Interim Report

Q3 2017

2 VirtualWorks Group AS – Interim Report – Q3 2017

Group Revenue Quarter-over-Quarter

(NOK Thousand)

Group Revenue YTD-over-YTD (NOK Thousand)

5.487

10.558

Q3 2016 Q3 2017

13.083

27.021

YTD 2016 YTD 2017

Highlights ........................................... 2

Comments from CEO ....................... 3

Media Coverage................................. 4

VirtualWorks Business Unit ............. 5

ayfie Business Unit ........................... 6

Market and Outlook ......................... 7

Financials ........................................... 8

Table of Contents

Q3 2017 Highlights

▪ Continued strong organic revenue growth as quarterly revenue increased to NOK 10,6 million, up 92 percent

compared to the same quarter last year

▪ All-time high monthly revenue in September of NOK 5,5 million, highlighting the positive trend going forward

▪ Contracts with a total value of NOK 6,7 million signed in the quarter, along with additional contracts worth NOK

7,1 million signed during the first 20 days of October

▪ Gross margin of 86 percent

▪ Launch of the ayfie Inspector

▪ Solid cash position of NOK 52,6 million

▪ Increased visibility in the market and in the media

▪ Listing of VirtualWorks Group AS on the NOTC market

▪ VirtualWorks Group AS presented at the DnB TMT Conference

3 VirtualWorks Group AS – Interim Report – Q3 2017

Comments from CEO

VirtualWorks Group experienced revenue growth in the third quarter of 2017

compared to both the third quarter last year and the second quarter this year.

Revenue of NOK 10,6 million represents an increase of 92 percent and 36 percent

respectively. There was also positive development throughout the quarter with a

monthly all-time high revenue of NOK 5,5 million in September. The year to date

revenue of NOK 27,0 million represents an increase of 107 percent compared to the

same period last year. The growth proves the positive underlying trend in the smart

search and text analytics market as well as the Group’s positioning.

The ayfie product was launched in the third quarter following the acquisition of the

natural language analysis and text analytics company, Language Tools, in early

2016. Subsequently, the establishment of the ayfie business unit has had a strong

focus on product innovation. In August, the ayfie Inspector was launched during

ILTACON in Las Vegas. A line of text analytics products, initially for the Legal market,

was launched in the US and the response has been very positive. By the end of the

third quarter, ayfie had signed contracts with a total value of NOK 10,8 million and

6,8 million total value signed contracts during the first 20 days October. Bringing the

total contracted value to NOK 17,5 million. The contracts which are signed with

leading law firms and major suppliers of eDiscovery solutions are a combination of

licenses and long-term development services giving an annual recurring revenue of

NOK 7,3 million. In addition to the positive response in the legal market, other

industries such as FinTech and also geographical markets outside the US have

shown interest in ayfie’s products.

The VirtualWorks business unit’s revenue in the third quarter was weaker than in the

previous quarters of this year. Measures have been taken to strengthen the sales

organization and the sales process, and new products will be launched in October.

Operating expenses increased slightly in the third quarter compared to the same

period last year and the second quarter of this year due to an increase in sales and

marketing activities. In August, we hosted a breakfast seminar in Stockholm where

Skanska participated by presenting their viaworks solution. In September, we co-

sponsored and attended the Enterprise Business Collaboration Conference in

Berlin.

The loss was reduced to negative EBITDA of NOK 8,4 million this quarter compared

to negative EBITDA of NOK 12,3 million in the third quarter last year. Year to date

loss was reduced to negative EBITDA of NOK 27,1 million compared to negative

EBITDA NOK 41,7 million in the same period last year. All research and development

of ayfie’s and VirtualWorks’ technologies and products have been carried out by our

technical staff in Munich and Oslo. All costs related to research and development

have been recorded as regular costs, and thus not capitalized.

On September 20th, VirtualWorks Group AS was listed on the NOTC market. Siw

Ødegaard, the Group’s new CFO, also presented the company at the DNB TMT

Opportunity Conference in Oslo on the same day.

Erik Baklid

CEO, VirtualWorks Group AS

Top 20 Shareholders of VirtualWorks Group AS

Holding Share Shareholder

7.507.595 13,61 MERRILL LYNCH, PIERC S/A

MLPF & S HOLD

4.531.811 8,21 MERTOUN CAPITAL AS

4.378.868 7,94 STAFF HOLDING AS

2.327.440 4,22 LEIJO AS

2.235.419 4,05 JESSE INVEST AS

2.122.283 3,85 LANI INVEST AS

2.000.000 3,62 TVENGE TORSTEIN INGVALD

1.943.682 3,52 LAST INVEST AS

1.479.412 2,68 HØYLANDET BYGGUTLEIE

1.347.626 2,44 HÜBERT LEIF

1.220.719 2,21 WANI INVESTERING AS

1.155.000 2,09 VESTLAND INVEST AS

1.140.068 2,07 EKER GROUP AS

1.130.575 2,05 TERSUS AS

1.094.141 1,98 JSQ AS AXERA BUSINESS

MANAG

1.085.998 1,97 ARVARIUS AS

1.051.415 1,91 TRANQUILLE INVESTMEN

1.044.451 1,89 ARCTIC SECURITIES AS

MEGLERKONTO

1.000.236 1,81 KNARTEN HOLDING AS

868.221 1,57 CLEARSTREAM BANKING

40.664.960 73,69 Total 20 largest

14.517.615 26,31 Others

55.182.575 100,00 Total no. of shares

Erik Baklid

4 VirtualWorks Group AS – Interim Report – Q3 2017

Media Coverage

http://www.verkstadsforum.se/nyheter.asp?n=5557

https://computersweden.idg.se/2.2683/1.689647/dustin-koper-nytt

http://lextechreview.com/iltacons-40th-anniversary-international-legal-technology-association-pulled-stops/

https://www.kkh.de/content/dam/KKH/Magazine/news+/3-2017/KKH_news_3-17%20WEB.pdf

https://youtu.be/zUD9BVue0ac

5 VirtualWorks Group AS – Interim Report – Q3 2017

VirtualWorks’ breakfast seminar in Stockholm Coverage of inbound marketing campaign around GDPR

VirtualWorks at the EBC in Berlin

The VirtualWorks Business Unit

The VirtualWorks business unit generated revenue of NOK 5,8 million in the third quarter compared to revenue of NOK 5,5 million

during the same period last year. The growth was slower than in previous quarters this year as fewer contracts were signed and

there was low consulting revenue during the holiday season. VirtualWorks posted a negative EBITDA of NOK 1,6 million for the

quarter.

A strong focus was given to onboarding new customers signed in the second quarter as well as to further development of major

new search customer cases in Norway and Sweden. Furthermore, resources have been allocated to the development and

marketing of our new product viainsight, set to be launched in late October 2017. By 25th May 2018, all businesses using and

storing personal data concerning EU and EEA citizens have to abide by the EU’s new General Data Protection Regulation (GDPR).

The new regulation requires businesses to have systems facilitating reporting of all personal data concerning EU and EEA

individuals. As modern businesses have enormous amounts of data, with up to 80 percent of the data being unstructured, stored

in a variety of different systems and databases, the GDPR requirement can be overwhelming. Based on the viaworks smart

search, insight and knowledge technology we have developed a GDPR specific solution that extracts personal data, regardless

of format and location, and reports the data in compliance with GDPR. The viainsight product can be used by all businesses,

regardless of industry and size of business. In addition to the standard product, tailored GDPR products will be offered larger

businesses with specific needs. Konica Minolta, our distribution partner for the European market, will present the new GDPR

product at their annual Berlin Conference for Premium resellers on October 20th.

The development team has also been preparing for the release of viaworks stream, an upgraded version of viaworks enabling

more efficient and personalized information flow within businesses. During the quarter, more than 20 connectors have been

updated and significant part of the software testing process was automated to increase future development speeds.

The inbound marketing process established last quarter is under further development with anticipation of it playing an essential

role in the launch of viainsight and viaworks stream.

6 VirtualWorks Group AS – Interim Report – Q3 2017

ayfie at ILTACON in Las Vegas

The ayfie Business Unit

The ayfie business unit generated revenue of NOK 4,7

million in the third quarter, which represented an

increase of 234 percent from the second quarter. The loss

of negative EBITDA of NOK 6,2 million represents an

improvement compared with the previous quarter’s

negative EBITDA of NOK 10,6 million. The positive

developments indicate that the ayfie business unit is

evolving from a development case into a market-ready

business.

The principal focus in the third quarter has been on the

introduction of ayfie products to the eDiscovery and legal

market through partnership/reseller agreements, media

coverage and the continued refinement of business

processes including pricing and on-boarding

procedures.

ayfie’s development partnership agreement with

Relativity® showcases the positive feedback that ayfie

and its product line has received from the eDiscovery and

the legal market. The partner agreement will allow us to

cross promote products and feature in sales material to

13.000+ organizations with 190.000 end users across 40

countries who all utilize Relativity®. The partner

agreement has already resulted in the signing of anexsys

and Trustpoint International as our first Relativity®

customers with the first customer case for contract

review in Relativity® in the UK.

The sales and marketing teams have generated and

extended the recent momentum by attending

conferences such as ILTACON and SOLID17 innovation

conference, along with increasing our media coverage

through our CIO magazine feature – published on

October 4th – and Reinventing Professionals podcast.

Lastly, ayfie established a joint venture with alpha-

modus, with the joint venture targeting the financial

vertical.

Relativity® is an eDiscovery software company that

works hard to build great software that tackles

eDiscovery challenges. www.relativity.com

Anexsys is a technology service provider specializing

in eDiscovery, Digital Forensics and scanning services

to support law firms in the UK and Europe.

www.anexsys.com

Alpha Modus is an investment technology company

built to leverage human expertise and machine

intelligence to extract alpha and alpha generating

utilities from big data. www.alphamodus.com

7 VirtualWorks Group AS – Interim Report – Q3 2017

Target Market Size To Reach over $20 Billion By 2024

According to Transparency Market Research and Grand View Research, our target

market for smart-search and text-analytics solutions will rise to over US$ 20 billion by

2024. The increasing demand for solutions offering time-saving data search capabilities

is expected to be a key factor driving the market growth over the next years.

www.transparencymarketresearch.com, www.grandviewresearch.com

Market and Outlook

The markets for search based information governance, artificial intelligence and text analytics are expected to grow substantially

over the next years. To handle the rapidly increasing amounts of data, both structured and unstructured, that are stored in a

variety of different systems, companies require tools for quick and efficient search. Tools that allow business to access, organize,

classify, analyze, and extract data will be vital. The combination of our smart search platform providing a single point of access

to all data and our text analytics technology based on natural language offers businesses the tools needed for efficient

automatization of data processing.

Our customer portfolio and the positive market feedback on our newly launched ayfie products proves the demand for our smart

search and innovative text analytics tools. Our core operational priorities will be to leverage the power of text analytics to an

even larger degree in both products and to increase platform flexibility for additional use cases to make them attractive to

additional market segments. The focus will also be on the continued strengthening of our sales organization and streamlining

of sales processes.

The VirtualWorks Group’s ambition is to capture a significant market position in the rapidly growing market for smart search and

text analytics. The license based business model with a high degree of recurring revenue and high gross margins will

accommodate for strong and profitable growth if we suceed in building an efficient sales organization and partner strategy.

8 VirtualWorks Group AS – Interim Report – Q3 2017

Financials

VirtualWorks Group consolidated – Profit & Loss

NOK Thousand Q3-17 Q3-16 QoQ % YTD 17 YTD 16 YTDoYTD %

Recurring Revenue 4.955 3.610 ▲ 37% 14.383 8.961 ▲ 60%

Perpetual Revenue 1.599 1.186 ▲ 35% 5.094 2.055 ▲ 148%

Services 3.496 690 ▲ 406% 7.037 2.060 ▲ 242%

Other Income 508 - ▶ 0% 508 6 ▲ 7848%

Total Revenue 10.558 5.487 ▲ 92% 27.021 13.083 ▲ 107%

Cost of Sales 1.465 333 ▲ 340% 3.662 1.542 ▲ 138%

Gross Profit 9.092 5.154 ▲ 76% 23.359 11.542 ▲ 102%

Gross Margin 86% 94% 86% 88%

Personnel 11.210 11.856 ▼ -5% 33.218 35.368 ▼ -6%

Other Operating Expenses 6.269 5.579 ▲ 12% 17.222 17.884 ▼ -4%

Operating Expenses 17.479 17.435 ▲ 0% 50.440 53.252 ▼ -5%

EBITDA (8.387) (12.281) ▲ 32% (27.081) (41.711) ▲ 35%

VirtualWorks Group’s consolidated revenue amounted to NOK 10,6 million in the third quarter, an increase of 92 percent

compared to the same period last year. The growth in revenue was driven by the launch of the new ayfie line of text analytics

products. Year to date revenue of NOK 27,1 million represents an increase of 107 percent compared to the same period last year.

The quarter’s cost of sales of NOK 1,5 million, related to utilization of third-party developers to accommodate some of our

customers accelerated schedule, gave a gross margin of 86 percent. Operational expenses of NOK 17,5 million were in line with

those of the same period last year although the revenue increase of 92 percent. The year to date development proves the same

positive trend with a 5 percent fall in operational expenses compared with the same period last year although a 107 percent

increase in revenue. Please note that costs related to research and development have been recorded as regular costs and thus

not capitalized.

The negative EBITDA of NOK 8,3 million shows a positive development compared to negative EBITDA of NOK 11,5 million in the

third quarter last year. Year to date negative EBITDA of NOK 27,1 million represents an improvement compared to the negative

EBITDA of NOK 41,7 million in the same period last year.

The financial statement has not been audited or reviewed by the auditors.

9 VirtualWorks Group AS – Interim Report – Q3 2017

VirtualWorks Group consolidated - Balance Sheet

NOK Thousand Q3 2017 Q3 2016 Change NOK Change %

Assets

Cash & Cash Equivalents

Cash & Cash Equivalents 52.608.324 3.075.075 ▲ 49.533.249 ▲ 1611%

Total Cash & Cash Equivalents 52.608.324 3.075.075 ▲ 49.533.249 ▲ 1611%

Current Assets

Accounts Receivable 7.360.621 3.072.284 ▲ 4.288.337 ▲ 140%

Prepaid Expenses 621.740 704.938 ▼ (83.198) ▼ -12%

Deferred Tax Assets 9.146.640 9.146.640 ▶ - ▶ 0%

Other Current Assets 3.592.691 175.724 ▲ 3.416.967 ▲ 1945%

Total Current Assets 20.721.691 13.099.585 ▼ 7.622.106 ▲ 58%

Non-Current Assets 66.526.661 90.237.967 ▼ (23.711.306) ▼ -26%

Total Assets 139.856.676 106.412.628 ▲ 33.444.049 ▲ 31%

Liabilities and Equity

Current Liabilities

Accounts Payable 723.553 952.723 ▼ (229.169) ▼ -24%

Accrued Expenses 5.363.858 2.013.181 ▲ 3.350.677 ▲ 166%

Deferred Revenue 8.579.571 9.601.325 ▼ (1.021.754) ▼ -11%

Taxes Payable & Other Payables 3.758.970 1.815.195 ▲ 1.943.775 ▲ 107%

Total Current Liabilities 18.425.952 14.382.424 ▲ 4.043.528 ▲ 28%

Non-Current Liabilities 54.923.498 90.376.543 ▼ (35.453.045) ▼ -39%

Total Liabilities 73.349.449 104.758.967 ▼ (31.409.517) ▼ -30%

Total Equity 66.507.227 1.653.661 ▲ 64.853.566 ▲ 3922%

Total Liabilities and Equity 139.856.676 106.412.628 ▲ 33.444.049 ▲ 31%

The Cash and Cash Equivalents increased to NOK 52,6 million in the third quarter due to the subsequent offering, that also

increased Equity. Accounts Receivable increased as more revenue was invoices at the end of the quarter due to the revenue

growth through the quarter.

The financial statement has not been audited or reviewed by the auditors.

10 VirtualWorks Group AS – Interim Report – Q3 2017

The VirtualWorks Business Unit – Profit & Loss

NOK Thousand Q3-17 Q3-16 QoQ % YTD 17 YTD 16 YTDoYTD %

Recurring Revenue 4.513 3.610 ▲ 25% 13.190 8.961 ▲ 47%

Perpetual Revenue 384 1.186 ▼ -68% 3.603 2.055 ▲ 75%

Services 433 690 ▼ -37% 2.416 2.060 ▲ 17%

Other Income 508 - ▶ 0% 508 6 ▲ 7848%

Total Revenue 5.838 5.487 ▲ 6% 19.716 13.083 ▲ 51%

Cost of Sales 483 333 ▲ 45% 1.574 1.542 ▲ 2%

Gross Profit 5.355 5.154 ▲ 4% 18.142 11.542 ▲ 57%

Gross Margin 92% 94% 92% 88%

Personnel 4.730 11.856 ▼ -60% 13.491 35.368 ▼ -62%

Other Operating Expenses 2.253 5.579 ▼ -60% 5.821 17.884 ▼ -67%

Operating Expenses 6.983 17.435 ▼ -60% 19.311 53.252 ▼ -64%

EBITDA (1.628) (12.281) ▲ 87% (1.169) (41.711) ▲ 97%

The VirtualWorks business unit generated revenue of NOK 5,8 million in the third quarter, showing an increase of 6 percent

compared to the revenue of NOK 5,5 million in the same quarter last year. The year to date revenue of NOK 19,7 million represents

an increase of 51 percent compared to the same period last year. As ayfie was established as a separate business unit in early

2017 through a reorganization where the ayfie business was demerged from VirtualWorks, comparisons of 2017 and 2016 costs

and results have to be at the consolidated level (there was no ayfie related revenue in 2016 as the products were launched in

2017). The financial statement has not been audited or reviewed by the auditors.

The ayfie Business Unit – Profit & Loss

NOK Thousand Q3-17 Q3-16 QoQ % YTD 17 YTD 16 YTDoYTD %

Recurring Revenue 442 - ▶ 0% 1.193 - ▶ 0%

Perpetual Revenue 1.215 - ▶ 0% 1.491 - ▶ 0%

Services 3.063 - ▶ 0% 4.621 - ▶ 0%

Other Income - - ▶ 0% - - ▶ 0%

Total Revenue 4.720 - ▶ 0% 7.305 - ▶ 0%

Cost of Sales 982 - ▶ 0% 2.088 - ▶ 0%

Gross Profit 3.738 - ▶ 0% 5.217 - ▶ 0%

Gross Margin 79% 0% 71% 0%

Personnel 6.251 - ▶ 0% 19.498 - ▶ 0%

Other Operating Expenses 3.656 - ▶ 0% 11.004 - ▶ 0%

Operating Expenses 9.906 - ▶ 0% 30.502 - ▶ 0%

EBITDA (6.169) - ▶ 0% (25.285) - ▶ 0%

The ayfie business unit generated revenue of NOK 4,7 million in the third quarter, which represents an increase of 234 percent

from the second quarter. The EBITDA of negative NOK 6,2 million represents a significant improvement compared with the

previous quarter EBITDA of negative NOK 10,6 million. The positive development is the result of the successful launch of the ayfie

text analytics product line in August and indicates that the business unit is evolving into a market-ready business. The financial

statement has not been audited or reviewed by the auditors.

VirtualWorks – www.virtualworks.com

VirtualWorks AS

Karenslyst Allé 49

0279 Oslo

Norway

+47 4831 08 00

VirtualWorks US

280 NE 2nd Ave

Delray Beach, FL

United States

+1 (877) 356-3463

VirtualWorks AB

United Spaces Waterfront

Klarabergsviadukten 63

101 23 Stockholm, Sweden

+47 (48) 31 08 00

VirtualWorks GmbH

Dingolfinger Str. 1-15

81673 Munich

Germany

+49 (89) 416 146 70

ayfie – www.ayfie.com

ayfie Inc.

28 West 44th St., Ste. 908

New York, NY 10036

United States

+1 (917) 208-9044

ayfie GmbH

Dingolfinger Str. 1-15

81673 Munich

Germany

+49 (89) 416 146 70