FINANCIAL REPORT Q4 2015 - Hofseth BioCare · CACO-2 cell assays. We have started a new trial using...

1 Quarterly report – Q1 2017

FINANCIAL REPORT

Q4 2015


This is Hofseth BioCare ASA

HBC is a Norwegian biotech company that offers high-value ingredients and finished products for humans and pets.

The company is founded on the core values of sustainability, traceability and optimal utilization of natural

resources. Through an innovative hydrolysis technology, HBC is able to preserve the quality of salmon oil, proteins

and calcium, prepared of fresh salmon off-cuts.

HBC's objective is to contribute to the efficient use of marine resources and deliver quality products for ingredients

and finished consumer products in the nutrition market.

Hofseth BioCare's headquarters are located in Ålesund, Norway with branches in Oslo, Chicago, Mumbai and

Tokyo. HBC is listed on Oslo Stock Exchange Axess list with ticker "HBC". More information about Hofseth BioCare

at www.hofsethbiocare.com and www.facebook.com/hofsethbiocare

Our vision

We shall be pioneers in production and

development of premium bioactive marine

ingredients for the human market.

We are strongly committed to convert raw materials

from the marine industry into high-quality food

grade ingredients.

Sustainability is the core value in all our activities.

Our spoken vision is:

Sustainable production of premium marine

ingredients with documented health effects

Our objectives

Hofseth BioCare’s key objective is to provide high-

value-added biomarine ingredients for human

applications. Through innovative production

technology and logistics, we preserve the quality of

protein, calcium and oil extracted from fish. The

technology is proprietary to our company.

Products that previously could only be used for

animal feed are now being produced for human

consumption and pharmaceuticals. We are thus

contributing to efficient use of marine resources.

Hofseth BioCare has three ambitious long-term

goals:

1. Higher profitability than our competitors creates a strong social responsibility

2. Leading R&D, technology and quality for the best products in the industry

3. The industry’s best competence team on fresh marine ingredients


• HBC has published a new study together with the Norwegian School of Sport Sciences, called “A Randomized, Double-Blinded Cross-Over Study Comparing Increase in Blood Leucine Levels after Ingestion of Hydrolyzed Salmon and Whey Proteins in Healthy Young Men”. The study shows a 15 min faster time to peak blood concentration of leucine after ingestion of ProGo™ compared to whey protein.

• Production of the new PetGo™ started and first commercial volumes ready for shipment in the third quarter.

• Signed agreement for utilizing the spray-drying capacity at the Berkåk plant. It is expected that during the third quarter, the capacity utilization will be 90 per cent.

• Mr. Roger Hofseth elected new CEO in August, and continues as Chairman of the Board

• Research show that HBC’s CalGo® is 100% in calcium hydroxyapatite microcrystalline form. This is considered the best form of calcium for absorption and incorporation.

• Current activity shows that petfood and feed contracts will increase revenues and cash flow in the second half of 2017.

Q2 2017 Q2 2016 1H 2017 1H 2016 2016

Operating revenues 5 505 8 171 64 149 13 529 20 204

EBITDA -13 314 -43 172 23 411 -64 427 -118 463

Operating profit/loss -18 412 -47 461 11 983 -73 009 -137 105

Profit/loss before taxes -19 307 -50 584 8 445 -78 769 -140 001

Earnings per share (NOK) -0.26 -0.43 0.04 -0.69 -1.01

Net cash flow -46 236 -1 919 1 997 -27 920 -12 707

Interest-bearing liabilities 33 095 122 160 33 095 122 160 74 445

Total assets 142 660 158 010 142 660 158 010 159 353

Equity ratio 43.5% -14.6% 43.5% -14.9% 33.6%


In the financial review, figures for the

corresponding periods in 2016 are given in

brackets.

Hofseth BioCare ASA (HBC) had operating

revenues of NOK 64.2m (13.5m) in the first half

of 2017 and EBITDA of NOK 23.4m (negative

64.4m). Equity ratio was 43.5% (negative

14.9%).

Hofseth BioCare had operating revenues of

NOK 5.5m (8.2m) in the second quarter of 2017.

Total operating expenses amounted to NOK

23.9m (55.6m) in the period.

Operational profit (EBITDA) for the second

quarter 2017 was negative NOK 13.3m

(negative NOK 43.2m).

Net financial items in the second quarter were

negative NOK 0.9m (negative 3.1m).

Loss before tax was NOK 19.3m in the period,

compared to a loss of NOK 50.6m during second

quarter 2016.

Cash flow from operations during the second

quarter was negative by NOK 9.6m compared to

negative NOK 36.1m in the same quarter last

year.

Net cash flow from investment activities was

negative by NOK 3.4m in the second quarter of

2017, compared to negative NOK 13.4m for the

corresponding period last year.

Cash flow from the financing activities

amounted to negative NOK 33.2m in the second

quarter 2017, compared to positive NOK 47.6m

in the second quarter of 2016.

Cash and cash equivalents decreased by NOK

46.2m during the quarter, leaving total holding

of cash and cash equivalents at NOK 18.2m by

the end of the period.

Total assets for the company were NOK 142.6m

at the end of second quarter of 2017 (NOK

158.0m). Deferred tax assets are not posted in

the balance sheet. Estimated value is NOK

115.6m.

Total equity amounted to NOK 62.0m (NOK -

23.5m) giving an equity ratio of 43.5% (-14.9 %)

for the group.

8,2 3,6 3,1

58,6

5,5

- 43,2 -41,2

- 12,9

36,7

- 13,3

-45

-35

-25

-15

-5

5

15

25

35

45

55

65

Q2-16 Q3-16 Q4-16 Q1-17 Q2-17

NO

K m

illio

n

Operating revenues EBITDA

- 23,6

77,153,6

81,3 62,0

- 14,9

40,433,6

44,4 43,5

- 20,0

- 10,0

-

10,0

20,0

30,0

40,0

50,0

-50

0

50

100

150

200

250

Q2-16 Q3-16 Q4-16 Q1-17 Q2-17

NO

K m

illio

n

Total asets Total equity

Equity ratio (%)


Hofseth BioCare produces Soluble Protein

Hydrolysate (ProGo®), Partly Hydrolyzed

Protein (PetGo™), fresh Salmon Oil (OmeGo®)

and Marine Calcium (CalGo®). The products are

based on fresh off-cuts from the Norwegian

salmon processing industry. The proprietary

production process with enzymatic hydrolysis

splits the four fractions of the salmon raw

material.

HBC operates two plants: The hydrolysis plant

in Midsund and the spray-drying plant in

Berkåk. In the second quarter, HBC processed

2,039 metric tons of salmon raw material and

continue to ramp up production volumes.

HBC produced a total of 549 tons of finished

goods during the second quarter of 2017. All

four fractions within specifications have been

produced for the first time at HBC, where the

majority was OmeGo®, followed by ProGo®,

CalGo® and PetGo™.

The first commercial volumes of PetGo™ (Partly

Hydrolyzed Protein) have been finalized for

delivery, after testing and tuning of the

production line in the first quarter.

In Process Development research, we continue

to work on the hydrolysis of CalGo® powder to

yield a new salmon super collagen peptide

product and at the same time yield a calcium

powder with reduced protein and increased

calcium ion content, that will make our CalGo®

an even more competitive product.

HBC has also completed preliminary laboratory

trials on using our normal reactors to increase

the yield of SPH without any change in the

specification, taste, smell profile. We will be

ready to test the recipe in full production

batches in the fourth quarter.

We completed our accelerated storage stability

studies with OmeGo® extruded into dry foods

for dogs and cats. OmeGo® containing pellets at

up to 10% w/w showed excellent storage

stability and the results have been incorporated

into a report and part of the specification for

OmeGo® in Pet foods. Protocol design and

pricing for a small study on palatability of

OmeGo® versus Fish oil containing pellets with

dogs is under development.

During the quarter, HBC has completed stability

and uptake studies to extend our AREDS I type

soft gel development with OmeGo® into the

AREDS II type formulation as well. We showed

that Lutein and Zeaxanthin eye-health

supplements needed for Age-Related Macular

Degeneration treatment are also very stable in

OmeGo®. Further we showed that both

supplements exhibited significantly higher

uptake in the OmeGo® matrix versus both

lecithin and aqueous solid formulations in

CACO-2 cell assays.

We have started a new trial using with OmeGo®

to search for new anti-inflammatory bio-

markers that could be impacted with our

unique oil. Completion and a report is expected

in the fourth quarter. Nine new unique

biomarkers are being assayed for impact over

an 8 week, three blood draw study together

with our partners in pre-clinical testing.

We have completed writing the protocol for a

new 4g/day ProGo study for Women's Health

re: Energy and Well-being. We have also

included 3 biomarkers for tracking during the 8-

week study duration. Ethics committee

approvals are ongoing.

851 224

537 045

2 039 480

651 211

Apr Q2JunMay


Our unique formulation of Salmon Protein

Hydrolysate has been formulated into a stable

aquaculture feed at 2 % and 5 % incorporation,

with excellent results in early trials. We have

completed the recipe and finished testing

aquatic stability and provided our partners the

optimum recipe for the trials planned for later

this year.

We have begun our research project into the

use of SPH in muscle building in ultra-low

birthweight babies and the impact of SPH on

bile acid and protein digestion and

incorporation. We will be collaborating on this

project with doctors at the Lucille Packard

Hospital at Stanford University.

This past quarter we began and are in the

middle of redefining our CalGo® product. We

have assayed it to show that it is 100% calcium

hydroxyapatite microcrystalline form which is

the best form of calcium for absorption and

incorporation. During the next quarter, we are

focused on completing all the necessary assays

to rebrand CalGo for human consumption.

We have begun a series of experiments on PHP

with anti-oxidants to increase the stability of

the powder for special human markets. All

assay development work was completed and

next quarter we are running multiple trials to

arrive at the optimum recipe.

Our R&D department continues to support

Patents and Trademarks, Production, Sales and

QA with specific experiments and

documentations.

In accordance with the Company’s strategy,

OmeGo® continues to be sold straight from the

factory, with no inventory time and cost. As

before, the volumes are mainly being sold into

feed to secure higher revenues and continued

cashflow. This is done as the focus is to increase

OmeGo® presence in the petfood and human

segment as finished products for increasing the

margins of the ingredient.

Samples of flavored ProGo® has reached a

larger audience of customers as the Company

seek to push the ingredient into the market

though its distributors and partners.

The Company’s fourth ingredient, PetGo™, is

being produced as expected and will be sold

straight from the factory, with no inventory

time and cost, as OmeGo®.

The focus going forward will be increased push

on ProGo® and finished product as well as

getting CalGo® ready for shipment to customers

on the global market.

The Hofseth BioCare share (HBC) was traded

between NOK 1.55 and 2.18 per share in the

second quarter and the last closing price on 30

June 2017 was NOK 1.69

Based on 233,499,759 outstanding shares, this

values the company’s equity at approximately

NOK 395 million.

As of 30 June 2017, the company had 684

shareholders. The 20 largest shareholders

controlled 88.49 per cent of the shares.

There are no new significant transactions with

related parties during 2017.


We confirm to the best of our knowledge that the interim financial statements for the period 1 January

to 30 June 2017 is prepared in accordance with IAS 34 - Interim Financial Reporting, and that the

accounts give a true and fair picture of the company's assets, liabilities, financial position and results of

operations.

We declare that, to the best of our knowledge, the interim report gives a true and fair overview of

important events in the financial year and their impact on preliminary results, the most important risk

and uncertainties for the remaining six months of the accounting period, and significant transactions

with related parties.

Hofseth BioCare ASA Board of Directors

Ålesund, 24 August 2017

Roger Hofseth Chairman and CEO

Henriette G. Heggdal Board member

Christoph Baldegger

Board member Torill Standal Eliassen

Board member


(figures in NOK 1 000, except earnings per share) Q2 2017 Q2 2016 1H 2017 1H 2016 2016 Notes

Gross operating revenue 5 505 8 171 64 149 13 529 20 204 7

Cost of sales 4 951 43 334 14 160 56 224 101 408

8 Salaries and other payroll costs 5 366 3 070 12 710 9 973 17 773 Other operating expenses 8 502 4 939 13 868 11 759 19 485

EBITDA -13 313 -43 172 23 411 -64 426 -118 463

Depreciation and Write-down 5 099 4 289 11 428 8 582 26 100

6

Operating profit/loss (EBIT) -18 413 -47 461 11 983 -73 008 -144 563

Financial income 177 -21 356 179 8 850 10 Financial expenses 1 072 3 102 3 894 5 939 11 745 10 Net financial items -895 -3 123 -3 538 -5 759 -2 896 10

Profit/loss before taxes -19 308 -50 584 8 444 -78 767 -147 459 Tax expense 0 0 0 0 0

Profit for the period -19 308 -50 584 8 444 -78 767 -147 459

Other comprehensive income/expenses 0 0 0 0 0

Total comprehensive income -19 308 -50 584 8 444 -78 767 -147 459

Total comprehensive income for the period attributable to: Non-controlling interests 0 0 0 0 0 Shareholders in HBC (majority) -19 308 -50 584 8 444 -78 767 -147 459

Total -19 308 -50 584 8 444 -78 767 -147 459

Earnings per share

Basic earnings per share (NOK) -0.26 -0.43 0.04 -0.69 -1.01 Diluted earnings per share (NOK) -0.26 -0.43 0.04 -0.69 -1.01

The interim financial information has not been subject to audit.


(figures in NOK 1 000) 1H 2017 1H 2016 2016 Notes

Research, patents etc. 15 803 15 799 16 229 5

Goodwill 0 7 458 0 5

Property, plant and equipment 72 131 96 556 104 683 6

Financial fixed assets 802 1 340 960

Total non-current assets 88 736 121 154 121 872

Inventories 27 074 29 762 15 589 9

Trade receivables 5 145 3 457 2 492

Other current assets 3 543 2 687 3 235 Cash and cash equivalents 18 162 951 16 165 Total current assets 53 924 36 857 37 481

Total assets 142 661 158 010 159 353

Share capital 233 500 122 210 233 500 11

Other Paid in equity (+) Uncovered losses (-) -170 835 -145 113 -179 279 Non-controlling interests -658 -648 -658

Total equity 62 007 -23 551 53 563

Non-current liabilities interest bearing 23 857 80 713 45 638

Total non-current liabilities 23 857 80 713 45 638

Other Interest bearing loans, leasing and borrowings 9 238 41 447 28 807 Trade payables 42 000 49 996 25 147 Other current liabilities 5 558 9 402 6 198

Total current liabilities 56 796 100 846 60 152

Total equity and liabilities 142 661 158 010 159 353 The interim financial information has not been subject to audit.

(figures in NOK 1 000) Q2 2017 Q2 2016 1H 2017 1H 2016 2016

Equity at start of period 81 315 4 378 53 563 32 546 32 546

Issue May 6th 2016 0 23 206 0 23 206 23 206

Issue September 29th 2016 0 0 0 0 149 023

Issue October 27th 2016 0 0 0 0 1 541

Other changes in equity 0 -550 0 -550 -5 294

Profit/loss for the period -19 308 -50 584 8 444 -78 767 -147 459

Other comprehensive income/expenses 0 0 0 0 0

Total comprehensive income -19 308 -50 584 8 444 -78 767 -147 459

Equity at the end of period 62 007 -23 551 62 007 -23 551 53 563


(figures in NOK 1 000, except earnings per share) Q2 2017 Q2 2016 1H 2017 1H 2016 2016

Number of shares end of period 233 500 122 210 233 500 122 210 233 500 Weighted average number of shares 233 500 118 143 233 500 114 276 145 030 Effect of employee stock options and warrants 450 450 450 450 450 Weighted average number of shares diluted 233 950 118 593 233 950 114 726 145 480 Basic earnings per share (NOK) -0.26 -0.43 0.04 -0.69 -1.01 Diluted earnings per share (NOK) -0.26 -0.43 0.04 -0.69 -1.01

NOK 1000 Q2 2017 Q2 2016 1H 2017 1H 2016 2016

Cash flow from operational activities

Profit before taxes -19 308 -50 584 8 444 -78 767 -147 459

Profit from sales of PP&E 0 0 -52 242 0 0

Depreciation and write-off 5 099 4 289 11 428 8 582 26 100

Changes in Inventory -7 384 16 059 -11 485 21 056 35 229

Changes in trade debtors 1 477 -2 573 -2 653 -1 477 -512

Changes in trade creditors 9 587 -7 767 16 853 -5 441 11 058

Changes in other current bal. sheet items 58 1 429 -570 -226 1 268

Classified as financial activities 895 3 043 3 538 5 759 7 089

Net cash flow from operational activities -9 576 -36 104 -26 685 -50 514 -67 226

Cash flow from investing activities

Proceeds from sale of PP&E 0 10 326 80 000 0 0

Investments in non-current tangible assets -2 842 -22 062 -5 272 -22 548 -39 267

Investments in non-current intangible assets -736 -1 670 -886 -1 670 484

Other investments 158 0 158 105 -3 320

Net cash flow from investing activities -3 419 -13 406 74 001 -24 113 -42 103

Cash flow from financing activities

Issuance of share capital 0 12 915 0 12 915 73 856

Transaction cost on issue of shares 0 -394 0 -394 -1 115

Payment of interest -895 -3 043 -3 538 -5 759 -7 089

Proceeds from borrowings 0 39 945 0 39 945 53 140

Repayment of borrowings -31 880 -1 833 -41 969 0 -22 170

Other financial activities incl. gov. grants -466 0 188 0 0

Net cash flow from financing activities -33 241 47 590 -45 319 46 707 96 623

Net change in cash and cash equivalents -46 236 -1 920 1 997 -27 920 -12 707 Cash and cash equivalents at the beginning of the period 64 398 2 871 16 166 28 871 28 872

Cash and cash equivalents at the end of the period 18 162 951 18 162 951 16 165

New shares subscribed from debt 0 10 685 0 10 685 115 565


This report has been prepared in accordance

with International Financial Reporting

Standards (IFRS) and the standard for interim

reporting (IAS 34). The same accounting

principles and calculation methods used in the

last Financial statements (IFRS) 2014 has been

used here.

The preparation of financial statements in

accordance with IFRS requires management to

make estimates based on professional

judgement and assumptions considered

realistic. There may be situations or changes in

market conditions that can lead to changes in

estimates, but management do not consider it

to be significant estimation uncertainty

associated with estimates and reported figures

for the company’s assets, liabilities, equity and

profits.

Deferred tax assets are not posted in the

balance sheet. Estimated value is MNOK 115.6.

Transactions with related parties are governed

by market terms and conditions in accordance

with the “arm’s length principle”.

NOK 1 000 R&D Trade-marks Patents Other Total

Book value at 31.03.2017 13 315 26 1 725 657 15 723

Additions 736 0 0 0 736 Depreciations for the period 554 1 73 28 656

Book value at 30.06.2017 13 497 25 1 652 629 15 803

Economic life 10

years 5 years 5-10 years 10 years


NOK 1 000

Machines and equipment

Fixtures and fittings Total

Book value at 31.03.2017 70 149 2 220 73 681

Additions 2 843 0 2 843

Depreciations for the period 4 103 289 4 392

Book value at 30.06.2017 68 888 1 931 72 131

Economic life 5-10 years 3-10 years

Method of depreciation straight line straight line

NOK 1000 Q2 2017 Q2 2016 1H 2017 1H 2016 2016

Per product Salmon oil 2 995 6 488 8 009 9 252 13 858 Protein 1 089 1 245 2 236 3 214 4 912 Calcium 0 0 0 22 27 By-product/other 1 380 438 1 622 1 041 1 407 Profit from sold PPE 0 0 52 242 0 0

Total revenues 5 505 8 171 64 149 13 529 20 204

NOK 1000 Q2 2017 Q2 2016 1H 2017 1H 2016 2016

Cost of goods sold 4 497 24 350 10 555 30 434 57 688 Write-downs inventory 454 16 792 2 987 22 040 43 720 Allocation of cost prod. calc. 0 2 192 618 3 750 0

Net cost of sales 4 951 43 334 14 160 56 224 101 408

NOK 1000 Q2 2017 Q2 2016 2016

Per product Raw material 1 208 0 575 Goods in process 0 0 0 Finished goods 25 866 29 762 15 013

Total inventory 27 074 29 762 15 589


NOK 1000 Q2 2017 Q2 2016 1H 2017 1H 2016 2016

Interest expense 816 2 892 2 165 5 608 11 242

Interest income 1 0 1 0 4 574

Net currency exchange -80 -231 -1 374 -151 -3 771

Gain from Bonds buy back 0 0 0 0 4 193

Net financial items -896 -3 123 -3 539 -5 759 -2 896

Largest shareholders

Shareholder # of shares % share SIX SIS AG (DEEP BLUE VENTURES FUND) 44 260 412 18,96 % ROGER HOFSETH AS 37 247 701 15,95 % ALLIANCE SEAFOODS INC. 33 333 333 14,28 % HOFSETH AS 21 279 492 9,11 % HOFSETH INTERNATIONAL AS 19 008 054 8,14 % SIX SIS AG (BONAFIDE GLOAL FISH FUND) 13 843 570 5,93 % STOREBRAND VEKST VERDIPAPIRFOND 6 967 289 2,98 % INITIA AB 4 601 000 1,97 % SEAFOOD FARMERS OF NORWAY AS 4 504 622 1,93 % SWELANDIA INTERNATIONAL AB 4 130 000 1,77 % VARMA MUTUAL PENSION INSURANCE 3 006 413 1,29 % DNB NOR MARKETS, AKSJEHAND/ANALYSE 2 338 800 1,00 % ØDEGÅRD PROSJEKT AS 2 104 039 0,90 % SINKABERG-HANSEN AS 1 764 107 0,76 % LFC AS 1 665 000 0,71 % JAN PETTERSSON 1 553 137 0,67 % HOFSETH LOGISTICS AS 1 469 813 0,63 % UBS SWITZERLAND AG 1 233 823 0,53 % CREDIT SUISSE (SWITZERLAND) LTD. 1 208 378 0,52 % ENTRANS INVEST AS 1 098 131 0,47 % Total 20 largest 206 617 114 88,49 % Total other 26 882 645 11,51 % Total no. of outstanding shares 233 499 759 100,00 % Total no. of shareholders: 684

FINANCIAL REPORT Q4 2015 - Hofseth BioCare · CACO-2 cell assays. We have started a new trial using...

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