Atlantic Sapphire

Report Publication Announcement • Dec 10, 2021

Atlantic Sapphire ASA: NFSA review of financial reporting – receipt of preliminary notice

Atlantic Sapphire ASA: NFSA review of financial reporting – receipt of preliminary notice

Miami, FL, 10 December 2021

Atlantic Sapphire ASA ("Atlantic Sapphire" or the "Company", and together with its consolidated subsidiaries, the "Group") has received certain information requests from the Financial Supervisory Authority of Norway (the "NFSA") in respect of the Company’s accounting treatment of its financial reporting of the Group's credit facility (the "Credit Facility") with DNB Bank ASA, New York Branch, and Farm Credit of Florida, ACA (together, the “Lenders”). Such information request is issued as part of the NFSA’s control of periodic financial reporting pursuant to the Norwegian Securities Trading Act §19-1, second paragraph.

On 9 December 2021, Atlantic Sapphire received a preliminary notice regarding its accounting treatment of the Credit Facility in the Group’s Consolidated Statement of Financial Position as of 30 June 2021 regarding its failure to meet a financial covenant. The NFSA indicated that they are considering requiring that the Group issue restated financial accounts and report as of and for the six-month period ended 30 June 2021 (the "First Half 2021 Financial Statements").

Pursuant to the Credit Facility, the Group’s EBITDA is required to exceed certain levels. For the three-month period ended 30 June 2021, the Group’s Q2 EBITDA was required not to be less than negative USD 7 million. As reported in the First Half 2021 Financial Statements on 26 August 2021, the EBITDA of the Group for the six months ended 30 June 2021 was negative USD 42 million, of which negative USD 13 million relates to the three-month period ended 30 June 2021. As such, the Group began the process of obtaining a waiver from the Lenders with respect to such breach prior to 30 June 2021. Prior to the announcement of the First Half 2021 Financial Statements on 26 August 2021, the Group received the formal waiver from the Lenders.

In the previously published First Half 2021 Financial Statements, the Credit Facility was, on the basis set out above, accounted for as a non-current liability in the Group's balance sheet. The NFSA is of the view in its preliminary notice that the covenant breach implied that the Lenders technically had, as of 30 June 2021, a right to require repayment of amounts outstanding under the Credit Facility. Consequently, the NFSA is of the view that such amounts should have been treated as a current liability rather than as a non-current liability as of 30 June 2021, despite a waiver being obtained prior to the completion and publication of the First Half 2021 Financial Statements.

Even though the Group was in the process of obtaining such waiver as of 30 June 2021 and obtained such waiver prior the publication of the First Half 2021 Financial Statements, the Group acknowledges that no formal waiver had been received as of 30 June 2021. Following a review of applicable IFRS standards and interpretations, the Group agrees with the NFSA that the USD 50 million of amounts outstanding under the Credit Facility should have been classified as a current liability accompanied by a note explaining that the formal waiver, which triggers a re-classification back to non-current liabilities, was obtained after 30 June 2021 and prior to the release of the First Half 2021 Financials Statements on 26 August 2021. Consequently, the Group will publish restated First Half 2021 Financial Statements in mid-January 2022.

The reclassification of the amounts outstanding under the Credit Facility in the restated First Half 2021 Financial Statements will have no effect for the Group. As mentioned above, the Group received a waiver from the Lenders for the relevant covenant as soon as practically possible and prior to publication of the First Half 2021 Financial Statements on 26 August 2021.

For further information, please contact:

Johan E. Andreassen

Chairman, Atlantic Sapphire ASA, and CEO, Atlantic Sapphire USA LLC;

Karl Øystein Øyehaug

Managing Director, Atlantic Sapphire ASA, and Chief Financing Officer, Atlantic Sapphire USA LLC

investorrelations@atlanticsapphire.com

About Atlantic Sapphire ASA

Atlantic Sapphire is pioneering Bluehouse® (land-raised) salmon farming, locally, and transforming protein production, globally. Atlantic Sapphire has been operating its innovation center in Denmark since 2011 with a strong focus on R&D and innovation to equip the Company with the technology and procedures that enable the Company to commercially scale up production in end markets close to the consumer. 

In the US, the Company has identified and obtained the requisite permits to construct its Bluehouse® in the ideal location in Homestead, Florida, just south of Miami. The Company has completed Phase 1 construction, which provides the capacity to harvest approximately 10,000 tons (HOG) of salmon annually. The Company completed its first commercial harvest in the US in September 2020. Atlantic Sapphire is currently constructing its Phase 2 expansion, which will bring total annual production capacity to 25,000 tons, and has a targeted harvest volume in 2031 of 220,000 tons.