL ASSETS 32,079 27,473 37,834

Liabilities and Equity

Equity

Sharecapital 1,561 1,406 1,406

Otherreservesincl.retainedearnings 20,299 15,886 26,866

TOTAL EQUITY 21,860 17,292 28,272

Creditinstitutions 4,039 3,119 3,043

Prepaidincome 706 0 0

Non-current liabilities 4,745 3,119 3,043

Short-termpartofnon-currentliabilities 0 941 918

Tradepayables 1,089 2,349 1,648

Prepaidincome 975 616 504

Otherpayables 3,410 3,156 3,449

Total current liabilities 5,474 7,062 6,519

TOTAL LIABILITIES 10,219 10,181 9,562

TOTAL LIABILITIES AND EQUITY 32,079 27,473 37,834


Cash Flow Statement (condensed) – Group

SEK ‘000

Q3-2020 01-07-2020

-30-09-2020 3 months

Q3-2019 01-07-2019

-30-09-2019 3 months

Q1-Q3-2020 01-01-2020

-30-09-2020 9 months

Q1-Q3-2019 01-01-2019

-30-09-2019 9 months

201901-01-2019-31-12-2019

12 months


Depreciation 246 372 1,063 891 1,334

Paidfinancialcosts -95 -94 -219 -606 -695

Taxpayments 1,819 0 1,819 0 979

Cash flow from operating activities before changes in operating capital -228 -4,445 -4,919 -9,981 -12,481

Operating activities

Changeininventories 239 -389 255 1,237 1,842

Changeincurrentreceivables -596 383 1,389 -18 303

Changeincurrentliabilities -2,288 509 482 101 -677

Cash flow from operating activities -2,873 -3,942 -2,793 -8,661 -11,013

Purchaseoftangibleassets 0 -132 -30 -986 -1,845

Saleoftangibleassets 96 0 136 0 0

Proceedsfromfinancialassets -8 0 51 0 0

Purchaseofintangibleassets -1,418 -1,503 -4,808 -3,179 -5,603

Cash flow from investing activities -1,330 -1,635 -4,651 -4,165 -7,448

Financing activities

Bridgeloan 0 0 0 -6,405 -6,405

Capitalincrease,netofcosts 0 -110 -66 21,975 36,691

Cash flow from financing activities 0 -110 -66 15,570 30,286

Cash flow for the period -4,203 -5,687 -7,510 2,744 11,825

Cash and cash equivalents at period start 13,950 13,581 17,240 5,140 5,140

Exchangeraterecalculationdifference– cashandcashequivalents

-9 18 8 28 275

Cash and cash equivalents at period end 9,738 7,912 9,738 7,912 17,240


Statement of Changes in Equity (condensed) - Group

SEK ‘000

Q3-2020 01-07-2020

-30-09-2020 3 months

Q3-2019 01-07-2019

-30-09-2019 3 months

Q1-Q3-2020 01-01-2020

-30-09-2020 9 months

Q1-Q3-2019 01-01-2019

-30-09-2019 9 months

201901-01-2019-31-12-2019

12 months

Equity at period start 23,662 21,643 28,272 4,680 4,680

Exchangeadjustments 90 109 135 297 -152

Capitalincrease,netofcosts 0 -110 -66 21,975 36,691

Netresultfortheperiod -1,892 -4,350 -6,481 -9,660 -12,947

Equity at period end 21,860 17,292 21,860 17,292 28,272

Supplementary Income Statement (condensed) - GroupKeyfiguresfromtheincomestatementfortheGrouparepresentedbelowonthebasisoftheunderlyingactivities.Realfictionhastwomainactivities;1)Innovation&Developmentactivities,includingalldirectlyrelatedexpensesincurredinconnectionwiththeInnovation&DevelopmentactivitiesintheGroupand2)Salesactivities,includingallotheractivitiesintheGroup.

Innovation & Development ActivitiesSEK ‘000

Q3-2020 01-07-2020

-30-09-2020 3 months

Q3-2019 01-07-2019

-30-09-2019 3 months

Q1-Q3-2020 01-01-2020

-30-09-2020 9 months

Q1-Q3-2019 01-01-2019

-30-09-2019 9 months

201901-01-2019-31-12-2019

12 months

Capitalizedownworkperformed 693 980 2,579 2,242 3,427

Otherexternalcosts -163 -733 -668 -1,301 -1,138

Personnelcosts -930 -1,183 -3,099 -3,481 -4,775

Depricationoftangiblefixedassets -6 -6 -18 -18 -24


Operating result -406 -925 -1,198 -2,513 -2,448

Sales Activities SEK ‘000

Q3-2020 01-07-2020

-30-09-2020 3 months

Q3-2019 01-07-2019

-30-09-2019 3 months

Q1-Q3-2020 01-01-2020

-30-09-2020 9 months

Q1-Q3-2019 01-01-2019

-30-09-2019 9 months

201901-01-2019-31-12-2019

12 months

Gross profit 1,132 1,969 4,105 9,100 11,367

Otherexternalcosts -991 -1,990 -3,621 -6,291 -8,761

Personnelcosts -1,694 -3,520 -6,380 -9,997 -13,374

Depreciationoftangiblefixedassets -240 -366 -1,045 -873 -1,310




Income Statement (condensed) – Parent company

SEK ‘000

Q3-2020 01-07-2020

-30-09-2020 3 months

Q3-2019 01-07-2019

-30-09-2019 3 months

Q1-Q3-2020 01-01-2020

-30-09-2020 9 months

Q1-Q3-2019 01-01-2019

-30-09-2019 9 months

201901-01-2019-31-12-2019

12 months

Operating income

Netrevenue(groupinternal) 150 150 450 450 600

Operating costs

Externalcosts -378 -237 -865 -602 -767

Personnelcosts -68 -194 -214 -477 -649

Operating result -296 -281 -629 -629 -816

Otherfinancialcosts 0 -17 0 -410 -410

Net result for the period -296 -298 -629 -1,039 -1,226


Balance Sheet (condensed) – Parent company

SEK ‘000 30-09-2020 30-09-2019 31-12-2019

Non-current assets

Financial assets

Sharesinsubsidiary 44,842 26,911 44,842

Total financial assets 44,842 26,911 44,842

TOTAL NON-CURRENT ASSETS 44,842 26,911 44,842

Current assets

Intercompanyreceivables 4,932 11,406 0

Otherreceivables 65 65 63

Prepaidexpenses 118 116 82

Total short-term receivables 5,115 11,587 145

Cash at bank and in hand 8,966 6,926 14,975

TOTAL CURRENT ASSETS 14,081 18,513 15,120

TOTAL ASSETS 58,923 45,424 59,962

Liabilities and Equity

Equity

Sharecapital 1,561 1,406 1,406

Otherreserves 57,538 44,269 58,985

Netresultoftheperiod -629 -1,039 -1,226

TOTAL EQUITY 58,470 44,636 59,165

Tradepayables 163 0 0

Otherpayables 290 788 797

Total short-term liabilities 453 788 797

TOTAL LIABILITIES 453 788 797

TOTAL EQUITY AND LIABILITIES 58,923 45,424 59,962


DEFINITIONS Solvency ratio:Equityasapercentageofthebalancesheettotal.KeyratiosofequityarepresentedtoprovideabetterunderstandingofRealfiction’slong-termabilitytopayitsdebt.Earnings per share:Netresultoftheperioddividedwithaveragenumberofsharesfortheperiod.Earningspershareforperiodsarenegative,thereforenodilution.Gross profit:Netturnoveraftercostsforgoodssold.Gross profit margin:GrossprofitasapercentageofNetrevenue.Net operating cost: ItemsbetweenGrossprofitandOperatingresultintheincomestatement.

”Realfiction” or the ”Company” referstotheGroup,namelyRealfictionHoldingAB(registeredundercompanyregistrationnumber559110-4616)anditswhollyownedsubsidiariesRealfictionApSandRealfictionLabApS.RealfictionApSandRealfictionLabApS,theGroup’soperatingsubsidiaries,werefoundedin2008and2019.RealfictionHoldingABwasformedinApril2017bywayofanon-cashissueinwhichthesharesinRealfictionApSwereexchangedforsharesinRealfictionHoldingAB,whichresultedintheGrouprelationship.

Picture above: Dreamoc XL3 used by Polytech at China Wind Power 2020 in Beijing, China

q3 interim report

Documents