ABL Group — Interim / Quarterly Report 2014

Oct 29, 2014

Interim report Q3 2014

THIRD QUARTER 2014 FINANCIAL REPORT

Highlights

• Total revenues of USD 10.7m in the 3rd quarter of 2014
• Adjusted EBIT of USD 0.3m in Q3 2014 (negative EBIT of USD 1.1m for the 3rd quarter after USD 1.4m one-off costs related to restructuring and listing)
• Order back-log of approx. USD 22m as of end September 2014
• Cash and cash equivalents of USD 21.4m at 30 September 2014; no interest-bearing debt
• The Company had 166 employees* as of end September 2014
• Continued high investment in growth and regional expansion (13 offices in 10 countries)
• Aqualis Offshore Holding ASA was listed on Oslo Stock Exchange on 13 August 2014
• Aqualis Offshore Holding ASA changed name to Aqualis ASA on 20 August 2014
• Aqualis established operations in Mexico through a newly formed subsidiary Aqualis Offshore S. de R.L. de C.V.
• The Company signed a rig moving services contract with Saudi Aramco, the world's largest energy company

Subsequent events

14 October 2014, Aqualis Offshore announced that following a multi-site assessment by Lloyd's Register Quality Assurance (LRQA), the company was been successful in achieving ISO 9001:2008 certification

* Includes contractors on 100% utilization equivalent basis

Key figures

	2014	2013	2013
(USD million)	Q3	Q3	FY
Total revenues	10.7	-	2.2
EBIT	-1.1	-	-0.9
EBIT adjusted*	0.3	-	-0.9
Cash and cash equivalents	21.4	-	0.8
Interest bearing debt	-	-	-
Number of outstanding shares (thousands)	43 191	-	-

* adjusted by one-off costs in Aqualis ASA of USD 1.4 million in third quarter 2014, relating to corporate restructuring and listing

OPERATIONAL UPDATE FOR THE THIRD QUARTER 2014

About Aqualis ASA

Aqualis ASA is a public company that, through its subsidiaries, offers marine and engineering consultancy services to the offshore oil, gas and renewable sectors globally.

The Company was formed through the spinoff of the offshore business from Weifa ASA (former Aqualis ASA), where the shares in Aqualis Offshore Ltd, Tristein AS and Offshore Wind Consultants Ltd were transferred as contribution in kind to Aqualis ASA.

Aqualis ASA operates under three different brands: Aqualis Offshore, Tristein and Offshore Wind Consultants. Aqualis Offshore is a specialized offshore marine

and engineering consultancy firm, focusing on the shallow and deep-water offshore segments of the oil and gas industry. Tristein is a provider of marine operations for the offshore oil, gas and wind industries. Offshore Wind Consultants is a globally focused consultancy providing independent services to the offshore renewables industry.

Operations

During the quarter Aqualis continued to be well supported by Clients and has been able to continue aggressively expanding operations globally as the Company seeks to become a major provider of specialized offshore marine and engineering consultancy services to the offshore oil & gas and renewables industries world-wide.

After 19 months of trading the Company now stands at 13 offices in 10 countries following the opening of our latest office in Mexico City. The total revenues of Aqualis are steadily increasing in line with the growing network of offices and employees.

At the end Sept 2014 Aqualis had 166 full time equivalent employees - an increase of 19% over the previous quarter.

During the quarter the Company entered into a number of new contracts globally, some of which represent significant milestones to our potential future expansion, including:

• a 3 year contract with Saudi ARAMCO to provide jack up rig movers
• a 3 year with 1 year option call out marine consultancy contract with Total ABK of Abu Dhabi
• a 9 month (renewable) marine warranty services (MWS) contract from ONGC to attend on all owned rig moves offshore India. This contract gives the company significant access to the Indian offshore market
• completion of the Newfield LF7-2 topside floatover project offshore China following our retention as MWS on behalf of London underwriters
• a detailed design engineering contract with an Indian client for the conversion and upgrade of 2 jack up drilling units into MOPU's. Work for one unit will be undertaken in our Houston office and for the other in Dubai
• the reactivation works associated with the bringing a stacked jack up drilling rig from offshore in the Gulf of Mexico into a shipyard and subsequent loadout onto a heavy lift vessel for transportation to the Far East for conversion into a MOPU
• commencement of a contract to effect the basic engineering of an OM 100-4 design lift boat in Houston

two large technical due diligence vessel inspection contracts for a vessel operator and a major financial institution based in Norway

In addition MSAs were signed with Nabors Drilling for attendance during global rig moves (and we completed our first rig move on their behalf shortly afterwards), together with the appointment by MMHE of Malaysia as Loadout Commander for future heavy module loadouts from the shipyard, and we are in the process of finalizing several others MSAs.

Rig moving operations have continued to expand in North Sea, NCS, Malaysia, China, Indonesia, India, Egypt, West Africa (Congo and Gabon) and Mexico. Whilst the start of the new season's rig moving operations offshore India, post the SW monsoon period, have been delayed by prolonged adverse sea conditions, these will commence in October and Aqualis Offshore has gained a number of new Indian clients in this market giving a healthy outlook.

During the quarter Aqualis Offshore UK has set up a structural engineering department which has started to gain good traction in the market.

Our most recent acquisition of Offshore Wind Consultants Ltd in London, a leading provider of consultancy services to the offshore renewables industry, has continued to positively impact Group results month by month delivering record revenues in August and record profits in September. OWC has recently been awarded a number of new projects several major utility companies and the outlook remains solid.

At the end of the third quarter backlog from fixed contracts stood at approx. USD 22m, up 16% from USD 19m at the end of Q2

with more than 50% of the work scheduled for completion after 1st Jan 2015. This puts Aqualis in a comfortable position for 2015. In addition the pipeline of work expected from call out contracts and MSAs continues to looks solid.

Transaction with Weifa ASA – Group continuity

On 24 July 2014, Weifa ASA (former Aqualis ASA) made a cash contribution of USD 10.5 million and transferred all of its shares in the subsidiaries Aqualis Offshore Ltd, Tristein AS and Offshore Wind Consultants Ltd to Aqualis ASA as a contribution in kind, together with USD 8.0 million in interest bearing loans to Aqualis Offshore Ltd and its subsidiaries and USD 8.8 million in financial assets representing a part interest in the prepayment in relation to Weifa ASA's (former Aqualis ASA) acquisition of Weifa AS. The transaction was recorded as a transaction under common control at group continuity.

Group continuity means that recognised group values related to the transferred offshore business are continued in the consolidated financial statement of Aqualis ASA.

The assets transferred as contribution in kind includes Aqualis Offshore Ltd with subsidiaries which were acquired by Weifa ASA on 8 November 2013. Based on group continuity the consolidated statement of comprehensive income and consolidated balance sheet for Aqualis ASA in 2013 constitutes the activity in these companies from 8 November 2013 to 31 December 2013. The shares in Tristein AS were acquired on 27 April 2014 by Weifa ASA and the activities of Tristein AS are included in Aqualis ASA Group accounts from that date based on group continuity. Offshore Wind Consultants Ltd was acquired by Weifa ASA on 29 June 2014 and the activities of Offshore Wind Consultants Ltd are included in Aqualis ASA Group accounts from that date.

FINANCIAL REVIEW FOR THE THIRD QUARTER 2014

Revenues

Aqualis recorded total revenues of USD 10.7 million in the third quarter 2014. The Group had no activity the third quarter last year.

Operating expenses

Total operating expenses were USD 11.9 million in the third quarter. Of the operating expenses USD 1.4 million were one-off costs related to the restructuring and listing of Aqualis. The Group had no activity the third quarter last year.

Net financials

Net financial income was USD 0.05 million. The net financial income consists mainly of interest earned on bank deposits and part interest in prepayment in relation to Weifa ASA's (former Aqualis ASA) acquisition of Weifa. The Group had no activity the third quarter last year.

Profit / loss

Aqualis incurred a net loss of USD 1.2 million for the third quarter 2014. Adjusted for the one-off operating expenses related to the restructuring and listing of Aqualis, the group had a net profit of USD 0.3 million. The Group had no activity the third quarter last year.

Cash flow

Aqualis had a net cash flow of USD 18.0 million for the third quarter 2014, after net proceeds from cash contribution and part interest in prepayment in relation to Weifa ASA's (former Aqualis ASA) acquisition of Weifa with a total of USD 19.3 million. The Group had no activity the third quarter last year.

Financial position

Aqualis had total assets of USD 54.2 million as of 30 September 2014. The Group had no activity the third quarter last year.

Cash and cash equivalents amounted to USD 21.4 million as of 30 September 2014. The Group had no activity the third quarter last year.

The Group had no interest bearing debt at 30 September 2014. The Group had no activity the third quarter last year.

Oslo, 29 October 2014

The Board of Directors of Aqualis ASA

Condensed interim Financial Statements THIRD QUARTER 2014

Statement of Comprehensive Income

		2014	2013	2014	2013	2013*
(USD '000)	Note	Q3	Q3	01.01-30.09	01.01-30.09	01.11.-31.12
Revenue		10 720	-	21 805	-	2 241
Other income		-	-	50	-	0
Total operating income		10 720	-	21 855	-	2 241
Payroll and payroll related costs	7	5 437	-	12 357	-	1 790
Depreciation, amortisation and impairment		223	-	632	-	110
Other operating costs		6 205	-	10 099	-	1 278
Total operating expenses		11 865	-	23 088	-	3 178
Operating profit/loss (EBIT)		-1 145	-	-1 233	-	-937
Finance income		52	-	133	-	124
Finance costs		7	-	123	-	60
Loss before tax		-1 100	-	-1 223	-	-873
Income tax expense		87	-	230	-	-
Profit/(Loss) for the period		-1 187	-	-1 453	-	-873
Other comprehensive income
Other comprehensive income to be reclassified to profit or loss in subsequent periods
Currency translation differences		-1 246	-	-1 473	-	65
Income tax effect		-	-	-	-	-
Total comprehensive income for the period		-2 433	-	-2 926	-	-808
Total comprehensive income for the year, net of tax attributable to:
Equity holders of the parent company		-2 433	-	-2 926	-	-808
Non-controlling interests		-	-	-	-	-
Total		-2 433	-	-2 926	-	-808
Earnings per share (USD): basic and diluted		0,0	0,0	0,0	0,0	0,0

* Figures for 2013 represent historical figures from Weifa ASA's (former Aqualis ASA) group accounts related to the spin-off of the Aqualis Offshore business. Aqualis Offshore which is now part of Aqualis ASA group was acquired by Weifa ASA in November 2013. Thus, no financial data is shown for the period prior to the acquisition in November 2013.

Condensed interim Financial Statements THIRD QUARTER 2014

Statement of Financial Position

(USD '000)	Note	30.09.2014		30.09.2013 31.12.2013*
ASSETS Non-current assets
Equipment		643	-	372
Intangible assets	4	22 217	-	15 364
Investment in associates		32
Total non-current assets		22 892	-	15 736
Current assets
Trade receivables		6 896	-	2 107
Other receivables		3 081	-	1 219
Cash & cash equivalents Total current assets	5	21 365 31 342	- -	838 4 165
Total Assets		54 234	-	19 901
EQUITY AND LIABILITIES
Equity
Share capital	6	702	-	0
Share premium		46 728	-	0
Other paid in capital Retained earnings		2 836 -3 376	- -	15 364 -3 029
Total equity		46 890	-	12 335
Non-current liabilities
Borrowings		-	-	-
Other long-term liabilities		247	-	5 174
Total non-current liabilities		247	-	5 174
Current liabilities
Trade payables Other current liabilities		1 409 5 689	- -	602 1 789
Total current liabilities		7 098	-	2 391
Total liabilities		7 345	-	7 565
Total Equity and Liabilities		54 234	-	19 901

* Figures for 2013 represent historical figures from Weifa ASA's (former Aqualis ASA) group accounts related to the spin-off of the Aqualis Offshore business. Aqualis Offshore which is now part of Aqualis ASA group was acquired by Weifa ASA in November 2013. Thus, no financial data is shown for the period prior to the acquisition in November 2013.

.

Condensed interim Financial Statements THIRD QUARTER 2014

Cash Flow Statement

(USD '000)	Note	2014 Q3	2013 Q3	2014 01.01-30.09	2013 01.01-30.09	2013* 01.11-31.12
Cash flow from operating activities
Net loss before income tax		-1 100	-	-1 223	-	-873
Non-cash adjustment to reconcile profit before tax to cash flow:
Estimated value of employee share options		105	-	105	-	-
Depreciation, amortisation and impairment		223	-	632	-	110
Changes in working capital:			-	-	-
Changes in trade receivables and trade creditors		-739	-	-3 089	-	143
Changes in deferred income		-	-		-	-
Changes in other accruals		492	-	1 052	-	-1 060
Effect related to acquisition of subsidaries				2 147
Net interest (income)/expense		-45	-	-10	-	-64
Net cash flow from operating activities		-1 064	-	-386	-	-1 744
Cash flow from investing activities
Purchase of equipment		-282	-	-584	-	-130
Acquisition of subsidiaries, net of cash		-		2 057
Interest received		52	-	133	-	124
Net cash flow from investing activities		-230	-	1 606	-	-6
Cash flow from financing activities
Proceeds from share issue		10 475	-	10 642	-	-
Proceed from contribution in kind		8 788		8 788
Transaction costs on share issue		-	-	-	-	-
Borrowings		-	-	-	-	1 174
Interest paid		-7	-	-123	-	-60
Net cash flow from financing activities		19 256	-	19 307	-	1 114
Net change in cash and cash equivalents		17 962	-	20 527	-	-636
Cash and cash equivalents beginning period		3 403	-	838	-	1 474
Cash and cash equivalents end period		21 365	-	21 365	-	838

* Figures for 2013 represent historical figures from Weifa ASA's (former Aqualis ASA) group accounts related to the spin-off of the Aqualis Offshore business. Aqualis Offshore which is now part of Aqualis ASA group was acquired by Weifa ASA in November 2013. Thus, no financial data is shown for the period prior to the acquisition in November 2013.

Condensed interim Financial Statements THIRD QUARTER 2014

Statement of Changes in Equity

			Share			Foreign currency	Non
(USD '000)	Note	Share capital	premium reserve	Other paid in capital	Retained earnings	translatioin reserve	controlling interests	Total equity
Equity as at 01.01.2013		-	-	-	-			-
Equity as at 30.09.2013		-	-	-	-	-		-
Equity as at 01.01.2014		-	-	-	-	-		-
Total comprehensive income					-1 453	-1 473		-2 926
Issue of share capital
Foundation capital, June	6	167	-
Private placement, July	6	118	10 357
Contribution in kind, July (group continuity)	6	417	36 701	2 731
Total issue of share capital		702	46 278	2 731				49 711
Share-based payment		-	-	105	-			105
Equity as at 30.09.2014		702	46 278	2 836	-1 453	-1 473	-	46 890

Notes to the interim Financial Statements

Note 1: Basis of presentation

The financial information is prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" ("IAS 34"), and according to the group accounting principles as described in this report.

Group continuity

The Aqualis ASA Group was established when the owners of Weifa ASA established Aqualis ASA as a fully owned subsidiary and transferred the offshore business from Weifa ASA to this new company. The transfer of business within the group did not result in any change of economic substance and is therefore not considered a business combination. Accordingly, the consolidated interim financial statements of Aqualis ASA are a continuation of the group values transferred from Weifa ASA in the spin-off of the marine and offshore business.

Weifa ASA transferred 100 percent of the shares in the subsidiaries Aqualis Offshore Ltd, Tristein AS and Offshore Wind Consultants Ltd to Aqualis ASA on 24 July 2014. The ownership of the subsidiaries and the related excess values from the acquisitions of the subsidiaries are consequently continued in the group interim financial statement of Aqualis ASA.

Aqualis ASA was subsequently listed on OSE under ticker AQUA.

Note 2: Summary of significant accounting policies

2.1 Consolidation principles

The financial statements comprise Aqualis ASA and companies in which Aqualis ASA has a controlling interest. An investor controls an investee when the investor have the power over the investee, has exposure or rights to variable returns from its involvement with the investee and has the ability to use its power over the investee to affect the amount of the investor's returns. Non-controlling interest are included in the company's equity.

The purchase method is applied when accounting for business combinations. Companies which have been bought or sold during the year are included in the consolidated financial statements from the date when control is achieved and until the date when control ceases.

Inter-company transactions and inter-company balances, including internal profits and unrealised gains and losses, are eliminated in full on consolidation.

2.2 Segment reporting

The company has organised its activities into one operating segment which is Marine and Offshore, and the internal reporting provided to the Board of Directors of Aqualis ASA, which is the company's chief decision maker, is in accordance with this structure.

2.3 Foreign currency translation

The statement of financial position of subsidiaries, with a different functional currency than the group's reporting currency USD, are translated at the exchange rate prevailing at the end of the reporting period, while the statements of comprehensive income are translated at the transaction exchange rate. The monthly average exchange rates are used as an approximation of the transaction exchange rate. Exchange differences are recognised in other comprehensive income ("OCI"). When investments in foreign subsidiaries are sold, the accumulated translation differences relating to the subsidiary attributable to the equity holders of the parent are recognised in the consolidated statement of profit and loss.

Transactions and balances

Foreign currency transactions are translated into the functional currency of the group's entities using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in the consolidated statement of profit and loss. Monetary assets and liabilities are translated at the closing rate at the reporting date.

Any goodwill arising on the acquisition of a foreign entity, and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition, are treated as assets and liabilities of the foreign operation and translated at the closing rate at the reporting date.

2.4 Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.

Rendering of services

The operations mainly consist of engineering and marine consultancy work. Consequently, revenue recognition is based on hourly/daily rates and actual registered hours when the service is delivered. Revenue is recognised when it is probable that transactions will generate future economic benefits that will flow to the company and revenue can be reliably estimated. Services rendered on fixed price contracts are recognised by reference to the stage of completion. Stage of completion is measured by reference to labour hours incurred to date as a percentage of the total estimated labour hours for each contract. For projects expected to generate a loss, the full estimated loss is recorded as cost immediately. When contract outcome cannot be measured reliably, revenue is recognised only to the extent that the expenses incurred are eligible to be recovered. When services are performed by an indeterminate number of acts over a specified period of time, revenue is recognised on a straight-line basis over the specified period.

2.5 Income tax

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Deferred income tax

Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

Unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and taxation authority.

2.6 Balance sheet classification

Assets and liabilities are presented in statement of financial position on current/non-current classification. An asset is current when it is expected to be realised or intended to sold or consumed in normal operating cycle, held primarily for the purpose of trading, expected to be realised within twelve months after the reporting period, or cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A liability is current when it is expected to settle in normal operating cycle, it is held primarily for the purpose of trading, it is due to be settled within twelve months after the reporting period, or there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

2.7 Equipment

Equipment is mainly made up of equipment acquired to render services, and consists of office related equipment as software, computer hardware, furniture and other.

Equipment are stated at cost, net of accumulated-depreciation and/or accumulated impairment losses, if any. Such cost includes expenditures that are directly attributable to the acquisition of the items. Costs accrued for major replacements and upgrades to equipment are added to cost if it is probable that the costs will generate future economic benefits and if the costs can be reliably measured. All other repairs and maintenance are charged to the income statement when incurred. Depreciation is calculated on a straight-line method to allocate their cost to their residual values over their estimated useful lives as follows:

Equipment: 2-5 years

The residual values, useful lives and methods of depreciation of production and lab equipment and other equipment are reviewed at each financial year end and adjusted, if appropriate.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. The recoverable amount is the higher of an asset's net sales value and its value in use.

An item of equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.

2.8 Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-linebasis over the period of the lease.

2.9 Intangible assets

Intangible assets with a finite useful life will be amortised on a straight-line basis over the estimated useful life of the asset. The fair value of the intangible assets will be estimated when there is an indication that the net book value of the intangible asset is higher than the fair value or when the need for impairment losses in previous periods no longer exists.

Intangible assets with an indefinite useful life will not be subject to amortisation and will be tested annually for impairment.

Goodwill

Goodwill represents the excess of cost of an acquisition over the fair value of the company's share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on the acquisition of subsidiaries is included within intangible assets.

Goodwill that arises on the acquisition of subsidiaries is allocated to cash generating units (CGUs).

Goodwill is measured at cost (residual) less accumulated impairment losses. Goodwill is tested for impairment at least annually, or when there are indications of impairment. Impairment is determined for goodwill by assessing the recoverable amount of each CGU to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

When an operation within a CGU or company of CGUs are disposed of, to which goodwill has been allocated, a portion of the goodwill is included in the carrying amount of the operation disposed of when determining the gain of loss on disposal. The portion of the goodwill allocated is measured based on the relative values of the operation disposed of and the portion of the CGU retained at the date of the partial disposal, unless it can be demonstrated that another method better reflects the goodwill associated with the operation disposed of. The same principle is used for allocation of goodwill when the company reorganises its businesses.

2.10 Employee benefits

a) Pension

The company currently has defined contribution plans only. For defined contribution plans, contributions are paid to pension insurance plans and charged to profit and loss in the period to which the contributions relate. Once the contributions have been paid, there are no further payment obligations.

b) Share-based compensation

Shared based compensation for key personnel are measured at fair value at the date of the grant. The share-based compensation is settled in stocks. The fair value of the issued options is expensed over the vesting period which in this case is over the agreed-upon future service time. The cost of the employee share-based transaction is expensed over the average vesting period. The value of the issued options of the transactions that are settled with equity instruments (settled with the company's own shares) is recognised as salary and personnel cost in profit and loss and in other paid-in capital. Social security tax on options is recorded as a liability and is recognised over the estimated vesting period.

2.11 Provisions and contingent liabilities

General

Provisions are recognised when the company has a present legal or constructive obligation as a result of past events, and it is more likely than not that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of the money and the risks specific to the obligation.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

2.12 Events after the balance sheet date

New information on the company's positions at the balance sheet date is taken into account in the annual financial statements. Events after the balance sheet date that do not affect the company's position at the balance sheet date, but which will affect the company's position in the future, are stated if significant.

Note 3: Critical accounting estimates and judgements in terms of accounting policies

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosures of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

3.1 Critical accounting estimates and assumptions

Assumptions and estimates are based on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the entity. Such changes are reflected in the assumptions when they occur. The items affected by

estimates in Aqualis ASA Group accounts includes valuation of goodwill, purchase price allocations related to acquisitions and assessment of value of trade receivables.

Note 4: Group continuity

The Aqualis ASA Group was established when the owners of Weifa ASA established Aqualis ASA as a fully owned subsidiary and transferred the offshore business from Weifa ASA to this new company. The transfer of business within the group did not result in any change of economic substance and is therefore not considered a business combination. Accordingly, the consolidated interim financial statements of Aqualis ASA are a continuation of the group values transferred from Weifa ASA in the spin-off of the marine and offshore business.

Weifa ASA transferred 100 percent of the shares in the subsidiaries Aqualis Offshore Ltd, Tristein AS and Offshore Wind Consultants Ltd to Aqualis ASA on 24 July 2014. The ownership of the subsidiaries and the related excess values from the acquisitions of the subsidiaries are consequently continued in the group interim financial statement of Aqualis ASA.

Values allocated to goodwill and other intangible assets at Weifa ASA's acquisition of Aqualis Offshore Ltd in November 2013, Tristein AS in April 2014, and Offshore Wind Consultants Ltd in June 2014 are specified in the table below.

USD thousand	AO Ltd	Tristein AS	OWC Ltd	Total
Intangible assets continued*	15 099	5 879	1 653	22 631

* USD 1 292 thousand is customer contracts and remaining amount is goodwill

The amount of USD 15 099 thousand is intangible assets recognised relating to Weifa ASA acquisition of Aqualis Offshore Ltd in November 2013. The amount of USD 5 879 thousand is intangible assets allocated at Weifa ASA's acquisition of Tristein AS in April 2014. The amount of USD 1 653 thousand represent the amount allocated to goodwill when Weifa ASA acquired Offshore Wind Consultants Ltd in June 2014. Of total intangible assets, USD 1 292 thousand is related to customer contracts which are amortised and the remaining amount is goodwill. The recognised amounts are continued in the group accounts of Aqualis ASA as the subsidiaries are transferred between companies under common control. Goodwill which is the value of employees with special skills and expected synergies with the existing business does not fulfil the recognition criteria under IAS 38 and are therefore not recognised separately. The values stated above represents continued group values prior to amortisation and translation at end of third quarter 2014.

Information related to initial allocation of intangible assets from Weifa ASAs (former Aqualis ASA) acquisition of Aqualis Offshore Ltd was disclosed in Weifa ASA (former Aqualis ASA) fourth quarter report and the annual accounts for 2013.

4.1 Purchase accounting Tristein AS

The purchase price for 100 percent of the shares in Tristein AS was NOK 23 million in cash plus a consideration of 9.5 million new shares in Weifa ASA (former Aqualis ASA) valued at a price of NOK 2.58 per share. The consideration shares were subject to a lock-up period of a minimum of three years from the date of closing of the transaction (post listing of Aqualis Offshore Holding ASA, now Aqualis ASA, on 13 August 2014, such lock-up restrictions have been transferred to Aqualis ASA and now apply to Aqualis ASA shares). The cash portion of the purchase price

USD 1,000	Note	Tristein 30.04.2014	Fair value adjustments	Fair value of assets and liabilities 30.04.2014
ASSETS
Non-current assets
Equipment		34	-	34
Intangible assets		-	5 879	5 879
Deferred tax assets		6	-	6
Investments in associated companies		35	-	35
Total non-current assets		75	5 879	5 954
Current assets
Trade receivables		1 018	-	1 018
Other receivables		100	-	100
Funds		209	-	209
Cash and cash equivalents		1 673	-	1673
Total current assets		3 000	-	3 000
Total assets		3 075	5 879	8 954
Trade payables		240	-	240
Taxes payable		17	-	17
Other current liabilities		764	-	764
Total current liabilities		1 021	-	1 021
Total liabilities		1 021	-	1 021
Total net assets		2 054	5 879	7 933

was be paid by cash at hand. The total consideration was USD 7.9 million based on the exchange rate on the transaction date.

The purchase price allocation identified fair value adjustments on intangible assets. The adjustment to intangible assets consists of contracts (USD 1.0 million) and goodwill (USD 4.9 million).

4.2 Purchase accounting Offshore Wind Consultants Ltd

The purchase price for 100 percent of the shares in Offshore Wind Consultants Ltd was GBP 0.1 million in cash plus a consideration of 2.675 million shares in Weifa ASA (former Aqualis ASA) valued at a price of NOK 3.94 per share. The consideration shares in Weifa ASA (former Aqualis ASA) were subject to a lock-up period of a minimum of three years from the date of closing of the transaction (post listing of Aqualis Offshore Holding ASA, now Aqualis ASA, on 13 August 2014, such lock-up restrictions have been transferred to Aqualis ASA and now apply to Aqualis ASA shares). The total consideration was USD 1.9 million based on the exchange rate on the transaction date.

USD 1,000	Note	Unaudited OWC 30.06.2014	Fair value adjustments	Fair value of assets and liabilities 30.06.2014
ASSETS
Non-current assets
Equipment		1	-	1
Intangible assets		-	1 653	1 653
Deferred tax assets		-	-	-
Investments in associated companies		-	-	-
Total non-current assets		1	1 653	1 654
Current assets
Trade receivables		166	-	166
Other receivables		200	-	200
Cash and cash equivalents		176	-	176
Total current assets		542	-	542
Total assets		543	1 653	2 196
Current liabilities
Trade payables		51	-	51
Taxes payable			-	-
Other current liabilities		213	-	213
Total current liabilities		264	-	264
Total liabilities		264	-	264
Total net assets		279	1 653	1 932

The purchase price allocation identified fair value adjustments in intangible assets. The adjustment of intangible assets consists of goodwill (USD 1.7 million).

Note 5: Cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents are comprised of the following:

(USD '000)	30.09.2014	30.09.2013	31.12.2013
Cash at banks	21 365	-	838
Money market funds	-	-	-
Other cash deposits	-	-	-
Total	21 365	0	838

Note 6: Share capital

	Number of shares (thousands)	Share capital (USD 000's)
At 1 January 2013	0	0
At 30 September 2013	0	0
At 1 January 2014	0	0
Foundation capital, June	10 000	167
Private placement, July	7 304	118
Contribution in kind, July	25 887	417
At 30 September 2014	43 191	702

Aqualis ASA was established 2 June 2014 fully owned by Weifa ASA (former Aqualis ASA) with share capital of USD 167 thousand. On 24 July 2014 Weifa ASA (former Aqualis ASA) made a cash contribution of USD 10.5 million where USD 118 thousand was share capital increase. At the same date Weifa ASA (former Aqualis ASA) transferred all of its shares in the subsidiaries Aqualis Offshore Ltd, Tristein AS and Offshore Wind Consultants Ltd to Aqualis ASA as a contribution in kind, together with USD 8.0 million in interest bearing loans to Aqualis Offshore Ltd and its subsidiaries and USD 8.8 million in financial assets representing a part interest in the prepayment in relation to Weifa ASA's (former Aqualis ASA) acquisition of Weifa AS. The share capital increase related to the contribution in kind was USD 417 thousand.

Note 7: Share options

	01.01.-30.09.2014		2013
	Number of options	WAEP (NOK)	Number of options	WAEP (NOK)
Outstanding at the beginning of the year	-	-	-	-
Granted	2 999 998	8.91	-	-
Exercised (1)	-		-	-
Forfeited	-	-	-	-
Expired	-	-	-	-
Outstanding at the end of period	2 999 998	8.91	-	-
Exercisable at the end of period	-	-	-	-

Share options issued to key personnel in Tristein AS and Offshore Wind Consultants Ltd at Weifa ASAs (former Aqualis ASA) acquisition of Tristein AS and Offshore Wind Consultants Ltd have been transferred to Aqualis ASA. The exercise prices are adjusted according to the option agreements, in line with OSE derivatives regulations, in order to reflect the restructuring that has taken place.

The fair value of the issued options is calculated using the Black & Scholes option pricing model using an annualised volatility (0.56) in the underlying share, duration of the option (3 years), risk free rate (1.83), price of the share and strike price of the options (8.91).

Employee options are expensed with USD 0.1 million in the third quarter 2014.

Note 8: Segment information

Aqualis Offshore has one operating segment, which are services to the marine and offshore sector. This is the only business segment used for internal reporting. The table below shows revenues and profits in different geographical areas.

(USD '000)	Q3 2014			Q3 2013			2013
	Marine &	HQ	Total	Marine &	HQ	Total	Marine &	HQ	Total
	Offshore			Offshore			Offshore
Revenues
Norway	2 554	-	2 554	-	-	-	282	-	282
Singapore	3 546	-	3 546	-	-	-	810	-	810
UAE	2 434	-	2 434	-	-	-	585	-	585
USA	1 655	-	1 655	-	-	-	241	-	241
Brazil	772	-	772	-	-	-	459	-	459
UK	961	-	961	-	-	-	9	-	9
China	16	-	16
Mexico	-	-	-
Elimination	-1 218	-	-1 218	-	-	-	-145	-	-145
Total revenue	10 720	-	10 720	-	-	-	2 241	-	2 241
Operating profit (EBIT)
Norway	192	-1 695	-1 503	-	-	-	-235	-	-235
Singapore	553	-	553	-	-	-	-81	-	-81
UAE	78	-	78	-	-	-	-190	-	-190
USA	189	-	189	-	-	-	-95	-	-95
Brazil	-32	-	-32	-	-	-	-18	-	-18
UK	-100	-	-100	-	-	-	-254	-	-254
China	-272	-	-272
Mexico	-58	-	-58
Elimination	-	-	-	-	-	-	-64	-	-64
Total operating profit (EBIT)	550	-1 695	-1 145	-	-	-	-937	-	-937
EBITDA	773	-1 695	-922	-	-	-	-827	-	-827
Depreciation and amortisation	-223	-	-223	-	-	-	-110	-	-110
Operating profit/loss (EBIT)	550	-1 695	-1 145	-	-	-	-937	-	-937
Assets
Current operating assets	9 977	-	9 977	-		-	3 326	-	3 326
Non-current operating assets	22 892	-	22 892	-		-	15 736	-	15 736
Operating assets	32 869	-	32 869	-		-	19 062	-	19 062
Cash and interest-bearing recievables	4 241	17 124	21 365	-		-	838	-	838
Total assets	37 110	17 124	54 234	-		-	19 901	-	19 901
Liabilities
Current operating liabilities	7 017	81	7 098	-		-	2 391	-	2 391
Non-current operating liabilities	247	-	247			-	-	-	-
Operating liabilities	7 264	81	7 345	-		-	2 391	-	2 391
Net interest bearing borrowings	-	-	-	-		-	5 174		5 174
Total liabilities	7 264	81	7 345	-	-	-	7 565	-	7 565

Note 9: Related parties

Aqualis ASA has paid NOK 5.0 million in structuring fee to Gross Management AS for services related to the structuring of the Weifa transaction, which is expensed under other operating cost in third quarter 2014 with USD 0.8 million. Gross Management AS is controlled by Øystein Stray Spetalen and Glen Rødland which through Ferncliff and associated companies holds approx. 24 percent of the shares in Aqualis ASA.

Note 10: Risk

The Group's principal financial liabilities comprise trade and other payables, and the Group has no borrowings at the end of third quarter 2014. The Group has trade and other receivables, and cash and cash equivalents. The main risks arising from the Group's financial instruments are interest rate risk, credit risk, foreign currency risk and liquidity risk. The Group's senior

management oversees the management of these risks, which is being reviewed by the Board of Directors.

Interest rate risk

The Group's exposure to the risk of changes to market interest rates relates primarily to the Group's cash deposits. For cash deposits interest rate changes will only have an immaterial impact on the Group's financial statements.

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions.

Customer credit risk is managed by each subsidiary in the Group, subject to established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed on an individual basis, and outstanding customer receivables are regularly monitored. The requirement for an impairment is analysed at each reporting date on an individual basis for major customers.

Liquidity risk

Liquidity risk is the potential loss arising from the Group's inability to meet its contractual obligations when due. The Group monitors its risk to a shortage of funds using cash flow forecasts. The Group is in a build-up phase and currently the strategy is to fund the growth of the business through existing cash reserves and if needed, by raising additional equity capital. Based on the current cash position, the Group assesses the liquidity risk to be low.

Note 11: Significant events and transactions after balance sheet date

No significant events or transactions have taken place after the balance sheet date.

Note 12: Impairment

There have been no indications of new instances of value impairment the first three quarters of 2014. In line with adopted principles, the Group carries out impairment tests for all goodwill in the fourth quarter, but any indications of a fall in the value of assets outside this period will be followed up immediately.

Note 13: List of subsidiaries

The following subsidiaries are included in the consolidated financial statements:

Company	Country of	Main operations	Ownership	Voting
	incorporation		interest 2014	power 2014
Aqualis Offshore Ltd.	UK	Marine & Offshore	100 %	100 %
Aqualis Offshore UK Ltd.	UK	Marine & Offshore	100 %	100 %
Aqualis Offshore Pte. Ltd	Singapore	Marine & Offshore	100 %	100 %
Aqualis Offshore Marine Services LLC	UAE	Marine & Offshore	49 %	100 %
Aqualis Offshore, Inc.	US	Marine & Offshore	100 %	100 %
Aqualis Offshore Servicos Ltda	Brazil	Marine & Offshore	100 %	100 %
Aqualis Offshore AS	Norway	Marine & Offshore	100 %	100 %
Aqualis Offshore S. de R.L. de C.V.	Mexico	Marine & Offshore	100 %	100 %
Aqualis Offshore Marine Consulting (Shanghai) Co., Ltd.	China	Marine & Offshore	100 %	100 %
Tristein AS	Norway	Marine & Offshore	100 %	100 %
Offshore Wind Consultants Ltd.	UK	Marine & Offshore	100 %	100 %

Tristein AS acquired and consolidated from 27 April 2014. Offshore Wind Consultants Ltd acquired and consolidated from 29 June 2014. Aqualis Offshore Marine Consulting (Shanghai) Co., Ltd established in Q2 and Aqualis Offshore S. de R.L de C.V. established in Q3 2014. All other consolidated from 8 November 2013.

Sjølyst Plass 2 NO-0278 Oslo Norway Tel: +47 23 01 49 90 www.aqualis.no