Thin Film Electronics : 2020 Annual

Thinfilm Electronics ASA

Annual Report 2020

Norway - Oslo

Corporate Headquarters

c/o House of Business Fridtjof Nansens Plass 4 0160 Oslo

Phone: [phone]

Email: [e-mail]

USA - San Jose

Global Headquarters

2581 Junction Avenue

San Jose, CA 95134

Phone: [phone]

thinfilmsystems.com

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Table of Contents

• Letter from the CEO

• 2020 Year in Revew

• About Thinfilm

• Report from the Board of Directors

14 Consolidated Financial Statements

18 Notes to the Consolidated Financial Statements

47 Thin Film Electronics ASA Annual Financial Statements 2020

50 Notes to the Annual Financial Statements Thinfilm ASA

62 Corporate Social Responsibility (CSR) Statement

1. Responsibility Statement
2. Auditor's Report

68 Corporate Governance

73 Articles of Association

75 Board of Directors

77 Executive Management

Table of Contents  | 1

Letter from the CEO

Just over a year ago, Thinfilm announced its strategy to develop premium microbatteries based on solid- state lithium battery (SSLB) technology. This focus has allowed us to leverage our deep materials and process technology expertise as well as our unique roll-to-roll manufacturing facility to address substantial existing and growing markets with superior products.

Throughout the past year, the Thinfilm team worked with purpose and commitment to achieve milestones in technology development, manufacturing readiness, and market development. Despite the operational challenges presented by an unprecedented global pandemic, Thinfilm successfully validated its strategy to bring scale to the premium solid-state microbattery market while building the technology, manufacturing, and commercial foundation for commercialization in late 2021.

As we enter the second year of our SSLB focus, I continue to be excited about solid-state chemistry and Thinfilm's Microbattery Product Platform because they enable energy dense, long-lived, and fundamentally safe batteries in ultracompact form factors that can be customized to individual customer requirements. Our engagements with potential customers in our target markets - hearables, wearables, and connected sensors -continue to provide enthusiastic validation that the planned benefits of our product platform resonate strongly with battery decision-makers.

However, Thinfilm brings more than just solid-state chemistry to make a meaningful impact in our target markets. Our unique steel-substrate,roll-to-roll factory in Silicon Valley enables us to scale the production of Thinfilm SSLB products. This combination of chemistry and capacity uniquely positions Thinfilm to provide commercially relevant quantities of milliamp-hour class batteries for our target markets.

We continue to be mindful of the potential for operational and commercialization uncertainty related to the ongoing pandemic. As part of managing the risks inherent in technology development and commercialization, we proactively identify approaches to mitigate potential challenges that may arise in late-stage technology development, including those related to our operations, technology integration, and customer acquisition and qualification activities. To this end, through targeted hiring activity since early 2020, we have added veteran leadership and expertise

in battery development, packaging, manufacturing operations, and business development.

I would like to thank our employees, potential customers, partners, board, and shareholders for their strong spirit of collaboration as we approach the commercialization of our premium microbattery technology in 2021. Our team remains focused on delivering the initial product based on the Thinfilm MPP, readying our roll-to-roll factory for technology transfer and scale-up, and continuing to engage market leaders who require innovative battery technology. We are excited to combine the benefits of solid-state technology and the scalability of steel- substrate, roll-to-roll manufacturing to enable the next generation of wearables and connected sensors.

Kevin Barber

San Jose, California

April 2021

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2020 Year in Review

Thinfilm fundamentally transformed in 2020, beginning with its 30 January announcement of an updated strategy focused on the development of solid-state lithium battery (SSLB) technology and the commercialization of SSLB products for the wearable devices and connected sensor markets. Despite the logistical and operational challenges presented by the global pandemic, the Company was able to make significant progress in technology and market development throughout the year.

During the first quarter, Thinfilm CEO Kevin Barber held an Investor Day and issued a strategy presentation

to explain the Company's approach to developing and scaling SSLB technology in the Company's existing San Jose, California factory. In late March, the Company announced its intention to raise funds via a private placement.

In the second quarter, the Company announced technical progress and a first major round of fundraising. The Company confirmed successful deposition of critical layers of the SSLB stack on Thinfilm steel substrates. In addition, the Company announced the filing of multiple provisional patent applications related to the encapsulation, assembly, and stacking of SSLB products based on stainless steel substrates. In financial matters, the Company reduced its share capital by reduction in the par value per share and issued approximately 5.9 million shares to a consortium of investors. On 20 May 2020, the Extraordinary General Meeting approved a private placement totaling NOK 25 million and a subsequent offering of up to NOK 7 million. In addition, two warrants (Warrant A and Warrant B) were attached to each share issued, creating added fundraising potential of NOK 105 million.

Third quarter highlights included the achievement of additional technical milestones and a second major round of fundraising. Thinfilm announced the successful fabrication of complete SSLB cells on stainless substrates and later confirmed the establishment of a consolidated production environment in its San Jose, California facility to continue rapid development of SSLB technology and products. The Company released an updated corporate presentation, and Thinfilm CEO Kevin Barber participated in the Nordic TMT Virtual Conference hosted by DNB and a video briefing with Nordnet. On 19 August 2020, the Extraordinary General Meeting approved a private placement totaling approximately NOK 50 million and a subsequent offering of up to NOK 10 million. In addition, one warrant (Warrant C) was attached to each share issued, creating added fundraising potential of NOK 100 million.

Finally, the company closed 2020 with the announcement of its first stacked, multi-cellsolid-state battery based on its SSLB technology and confirmed that continued positive feedback regarding its SSLB technology had led to broadened engagements

with leading manufacturers of wearable devices and connected sensors. Nearly 95% of issued Warrants A, which expired 31 December 2020, were exercised, raising approximately NOK 30 million.

At the end of 2020, the Company had 22 full-time employees, all of whom were based in the Company's San Jose, California facility.

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