Norcod — Interim / Quarterly Report 2021

Aug 12, 2021

INTERIM REPORT Q2 2021 Norcod Q2 Report 2021 | www.norcod.no |

Q2 2021 has been very productive period at Norcod with several important events and milestones taking place. The company is about to enter the next stage of its development with a market -ready product and has spent the time building biomass and preparing for the upcoming harvest.

In May Norcod was granted the prestigious Global G.A.P. certification that cements yet another strategic milestone with this major world -class aquaculture certification. Norcod is the first company within the Cod industry to obtain this certification. It demonstrates the company's clear operational focus, from the outset, on sustainability. The standard covers the entire production chain from broodstock, seedlings and feed suppliers to farming, harvesting and processing – or 'feed to fork'. It lays down strict criteria for legal compliance, employee occupational health and safety, animal welfare, food safety and environmental and ecological care.

QUARTERLY REPORT

HIGHLIGHTS

• Three new locations rigged for operation
• Initiated new production cycle at sea
• Achieved prized GlobalG.A.P. certification
• Appointed new Chief Financial Officer
• Unveils new visual identity

Norcod also underwent the GLOBALG.A.P. Risk Assessment on Social Practice (GRASP), a voluntary part of the certification process applied to assess social risks in primary production and to provide additional transparency to supply chain partners.

During the quarter, there has been high activity at the company's locations in Meløy and Frøya. Moorings and installation of cages on three new sites have been in focus towards the initiation of this year's stocking of cod. These new establishments will be operated by both existing and newly recruited experienced employees.

Kia Zadegan joined Norcod, as Chief Financial Officer, from the CFO spot at Dusseldorf -based software and IT consultancy group DataLab GmbH. Prior to that he was Managing Director Northern, Central & Eastern Europe for specialist payment and data analysis company PRG -Schultz.

Norcod is a front-runner and strong driving force for responsible cod farming on an industrial scale. Global G.A.P. initial audit was conducted in mid-February and in May the result from the audit declared Norcod as responsible player in the aquaculture industry. The company is the first cod farmer to obtain this certification. It demonstrates the clear operational focus the company, from the outset, has had on sustainability, and that Norcod is a responsible player in the aquaculture industry.

Norcods growth aspirations meant moving on from an outsourced financial services model, to establishing an internal full time finance role, to coordinate and achieve these ambitious plans. Kia Zadegan joined Norcod as CFO in June. With senior positions at international stock-listed companies both in the EU and US under his belt, Zadegan boasts strategic and operational experience across different verticals and locations. He brings deep insight in finance and IT, as well as experience from start-ups and M&A activities. Zadegan's market knowledge of fishfarming stems from his three years as Head of Finance at Stolt Seafarm, while as President and CEO of US operations for Aleutian Seafoods based in Seattle and Alaska he also gained first-hand knowledge of major fisheries.

Norcod has, during the summer completed, its second round of cod fry in land-based growth facilities. The growth phase lasts approximately five to six months. At the point of transfer to sea pens the juveniles weighed on average 80-100 grams. Transfer operation to the sea-site growth facilities went successfully as planned. The fish was observed to exhibit calm behavior and immediately began feeding after their arrival. The fish are distributed between the company's three sea farm 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 will come in 2022 following a sea phase of around 15 to 18 months.

KEY EVENTS DURING & AFTER Q2

Sirena Group, a leading sales and marketing company of premium seafood, is responsible for Norcod's market strategy and has lined up selected customers in key markets once harvesting starts. Norcod is positioned and branded as the sustainable and delicious high-end seafood product that it is. Norcod has completed an inspiring rebranding that better reflects the premium quality of the company's farmed Atlantic Cod.

The cornerstone of the new visual identity is a strong, clear, modern, and elegant logo featuring a simple circular design element being dubbed the 'Norcod circle'. The circle is symbolic of, firstly, fish schooling in ring formation representing Norcod's fresh promise with rapid delivery and the important welfare aspect of thriving fish. Secondly, it represents the large round fish pens deployed by Norcod, as well as its vision and promise as a modern company to be fully transparent. Thirdly, it symbolizes the globe representing Norcod's devoted pursuit of sustainable production in the oceans. Lastly, it represents a round dinner plate symbolizing the quality of Norcod's premium product as a delicious meal.

LOOKING AHEAD

Norcod's first production cycle of cod is now approaching the planned size of 3,5-4 kg. The company is preparing for its first commercial harvest of fresh cod during the third quarter. The pilot batch of 180,000 fish are held at partner Namdal Settefisk's facility in Finnangerøya in Namsos municipality, with the rest at Norcod's facility at Jamnungen in Frøya. The pilot batch has been in the sea for around 18 months and the main batch for around 13 months. Both are performing well, with high feed efficiency. The fish are calm, well distributed in the pens and survival rate is good. Strong biological performance lowers both risk and production cost.

Due to impressive biological performance at our Frøya locations, we are fast reaching the maximum permitted biomass (MTB). Therefore, it is necessary to start the harvesting process earlier than originally planned, effecting the size of the fish that is first harvested. Over the entire harvest period, however, the average weight will remain neutral, due to significantly larger fish towards the end of the cycle.

A brand-new feed barge equipped with waterborne feeding technology to site Frosvika will be delivered in October, as well as the arrival of a new hybrid-electric service vessel. Both barge and vessel are key components in the company's sustainability strategy to enhance operational efficiency and lower emissions in the production cycle.

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 in order to avoid operational challenges. 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, there are 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, which as of reporting date, does not have any commercial activity.

The half year financial report is consolidated according to IFRS regulations that were adopted and implemented in 2020. As the new CFO, Kia Zadegan, has reconsidered the fair value adjustment of the Biomass, and determined that the increase reported in the 2020 financials as well as the Q1 2021 filings, were overestimated, and warranted a significant reversal of the position that has been taken in the 2nd quarter of 2021.

This reversal of previous increase in value, is by no means a reflection of the production performance of Norcod AS, which continues to meet and beat the targets set, and will not affect the real operating results of the company as a whole for the year 2021. This is simply a consequence of over performance of our production team, which has resulted in Norcod having to commence harvesting from our Frøya facilities earlier than expected, and before we reach maximum permitted biomass (MTB), causing smaller fish to be harvested first.

Operating loss before fair value adjustment for the 1st half of 2021 is NOK 1,8 million compared to NOK 10,9 million for the same period last year.

The total revenue generated during the 1st half of 2021 amounted to NOK 12,5 million. This revenue was generated from test harvesting to establish the quality of the product, and as a marketing exercise. The actual commercial harvesting of Norcod Biomass is expected to begin mid-August 2021 and will continue for several months.

Income from associated companies is not accounted for in the quarter. Havlandet Norcod AS, is owned 50% by Norcod AS. The company has not had any operational activities and the Group has therefore not applied equity accounting for this investment yet.

INCOME STATMENT

* The figures in the interim financial statement is unaudited.

Consolidated statement of comprehensive income
		YTD	YTD
		H1	H1	Full year
	Note	2021	2020	2020
		Unaudited	Unaudited	Audited
		12 500	6 3 0 9	7 2 2 5
		$-9952$	7 3 8 5	$-4955$
l expenses		11 6 69	5 2 5 9	15 157
rtization		3 9 8 5	556	3 0 3 4
າses		8614	3 9 7 2	12 3 8 7
		14 3 17	17 173	25 623
re fair value adjustment of biomass		$-1817$	$-10864$	$-18398$
biomass	1	$-18087$	3638	28 794
		$-19904$	$-7226$	10 3 96
	4	$-5296$	$-13$	-4725
		$-25201$	$-7239$	5671
		$-5544$	$-1593$	1 1 8 4
		$-19657$	$-5647$	4 4 8 7
period
income		0	0	0
income for the period		$-19657$	$-5647$	4 4 8 7

The total assets of Norcod Group stand at NOK 551 million as at the end of Q2, 2021. There is substantial increase in biological assets increasing to NOK 193 million, compared to NOK 46 million for the same period last year. In doing so, Norcod has achieved impressive feed conversion ratios, without compromising quality or health of the biomass.

Norcod is financially sound, and carries lease liabilities of NOK 79 million, as well as a long -term interest -bearing debt of NOK 71,8 million, which is not due until 2023.

Additionally, Norcod participated in a share buyback program, of 40,000 shares in June 2020, in a private placement with Isfjord Norway AS, according to the share buyback clause, section 8 a - I, as authorised by the board, dated 6 May 2021.

BALANCE SHEET

Consolidated statement of financial position
		YTD	YTD
	Note	30 June 2021	30 June 2020	31 Dec 2020
in NOK '000)		Unaudited	Unaudited	Audited
rent assets
ions, patents, licences, trademarks and similar rights	$\overline{2}$	7 0 6 5	4 9 3 7	5 9 0 2
, plant & equipment		44 2 74	24 600	21 5 72
use assets		115 679	3 8 1 2	26 601
ent in subsidiaries		0	0	0
ent in associated companies	3	16 003	15 000	16 003
on-current receivables		$-2$	1 0 3 7	893
d tax assets		14 3 4 9	1636	7562
n-current assets		197 369	51 022	78 533
assets
y and biological assets	1	192 947	46 443	132 045
rm receivables		29 5 28	17 548	42 994
d cash equivalents		131015	14 636	218 273
rrent assets		353 490	78 627	393 312
SSETS		550 859	129 648	471845
AND LIABILITIES
pital		8 4 9 6	5730	8516
emium		379 072	124 806	382 642
d earnings		$-15169$	$-5647$	4487
uity		372 398	124 889	395 644
۱S
rent interest-bearing debt		0	0	0
bilities	4	79 356	1 0 9 6	806
n-current liabilities		79 356	1096	806
interest-bearing debt	4	71 768	0	67952
s payable		32 4 15	3 5 5 4	13 503
Irrent liabilities		$-5078$	110	$-6060$
rrent liabilities		99 105	3664	75 394
QUITY AND LIABILITIES		550 859	129 648	471845

Norcod reports a negative cashflow for the first half of 2021 totalling NOK 87,3 million, which primarily covers NOK 60,9 million of biological growth, compared to NOK 31,2 million for the same period last year. The remaining negative cash flow in 2021 was due to purchase and leasing of plant and equipment, and some harvesting and sales activities.

In comparison, for the same period in 2020, and in fact for 2020 in total, a positive cashflow overall is reported, due to issuance of new shares.

The Group's cash and cash equivalents at the end June 2021 totalled NOK 131 million compared with NOK 14,6 million at the end of June 2020.

CASH FLOW STATEMENT

		YTD	YTD
		30 June 2021	30 June 2020	2020
	Note	Unaudited	Unaudited	Audited
		$-25201$	$-7239$	5671
ties
		2 0 6 7	556	3 0 3 4
cal assets	1	$-60903$	$-31235$	$-116837$
		13 4 66	$-10239$	7 1 1 9
		$-1125$	2750	7376
		982	-99	$-48210$
ctivities		$-70715$	-45 507	$-141846$
ities
rty, plant & equipment		-94 934	$-29955$	-49 622
diary and associated companies	3	$-3707$	$-15000$	$-16003$
		895	$-849$	$-855$
	2	$-1163$	0	$-1814$
tivities:		$-98910$	-45 804	$-68293$
ities
	4	82 3 66	$-154$	86 519
lebt	4	0	$-10$	$-15403$
	4	0		$-3607$
		0	97 650	352 445
tivities:		82 366	97 486	419 953
and cash equivalents		$-87259$	6 1 7 6	209 814
e beginning of the period		218 273	8 4 6 0	8460
ose of the period		131 015	14 636	218 273

EQUITY

(Amounts in NOK '000)	Paid-in equity			Other equity
2020		Share capital Share premium Other paid-		in equity	Retained earnings	Total equity
Equity as of 1 jan 2020	37	32 848			0	32 885
Net profit/loss for the period	0	0		0	4 4 8 7	4 4 8 7
Other comprehensive income for the period		0			0	0
Total comprehensive income 2020	37	32 848			4 4 8 7	37 372
Issue of shares 25.02.2020	20	99 485		0	0	99 505
Fund issue 22.06.2020	5673	-5 673		0	0	0
Issue of shares 2.10.2020	286	19 7 14		0	0	20 000
Issue of shares 13.10.2020	2 500	236 343		0	0	238 843
Other changes		-76				-76
Equity as of 31 Dec 2020 (Audited)	8 5 1 6	382 642			4 4 8 7	395 644

				Retained
2021		Share capital Share premium Other paid-	in equity	earnings	Total equity
Equity as of 1 jan 2021	8516	382 642		4 4 8 7	395 644
Net profit/loss for the period				$-19657$	$-19657$
Purchase own shares	$-20$	$-3687$			$-3707$
Other comprehensive income					0
Total comprehensive income 30 June 2021	8496	378 954		$-15169$	372 280
Other changes		117			117
Equity as of 30 June 2021 (unaudited)	8 4 9 6	379 072	0	$-15169$	372 398

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 June 2021. It is authorised for issue by the board of directors on 11 August 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	H1 2021	H1 2020
Feed and other materials	4789	846
Roe and cod fry at cost	9038	15 902
Biological assets held at sea farms at cost	168 414	11 139
Total Biological assets before fair value adjustment	182 240	27887
Fair value adjustment of biological assets	10 707	-9 434
Total biological assets	192 947	18 4 54

Change in the book value of biological assets for the period	H1 2021	H1 2020
Biological assets at the beginning of the period	132 045	15 208
Increase resulting from production/purchase	76 911	12 680
Reduction resulting from sale/harvesting	$-1206$	0
Reduction resulting from incident-based mortality		0
Biological adjustments	3 2 8 5	0
Net fair value adjustment	$-18087$	-9 434
Biological assets at the end of the period	192 947	18 4 54

NOTES TO INTERIM FINANCIAL STATEMENT (CONT.)

NOTES TO INTERIM FINANCIAL STATEMENT (CONT.)

Non-Current interest-bearing liabilities	H1 2021	H1 2020	2020
Lease liabilities to credit institutions	79 356	1096	806
Non-current leasing liabilities	79 356	1096	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	June 30 2021
Debt to Artha Holding A/S	66 949				66 949
Dissemination commission	$-1869$			1 602	$-267$
Adjustment due to change in currency	$-121$			2 3 0 1	2 1 8 0
Accrued interest	2993			4 0 0 6	6999
Totalt	67952		o	7909	75 860

CONTACT: Kia Zad e gan , CF O kz@ norcod .no