Norcod — Interim / Quarterly Report 2021

Nov 4, 2021

Another eventful quarter has passed. Norcod started commercial harvesting of premium cod to generate sales revenue for the company. The initial harvest period is considered one of the most valuable milestones for Norcod following an intensive four-year effort to start production along the Norwegian coastline. From the start of harvesting medio August to the end of the quarter, 345 tonnes (round weight) were harvested. This very significant milestone is proof of concept, demonstrating that Norcod has achieved commercially viable, biologically superior farmed cod, which paves the way for a positive and lucrative future for the industry.

During the summer a batch of 2.4 million fish was transferred to three sea sites at the company's locations in Meløy and Frøya. Transfer operation to the sea facilities, completed 1st of July, went successfully as planned. The fish remained calm throughout the process and immediately began feeding on arrival. Throughout the quarter the cod has shown excellent growth and survival rate.

QUARTERLY REPORT

HIGHLIGHTS

• The 2021 batch of 2.4 million fish shows excellent performance

• Started commercial harvest
• Commenced construction of new cod fry facility
• Recruiting additional operational personnel
• NOK 15.9 million revenues in Q3

Norcod and fry producer Havlandet Marin Yngel have by virtue of the 50-50 joint venture Havlandet Norcod AS commenced the construction of the new cod fry facility. This production site, which has a license to produce 24 million fry per year, will be ready to receive its first fry in autumn 2022. Work began at the site on the 17th of August. As a result of the JV, Norcod AS is the only commercial cod farming company with guaranteed direct access to cod fry from own facilities, while also providing the remainder of the cod farming industry a reliable source of cod fry.

The increased operational activity in Norcod is the backdrop for the need of more employees. Skilled operating technicians are the key to ensuring fish welfare, handling input factors in production efficiently and in the best possible way safeguarding the surrounding environment. Norcod has succeeded in recruiting personnel with relevant expertise and devotion. We endeavour to continue to hire the right people to join our team to facilitate our growth strategy.

Norcod's shareholders and investors can finally see the benefits of their long-term perspective, as we enter the next phase in the company's development, with the commencement of the commercial harvesting activity. We have generated revenues of NOK 15.9 million, in the quarter, and are well on our way to processing an expected volume of 5,000 tons in the next few months.

The harvest activity has been increasing and current year's harvest ready biomass consists of the pilot batch farmed at partner Namdal Settefisk's facility at Finnangerøya in Namsos municipality, and the main share of the 2021 batch at Norcod's facility Jamnungen in Frøya. Both have performed well, with high feed efficiency. The pilot batch is now complete, achieving a biological feed conversion rate as low as 1.007.

KEY EVENTS DURING & AFTER Q3

HARVEST

Norcod has been very well received in the market. Sirena Group, a leading sales and marketing company of premium seafood, is responsible for Norcod's market strategy and has lined up a select group of customers in key markets. The product is positioned and branded as the sustainable and delicious high-end seafood product that it is.

The response from the market has been overwhelmingly positive, which now allows Sirena to extend the sales into an ever-wider customer base in key markets. On factors such as appearance, texture, colour and taste, Norcod is receiving unanimous praise, and the end customer is asking for the same product from their local supermarkets; Something Norcod will capitalise on by direct labelling our cod to be displayed for sale.

MARKETING & SALES

Norcod has during the summer completed the second round of cod fry production in land-based growth facilities. The growth phase lasts around five to six months. At the point of transfer to sea pens the juveniles weighed around 80-100 grams. Transfer operation to the sea-site growth facilities went successfully as planned.

The fish engaged calm behaviour and immediately began feeding after their arrival. The fish are distributed between the company's three sea sites at Pålskjæra, Skogsøya and Frosvika. The latter, located in Meløy municipality in Nordland county, is Norcod's newest site. Harvest volumes from the 2021 batch are expected to be market ready in 2022/23 following the sea growth phase.

PRODUCTION

Norway's Fisheries and Seafood minister Odd Emil Ingebrigtsen was on hand to participate in the "first spade in the ground" ceremony, as the Norcod and partner Havlandet Marin Yngel embarked on a major investment in cod aquaculture. Norcod AS is now the only commercial cod farming company, with guaranteed and direct access to cod fry, which is paramount in facilitating Norcod's future strategic growth plan objectives.

Building a brand-new fry facility in Florø is an important step for Norcod on the journey towards achieving harvest volumes of 25,000 metric tonnes of fresh farmed cod by 2025. It also cements the collaboration with Havlandet as a strong platform for the future. For cod farming to be successful it is crucial to start with the best possible fish biology and highest quality fry. This new facility will provide the best possible starting point for Norcod's production cycles.

HAVLANDET NORCOD AS

In October Norcod received its new hybrid-electric service vessel, "Julianne J". The vessel is one of the key components in the company's sustainability strategy to enhance operational efficiency and lower emissions in the production cycle. Norcod is taking advantage of biological advances and new technology to succeed in fish farming, while adopting environment-friendly production methods.

NEW & MODERN ENVIRONMENTALLY FRIENDLY VESSELS

Production volume from the first cycle of sea placements will reach 5000 tons, however due to high sea temperatures during the summer 2021, our sea production has progressed at a slightly slower pace, consequently extending our harvest plan a further 2 months. Our first production cycle is expected to be fully harvested by the end of the first quarter 2022.

Preparations for Norcod's third round of transferring juveniles to land-based growth facilities are well under way. This batch of seventh generation juvenile cod from the company's joint venture partner, Havlandet Marine Yngel AS, is scheduled to go into sea phase in spring 2022, after starting their growth phase during Q4.

Two brand-new feed barges equipped with waterborne feeding technology in are expected to be delivered and operational in December, in addition to the arrival of the new hybrid-electric service vessel. Both barges and vessel are key components in the company's sustainability strategy to enhance operational efficiency and lower emissions in the production cycle. Besides contributing to a lower CO 2 footprint, waterborne feeding technology is more energy effective, allows feeding at desired depth and avoids the impact of wind and surface currents, and provides the possibility for more intensive feeding (kg/min), less breakage, larger pellet-size and not least, minimal wear on the feed hoses regarding microplastic emissions. Norcod is proud to be leading the cod farming industry in the right direction.

LOOKING AHEAD

Norcod is following the Norwegian authorities' guidelines regarding Covid-19, and the company will assess and make internal adjustments to adapt to the situation on an ongoing basis. It is a key priority for us to protect Norcod's employees at each of Norcod's premises. Norcod is also in close dialogue with the company's suppliers to limit delays in upcoming equipment deliveries. There have been delays in the construction of Norcod's last ordered catamaran service vessel and feed barges, but the production management has found workable temporary solutions pending completion and receipt. Otherwise, no direct consequences for Norcod's operations due to the pandemic.

FINANCIAL PERFORMANCE

The Norcod Group includes the parent company Norcod AS and its subsidiary Norcod Equipment AS, as well as a 50% stake in Havlandet Norcod AS.

Havlandet Norcod AS commenced the construction of the new cod fry facility at Florø, during the quarter, which expected to be completed and fully operation by Q3 2022.

The consolidated Q3 financial report, includes all commercial activities from all 3 entities.

The 2021 Q3 financial report is consolidated according to IFRS regulations that were adopted and implemented in 2020.

During this period, Norcod entered a new phase by starting commercial harvesting of the biomass set out to sea in 2020. The activity is made possible by close partnership with Namdal Seafoods for processing activities, professionally packing our premium product, and Sirena as sales and marketing experts from Denmark, distributing Norcod's product to an eagerly awaiting market.

Norcod made the strategic decision to start the harvest at a manageable low volume of approximately 50 tons per week, to allow for any issues to be handled before we increase the volume to a 5 times multiple. It is therefore not unexpected that we will not achieve economies of scale until later in Q4, which the Q3 results clearly reflect.

Norcod is proud to report a total revenue of NOK 15.9 million for the quarter, increasing the total YTD revenue to NOK 28.4 million.

Operating loss for the period is NOK 8.1 million totalling 9.9 million for the year, reflecting associated higher relative costs of harvesting smaller volumes for the period. The per kg costs are expected to decrease significantly in Q4, once Norcod process higher volumes of product.

Havlandet Norcod AS, is owned 50% by Norcod AS. The company began operational activities in the quarter and is included in the Group consolidated accounts.

INCOME STATMENT

	Note	Q3 2021	Q3 YTD 2021	Q3 2020	Q3 YTD 2020	Full year 2020
			Unaudited		Unaudited	Audited
		15 930	28 430	387	6713	7 2 2 5
		5987	$-3965$	$-17887$	$-10501$	$-4955$
		7659	19 3 28	3863	9 1 2 2	15 157
		2 2 6 0	6 2 4 6	1 1 1 6	1672	3 0 3 4
		8 1 4 1	16 755	3 601	7591	12 3 8 7
		24 047	38 364	$-9306$	7884	25 623
djustment of biomass		$-8117$	-9 934	9694	$-1171$	$-18398$
	5	1954	$-16134$	6 3 0 9	9947	28 794
		$-6163$	$-26068$	16 002	8776	10 3 96
		$-2469$	$-7765$	$-5786$	$-5800$	$-4725$
		$-8632$	-33 833	10216	2977	5671
		$-1899$	$-7443$	2 2 4 8	655	1 1 8 4
		$-6733$	$-26390$	7968	2 3 2 2	4487
e period		$-6733$	$-26390$	7968	2 3 2 2	4487

FINANCIAL POSITION

Consolidated statement of financial position
		YTD	YTD
	Note	Q3 2021	Q3 2020	31 Dec 2020
000)		Unaudited	Unaudited	Audited
ssets
atents, licences, trademarks and similar rights	2	7819	5434	5 9 0 2
: & equipment		46 061	27 508	21 5 72
sets		115 332	4 3 0 3	26 601
subsidiaries
associated companies	3	35 733	16 003	16 003
ent receivables		5 0 0 0	946	893
ssets		15 005	2 2 6 3	7562
ent assets		224 951	56 457	78 533
biological assets	$\mathbf{1}$	230 274	87 434	132 045
eivables		49 231	16 14 6	42 994
equivalents		69 962	91 998	218 273
issets		349 466	195 577	393 312
		574 417	252 035	471845
ABILITIES
		8496	5730	8516
		378 949	146 660	382 642
		$-21903$	2 3 2 2	4487
ngs
		365 542	154 711	395 644
terest-bearing debt
	4	76 445	952	806
ent liabilities		76 445	952	806
t-bearing debt	4	73 685	84 504	67952
ble		54 704	9434	13 503
iabilities		4 0 4 2	2 4 3 4	$-6060$

The total assets of Norcod Group have increased further in value to NOK 574 million as at the end of Q3, 2021. There is continued growth in biomass and equivalent biological asset values NOK 230 million, compared to NOK 87 million for the same period last year. In doing so, Norcod has achieved impressive feed conversion ratios, as low as 1.007 while maintaining an impressive record of low mortality and extremely high-quality product.

Norcod remains financially sound, with extensive cash reserves and carries lease liabilities of NOK 76million, as well as a longterm interest-bearing debt of NOK 73.4 million, which is not due until 2023.

Norcod reports a negative 2021 year to date cashflow of NOK 148 million. An increase of NOK 130 million in biological assets, accounts for 88% of cash usage. The remaining negative cash flow in 2021 was primarily due investment in Havlandet Norcod AS joint venture and the purchase and leasing of plant and equipment,

Cash proceeds from sales activities were first received from clients in Q4.

The Group's cash and cash equivalents as at 30th September 2021 totalled NOK 70 million.

CASH FLOW STATEMENT

Consolidated statement of cash flow
		YTD
		Q3 2021	2020
	Note	Unaudited	Audited
		$-33833$	5671
activities
tion		6 2 4 6	3 0 3 4
ological assets	1	$-130118$	$-116837$
ıble		6 2 3 7	7 1 1 9
6		$-40941$	7376
s		5460	$-48210$
		9508
ing activities		$-177442$	$-141846$
activities
property, plant & equipment		$-24489$	-49 622
subsidiary and associated companies	з	$-19730$	$-16003$
		$-4107$	$-855$
	2	$-1917$	$-1814$
ng activities		$-50244$	$-68293$
activities
	4	81 372	86 519
ring debt	4		$-15403$
	4	$-1998$	$-3607$
ares			352 445
ng activities		79 374	419 953
cash and cash equivalents		$-148312$	209 814
at the beginning of the period		218 273	8460
at close of the period		69 962	218 273

EQUITY

(Amounts in NOK '000)	Paid-in equity
2020		Share capital Share premium	Other paid- in equ ity	Retained earnings	Total equity
Equity as of 1 jan 2020	37	32 848			32885
Net profit/loss for the period				4487	4487
Other comprehensive income for the period
Total comprehensive income 2020	37	32 848		4487	37 372
Issue of shares 25.02.2020	20	99 485			99 505
Fund issue 22.06.2020	5673	$-5673$
Issue of shares 2.10.2020	286	19 7 14			20 000
Issue of shares 13.10.2020	2500	236 343			238 843
Other changes		-76			-76
Equity as of 31 Dec 2020 (Audited)	8516	382 642		4487	395 644

2021		Share capital Share premium	Other paid- in equity	Retained earnings	Total equity
Equity as of 1 jan 2021	8516	382 642		4487	395 644
Net profit/loss for the period				$-26390$	$-26390$
Purchase own shares	$-20$	-3 687			$-3707$
Other comprehensive income
Total comprehensive income 30 September 2021	8496	378954		$-21903$	365 547
Other changes			-5		-5
Equity as at 30 September 2021 (unaudited)	8496	378954	-5	$-21903$	365 542

NOTES TO INTERIM FINANCIAL STATEMENT

Accounting Principles

Norcod AS is the parent company in the Norcod Group. The Group includes the parent company Norcod AS and its wholly owned subsidiary Norcod Equipment AS. The Groups head office is located at Thomas Angells gate 22 in Trondheim, Norway. Norcod AS is listed on the Oslo Stock Exchange Euronext Growth under the ticker NCOD.

The consolidated condensed interim financial statements comprise the financial statements of the Parent company and its subsidiary as of 30 September 2021. It is authorised for issue by the board of directors on 3 November 2021.

These consolidated financial statements have been prepared in accordance with International Accounting Standards 34 Interim Financial Reporting All significant accounting principles and calculation methods used in the most recent annual accounts are described in the annual report for 2020. With effect from 1 January 2020, the consolidated statements have been prepared on the historical cost bases excepted for biological assets, which is measured at fair value with gain and losses recognized in profit or loss. The group have also implemented IFRS 16 Lease Obligations. The Group's accounting principles for these two areas are described together with other IFRS transition information in the notes to these interim accounts.

No other accounting principles have been changed or other standards have been adopted during the period. The annual report is published on www.norcod.no. The interim financial statements are unaudited.

Book value of inventory and biological assets		Q3 2021	Q3 2020
Feed and other materials		3,294	1,683
Roe and cod fry at cost
Biological assets held at sea farms at cost		218,888	75,804
Total Biological assets before fair value adjustment		222,182	77,487
Fair value adjustment of biological assets	See note 5	8,091	9,947
Total biological assets		230,274	87,434

The group had no finished goods in Q3 2021.

Biological assets are, in accordance with IAS 41 Agriculture, measured at fair value in accordance with IFRS 13. Biomass measured at fair value, is categorized at Level 3 in the fair value hierarchy, as the input is mostly unobservable. All cod at sea are subject to a fair value calculation, while roe and cod fry are measured at cost as cost is deemed a reasonable approximation for fair value as there is little biological transformation. The technical model used to calculate the fair value of biomass is a present value model. Present value is calculated on the basis of estimated revenues less production costs remaining until the cod is harvestable at the individual site. The cod is harvestable when it has reached the estimated weight required for harvesting specified in the company's budgets and plans.

The estimated value is discounted to present value on the balance sheet date. The expected biomass at harvest is calculated on the basis of the number of individuals held at sea farms on the balance sheet date, adjusted for expected mortality up until the point of harvest and multiplied by the fish's estimated weight at harvest. The price is calculated using the Group's best estimate of future prices and are not observable. The price includes the Group's best estimate of the future prices of cod liver and other products of the cod that will be sold. Prices are adjusted for expected costs related to harvesting, sales and carriage costs. The Group applies a monthly discount rate of 4%.

Change in the book value of biological assets for the period - Full Year	Full YTD Q3 2021	Q3 2020
Biological assets at the beginning of the period	132045	18 454
Increase resulting from production/purchase	130 118	59 033
Reduction resulting from sale/harvesting	-12 091
Reduction resulting from incident-based mortality	$-3664$
Biological adjustments
Net fair value adjustment	$-16134$	9 947
Biological assets at the end of the period	230 274	87434

NOTES TO INTERIM FINANCIAL STATEMENT (CONT.)

NOTES TO INTERIM FINANCIAL STATEMENT (CONT.)

INOTE 4 - INTEREST-DEALING NADIMES
Non-Current interest-bearing liabilities			Full YTD Q3 2021	Q3 2020	2020
Lease liabilities to credit institutions			76445	952	806
Non-current leasing liabilities			76 445	952	806
Leasing liabilities			79 356	1096	806
Next year's lease payments			$-15952$	$-604$	$-604$
Long-term leasing liabilities			63 404	492	202
Current interest-bearing liabilities
Change in current debt from shareholders (amount in NOK million)	31 Dec 2020	Issued	Fallen due/Redeemed	Booked as expense	Sept 30 2021
Debt to Artha Cod Ansvarligt Lån P/S	66 949				66 949
Dissemination commission	$-1869$			1602	$-267$
Adjustment due to change in currency	$-121$			$-2167$	$-2288$
Accrued interest	2993			6 2 9 8	9 2 9 1
Totalt	67952			5733	73 685
	31 Dec 2020		Increase/(Decrease) 2021		Sept 30 2021
Leasing	806		75 638		76 445
Long term loan	67952		5733		73 685
Total interest bearing liabilities	68758		81372		150 130
NOTE 5 - Fair value adjustment biomass
Book value Fair Value Adjustment	31 Dec 2020	Booked in 2021	Sept 30 2021
Fair Value adjustment Biomass IFRS	14 401	$-6309$	8092
Adjusted value Biomass	14 3 9 3	-9824	4569
Total fair value adjustment	28 7 94	$-16134$	12 661