Untitled

Published:

31.03.2023

Annual Report

2022

Content

Approved by the Board of Directors in Hofseth BioCare ASA 30 March 2023

Hofseth BioCare ASA is committed to maintaining high standards of cor-

porate governance that will strengthen confidence in the company among

share holders, capital market and among other stakeholders, thereby con-

tributing to the greatest possible value creation over time. The aim of

corporate governance is to regulate the roles of shareholders, board and

management beyond what is required by legislation.

The company reports in accordance with the recommendation of 30 October

2014, last updated 17 October 2018 («the Recommendations») issued by the

Norwegian Corporate Governance Board (NUES). The rules on the continuing

obligations of listed companies at www.oslobors.no and guidelines are avail-

able at www.nues.no

Compliance is based on a «comply or explain» principle, which means that

the company must comply with all recommendations or explain why they

have chosen an alternative approach to specific recommendations. The

following explains the company's compliance with the 15 sections and ad-

dresses the additional requirements set out in the Accounting Act § 3-3 b.

Any deviation from the Code of Conduct will be explained under the appro-

priate section.

This report is part of the company's annual report. The report is also avail-

able on Hofseth BioCare's website www.hofsethbiocare.com, along with

more information about the company's business.

CHAPTER 1

Corporate governance 3

CHAPTER 2

The board of director’s report 2022 10

CHAPTER 3

Financial statements 17

Statement of comprehensive income 19

Statement of financial position 20

Statement of cash flows 22

Statement of changes in equity 23

Notes to the accounts 24

Declaration of the Board of Directors and Managing Director in Hofseth BioCareASA

CHAPTER 4

Auditors report 60

Corporate governance

CHAPTER 1

CORPORATE GOVERNANCE

Hofseth BioCare is a Norwegian public limited company and is

listed on Oslo Stock Exchange. The Norwegian Accounting Act

and the rules of the Continuing Obligations for stock listed com-

panies impose a duty on the Company to issue its principles

and practice for corporate governance in the annual report.

Values and guidelines for business

ethics and corporate social

responsibility

The company's values are an important premise for corporate

governance. Trust in HBC as a company, and in the business,

is crucial for the company's future competitiveness.

Hofseth BioCare is committed to transparency about its

guidelines for management of the Company. This strengthens

the value creation, builds internal and external confidence

and promotes a code of ethics and a sustainable approach

to business.

HBC is founded on the core value of sustainability and optimal

use of natural resources. The Company aspires to create

a healthy company culture based on these core values. The

Board of Directors has approved the Code of Conduct for

business ethics and corporate social responsibility. The

Company's tailored Code of Conduct and internal guidance

provide a suitable separation of roles and responsibilities,

promoting efficient collaboration between the company's

shareholders, the Board of Directors, and its management

team, and ensuring that the business is subject to satisfactory

controls and monitoring. An appropriate distribution of roles,

effective collaboration and satisfactory controls contributes

to the best possible value creation over time, for the benefit of

its owners and other stakeholders.

The company's code of Ethics addresses the management

of neutrality, conflict of interest situations, interactions with

clients and vendors, communication with the press, insider

trading, and pertinent personal financial interests.

The core of the concept of CSR is the company's responsibility

for people, communities and environment affected by

operations, and typically addresses:

› Human rights which means that the company carries out

its operations in accordance with the international agre-

ements and conventions that are fundamental rights for

every human being, regardless of race, gender, religion or

other status.

› Anti-corruption which means that the organization man-

dates that it should not demand, receive or accept an offer

of an improper advantage in connection with a position,

office or assignment.

› Employee relations where AMLs (Working Environment

Act) provisions concerning employment contracts, wor-

king hours, insurance, pension, vacation, sick monitor-

ing etc. embodied in internal guidelines and be followed

throughout the organization. The employees are organi-

zed, and there is established good communication chan-

nels between employee representatives and management.

› HSE (Health, Security and Environment) is the company’s

top priority. Through guidelines and incorporate routines

that safety inspections, preventive maintenance routines,

etc. all the employee are involved. A safety delegate sys-

tem is implemented in the organization.

› Discrimination where the Company endeavours to ensure

that there shall be no discrimination or unequal treatment

The Board of Directors of Hofseth BioCare ASA (HBC or the

company) has the ultimate responsibility to ensure that the

company is practicing good corporate governance. The company's

Board of Directors and management conducts a thorough review

and assessment of its principles of corporate governance annually.

CORPORATE GOVERNANCE

which has its basis in individuals, genders, ethnicities, na-

tionalities, religious communities and the like.

› Environmental which is a key factor in the company's so-

cial responsibility. Emissions to water and air are conti-

nuously monitored. Regular meetings are held with local

authorities and municipal bodies.

Business

The aim of Hofseth BioCare is defined in the Company's Ar-

ticles of Association, which inter alia, states:

› Hofseth BioCare's business is development, manufactu-

ring, marketing and sale of marine ingredients such as

oil, calcium and protein products, as well as cooperation

with, and the participation and ownership in businesses

engaged in related businesses.

› The Company’s board of directors shall have from 3 to

10 members according to the resolution of the General

Meeting.

› The company shall have an audit committee.

Please refer to the Articles of Association for Hofseth BioCare,

last modified 3 July 2022, which are available at the compa-

ny's website www.hofsethbiocare.com.

Equity and dividend

Equity

Hofseth BioCare shall have an equity ratio which is appropri-

ate in relation to its objectives, strategy and risk profile, and

the Board of Directors will continually assess the capital si-

tuation.

The Company's Board of Directors and management have

used the following instruments to have a customized equity

at any given time

› Private placement/capital increase

› Shareholder loans (subordinated loan) that can be dee-

med part of the company's equity

› Sales-enhancing and cost-cutting measures

As of 31 December 2022, the group had an equity of NOK

148.0 million, corresponding to an equity ratio of 36.0 %. The

board considers an equity ratio of more than 25.0 per cent to

be at a satisfactory and prudent level. The company's long-

term debt financing has financial covenant requirements of

25 % equity, including subordinated loans. The main sharehol-

ders have, if necessary, provided subordinated loans to ensure

that the company is not in breach of covenant requirements

from the banks. The board will at all times consider various

instruments to ensure that the company has sufficient equity,

including an authorization given to the board at the general

meeting on 30 august 2022 to issue up to approximately 39.5

million new shares intended to be used in the event of a need

for additional equity and liquidity. It is the Board's intention to

ask the General Meeting for a similar authorization for the co-

ming period.

Dividend

HBC aims to give its shareholders a competitive rate of return

based on the company's earnings. Dividends will be considered

in the context of HBC’s financial position, loan terms and capi-

tal requirements for existing and new projects.

Mandates of the board of directors

Mandates granted to the Board of Directors, either to increa-

se the company's share capital or to buy its own shares, will

generally be limited to defined purposes and usually limited in

time until the date of the next ordinary general meeting.

As of 31 December 2022, the Board of Directors in HBC holds

an authorization to increase the company's share capital

by issuing new shares with a total face value of up to NOK

395,081.03 equivalent to 39,508,103 shares, each with a nomi-

nal value of NOK 0.01.

The authorization can be used in connection with the issuance

of shares to investors who are considered to have strategic

importance for the company as well as to repair any issues as

a result of such, or any other private equity issues.

In accordance with this power of attorney to the Board of Dire-

ctors, the company will also be able to offer shares to the pe-

ople or companies who are not shareholders of the company.

Existing shareholders' preferential right may be waived.

The Board of Directors is given the authority to change the

Articles of Association stating the share capital size in acco-

rdance with the shares the Board decides under this authori-

zation. The authorization was granted at the Ordinary General

Assembly 30 August 2022 and is valid until the Ordinary Gene-

ral Assembly in 2023, however not longer than 30 June 2023.

Equal treatment and transactions with related

parties

Hofseth BioCare has one class of shares. Each share in the

Company carries one vote.

As a general principle, all transactions involving the company's

own shares should be conducted through the stock exchange

or at the stock market price if traded outside of the stock

exchange, or in a manner that ensures all shareholders are

treated equitably.

Transactions with related parties

Included in the rules of procedures for the Board are guide-

lines for how the members of the Board and the CEO shall

act in discussions or decisions related to issues which are of

CORPORATE GOVERNANCE

special personal importance to them, or to any related parties

to the member in question.

Transactions with related parties are governed by market

terms and conditions in accordance with the «arm’s length

principle».

The Company’s shareholders, Board and management and

their related parties, as well as all companies in the Hofseth

group, including RH Industri AS and Hofseth International AS,

will be related parties to Hofseth BioCare.

Transactions with related parties are further described in the

notes to the financial statements.

Freely tradable shares

All shares in Hofseth BioCare are freely tradable with no limi-

tations in the Articles of Association.

The general meeting

Through the general meeting the shareholders exercise the

highest authority in Hofseth BioCare. All shareholders are

entitled to submit items to the agenda, meet, speak and vote

at general meetings in accordance with the provisions of the

Norwegian Public Limited Companies Act. The Board of Hof-

seth BioCare strives to ensure that the general meetings are

an effective forum for communication between shareholders

and the Board, and the Board shall take steps to ensure that

as many shareholders as possible may exercise their rights

by participating in the general meetings.

The annual general meeting is held every year before the end

of May. Extraordinary general meetings may be called by the

Board at any time. Hofseth BioCare’s auditor or shareholders

representing at least five percent of the total share capital may

demand an extraordinary General Meeting to be called.

The notice for the annual general meeting is available on the

Company’s website and sent to shareholders with known ad-

dresses by post no later than 21 days prior to the date of the

meeting. Article 9 in the Company’s Article of Associations

states that documents related to matters on the agenda of

a general meeting can be made available on the Company’s

website rather than being sent to shareholders by post. The

supporting documentation will be available at the same date

as the notice and provides all the necessary information for

shareholders to form a view on the matters to be considered.

The deadline for registration for the annual General Meeting is,

at the latest, 3 days before the general meeting takes place.

Shareholders who cannot attend the general meetings in per-

son, shall be given the opportunity to vote, and the Company

shall provide information and nominate an available person

who may vote on behalf of the shareholders in this respect.

The general meeting elects the members and deputy mem-

bers of the Board, determines the remuneration of the mem-

bers of the Board, approves the annual financial statements,

discusses the Board of Director’s guidelines on management

remuneration and decides such other matters which by law or

Hofseth BioCare’s Articles of Association are to be transacted

at the General Meeting.

The Board of Directors, the Nomination Committee and the

auditor's attendance at the General Meeting is waived from

the recommendation if a review of the agenda, the availability

and physical location would suggest this is not practical. Un-

der the General Meeting for the adoption of the 2021 financial

statements for two members participated. The auditor did not

participate.

Nomination committee

The General Meeting has chosen a Nomination Committee to

ensure objectivity regarding the shareholders’ interests.

The company shall have a nomination committee consisting

of 3 members where the majority of the members shall be

independent of the board of directors and the management.

The members of the nomination committee shall be elected

for terms of two years.

The nomination committee shall propose candidates for the

board of directors and the nomination committee, including

remuneration to the board of directors and the members of

the nomination committee. Members of the Nomination

Committee are Geir Even Håberg, Lennart Clausen and Svein

Myhre.

The remuneration to the Nominating Committee shall be

determined by the General Meeting.

The nomination committee shall evaluate the need for

changes of the board and the nomination committee. To have

the best possible basis for their deliberations, the committee

should be in contact with the directors and the CEO.

Furthermore, the Nomination Committee should consult

relevant shareholders for nominations and for consensus in

its decision. The board’s evaluation report (ref. Paragraph 9

on the Board’s instructions) shall be treated separately by the

Nomination Committee.

The recommendations of the nomination committee shall

include a justification as to how the best interest of the

shareholders and the Company has been secured.

The board of directors, composition and

independence

The Board of Hofseth BioCare includes six members, of which

threefrom each gender, corresponding with the Company’s

Articles of the Associations Section 5, stating that the Board

should have from three to ten members.

CORPORATE GOVERNANCE

Members of the Board are selected in the light of an evaluation

of the Company’s needs for expertise, capacity and balanced

decision-making, and with the aim of ensuring that the Board

of Directors can operate independently of any special interests

and function effectively as a collegiate body.

The majority of the Board of Directors shall be independent of

Hofseth BioCare’s management and its main business conne-

ctions. At least two of the members of the Board shall be inde-

pendent of the Company’s main shareholder(s). The Board of

Directors does not include executive personnel.

Director of the Board, Roger Hofseth, is as of 31 December

2022 CEO of Hofseth International AS, one of the Company’s

largest shareholders, and director of the Board, Dr. Crawford

Currie is Head of Medical R&D in the Company. Both are rela-

ted to several of the Company’s business connections and are

thus not considered independent.

The Chair of the Board, Kristin Fjellby Grung, Director Chris-

toph Baldegger, Director Amy Novogratz and Director Torill

Standal Eliassen are considered independent of management,

business connections and the Company’s main shareholders.

The term of office for members of the Board of Directors is

two years. An updated overview of the members of the Board

of Directors of Hofseth BioCare, including their employment,

education and professional background is provided at the

Company’s website www.hofsethbiocare.com.

Members of the Board of Directors are encouraged to own

shares in the company.

The General Meeting elects the Chair of The Board of Dire-

ctors.

The work of the board of directors

The Board

The Board of Directors has the overall responsibility for the

management of Hofseth BioCare. This includes a respon-

sibility to supervise and exercise control of the Company’s

activities.

Furthermore, this includes developing the Company’s stra-

tegy and monitoring its implementation. In addition, the

Board of Directors exercises supervision responsibilities to

ensure that the company manages its business and assets

and carries out risk management in a prudent and satis-

factory manner. The Board of Directors is also responsible

for the appointment of the Chief Executive Officer (CEO).

A separate instruction for the board of directors is imple-

mented and the Board develops a yearly plan for their work.

In accordance with the provisions of Norwegian company

law, the case processing and responsibilities of the board

are governed by a set of rules and procedures. The chair of

the board is responsible for ensuring that the work of the

board is carried out in an efficient and responsible manner

in accordance with the legislation.

The board has established instructions for the work of the

CEO. A distinct division of responsibilities exists between

the board and the CEO. The CEO is responsible for the ope-

rational management of the Company.

The board conducts an annual evaluation of its work, form

of work and competence.

The Board of Directors has adopted an audit committee (the

"Audit Committee") in accordance with the Company's Ar-

ticles of Association § 6 and the Code of Practice. The Audit

Committee has a defined instrution for their work.

According to the company's articles of association, section

6, the board decides the members of the committee. The

members of the audit committee in Hofseth BioCare are To-

rill Standal Eliassen (chair) and Christoph Baldegger.

The company has established its own compensation

committee in accordance with the company's articles of

association, section 11. The members of the compensation

committee are Christoph Baldegger and Torill Standal Eli-

assen.

Risk management and internal control

The Board of Hofseth BioCare shall ensure that the Company

has sound internal control and systems for risk management

that are appropriate in relation to the extent and nature of the

Company’s activities. The internal control and the systems

should also encompass the Company’s corporate values, ethi-

cal guidelines and guidelines for corporate social responsibi-

lity.

Risk management and internal control is performed through

various processes within the Company, both through the Board

of Directors work and the operational management of the

Company.

The Board of Directors receives regular reports from manage-

ment outlining the financial and operational performance of the

Company. The administration's reporting should be based on

input according to key reporting from the chain of command, as

updated accounting and valuation of accounting items, includi-

ng relevant operating data of importance for the assessment of

accounting records. Monthly operating reports shall be evalua-

ted and decided by the overall management of the group.

There must be sufficient qualified resources to carry out ap-

propriate reports which will contribute to decision support and

CORPORATE GOVERNANCE

continuous control of the Group's financial performance.

During the budgeting process and budget approval, the bo-

ard ensures that internal control systems and key risk factors

the company may face are considered. Given the company's

growth strategy, the board emphasizes that the internal control

systems encompass all facets of the company's operations,

including strategic, operational, and financial risks. The board

also evaluates the necessity for additional actions concerning

risk factors.

The Board of Directors has adopted guidelines that encompass

the Company’s corporate and ethical values and corporate soci-

al responsibility, cf. Section 1 (Code of Ethics).

The preparation of interim reports and annual reports shall be

in accordance with Norwegian and international principles for

accounting and as further set out in the rules of procedure for

Board of Directors.

The Group's control environment is assessed as satisfactory,

and the Group has a satisfactory accounting and controlling

department. Parts of the payroll functions are outsourced to an

external accounting firm.

Operative internal control is safeguarded through established

procedures and guidelines to be followed up through line ma-

nagement and management reporting. Likewise, continuous

risk analysis and control activities are executed. The Board be-

lieves that the scope and level of the said areas is satisfactory

to the Group's size and complexity.

The Board of Directors, through its Audit Committee and toget-

her with its independent auditor, carries out an annual review of

the Company’s most important areas of exposure to risk and its

internal control arrangements.

The Board of Directors describes in the annual report the main

features of the Company’s internal control and risk manage-

ment systems related to the Company’s financial reporting.

Remuneration of the board of directors

The compensation to the Board shall reflect the Board’s re-

sponsibility, expertise, time commitment and the complexity

of the Company’s activities.

The remuneration paid to the members of the Board will be

decided by the General meeting. The remuneration paid to

the members of the committees will be decided by the gene-

ral meeting having considered proposals by the Board in line

with the Code. Information about the fee paid to the Board and

committees is stated in the annual report.

There is an authorization the board may use in connection

with the issuance of shares to directors and employees of the

Company. In addition to moderate board remuneration, it was

considered that options are the most appropriate way to honor

board members.

Remuneration of executive personnel

The Board of Directors prepares guidelines for the remune-

ration of the executive personnel. The guidelines have been

communicated to the general meeting through a management

salary statement. The Company’s performance-related remu-

neration of the executive personnel are linked to value creation

for shareholders or the Company’s earnings performance over

time and the Company strives to ensure that its arrangements

are in line with the guidelines.

Information and communications

Hofseth BioCare’s information policy shall be based on open-

ness and equal treatment of all shareholders and the Compa-

ny has resolved to comply with the Oslo Børs’ Code of Practice

for Reporting IR Information.

Hofseth BioCare strives to continuously publish all relevant

information to the market in a timely, effective and non-dis-

criminatory manner. All stock exchange announcements are

made available both on the Company’s website and on the

Oslo Stock Exchange news website www.newsweb.no and are

also distributed to news agencies (via Intrado/Notified).

The Company publishes its preliminary annual financial state-

ments by the end of February, together with its fourth quarter

results.

The complete annual report and financial statements are

made available to shareholders no later than three weeks prior

to the annual general meeting, or, at the latest, by 30 April each

year, which is the last date permitted by the Securities Trading

Act. For 2021 the complete annual report and financial state-

ments were approved and published 25 March 2022.

Quarterly results are normally published at the latest within

two months after the close of the quarter.

The Company’s financial calendar for the coming year is publis-

hed no later than December 31 in accordance with the rules of

the Oslo Stock Exchange. The financial calendar is available on

the company’s website and on the Oslo Stock Exchange website.

Quarterly reports and presentation material are available on

the Company’s website, www.hofsethbiocare.com.

Take-overs

It is a fundamental principle to Hofseth BioCare that all share-

holders are treated equally. Openness in respect of take-over

situations is considered to be important in ensuring equal tre-

atment of all shareholders.

The Company will not seek to hinder or obstruct take-over

bids for the Company’s activities or shares unless there are

CORPORATE GOVERNANCE

particular reasons for this.

In the event of a take-over bid for the Company’s shares, the

Board of Directors should not exercise mandates or pass any

resolutions with the intention of obstructing the take-over bid

unless this is approved by the general meeting following an-

nouncement of the bid.

If an offer is made for the Company’s shares, the Company’s

Board of Directors should issue a statement making a re-

commendation as to whether shareholders should or should

not accept the offer. The Board of Director’s statement on the

offer should make it clear whether the views expressed are

unanimous. If this is not the case, it should explain the basis

on which specific members of the Board of Directors have

excluded themselves from the Board of Directors’ statement.

The Board of Directors should arrange a valuation from an in-

dependent expert. The valuation should include an explanati-

on and should be made public no later than at the time of the

public disclosure of the statement.

Any transaction that is in effect a disposal of the Company’s

activities should be decided by a general meeting.

Auditor

EY is the auditor for Hofseth BioCare and is appointed by the

general Meeting.

The auditor shall annually submit to the audit committee the

main features of the plan for the auditing work. Furthermore,

the auditor shall at least once a year prepare a report contai-

ning its opinions on the Company's accounting policies and

internal control. The auditor participates in board meetings de-

aling with the consolidated financial statements for the Group

and the company.

In meetings with the audit committee and the board audi-

tor shall explain any material changes in the company's and

Group's accounting policies, the assessment of the significa-

nt estimates and all significant matters that there has been

disagreement about between the company and the auditor.

The Board has annual meetings with the auditors without the

group management teams present.

There are no written guidelines for executive management's

use of auditors for services other than auditing. This differs

from «Norwegian recommendation for corporate governan-

ce.» The auditor reports to the audit committee on which

non-audit services have been provided to the group and the

company. Throughout the year, the audit committee is respon-

sible for approving the non-audit services provided by the au-

ditor, as well as the fees for these.

The Audit Committee in conjunction with the annual report

in 2022 received a written confirmation from the auditor that

he satisfies established and legitimate independence require-

ments.

Information about the auditor's remuneration for auditing and

other services will be provided to the Annual General Meeting.

The auditor's remuneration is disclosed in note 5 to the finan-

cial statements.

The board of director’s

report 2022

CHAPTER 2

THE BOARD OF DIRECTOR’S REPORT 2022

Important events in 2022

First quarter

In the first quarter, the ingredient business saw an impressive

growth of 93.5% in sales, in comparison to the same period

in the previous year. Alongside this, the company had a reco-

rd order book, indicating a strong demand for their products.

During this quarter, the company's researchers made significa-

nt progress in their studies on SPH peptides. They published

their first preclinical assay work on the use of SPH peptides in

prostate cancer in the Marine Drugs journal. The study show-

cased the positive results of combining SPH peptides with

androgen deprivation therapy to enhance anti-tumour activity.

This breakthrough discovery opens new possibilities for trea-

ting prostate cancer.

Furthermore, the company's first clinical trial for CalGo® has

been accepted for publication in the Biomedical Journal of

Scientific and Technical Research. The trial demonstrated the

enhanced absorbability of CalGo® when compared to calci-

um carbonate, particularly in post-menopausal women. This

finding suggests that CalGo® could be an effective treatment

option for individuals with calcium deficiencies.

The company has also identified eight structurally similar pep-

tides that are responsible for driving the FTH1 actions of SPH.

These peptides have previously unknown structures and have

the potential to be claimed as a novel composition of matter.

This breakthrough could lead to a broader IP claim set for HBC

and further research into SPH peptides and their potential

uses.

Overall, the company has made significant progress in its re-

search and development efforts in the first quarter of the year.

With the positive results seen in the studies on SPH peptides

and the clinical trial for CalGo®, the company is poised to

make further strides in the health and wellness industry.

Second quarter

In the second quarter, the company faced challenges due to

a constrained supply of salmon off-cuts, which was caused

by a price spike in salmon. This resulted in unusually low pro-

duction volumes of raw materials. Despite this, the company

experienced a strong demand and favourable market prices,

resulting in net sales of NOK 25m with a gross margin of 31%.

This was an improvement compared to the same period last

year, where the gross margin was 21%.

The company made significant progress in their research and

development efforts during this quarter. They successful-

ly completed their second preclinical assay of the bioactive

peptides in SPH in prostate cancer after publishing the results

from their first preclinical assay in the journal Marine Drugs.

The results demonstrated that the addition of the peptides to

standard of care enhanced anti-tumour activity in drug-sens-

itive and drug-resistant cell lines. This breakthrough could

potentially lead to new and more effective treatments for pro-

state cancer.

In addition, the company completed the manufacturing opti-

mization of the lead eosinophilia modulating lipopeptide MA-

022. Preclinical trial work with MA-022 as a drug lead in eo-

sinophilic esophagitis is planned. This progress is significant

as eosinophilic esophagitis is a chronic inflammatory disease

of the esophagus, which is difficult to manage with existing

treatments. The development of a new treatment option could

significantly improve the quality of life for individuals with this

condition.

Overall, despite the challenges faced by the company in the

second quarter, they made significant progress in their rese-

arch and development efforts. With the successful completi-

on of preclinical assays and manufacturing optimization, the

company is poised to make further strides in the health and

wellness industry.

Third quarter

During the third quarter, HBC achieved an impressive 105%

year-on-year growth in revenue, demonstrating the strength of

their business in uncertain times. The company also signed

contracts with new salmon processors to ensure increased

access to salmon off-cut for their production process. This

move will help the company meet the growing demand for

their products and further expand their business.

In July, HBC successfully completed a private placement of

35,490,000 new shares at a subscription price of NOK 4.00 per

share, raising gross proceeds of NOK 141 million. This move

will provide the company with additional funding to support

their research and development efforts and fuel their growth

in the industry.

In August, the company appointed Mr. Jon Olav Ødegård as

CEO, following the election of Mr. Roger Hofseth as director

to the Board after the general meeting on August 30. These

changes in leadership are expected to further strengthen the

company's position in the market and help drive their growth

strategy.

Furthermore, the company delivered record organic revenue

and profits in the Consumer and Pet health segment during

the third quarter. The segment saw over a fourfold impro-

vement year-on-year, indicating the strong demand for their

products and the effectiveness of their research and develop-

ment efforts.

Overall, the third quarter was a successful period for HBC,

with significant achievements in revenue growth, fundrai-

sing, leadership appointments, and segment performance.

The company is well-positioned to continue making strides in

THE BOARD OF DIRECTOR’S REPORT 2022

The Group had an operating loss of NOK 128.6 million in 2022,

compared with a loss of NOK 118.6 million in 2021. Corre-

spondingly, the parent company had an operating loss of NOK

112.6 million compared to NOK 110.7 million in 2021.

Net financial result was NOK -8.8 million in 2022, compared

with NOK -7.9 million in 2021. Net financial result for the pa-

rent company was NOK -6.8 million and -11.5 million in 2022

and 2021, respectively.

The Group had a loss before tax of NOK 137.4 million in 2022,

compared to a loss of NOK 126.5 million the year before. For

the parent company the loss before tax was NOK 119.4 million

in 2022, compared to NOK 122.2 million in 2021.

The group had a tax expense of NOK 0.0 million in 2022, equal

to NOK 0.0 million in tax expense in 2021. The Group has not

recognized any deferred tax assets. Net loss for the year was

NOK 137.4 million, compared to a net loss of 126.5 million in

2021. The parent company had a net loss of NOK 119.4 million

in 2022, compared to NOK 122.3 million in 2021.

Financial position

As of 31 December 2022, Hofseth BioCare had a total conso-

lidated balance sheet of NOK 411.0 million, down from NOK

416.0 million at the end of 2021. The parent company had a

balance sheet total of NOK 402.6 million compared to NOK

394.1 million in 2021.

Equity amounted to NOK 148.0 million at the end of 2022,

which corresponds to an equity ratio of 36.0 %. At the end of

2021, the group had a total equity of NOK 140.4 million and an

equity ratio of 33.7 %. The parent company had equity of NOK

167.8 million at the end of 2022, compared with NOK 142.8

million the year before. The equity ratio was correspondingly

41.7 % in 2022 and 36.2 % at the end of 2021 in the parent

company.

As of 31 December 2022, the group had cash and cash equiva-

lents of NOK 32.4 million, compared with NOK 49.9 million at

the end of last year. The parent company had NOK 31.3 million

in cash and cash equivalents at the end of 2022, compared

with NOK 48.4 million in 2021.

At the end of 2022, the group had NOK 0.8 million in long-term

interest-bearing debt and NOK 0.5 million in short-term inte-

rest-bearing debt, compared with NOK 23.8 million and NOK

2.4 million at the same time the year before, respectively. The

parent company had NOK 0 million and NOK 6.9 million in

long-term and short-term interest-bearing debt in 2022, respe-

ctively. At the end of 2021, the long-term share was NOK 22.4

million and NOK 1.9 million short-term.

The group has interest-bearing lease obligations of NOK 90.0

million for long-term lease obligations and NOK 12.9 million

in short-term lease obligations at the end of the year, compa-

the health and wellness industry and delivering value to their

customers and shareholders.

Fourth quarter

The ingredients business of HBC showed favourable momen-

tum in Q4 with an 87% growth compared to the same quarter

last year on an underlying basis. This growth generated sales

revenues of NOK 34m, which is a significant increase from

NOK 18m in the same period last year. Additionally, the finis-

hed goods business delivered record fourth quarter and full-

year revenue and cash margin, with revenue at +68% reaching

NOK 31.7m compared to NOK 18.8m in the same period in

2021. The fourth quarter alone delivered NOK 10.7m, a signifi-

cant increase from NOK 3.7m last year.

In October, Stanford School of Medicine successfully comple-

ted pre-clinical trial work testing ProGo® bioactive peptides in

effective gut health support. This is an important development

for HBC and underscores their commitment to developing inn-

ovative products that promote overall health and wellness.

HBC has also made a significant addition to its leadership

team with the hiring of Mrs. Christel Kanli as the new CFO/

COO. She brings extensive global experience from Orkla ASA

and several start-ups and will begin her tenure in March 2023.

Finally, the first significant ProGo® order from China for iron

deficiency applications commenced in Q4, and the pipeline is

building. This highlights the growing demand for HBC's produ-

cts and the company's ability to expand its business into new

markets.

Overall, the fourth quarter was a successful period for HBC,

with strong growth in the ingredients and finished goods bu-

sinesses, significant progress in product development and re-

search, and a key addition to the leadership team. The compa-

ny's continued focus on innovation and expansion is expected

to drive growth and deliver value to customers and sharehol-

ders alike.

Financial results

Revenues and profits

The Group generated gross operating revenues of NOK 120.5

million in 2022, up from NOK 87.6 million in 2021. Correspon-

dingly, the parent company had gross revenues of NOK 120.0

million in 2022, up from NOK 88.1 million in 2021.

Operating costs, excluding depreciation and amortization

amounted to NOK 218.7 million in 2022, compared to NOK

176.8 million in 2021. For the parent company operating

expenses amounted to NOK 206.6 million in 2022 compared

to NOK 173.0 million in 2021. The expenses are mainly cost of

sales, salaries and other operating expenses.

THE BOARD OF DIRECTOR’S REPORT 2022

flow and profitability, the Board will consider appropriate me-

asures such as obtaining loans or equity. The current outlook

indicates a positive trend, and the Board will take necessary

steps to sustain this momentum. If the group and the parent

company do not achieve planned market measures adequa-

tely, new loan facilities or share issues will be established in

2023. Therefore there is an uncertainty with regards to the go-

ing concenr assumption.

Assuming a going concern, the group's and the parent compa-

ny's assets and values are currently present. However, the va-

lue of some of the group's and the parent company's assets

may be lower than their carrying amounts in a potential forced

sale related to liquidation. This uncertainty is primarily related

to the value of intangible assets, fixed assets, financial assets,

and investments, as well as the value of inventories.

Allocation of earnings

Net loss for the parent company Hofseth BioCare ASA is NOK

-119.4 million in 2022. The board proposes the following allo-

cation of the loss:

Uncovered loss - 119.4 million

Totalt - 119.4 million

Risk and risk management

Risk management

The industry in general is subject to several risk factors. Alt-

hough these are particularly associated with the production

process, also conditions to external suppliers, customers, re-

gulatory provisions, as well as general market trends are es-

sential.

All these risk factors may have a negative impact on the

Group's business, financial condition, results and ability to exe-

cute projects. Some of the main risk factors facing the Group

are briefly described below. We also refer to note 19 «Financial

Risk Management» in the financial statements.

Operational risk

The biotechnology industry is characterized by integration

and interdependence between different steps in the produ-

ction process. In Hofseth BioCare, there is a high degree of

integration between the various stages of production. Any

interruption in one production stage can therefore result in

all or part of the production stopping. Hofseth BioCare has

installed comprehensive monitoring and employees work con-

tinuously to optimize the processes to maximize operational

continuity. Significant improvements in the production lines in

recent years have given the company better opportunities for

continued production if one of the components stops. Several

contingency measures have also been implemented, ensuring

continued operation in the event of any interruption of critical

functions, and this continuous work has a high priority and is

monitored in real-time.

red with NOK 100.9 million and NOK 12.1 million at the end of

2021. The parent company has interest-bearing lease obligati-

ons with NOK 72.5 million and NOK 10.1 million in short-term

lease obligations at the end of 2022, compared with NOK 80.3

million and NOK 9.8 million at the end of 2021.

Cash flows

The group's cash flow from operating activities amounted to

NOK -45.2 million in 2022, compared with NOK -61.8 million

the year before. The parent company had a negative cash flow

of NOK -45.1 million compared to negative NOK 61.3 million

the year before.

Net cash flow from investing activities amounted to NOK -17.8

million, compared with NOK -38.0 million in 2021 for the group.

In the parent company, cash flow from investing activities was

NOK -17.3 million in 2022 compared to NOK -35.0 million in

2021.

Net cash flow from financing activities amounted to NOK 45.5

million in 2022, compared with NOK -23.2 million the year

before. Corresponding figures in the parent company were

NOK 45.4 million in 2022 and NOK -27.2 million in 2021. The

company completed a share issue in 2022.

Going concern

In accordance with the accounting act § 3-3a we confirm that

the condition for continued operations is present and that the

annual report have been prepared based on the going concern

assumption.

The company has an unused credit facility of NOK 37 milli-

on. Additionally, the board has been authorized by the general

meeting held on 30 August 2022 to issue up to 39,508,103

new shares. These authorizations are intended to be utilized

in case the parent company and the Group requires additional

equity and liquidity.

As of 31 December 2022, the parent company meets all requ-

irements in its loan agreements and is not in violation of any

loan conditions. Although the parent company and the Group

has negative results in the first two months of 2023, it is still

not in breach of the terms of any of the loans. Refer to note

16 for more details on the Group's and the parent company's

interest-bearing debt conditions, as well as note 19 for infor-

mation on liquidity risk and maturity structure of the group's

liabilities.

The operations of the Group are subject to uncertainty with

respect to its ability to sell sufficient product volumes at fa-

vourable margins and maintain adequate cash reserves. While

the Company has recently achieved higher margins and impro-

ved cash flow, the Board of Directors remains vigilant about re-

viewing the Company's equity and cash balance. If additional

resources are needed to ensure continuity of operations and

support planned activities aimed at generating positive cash

THE BOARD OF DIRECTOR’S REPORT 2022

A competent workforce is an important factor in the work of

ensuring continuity in production. Hofseth BioCare's employe-

es have extensive experience and expertise in the company's

technology, and new employees undergo training and educati-

on to build up the necessary expertise.

The group's production processes are mainly concentrated in

the Midsund plant and downtime at this plant can have a signi-

ficant impact on the company's potential revenues.

Market risk

Hofseth BioCare reduces its market risk through geographical

and market presence, and are currently selling in different mar-

ket segments. Our distributors are present in 60 countries and

know the local markets and are able to identify the factors that

are important for Hofseth BioCare to be able to sell products

to end customers in different parts of the world. In addition

to focusing on sales to Europe, North America and Asia, the

company sells its products to various segments of the human

nutrition market (sports nutrition, supplements, and health

food), as well as to the market in nutrition for the pet and feed

industry. This strategy allows Hofseth BioCare to reduce its

dependence on one market segment and geographical area.

Foreign exchange risk

Hofseth BioCare trades in several currencies, but mainly in US

dollars and Euros. Fluctuations in exchange rates can have

an impact on the company's operations, results and financial

position. Hofseth BioCare will not engage in currency specula-

tion and through currency hedging, the company can reduce

this risk with more predictable cost and revenue streams.

Interest rate risk (own financing, deposits)

Changes in general interest rates could affect the company's fi-

nancing and may have an impact on costs. Changes in interest

rates may also affect the value of the company's assets.

Credit risk

To minimize the risk of losses on receivables, customers' cre-

ditworthiness is assessed on an ongoing basis. Receivables

from all customers must be credit insured through Coface

Norway or paid before shipping goods.

Hofseth BioCare’s marketing and distribution strategy is to

seek collaboration with medium to large business associates

who have extensive knowledge of their markets. This will of-

ten mean well-established, solid companies with high credit

ratings.

Financial and liquidity risk

The Group manages its liquidity risk by strive to have suffici-

ent cash, and credit lines in banks. Moreover, preparing and

monitoring forecasts monthly to keep track of actual cash

flows.

Hofseth BioCare had cash and cash equivalents totalling

NOK 32.4 million at the end of 2022, compared with NOK

49.9 million at the same time the year before. Cash and cash

equivalents largely consist of cash and bank deposits. In ad-

dition, the company has an unused credit facility of NOK 37

million.

Risk insurance

Although Hofseth BioCare seeks to reduce the impact of ad-

verse events using its risk management system, a certain risk

remains exist which cannot be eliminated through preventive

measures. The company covers such risks to a certain extent

through the purchase of insurance. The Hofseth BioCare insu-

rance portfolio is covering areas such as business interrupti-

on, damage to equipment and property, third party liability and

other risks, product liability insurance, board liability insuran-

ce, as well as various types of personnel insurance.

Organization

Hofseth BioCare AS was founded in 2009, with the conversion

to a publicly listed company (ASA) in 2011. In 2022, Hofseth

BioCare Group had a total of 62 employees. The companys

work related to the Equality statement(ARP statement) is des-

cribed in the company`s ESG report, witch is avaliable on the

companys webpage.

Working environment

The group's working environment is considered good. The Bo-

ard emphasizes great importance and priority to reduce ab-

senteeism and preventing injuries. One work-related accident

occurred during the year that resulted in absence. Long-term

absence in 2022 was 2.65%, compared to 5.12 % in 2021, short-

term absence was 1.63 %, compared to 1.26 % in 2021.

Total absence was 4.28 % in 2022. Risk analysis is the basis

for measures to be taken to prevent damage or other adverse

events to occur. This is a key element in Hofseth BioCare's work

with HSE. Understanding risk is essential to prevent dangerous

situations. This will be handled continuously and HSE training is

considered good. Risk analysis work is being followed up conti-

nuously. If HSE non-conformities occur, measures will be put in

place to prevent such non-conformities from happening again.

Hofseth BioCare has a partnership with Medi3 who takes care

of occupational health in the Group. All employees will also in

2023 undergo a medical examination. For HBC Berkåk AS an

occupational health agreement has been established with Akti-

Med. This is a requirement for all companies that belong to our

industry group ref. Section 13 of the Regulations for organizati-

on, leadership, and participation.

THE BOARD OF DIRECTOR’S REPORT 2022

Injury and illness absence Berkåk

2022

Midsund

2022

Adm.

2022

Group

2022

Total absence (%) 3.55 6.56 0.62 4.28

Total working hours (all) 16 525 59 508 33 584 109 617

-specification:

Short term absence (%) 2.14 2.07 0.62 1.63

Long term absence (%) 1.40 4.49 0.00 2.65

Number of injuries 0 1 0 1

Number of work-related accidents 0 1 0 1

Equality

Hofseth BioCare aims to practice equality and avoid discrimi-

nation in all aspects of our HR and recruitment policies. Hof-

seth BioCare actively works consciously to promote recruit-

ment of female managers and employees. At the end of 2022,

13 of 62 employees in Hofseth BioCare were female, and on

the Board of Directors 3 of 6 members were female.

Environment

Hofseth BioCare is working to reduce the environmental im-

pact in several areas. The major environmental issues are rela-

ted to the plant in Midsund. The emissions are mainly related

to a process which also affect emissions to air and sea. HBC

aims to continuously satisfy all requirements for emissions to

air and sea. Hofseth BioCare is also working on minimizing

total energy consumption.

All organic material that has not been heat-treated goes

through a treatment plant and is acid-treated with the right pH

and holding time before it is discharged into the sea. Hofseth

BioCare has routines for sampling and measurement of was-

tewater to be within the imposed requirements.

All waste from the production at Midsund are sorted and deli-

vered to recycling, or disposal as hazardous waste.

Organic waste from the process is delivered to approved ma-

nufacturers of biogas. Residual waste is collected in a sepa-

rate compactor and delivered to the incinerator. Plastic, card-

board and paper are sorted and delivered to recycling. Waste

from our laboratory is collected and delivered in special con-

tainers as special waste. Steel and electric waste is delivered

to an approved landfill.

Hofseth BioCare transports mainly by road and sea. This ap-

plies to the inbound transport of raw materials and outbound

products to our customers around the world. Through the

optimization of transport and raw material sourcing within

Møre og Romsdal, the group aims to reduce the need for long-

haul operations. Transport of finished products are mainly to

Europe, Asia and the United States. For Europe, transport by

road and by sea is used and to the United States and Asia we

transport by sea. The group intends to transport more goods

by rail and boat if solutions for such transport can compete

with road transport regarding speed and infrastructure. A new

project started late 2022 aim to transport more goods in rail to

southern Europe in the future.

Corporate social responsibility

See separate ESG report prepared about the strategy to take

an active responsibility around our business. This is published

on the company`s webpage at the date of publication of the

Annual report.

Transparancy act

The company will publish a seperate report on the company`s

webpage before 30.06.2023.

Shareholders

At the end of the year the company had 1,407 shareholders.

For further details about the shareholders, see note 24 to Hof-

seth BioCare ASA's financial statements. The company has no

provisions restricting the right to sell the Company's shares.

Related parties

Related party transactions are made on commercial terms in

accordance with the «arm's length» principle. A complete and

detailed overview of transactions with related parties is inclu-

ded in note 6 to Hofseth BioCare ASA's financial statements.

Corporate governance

Hofseth BioCare ASA aims to maintain a high standard of cor-

porate governance. A healthy corporate culture is the key to

retain confidence in the company, ensuring access to capital

and ensuring a high degree of value creation over time.

All shareholders are treated equally and there should be a cle-

ar divide of roles and responsibilities between the Board and

management. Hofseth BioCare follows the Norwegian Code

of Practice for Corporate Governance of 30 October 2014. A

more complete description of how Hofseth BioCare follows

the recommendation and the 15 provisions, can be found on

http://www.hofsethbiocare.no/investors/cg/.

THE BOARD OF DIRECTOR’S REPORT 2022

has shown a strong project pipeline from APAC, Europe, and

China, and we are seeing the breadth of use for our ingredients

broaden out significantly, selling into pet, food, and health sup-

plement customers.

HBC's research work includes both clinical and preclinical

development stages with the aim of developing products for

the relief and prevention of several different clinical areas and

indications. The experiments we have carried out have had po-

sitive results that support the great potential that lies in HBC's

unique products for nutrition for humans and pets. Increased

production volumes and a larger customer base will always be

seen in connection with the group's environmental profile. Hof-

seth BioCare's vision is, and will continue to be, sustainable

production of premium bioactive ingredients with documen-

ted health effects.

Our sales strategy is the distribution of products in three seg-

ments: animal feed, pets and human. This diversification will

ensure higher revenues and cash flows in the years ahead. At

the same time, further research and development will increa-

se future sales in the core business area of ingredients and

finished products for human nutrition. HBC have seen a strong

increase in sales, and we have lowered the cost base and in-

creased gross margins on all products. We expect the current

trends to continue from H2 2022 into 2023, with revenues and

gross margins growing, as well as recurring revenues from a

strong evolving Brilliant Salmon oil business direct to the con-

sumer. New nutraceutical customer projects are being initia-

ted weekly, and the pet health business is also expected to

grow significantly next year.

Outlook

The first half of 2022 was operationally challenging due to

lower production caused by high spot salmon prices, which

spiked at the beginning of the year along with all commodi-

ties. The global business outlook and confidence also took

a hit, with significant supply chain disruptions complicating

business execution and deliveries due to the ongoing tragedy

of war in Ukraine. These factors had a noticeable impact on

our business, as well as on all other businesses involved in

raw material production, logistics, and supply. However, as the

environment began to stabilize, salmon production volumes

picked up in the second half of 2022, resulting in higher capa-

city utilization and stronger sales and margins. Furthermore,

we have diversified our sources of raw material, reducing our

dependency on just one provider to grow and broaden our bu-

siness in the coming months.

In response to the market volatility in early 2022, we proactive-

ly optimized our organization and supply chain management

by implementing an internal review of all our respective busi-

ness units at HBC. This review has resulted in several person-

nel changes and a meaningful re-organization of responsibili-

ties to improve accountability, efficiency, and communication

within the company. The project is almost completed and will

be finalized before the end of Q1 2023.

Q4 continued its positive trajectory, with growth in all major

market geographies for all ingredients. We are now selling in

all major markets across the EU, Asia (including China), and

the US, and educating nutraceutical customers about our

unique ingredients with patents and market-leading health

claims for the consumer health segment. The fourth quarter

Hofseth BioCare ASA Board of Directors,

Ålesund, 30March 2023

Kristin Fjellby Grung Torill Standal Eliassen Crawford Currie Christoph Baldegger

Chair of the board Board member Board member Board member

Amy Novogratz Roger Hofseth Jon Olav Ødegård

Board member Board member CEO

CHAPTER 3

Financial statements

Consolidated and parent company

FINANCIAL STATEMENTS – CONSOLIDATED AND PARENT COMPANY

Content

CHAPTER 3

Financial statements 17

Statement of comprehensive income 19

Statement of financial position 20

Statement of cash flows 22

Statement of changes in equity 23

Notes to the accounts 24

Note 1: Accounting policies 24

Note 2: Accounting estimates and management judgement and assumptions 32

Note 3: Segment information 33

Note 4: Cost of sales and other operating expenses 34

Note 5: Employment costs and expenses for employees and

benefits for senior employees 35

Note 6: Related party transactions 36

Note 7: Financial income and expenses 38

Note 8: Income taxes 39

Note 9: Earnings per share 39

Note 10: Intangible asset 40

Note 11: Fixed assets 42

Note 12: Leases 43

Note 13: Changes in liabilities from financial activities 45

Note 14: Fair value measurement 46

Note 15: Financial assets 47

Note 16: Interest-bearing debt and borrowings 48

Note 17: Financial assets and liabilities by category 49

Note 18: Financial risk management 50

Note 19: Inventory 53

Note 20: Trade receivables and other current receivables 54

Note 21: Cash and cash equivalents 55

Note 22: Equity investments 55

Note 23: Accounts payable and other short-term liabilities 56

Note 24: Share capital, shareholders and dividends 57

Note 25: New accounting standards with future effective date 58

Note 26: Subsequent events 58

Declaration of the Board of Directors and Managing Director in Hofseth BioCareASA

FINANCIAL STATEMENTS – CONSOLIDATED AND PARENT COMPANY

Consolidated (IFRS) Parent company (IFRS)

(Amounts in NOK 1000) Note 31.12.2022 31.12.2021 31.12.2022 31.12.2021

Operating revenues and expenses

Sales revenues

3, 6 119 128 76 878 118 815 76 689

Other income

3 1 320 10 738 1 144 11 359

Total operating revenue 120 448 87 616 119 959 88 048

Cost of sales

2, 4, 6 91 934 64 517 90 785 72 152

Salaries and other payroll expenses

5 57 043 44 713 47 206 37 796

Other operating expenses

4, 6, 14 69 677 67 600 68 617 63 100

Depreciation and Write-downs

10, 11, 12 30 412 29 350 25 965 25 710

Operating profit/loss (EBIT) -128 618 -118 565 -112 613 -110 710

Loss from associated company

22 204 31 0 0

Financial income

7 4 568 3 647 4 768 3 651

Financial expenses

6, 7, 12 13 136 11 577 11 522 15 182

Net financial expenses

15, 18 -8 772 -7 900 -6 754 -11 531

Loss before taxes -137 390 -126 464 -119 367 -122 241

Tax expense

8 0 0 0 0

Net loss for the period

2 -137 390 -126 464 -119 367 -122 241

Other comprensive income and costs 0 0 0 0

Total comprehensive income -137 390 -126 464 -119 367 -122 241

Comprehensive income attributable to:

Shareholders in HBC ASA -137 389 -126 463

Non-controlling interest -1 -1

Total -137 390 -126 464

Earnings per share (NOK) 2022 2021 2022 2021

Basic earnings per share

9 -0.37 -0.35 -0.32 -0.34

Diluted earnings per share

9 -0.37 -0.35 -0.32 -0.34

1 January – 31 December

Hofseth BioCare ASA

Statement of comprehensive income

FINANCIAL STATEMENTS – CONSOLIDATED AND PARENT COMPANY

Consolidated (IFRS) Parent company (IFRS)

(Amounts in NOK 1000) Note 31.12.2022 31.12.2021 31.12.2022 31.12.2021

ASSETS

Non-current assets

R&D, patents etc.

2, 10 60 588 53 055 60 588 52 867

Total intangible assets 60 588 53 055 60 588 52 867

Machinery and equipment

11 57 836 63 209 51 697 56 384

Right of use assets

12 108 366 120 342 87 266 96 774

Fixtures and fittings

11 2 592 2 281 2 579 2 255

Total fixed assets

2 168 794 185 831 141 542 155 413

Investment in subsidiary

7, 22 0 0 11 231 11 231

Investment in affiliated company

22 5 559 5 764 6 517 6 517

Non-current financial assets

15 340 1 012 340 1 012

Total non-current financial assets 5 900 6 776 18 089 18 761

Total non-current assets 235 282 245 662 220 219 227 041

Current assets

Inventory

2, 6, 19 116 525 90 813 115 983 90 244

Trade receivables

2, 6, 20 14 072 10 089 13 803 9 970

Other current receivables

5, 20 12 724 19 488 21 301 18 449

Cash and cash equivalents

21 32 427 49 921 31 335 48 359

Total current assets

14, 15 175 748 170 311 182 423 167 023

Total assets

2, 25 411 030 415 973 402 642 394 064

Statement of financial position

1 January – 31 December

Hofseth BioCare ASA

FINANCIAL STATEMENTS – CONSOLIDATED AND PARENT COMPANY

Hofseth BioCare ASA Board of Directors,

Ålesund, 30March 2023

Kristin Fjellby Grung Torill Standal Eliassen Crawford Currie Christoph Baldegger

Chair of the board Board member Board member Board member

Amy Novogratz Roger Hofseth Jon Olav Ødegård

Board member Board member CEO

Consolidated (IFRS) Parent company (IFRS)

(Amounts in NOK 1000) Note 31.12.2022 31.12.2021 31.12.2022 31.12.2021

EQUITY AND LIABILITIES

Equity

Paid in equity

Share capital

5, 24 3 951 3 578 3 951 3 578

Share premium 144 765 137 485 163 872 139 187

Other paid in equity 0 0 0 0

Total paid in equity 148 716 141 063 167 823 142 765

Retained earnings

Other paid in equity 0 0 0 0

Total retained earnings (+) Uncovered loss (-)

(attributable to equity holders of the parent)

0 0 0 0

Non-controlling interests

22 -686 -685 0 0

Total equity

2, 6 148 030 140 378 167 823 142 765

Non-current liabilities

Subordinated debt

6, 13 0 22 433 0 22 433

Interest-bearing loans and borrowings

6, 13 812 1 352 0 0

Lease liabilities

6, 12, 13 89 960 100 878 72 492 80 343

Total non-current liabilities

16, 17, 18 90 772 124 662 72 492 102 776

Current liabilities

Interest-bearing loans and borrowings

6, 16, 13 540 2 420 0 6 855

Lease liabilities

6, 12, 13 12 855 12 099 10 055 9 801

Trade payables

6, 23 145 752 124 165 140 551 121 476

Other liabilities

23 13 081 12 249 11 720 10 391

Total current liabilities

16, 17, 18 172 228 150 933 162 327 148 523

Total liabilities

14, 16, 18 263 000 275 595 234 819 251 298

TOTAL EQUITY AND LIABILITIES

2, 25 411 030 415 973 402 642 394 064

FINANCIAL STATEMENTS – CONSOLIDATED AND PARENT COMPANY

Consolidated (IFRS) Parent company (IFRS)

(Amounts in NOK 1000) Note 31.12.2022 31.12.2021 31.12.2022 31.12.2021

Cash flow from operating activities

Loss before tax -137 390 -126 464 -119 367 -122 241

Paid tax

8 0 0 0 0

Depreciation and impairment

2, 10, 11, 12 30 412 29 350 25 965 25 710

Impairment/reversal shares

7, 22 0 0 0 4 889

Loss from associated company

22 -204 -31 0 0

Change in inventory

19 -25 712 -17 511 -25 739 -18 019

Change in trade receivables

20 -3 983 4 178 -3 833 4 026

Change in trade payables

23 70 355 39 208 67 844 38 238

Change in other accruals 11 400 96 1 653 -2 099

Items classified as financing activities 9 954 9 394 8 359 8 175

Net cash flows from operating activities -45 168 -61 779 -45 118 -61 320

Cash flow frwom investing activities

Aquisition of tangible fixed assets

11 -4 020 -22 924 -3 534 -19 929

Investment in other companies

22 0 -188 0 -188

Investment in intangible assets

10 -13 758 -14 827 -13 758 -14 827

Net cash flow from investing activities -17 778 -37 939 -17 292 -34 945

Cash flow from financing activities

Proceeds from issue of shares 70 777 0 70 777 0

Transaction costs on issue of shares -326 0 -326 0

Payment of interest

6, 7, 13 -1 362 -1 799 -1 307 -2 277

Proceeds from new borrowings

6, 16, 13 0 1 087 0 1 087

Repayment of borrowings

6, 16, 13 -2 420 -3 421 -1 879 -2 880

Payment of lease liabilities

6, 12, 16, 13 -12 625 -11 469 -9 850 -8 686

Payment of interest on lease liabilities

12, 13 -8 592 -7 595 -7 053 -5 898

Payment borrowings from subsidiary

23 0 0 -4 976 -8 498

Net cash flow from financing activities

17 18 45 452 -23 197 45 386 -27 152

Cash and cash equivalents at 1 January 49 921 172 835 48 359 171 777

Net change in cash and cash equivalents -17 494 -122 914 -17 024 -123 418

Cash and cash equivalents at 31 December

21 32 427 49 921 31 335 48 359

Statement of cash flows

1 January – 31 December

FINANCIAL STATEMENTS – CONSOLIDATED AND PARENT COMPANY

Consolidated (IFRS)

(Amounts in NOK 1000) Note Share

capital

premium

Other paid

in capital

Uncovered

loss

Non-

controlling

interests

Total

equity

As of 1 January 2021 3 578 236 709 8 684 15 477 -684 263 764

Share based payment program

5 0 0 3 487 0 0 3 487

Other changes 0 0 0 -409 0 -409

Net loss for the period 0 -99 224 -12 171 -15 068 -1 -126 464

Other income and costs 0 0 0 0 0 0

Total comprehensive income 0 -99 224 -12 171 -15 068 -1 -126 464

As of 31 December 2021

2, 5, 24 3 578 137 485 0 0 -685 140 378

As of 1 January 2022 3 578 137 485 0 0 -685 140 378

Share based payment program

5 0 0 2 773 0 0 2 773

Issue shares 07.07-01.08.2022 373 141 605 0 0 0 141 978

Share issue cost 0 -326 0 0 0 -326

Other chages 0 617 0 0 0 617

Net loss for the period 0 -134 616 -2 773 0 -1 -137 390

Other income and costs 0 0 0 0 0 0

Total comprehensive income 0 -134 616 -2 773 0 -1 -137 390

As of 31 December 2022

2, 5, 24 3 951 144 765 0 0 -686 148 030

Parent company (IFRS)

(Amounts in NOK 1000) Note Share

capital

premium

Other paid

in equity

Uncovered

loss

Total equity

As of 1 January 2021

2, 5, 24 3 578 236 709 8 684 12 650 261 621

Share based payment program

5 0 0 3 487 0 3 487

Other changes 0 0 0 -102 -102

Net loss for the period 0 -97 522 -12 171 -12 548 -122 241

Other income and costs 0 0 0 0 0

Total comprehensive income 0 -97 522 -12 171 -12 548 -122 241

As of 31 December 2021

2, 5, 24 3 578 139 187 0 0 142 765

As of 1 January 2022 2, 5, 24 3 578 139 187 0 0 142 765

Share based payment program

5 0 0 2 773 0 2 773

Issue shares 07.07-01.08.2022 373 141 605 0 0 141 978

Share issue cost 0 -326 0 0 -326

Net loss for the period 0 -116 594 -2 773 0 -119 367

Other income and costs 0 0 0 0 0

Total comprehensive income 0 -116 594 -2 773 0 -119 367

As of 31 December 2022

2, 5, 24 3 951 163 872 0 0 167 823

Statement of changes in equity

1 January – 31 December

NOTES TO THE ACCOUNTS

Note 1: Accounting policies

General information

Hofseth BioCare ASA ia a public limited liability company dom-

icilied in Ålesund, Norway. The company`s headquarter is in

Kipervikgata 13 in Ålesund, with one manufacturing facility in

the municipality of Molde and one manufacturing facility in

the municipality of Rennebu. The annual financial statements

were approved for issuance by the board of directors 30 March

2023.

The Group`s operation is the processing of fish offcuts into

high quality protein and other food supplements.

The company’s consolidated financial statements for 2022

consist of the parent company and the subsidiaries HBC

Berkåk AS, HBC Therapeutics AS, HBC Switzerland GmbH and

Hofseth BioCare Rørvik AS (the Group). In addition the subsid-

iarie HBC Americas LLC, which is registered, but has no trasac-

tions and are therefore not consolidated in 2022.

Basis of preparation

The consolidated financial statements and the parent com-

pany financial statements of Hofseth BioCare ASA have been

prepared in accordance with IFRSs and related interpretations

as issued by the International Accounting Standards Board

(IASB) and as adopted by the EU as of 31 December 2022, as

well as the additional disclosure requirements following from

the Norwegian accounting act as of 31 December 2022.

The consolidated financial statements and the parent compa-

ny financial statements are prepared on the historical cost ba-

sis, with the exception of financial instruments that are meas-

ured at fair value with changes in value through profit or loss.

The consolidated financial statements and the parent compa-

ny financial statements have been prepared applying consist-

ent accounting policies for similar transactions and event.

Basis for consolidation

(i) Subsidiaries

The consolidated financial statements include Hofseth Bio-

Care ASA and companies controlled by Hofseth BioCare ASA.

Companies are determined to be controlled when the Group is

exsposed to, or has rights to, variable returns as a result of the

involvement from the Group, and the Group is able to influence

the returns through its power over the company. All the follow-

ing criteria must be fulfilled:

› power over the company

› exposed to, or have rights to, variable returns from its in-

volvement in the company invested in, and

› possibility to exercise its power over the company to influ-

ence the amount of the returns

(ii) Associated companies

Associated companies are units in which the group has sig-

nificant influence, but not control over the financial and op-

erational management (normally with an ownership share

between 20% and 50%). Significant influence is the power to

participate in financial and operational decisions in principle in

the company, but where Hofseth BioCare still has no control or

joint control. In the case of an ownership interest of less than

20%, in order to be treated as an associated company, it must

be clearly demonstrated that significant influence exists, for

example through shareholder agreements. The consolidated

financial statements include the group's share of profit from

associated companies recognized according to the equity

method from the time significant influence is achieved and

until such influence ceases. When the group's share of nega-

tive profit exceeds the value of the investment, the carrying

amount of the investment decreases to zero and recognition of

additional negative profit ceases. The exception is those cas-

es where the group has an obligation to cover negative results.

The group has no joint ventures.

(iii) Elimination of transactions in the consolidation

Group internal balances and any unrealised gains or losses

or revenues and costs related to intra Group transactions, are

eliminated in full in the consolidated financial statements.

(iv) The non-controlling interest in the consolidated financial

statements is the non-controlled share of the Group’s equity.

In business combinations the non-controlling interest is meas-

ured including the non-controlling interest’s share of the ac-

quired entity’s identifyable net assets. The subsidiary’s annual

result, together with the individual components recognized

in other comprehensive income, is attributable to the parent

company and the non-controlling interests. Total comprehen-

sive income is attributed to the share holders of the parent

company and to the non-controlling interests even if this re-

sults in negative non-controlling interests.

Functional currency and presentation currency

The Group’s presentation currency is NOK, which is also the

functional currency of all companies in the Group. All amounts

are presented in NOK 1 000 unless specifically noted.

Use of estimates when preparing the annual financial

statements

Management has to some extent used estimates and as-

sumptions which have affected assets, liabilities, revenues,

expenses, and information of potential commitments. Fu-

ture events may cause changes in the estimates. Estimates

and the underlying assumptions are assessed continuously.

Changes in accounting estimates are recognized in the period

the changes occur. To the extent the changes also affect fu-

ture periods, the effect is allocated over the current and future

periods. See note 2.

Foreign currency

Transactions in foreign currency are translated at the exchange

rates prevailing at the date of the transaction. Monetary items

in foreign currency are translated to Norwegian kroner at the

exchange rate at the balance sheet date. Currency exchange

NOTES TO THE ACCOUNTS

gains and losses are recognized in the income statement and

presented as financial income/financial expense.

Revenue recognition policies

Revenues are primarily generated from manufactured own

goods within the following product types:

› Salmon oil (OmeGo®)

› Water-soluble protein (ProGo®)

› Calcium (CalGo®)

› Non-soluble protein (PetGo™)

Revenue from contracts with customers is recognized when

control of goods or services is transferred to the customers

with an amount that reflects the consideration that the Group

expects to be entitled to in exchange for delivered goods and

services. Control is normally transferred to the customer when

goods are sent from the warehouse to the customer.

To the extent the customers enter into a contract for the pur-

chase of goods, which the customers wish to continue to store

at Hofseth BioCares' warehouse, the consideration is recog-

nized as revenue when control has passed to the purchasing

party. The customers have a desire to continue storing on the

group's stock as a result of requirements for moisture, temper-

ature, etc. when storing the goods, especially Calcium and Pro-

tein. In such sales, there is an agreement of control transfer to

the customers for the actual delivery of the goods. The parent

company and the group also earn revenues from the service

of storing the goods, which are recognized at a fixed price per

month in storage.

The Group assesses whether there are obligations in the sales

contracts that are separate performance obligations, and for

which parts of the transaction price must be allocated or agreed

variable payment terms in the contracts. The parent company

and the group have offered rights of return when selling from

the web-stores to customers in the human market and have fac-

tored in an estimated level of returns when calculating revenue.

Furthermore, the Group also assesses whether there are sig-

nificant financing components in the sales contracts (advance

payment, extra long credit terms, etc.).

Contract assets

The Group's right to remuneration in exchange for goods or

services that the group has transferred to a customer when

this right is conditional on other factors than merely the pas-

sage of time (for example, the company's future delivery).

Trade receivables

A receivable represents the Group's right to payment of an

amount which is unconditional (i.e. the agreed credit time be-

fore payment of the consideration falls due). See accounting

principles for financial assets’ initial recognition and subse-

quent measurement. Payment terms in the group's customer

contracts vary from 0 days to 60 days.

Contract liabilities

A contract liability may be an obligation to deliver goods or

services to the customer, from whom the group has received

consideration (or an amount of the consideration is overdue).

If a customer pays the consideration before the Group delivers

goods or services to the customer, a contractual obligation is

recognized at the time of payment or at the time payment of

the consideration is due (whichever takes place first). Contract

liabilities are not recognized until the Group delivers goods

and services in accordance with the contract. The group has

not identified contractual obligations in the delivery contracts

entered into as of 31 December 2022.

Segments

An operating segment is a component of the Group that en-

gages in business activities from which it earns revenues and

incurs expenses. The Group’s operating results are regularly

reviewed by the managing director to monitor the Group’s re-

sults and make decisions about resource allocations.

As the Group has one common and not separable manufactur-

ing process for its products, management focuses its financial

review on revenues and quality generated from the manufac-

turing process. Management monitors the financial results at

Group level and, hence, the Group only has one segment.

Information about products is presented in note 3.

Government grants

Government grants are recognised at the time it is reasonably

certain that the company complies with the requirements stat-

ed to be eligible for the grants and will receive payment. Grants

relating to operating expenditures are recognised systemati-

cally over the grant period. Grants are recognised against the

costs the grant is meant to cover. Grants for investments are

recognised systematically over the asset’s useful lives. Grants

for investments are recognised as a reduction to the related

assets’ carrying amount.

Employee benefits

Defined contribution pension plan

A defined contribution pension plan is an arrangement in

which the employer pays fixed constributions to a fund or a

pension fund, and in which the parent company and the group

has no further legal or constructive obligations to pay addi-

tional contributions. The contributions are recognized in the

income statement as salary related costs in the period in

which the employee renders the service.

NOTES TO THE ACCOUNTS

AFP pension plan

The group is affiliated with the AFP scheme, which is a col-

lective pension scheme for the collectively agreed sector in

Norway.

Accounting-wise, the scheme is considered a defined benefit

multi-employer scheme. However, the group is unable to iden-

tify its share of the scheme's underlying financial position and

performance with sufficient reliability. Therefore, the scheme

is accounted for as a defined contribution scheme. As a result,

obligations from the AFP scheme are not recognized on the

balance sheet. Premiums to the scheme are expensed as they

accrue.

Share based payment arrangements for consultant

The parent company has entered into a share-based payment

arrangement with a hired consultant. The arrangement is an

option plan with settlement in shares of the company.

The method of recognition varies depending on whether the

consultant is determined to be an employee or not. The con-

sultant is determined to be an employee when the agreement

for servies relates to an individual delivering personal services,

and that the individual (consultant) either:

• is determined to be employed for legal or tax purposes

• works for the company under directives from managing

bodies and is managed in the same way as if the individual

was legally employed

• delivers services of similar nature to the services delivered

by legally employed individuals

To the extent the consultant is determined to be employed, in

accordance with the the above description, the share option

program is measured at fair value at the time of grant. The

calculated fair value of the granted options are accrued and

recognised as an expense over the period in which the consult-

ant’s right to receive the options is vested, which is over the

agreed future service period (vesting period). For transactions

which are settled in the company’s own equity instruments

(equity settled arrangements) the value of the granted options

is recognized in the period as salary expenses in the profit or

loss with the offsetting entry to other paid in equity.

Obligations for bonuses related to the value of the company’s

shares, for which cash settlement has been agreed, are meas-

ured at fair value each balance sheet date until the time of

settlement, and changes in fair value are recognized in prof-

it or loss. The company is not obliged to pay social security

when the consultant is not determined to be employed by the

company for tax purposes.

Financial income and financial expenses

Financial income consists of interest income, dividends, foreign

exchange gains and gains from sale of financial instruments. In-

terest income is recognised when earned, calculated using the

effective interest rate method, while dividends are recognised on

the date of the general meeting approving the dividends.

Financial expenses consist of interest expenses, guarantee

commissions, foreign exchange losses and losses from sale

of financial instruments. Interest expenses and guarantee

commissions are recognized when incurred, calculated using

the effective interest rate method.

Income taxes

Income tax expenses consist of current taxes payable and

changes in deferred taxes. Current taxes payable are taxes

payable or tax receivables related to taxable income or loss

for the year, based on tax rates substantively enacted at the

balance sheet date. Changes in calculated current taxes paya-

ble related to prior years are included in the amount.

Deferred tax/deferred tax assets are calculated on all tempo-

rary differences between carrying amounts and tax bases for

all assets and liabilities on the balance sheet date.

Deferred taxes are calculated using the tax rate expected to be

applicable at the time of reversal of the temporary differences.

Deferred tax assets are recognised to the extent the company

is expected to have sufficient taxable income in future periods

to utilize the tax benefit. The companies recognize previously

unrecognized deferred tax assets to the extent it has become

likely that the company may utilize the deferred tax benefit.

Likewise, the company will reduce deferred tax assets to the

extent the company no longer expects that it will be able to

utilise the deferred tax benefit.

Deferred tax and deferred tax assets are measured at nomi-

nal values. Deferred tax liabilities are presented as provisions/

long term liabilities in the balance sheet, while deferred tax as-

sets are presented as intangible assets.

Intangible assets

Intangible assets acquired separately are recognised at their

cost price. The cost price for intangible assets acquired are

recognised at fair value in the Group. Recognised intangible

assets are accounted for at cost less any depreciation and im-

pairment write-down.

Internally generated intangibe assets, except for recognised

development costs, are not recognised, but expensed as in-

curred.

Intangible assets with finite useful life are depreciated over

their useful lives and tested for impairment when impairment

indicators are present. Depreciation methods and useful lives

are assessed annually as a minimum. Changes to deprecia-

tion method and/or useful life are accounted for as estimate

changes.

Patents and licences

Acquisition costs for patents and licences are recognised and

depreciated over their estimated useful lives.

NOTES TO THE ACCOUNTS

Development activities

Expenditures on research are recognised in the income state-

ment as incurred. Expenditures on development activities, in-

cluding product development (new or improved products) are

recognized when all the following criteria are fullfilled:

› It is technically possible to complete the asset / product

in such a way that the Group may use or sell the asset /

product in the future

› It is management’s intention to complete the asset / prod-

uct, as well as to use or sell the asset / product

› It is possible to use the asset / sell the product

› How the asset / product will generate future revenues can

be proven

› The Group has sufficient technological and financial res-

sources available to complete the asset / development of

the product

› The costs can be reliably measured

Recognised costs include cost of material, consultant fees

and direct salary costs. Other development costs are rec-

ognized in the income statement as incurred. Previously ex-

pensed development costs are not subsequently capitalized.

Recognised development costs are depreciated on a straight-

line basis over the assets / products estimated useful lives.

Fixed assets

Fixed assets are measured at cost, less accumulated de-

preciations and impairment write- downs. Fixed assets are

derecognized when sold or disposed of and any gains or loss-

es are recognized in the income statement.

Acquisition cost for fixed assets is the cost price and costs

directly associated wih getting the asset ready for its intended

use.

Expenditures incurred after recognition of the fixed asset,

such as day-to-day maintenance, are recognized in the income

statement as incurred, while expenditures expected to gener-

ate future economic benefits are recognized in the carrying

amount. Depreciation period, depreciation method and residu-

al values are assessed annually.

Fixed assets are carried at cost until manufacturing or devel-

opment has been completed. Fixed assets under construction

are not depreciated until the assets are ready for their intend-

ed use.

When significant components of a property, plant and equip-

ment are determined to have different useful lives, they are

accounted for as separate components.

Each component of property, plant and equipment is depreci-

ated on a straight-line basis over its estimated useful life, as

this is considered to best represent the consumption of the fu-

ture economic benefits of the assets. Land is not depreciated.

Estimated useful life for the current period and depreciation

periods are disclosed in note 11. Depreciation method, useful

life and residual values are reassessed at the balance sheet

date and adjusted if found necessary. When the carrying

amount of a fixed asset or a cash-generating unit is higher

than the recoverable amount, the asset is written-down to its

recoverable amount. Recoverable amount is the higher of val-

ue in use and fair value less costs of disposal.

Investment in subsidiaries and associated companies

Investments in subsidiaries and associated companies are

assessed according to the cost method in the company fi-

nancial statements. Investments are valued at acquisition

cost, unless impairment has been necessary. Write-downs

have been made at fair value when impairment is due to rea-

sons that cannot be expected to be temporary. Impairment

losses are reversed when the basis for impairment is no

longer present.

Dividends and other distributions are recognized as income

when adopted at the general meeting of the subsidiaries. If

dividends exceed the retained earnings after the acquisition,

the excess part represents repayment of invested capital, and

the dividends are deducted from the value of the investment

in the balance sheet.

Leases

For contracts constituting or containing a lease, the company

and the group separate lease components if the underlying

asset may be used either on its own or together with other

resources easily available to the company and the group, and

the underlying asset is neither dependent nor interrelated on

other underlying assets in the contract. The company and the

group then account for each single lease component in the

contract as one lease contract separately from the non-lease

component in the contract.

At the time of commencement of a lease contract the compa-

ny and the group recognize a lease liability and a correspond-

ing right of use asset for all leases, except for the following

excemptions elected under the standard:

› Short-term leases (lease term of 12 months or less)

› Low value assets

For such leases the company and the group recognize the

lease payments as other operating expenses in the profit or

loss when incurred.

Lease liabilities

The company and the group measure the lease liabilities at

the present value of the lease payments to be made over the

lease term at the commencement date. The lease term is the

non-cancellable period of the lease, in addition to periods cov-

ered by options to extend or terminate the lease if it is reason-

ably certain that the group will (will not) exercise the option.

The lease payments included in the measurement of the lease

liability consist of:

NOTES TO THE ACCOUNTS

› Fixed lease payments (including in substance fixed pay-

ments), less any lease incentives receivable

› Variable lease payments which are dependant on an index

or rate, measured for the first time using the index or rate

applicable at the commencement date

› Amounts expected to be payable by the company and the

group under residual value guarantees

› The exercise price for an option to purchase the asset, if it

is reasonably certain that the company and the group will

exercise this option

› Termination fee, if the lease term has been determined on

the basis that the company and the group will exercise an

option to terminate the lease

The lease liability is subsequently remeasured by increasing

the carrying amount by an accretion amount on the lease

liability, and reduce the carrying amount for lease payments

made, as well as potential reassessments or changes to the

lease agreement, or to reflect adjustments to lease payments

as a result of a change in an index or a rate.

The company and the group do not include variable lease

payments in the lease liability. Variable payments are recog-

nized in the profit or loss as incurred. The company and the

group presenter the lease liabilities in separate line items in

the statement of financial position.

Right of use assets

The company and the group measures right of use assets at

cost, less accumulated depreciations and impairment losses,

adjusted for potential new measurements of the lease liability.

Cost for the right of use assets comprise:

› The amount established at initial recognition of the lease

liabiilty

› All lease payments made at or before the commencement

date, less lease incentives received if any

› All direct expenditures incurred for the company and the

group related to entering into the agreement

The group applies the depreciation provisions in IAS 16 Proper-

ty, plant and equipment when depreciating the right of use as-

set, except for the fact that the right of use asset is depreciated

from the date of commencement until the end of the lease peri-

od or the end of the asset’s useful life, whichever is expected to

take place first, unless there is an option to purchase the asset

which has been determined to be exercised with reasonable

certainty, in which case the right of use asset is depreciated

over the expected economic life of the underlying asset.

The group applies IAS 36 «Impairment of assets» in order to

determine whether the right of use asset has been impaired

and, if this is the case, write it down for impairment.

Impairment of non-financial assets

Depreciable fixed assets and intangible assets are assessed

for impairment when impairment indicators are identified. Im-

pairment write-downs for the difference between the carrying

amount and the recoverable amount are recognised in the in-

come statement.

The recoverable amount for an asset or a cash generating

unit is the higher of value in use and fair value less costs of

disposal. When assessing value in use, estimated future cash

flows are discounted to net present value using a pre-tax mar-

ket-based discount rate. The discount rate includes the time

value of money and asset specific risk. When testing for im-

pairment, assets which are not tested individually are tested at

a Group level representing the lowest level of identifiable cash

flows which are independent of cash flows from other assets

or Groups of assets (cash generating units or CGUs).

Impairment write-downs are recognised to the extent the car-

rying amount of an asset or cash generating unit exceed the

estimated recoverable amount. When recognizing impairment

write-downs related to cash generating units, any goodwill

impairment is recognized first. Any remaining impairment

amount is split pro-rata on other assets in the cash generating

unit (Group of cash generating units). Impairments are pre-

sented in the line item depreciations and impairments.

For other assets an assessment as to whether there are indi-

cations that the impairment is no longer present or reduced is

made on the balance sheet date (reporting date). Impairments

are reversed if the estimates in the calculation have favoura-

bly changed the recoverable amount. Impairment reversals are

limited to the carrying amounts being equal to what it would

have been if no impairment had been recognised.

Financial assets

Financial assets are classified at initial recognition and are

subsequently measured at amortized cost, at fair value

through other comprehensive income (OCI) or at fair value

through profit or loss.

The classification of financial assets on initial recognition de-

pends on both the characteristics of the financial assets' con-

tractual cash flows and the Group's business model for manag-

ing these. The Group's business model for managing financial

assets refers to how the Group manages its financial assets to

generate cash flows. The business model determines whether

cash flows will arise by receiving contractual cash flows, or by

selling the financial assets or both.

Accounts receivables that do not contain a significant financing

component are measured at the transaction price determined in

accordance with IFRS 15, see the accounting policies in section

on revenue from contracts with customers, and then measured

at amortized cost.

Other long-term and short-term receivables, as well as cash and

cash equivalents, are recognized at fair value on initial recogni-

NOTES TO THE ACCOUNTS

tion and subsequently at amortized cost.

Financial assets at fair value through profit or loss include finan-

cial assets held for trading, financial assets designated at fair

value through profit or loss, or financial assets that are required

to measure at fair value. Financial assets are classified as held

for trading if they are purchased for the purpose of being sold or

repurchased within a short period of time. Derivatives are also

classified as held for trading.

Financial assets at fair value through profit or loss are recog-

nized in the balance sheet at fair value with net changes in fair

value recognized in the income statement. The category in-

cludes derivative instruments (forward contracts in foreign cur-

rency) and long-term equity investments. Dividends on equity

investments are recognized as financial income in the income

statement when there is a right to payment of dividends.

Financial assets are derecognised when the rights to receive

cash flows from the assets have expired or the Group has

transferred its rights to receive cash flows from the assets.

Impairment of financial assets

For accounts receivables and contract assets, the Group uses

a simplified approach to calculating expected credit losses

(ECL). The Group therefore does not track changes in credit

risk, but instead recognizes a loss provision based on expect-

ed credit losses over the life of the trade receivable and the

contract asset on each reporting date. The Group has estab-

lished a provision matrix that is based on historical losses,

adjusted for future-oriented factors that are specific to the

debtors and the economic environment.

The Group considers a financial asset to be in default when it is

more than 60 days overdue. In some cases, however, the Group

may also consider that a financial asset is in default when inter-

nal or external information indicates that the Group is unable to

receive the outstanding contract amounts in its entirety before

taking into account any credit insurance that the Group has. A

financial asset is recognized as a loss when there is no reason-

able expectation of receiving contractual cash flows.

Further information on any impairment of financial assets is

provided in notes 20, 21 and 22.

Inventory

Inventories are measured at the lower of cost and net realisa-

ble value. Net realisable value has been estimated as selling

price in the ordinary course of business less the estimated

costs of completion and the estimated costs for marketing

and distribution. Cost is allocated using the FIFO-method and

includes expenditures incurred in purchasing the goods, raw

material, costs to bring the goods and the raw material to their

current condition and location. Owned goods are valued at

manufacturing cost and include raw material costs, as well as

other variable and fixed production costs that can be allocated

based on normal capacity utilization. See note 2 and 19 for

more information.

Cash and cash equivalents

Cash includes cash in hand and bank deposits. Cash equiva-

lents are short term highly liquid investments which can im-

mediately be converted to a known amount of cash, and with

a maximum duration of 3 months from the date of acquisition.

Financial liabilities

Financial liabilities are initially recognized as financial liabil-

ities at fair value through profit or loss, subordinated loans,

interest-bearing liabilities, lease liabilities, derivatives, trade

payables, or other current liabilities.

Interest-bearing debt and other liabilities are recognized at fair

value less transaction costs at the time of establishment. In

subsequent periods, loans are recognized at amortized cost

using the effective interest rate. For more information see note

16.

Financial liabilities at fair value through profit or loss include

financial liabilities held for trading purposes and financial lia-

bilities designated at initial recognition at fair value through

profit or loss. Financial liabilities are classified as held for trad-

ing purposes if they are contractual for the purpose of being

sold or repurchased within a short period of time. This cat-

egory also includes derivative instruments (currency forward

contracts). Gains or losses on liabilities held for trading are

recognized in the income statement, see note 7.

Derivatives

The Group uses financial forward exchange contracts (deriv-

atives) to hedge the Group's currency risk. The forward ex-

change contracts are recognized in the balance sheet at fair

value at the time the contract is entered into with the credit in-

stitutions, and subsequently the portfolio of forward exchange

contracts is adjusted continuously at fair value through profit

or loss. The forward exchange contracts are capitalized as

financial assets when fair value is positive and as financial

liabilities when fair value is negative. See notes 7, 15 and 18.

The Group does not have forward exchange contracts or other

derivatives that are considered hedging instruments in hedg-

ing terms as defined in IFRS 9.

Provisions

A provision is recognised when the company has an obligation

(legal or constructive) as a result of a past event, it is likely

(more likely than not) that payment will be made as a result

of the liability and the amount can be measured reliably. If the

effect is significant, the provision is measured at the discount-

ed value of future cash outflows using a pre-tax discount rate

reflecting the market’s pricing of the time value of money and,

if relevant, the risks specifically related to the liability.

A provision for a guarantee is recognised when the under lying

NOTES TO THE ACCOUNTS

products or services are sold. The provision is based on histor-

ical information about guarantees and a weighting of potential

outcomes against their likelihood of occuring.

Provisions for onerous contracts are recognised when the

company’s expected revenues from a contract is lower than

the unavoidable costs of meeting the obligations under the

contract.

Contingent liabilities and contingent assets

Contingent liabilities for which it is not likely that the liability

will incur are not recognized in the financial statements. Signi-

ficant contingent liabilities are disclosed, except for contin-

gent liabilities related to which it is remote that payment will

have to be made.

Contingent assets are not recognised in the financial state-

ments unless they are virtually certain. Other contingent

assets are disclosed if it is likely that an economic benefit will

be received by the Group.

Going concern

In accordance with the accounting act § 3-3a we confirm that

the condition for continued operations is present and that the

annual report have been prepared based on the going concern

assumption.

The company has an unused credit facility of NOK 37 million.

Additionally, the board has been authorized by the general

meeting held on 30 August 2022 to issue up to 39,508,103

new shares. These authorizations are intended to be utilized

in case the parent company and the Group requires additional

equity and liquidity.

As of 31 December 2022, the parent company meets all requ-

irements in its loan agreements and is not in violation of any

loan conditions. Although the parent company and the Group

has negative results in the first two months of 2023, it is still

not in breach of the terms of any of the loans. Refer to note

16 for more details on the group's and the parent company's

interest-bearing debt conditions, as well as note 19 for infor-

mation on liquidity risk and maturity structure of the Group's

liabilities.

The operations of the Group are subject to uncertainty with

respect to its ability to sell sufficient product volumes at fa-

vourable margins and maintain adequate cash reserves. While

the Company has recently achieved higher margins and impro-

ved cash flow, the Board of Directors remains vigilant about re-

viewing the Company's equity and cash balance. If additional

resources are needed to ensure continuity of operations and

support planned activities aimed at generating positive cash

flow and profitability, the Board will consider appropriate me-

asures such as obtaining loans or equity. The current outlook

indicates a positive trend, and the Board will take necessary

steps to sustain this momentum. If the group and the parent

company do not achieve planned market measures adequa-

tely, new loan facilities or share issues will be established in

2023. Therefore there is an uncertainty with regards to th ego-

ing concern assumption.

Assuming a going concern, the Group's and the parent compa-

ny's assets and values are currently present. However, the va-

lue of some of the group's and the parent company's assets

may be lower than their carrying amounts in a potential forced

sale related to liquidation. This uncertainty is primarily related

to the value of intangible assets, fixed assets, financial assets,

and investments, as well as the value of inventories.

Financial implications of climate change

While it is widely recognized that continued emission of green-

house gases will cause further warming of the planet and this

warming could lead to damaging economic and social conse-

quences, the exact timing and severity of physical effects for

HBC are difficult to quantify. The large-scale and long-term na-

ture of the problem makes it uniquely challenging, especially

in the context of economic decision making.

While changes associated with a transition to a lower-carbon

economy present risk, HBC also create significant oppor-

tunities in the nature of our business model. Turning waste

streams into high-end human and pet nutrition is important for

the environment and out teams at the facilities are focused on

climate change mitigation and adaptation of new technology

solutions.

Circular economy initiatives which HBC is a part of, and the

strive to reduce greenhouse gases is high on the agenda with

the Board and management of HBC and the Group has invest-

ed significant amounts in both machinery and knowledge

since we joined the Global Reporting Initiative (GRI) in 2019.

In a carbon constraint world, climate change is confronting

HBC with totally new challenges. One way the Group deal

with the impacts of climate change is to comprehend them

as risks and analyse possible effects as we do elsewhere

in our organization by the combination of probability and

its consequence. Therefore, HBC view climate risks as the

possible impacts of climate change with the potential to

influence positively or negatively the future development of the

HBC Group, and together with the rest of the Hofseth Group.

The risks and opportunities for HBC from climate change

are classified as direct or indirect. Direct climate risks and

opportunities are resulting out of changing natural conditions

as rising temperatures, sea levels or an increasing number

of extreme weather events. Indirect climate risks and

opportunities seems to have much more implications than

the direct ones. Examples of indirect risks are regulatory or

litigation, credit risk, market risk and reputation risk.

As previously mentioned, these risks are also great

opportunities for HBC. However, risks and opportunities HBC

as an organization face today related to climate change,

NOTES TO THE ACCOUNTS

are difficult to estimate, and mitigate or explore. HBC has a

work group among the management team, led by the head

of Sustainability, that analyse climate risks and utilize the

opportunities that arise from climate change. As of the end

of 2022, the financial implications of climate change are

very limited. As of today, there are few requirements for

sustainability in the finished product, no distinctly strict

emission rules at the factories, no external influence (e.g.

sea level rise). The management expect increased focus on

impairment testing as the Group grow and increase its asset

base in the future.

Financial implications of the war in Ukraine

Apart from a general increase in energy-prices, the Group is

not direct affected by the conflict.

Subsequent events

New information subsequent to the balance sheet date about

the Group’s and the parent company’s financial position at

the balance sheet date are taken into account in the financial

statements. Events subsequent to the balance sheet date

which do not influence the Group’s or the parent company’s

financial position at the balance sheet date, but which will in-

fluence the Group’s or the parent company’s position in the

future, have been disclosed in the notes if significant.

New accounting standards

Standards with changes that apply to the accounting period

January 1, 2022 has not had any material impact for the finan-

cial year 2022. The group and the company have not imple-

mented early standards released but not yet active.

NOTES TO THE ACCOUNTS

Note 2: Accounting estimates and management judgement and assumptions

The preparation of financial statements in accordance with

IFRS requires management to make judgments when choos-

ing and applying accounting principles. Further, IFRS requires

the management to make estimates based on judgments, and

that estimates and assumptions are realistic. All estimates are

considered to be the expected value based on the manage-

ment’s best knowledge.

The Group’s most significant accounting estimates and areas

of judgment are the following:

› Allocation of production costs in manufactruring cost of

finished product cost

› Transactions with related parties

› Recognition of intangible assets

› Inventory - obsolescence

› Assessment of losses on accounts receivables

Allocation of production costs in manufactruring cost of

finished product cost

Four types of finished products are produced from a common

production process based on the same input factors. The

value of the individual finished product is based on the allo-

cation of production costs determined based on the finished

product's relative share of production yield multiplied by the

expected sales value. The same model has been used for allo-

cating production costs over several years. The determination

of expected sales value as a basis for allocating production

costs has significant discretionary assessments and has a

significant effect on the calculation of the cost of production

of the various finished product products. The group and the

parent company are still in a start-up and development phase,

but management's judgment has based on agreed prices in

historical sales transactions and expected sales value at the

reporting date. See notes 4, 6 and 19.

Transactions with related parties

Transactions with related parties constitute a significant part

of the Group's and the parent company's ordinary operating

revenues and costs, and where the determination of arm's

length pricing is largely based on judgment. The transactions

also affect liquidity and financial carrying capacity for the

Group's and the parent company's operations.

The most significant transactions with related parties are

sale of finished goods, purchase of raw materials (fish trim-

mings), ongoing rental obligations related to production equip-

ment and factory buildings Midsund and Berkåk, as well as

agreements on short-term, long-term and subordinary loan

financing.

Hofseth BioCare ASA has a 5 years agreement startig

01.01.2022, and gives the parent company the exclusive right

to get all the by-products from the production of Hofseth Sales

AS's suppliers. Judgment has been applied when setting con-

ditions for the purchase of raw materials. See notes 4 and 6.

Hofseth BioCare ASA has sold finished goods to related parties

in 2021 and 2022. Prices are determined on the basis of current

and historical transactions with independent parties in 2021

and 2022. Discretion has been used in determining conditions

for the sale of finished goods, see notes 3 and 6.

Leases of production equipment, leases of factory facilities at

Midsund and Berkåk, as well as agreements for long-term and

subordinated loans. When agreeing financial terms in leases,

agreements for long-term loans in 2019 and 2020 a subordi-

nated loan in 2019, historical terms with third parties, achieved

by the group and the parent company, have been referred to.

Judgement has been applied when setting the financial terms.

See notes 6, 12, 13, 16 and 18.

Recognition of intangible assets

The Group has come far in the development phase of estab-

lishing production at the targeted level and with the quality

that the business model has been based on. The Group in-

vests in research and development activities on an ongoing

basis. Uncertainties exist relating to the timing of when the

requirements for recognition of intangible assets have been

met. The management’s starting point is that research and

development activities are capitalized when there is an identi-

fiable asset or product that is controlled by the company that

is expected to result in future economic benefits. Uncertain-

ties also exist relating to the assessment and estimation of

the cost price for the intangible assets, and mainly relating to

the estimation of cost price for developing intangible assets

and product development. Development activities that qualify

for capitalization are capitalized both in the Group and parent

company. See note 10.

Inventories

Goods in stock are valued at the lower of cost and selling

price. It is used judgment in relation to quality and durability.

The Group uses a model in which provision is made for obso-

lescence gradually if goods in stock approach the expiration

of the shelf life. It is set aside for obsolescence, see note 20.

Assessment of loss relating to accounts receivables

At the end of 2022, the Group had no significant overdue ac-

counts receivables. All significant accounts receivables are

credit secured by Coface Norway, limited to a maximum of

TNOK 13,600 and with a coverage rate of 90 %. When analyz-

ing future information about the Group's customers and mar-

kets, future challenges are not listed today, which indicate that

there will be a significant credit loss in the future. See note 18

on credit risk and note 20 on accounts receivables and other

receivables.

NOTES TO THE ACCOUNTS

Note 3: Segment information

The processing plants of the parent company are situated in Nor-

way, where the production is adjusted to meet the standard for

human consumption. The Group operates solely in the produc-

tion of four main products, namely salmon oil (OmeGo®), solu-

ble protein (ProGo®), Calcium (CalGo®), and non-water-soluble

protein (PetGo™), all of which are produced in the Midsund plant.

For the production of salmon oil, the raw material is sourced

fresh, and a closed feeding system is employed to maintain high

quality with low oxidation levels. The oil is stored in nitrogen-filled

tanks to preserve its quality during the manufacturing process.

The unique production process involves the release of oil from

the raw material using enzymes, resulting in fresh salmon oil with

a long shelf life.

The Group also produces hydrolyzed salmon protein, which is

quickly absorbed by the body and has good solubility in water.

The manufacturing process has been optimized for increased

capacity and quality, with improvements made in 2021 and 2022.

The Midsund factory expansion, completed in 2021, has replaced

the drying process previously carried out at Berkåk.

In 2018, the Group installed a fully automated process line to pro-

duce calcium powder, resulting in increased yield and improved

quality and reliability in 2019-2022. The process involves the sep-

aration of bone fraction, which is then dried and milled to pure

calcium powder.

The non-soluble protein, known as the PHP fraction, is separated

and dried to produce high-quality fishmeal.

Although the products are produced in the same process and

from the same raw material supply, the revenue is split by product

for informational purposes. The management monitors the cost

of sales as total cost of sales but split by product. The Production

Manager manages production by tracking the raw material input

and finished goods output of the four product types to calculate

the margin by product.

REVENUE PER PRODUCT Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

By product

Salmon Oil (OmeGo

) 77 759 43 433 77 759 43 433

Soluble Protein Hydrolysate (ProGo

) 12 598 9 504 12 598 9 504

Calcium (CalGo

) 2 914 2 716 2 914 2 716

Non-soluble Protein (PetGo™) 25 480 20 920 25 480 20 920

Other income 1 697 5 696 1 208 6 128

Sum revenue 120 448 82 268 119 959 82 700

Insurance claim settlement

0 5 348 0 5 348

Total revenues

120 448 87 616 119 959 88 048

By region

Norway 6 991 13 772 6 502 14 207

Asia 14 164 3 974 14 164 3 974

Europe excl Norway 78 162 39 974 78 162 39 974

America 21 131 24 548 21 131 24 548

Total revenues

120 448 82 268 119 959 82 700

* the group recieved TNOK 5 348 in 2021 for calcium damaged in 2021.

In 2022 goods totaling TNOK 59.196 were sold to three custom-

ers, each of which accounted for more than 10 % of total turn-

over. The sales to each of these customers are TNOK 28,329,

TNOK 17,750, and TNOK 13,117, respectively. In 2021, goods

totaling TNOK 44,472 were sold to three customers, each of

which accounted for more than 10 % of total turnover. The sales

to each of these customers are TNOK 20,219, TNOK 14,282 and

TNOK 9,971. The company has no contractual assets or liabili-

ties as of 31 December 2022.

NOTES TO THE ACCOUNTS

Note 4: Cost of sales and other operating expenses

COST OF SALES Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Raw material 55 704 38 559 55 662 38 559

Freight

26 252 17 700 26 252 17 750

Purchased services

26 953 24 374 25 846 32 009

Obsolescence cost

8 537 399 8 537 399

Change in inventory

-25 512 -16 515 -25 512 -16 566

Total cost of sales 91 934 64 517 90 785 72 152

OTHER OPERATING EXPENSES Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Leases of equipment 1 707 1 159 1 611 1 046

Leases of warehouses and factories

2 239 1 450 2 094 1 062

Travelling cost

2 651 1 187 2 510 1 008

Consultant fees and tax advisory

2 110 1 671 1 956 1 577

Lawyers

1 263 2 354 1 263 2 354

Consulting

14 498 18 921 16 927 18 069

Advertising

15 042 13 031 15 040 13 031

R&D and patents

13 635 8 869 13 630 8 800

Repair and maintenance

10 555 12 533 9 007 10 950

Other operating expenses

7 855 9 319 6 419 7 792

Government grants

-1 879 -2 894 -1 840 -2 587

Total

69 677 67 600 68 617 63 100

The Group recieved grants from skattefunn of TNOK 4 324

(TNOK 4 509 in 2021), split by TNOK 1 879 in other operating

expenses and TNOK 2 445 in salaries. Corresponding num-

bers was TNOK 4 132 (TNOK 4 122 in 2021) for parent compa-

ny, split by TNOK 1 840 in other operating expenses and TNOK

2 292 in salaries. See note 5.

NOTES TO THE ACCOUNTS

Note 5: Employment costs and expenses for employees and

benefits for senior employees

SALARIES Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Salaries 44 346 38 172 35 346 32 000

Social security costs 5 369 4 836 4 972 4 407

Pension costs 5 387 2 272 5 024 1 950

Share based payments and bonus costs consultant 2 346 1 634 2 346 1 634

Other employee benefits 2 039 1 369 1 808 1 187

Capitalized cost in associated with development 0 -1 954 0 -1 847

Public grants from Skattefunn -2 445 -1 615 -2 292 -1 535

Total employee benefit expenses 57 043 44 714 47 205 37 796

Average number of FTE`s 62 57 53 47

REMUNERATION TO EXECUTIVE MANAGEMENT TEAM

(Amounts in NOK 1000) - Group 2022 2021

Management team

Salaries 6 622 5 615

Benefits in kind 191 80

Pension costs 173 142

Share based payments 2 346 1 634

Other employee benefits 4 778* 16 169*

Total remuneration 14 110 23 640

* Includes remuneration of TNOK 4 138 for managing R&D (TNOK 15 209 in 2021). Remuneration for R&D is split in other operating expenses and

capitalized development costs in 2022 and 2021

No loans or guarantees are granted to members of the management team, Board of Directors or other elected bodies. Reference is

made to the Executive Remuneration Report which will be available on the company's website before the annual general meeting.

Defined contribution pension scheme

The parent company and the group have a statutory obligation

to comply with the law on mandatory occupational pensions

and have a pension scheme that satisfies the requirements of

this Act. Contributions have been expensed in the Group by

TNOK 2 787 in 2022 (TNOK 2 272 in 2021), in the parent com-

pany TNOK 2 424 (TNOK 1 950 in 2021). The parent company

and the group had cost for AFP of TNOK 2 620 in 2022 (TNOK

0 in 2021). The cost in 2022 had provisions for the year 2017-

2021 of TNOK 2 131, and TNOK 489 for 2022.

Options

The fair value of Jon Olav Ødegård's options have been calcu-

lated at the time of grant, 30 August 2022, and expensed over

the vesting period up until 1 November 2022. The fair value

of the program has been estimated to TNOK 1 170 in 2022.

Fair value of the options has been estimated using the Black-

Scholes option pricing model. The options exerciable up until

31 October 2025. Other inputs used in the model are:

-Spot price: NOK 3.39 per option

-Strike price: NOK 3.63 per option

-Volatility: 48.0%

-Dividend: 0.0%

-Risk-free rate: 3.58%

The fair values of James Berger's options have been calculat-

ed at the time of grant, 17 October 2019, and was expensed

over the vesting period of 36 months. The fair value of the

program was estimated to TNOK 12 342 in 2019. Fair value

of the options was estimated using the Black-Scholes option

pricing model.

A total of TNOK 1,176 (TNOK 1,633 in 2021) was expensed in

connection with the option program in 2022. No share options

were exercised in 2022, and per 31.12.22 all options under this

agreement has expired.

As partial payment for work performed for the company, Ten-

et Brandlogic Corp. was granted options in the company. The

options are expensed over the vesting period in 2021. Total ex-

pensed in 2022 is TNOK 0 (TNOK 1,462 in 2021). The options

under this agreement is exerciable per year end, and there is

TNOK 172 options outstanding per 31.12.2022.

NOTES TO THE ACCOUNTS

OPTIONS

(Amounts in NOK 1000)

GROUP

2022

number

2022

WAEP

2021

number

2021

WAEP

Outstandig 01.01. 5 523 0.01 5 351 0.01

Exerciable 01.01 172 0.01 0 -

Granted during the year 1 000 0.01 172 0.01

Forfeited during the year 0 - 0 -

Exercised during the year 0 - 0 -

Expired during the year 5 351 0.01 0 -

Outstandig 31.12. 1 172 0.01 5 523 0.01

Exerciable 31.12. 1 172 0.01 172 0.01

AUDITOR’S FEES Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Audit fees 1 621 1 260 1 537 1 215

Other confirmations 45 0 45 0

Tax advice 0 33 0 31

Other services 0 6 0 6

Total 1 666 1 299 1 582 1 252

VAT is not included in the amounts above. TNOK 24 of the total amount is capitalized direct against equity.

Note 6: Related party transactions

The Group's related parties include shareholders, board mem-

bers and the senior management and their related parties.

RH Industri AS, Hofseth Property AS, Hofseth International

AS, Hofseth Logistics AS, Seafood Farmers of Norway AS,

Hofseth AS, Hofseth Sales AS, Hofseth Aalesund AS, Hofseth

North America, Hofseth Asia, Hofseth Processing AS, Ålesund

Kipervikgate 13 AS and Hofseth Aqua AS are considered to be

related parties to Hofseth BioCare ASA. In these companies,

CEO (up until 29.07.2022), board member and shareholder

in Hofseth Biocare ASA, Roger Hofseth, has significant influ-

ence through ownership interests, leading positions and board

memberships. Further is shareholder Yokorei CO. Ltd. consid-

ered a related party.

All related party transactions have been made in the ordinary

course of the business at the arms length principle. The main

transactions made in 2021 and 2022:

› Purchase of raw materials from Hofseth Sales AS. See fur-

ther details in the agreement below.

› 13 of the company's (16 in the group) lease agreement for

production equipment that are active in 2022 have been

entered into with Hofseth AS, Hofseth International AS and

RH Industri AS and subleased to Hofseth BioCare ASA with

a mark-up of 5-10 % on monthly instalments.

› Other minor administration costs are invoiced from Hof-

seth International AS.

NOTES TO THE ACCOUNTS

› Yokorei Co. Ltd. had a loan to the Group wich has been re-

paid in full during 2022 (TNOK 1,879 as of 31 December

2021). The loan expired on 30 September 2022 and had a

fixed interest rate of 4 %.

› RH Industri AS had provided a subordinated loan to the

group with an outstanding amount of TNOK 22,432 as of 31

December 2021. The loan expired 30 September 2024 and

carries an interest rate of Nibor + 4.5 %, but the full amount

has been convertes to shares in he share issue in July 2022.

› RH Industri AS and Hofseth Sales AS have paid storage

rent of TNOK 0 in 2022 (TNOK 646 in 2021), for goods pur-

chased from the company in 2020.

› Hofseth BioCare ASA had a agent agreement with Hofseth

International AS, Hofseth Sales AS and RH Industri AS re-

cieved agent fees of total TNOK 0 (TNOK 190 in 2021) for

sale of goods stored at the companys storage.

› Hofseth North America has purchased goods worth TNOK

17,750 in 2022 (TNOK 9,971 in 2021).

› Yokorei Co. Ltd. has purchased goods worth TNOK 247 in

2022 (TNOK 207 in 2021).

› The Group rents factory buildings at Midsund and Berkåk

from Hofseth Property AS at a cost of TNOK 12,071 in

2022 (TNOK 10,150 in 2021). The agreement is signed for

15 years, until 2032.

The statement of profit and loss and the balance sheet include the following transactions with shareholders and related parties

to shareholders:

BALANCE SHEET ITEMS Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Right of use assets 108 938 109 917 88 176 89 085

Trade receivables 2 354 2 325 2 243 2 325

Subordinated loan 0 -22 433 0 -22 433

Loan from shareholders 0 -1 879 0 -1 879

Other receivables 0 0 9 577 75

Leasing liabilities -101 661 -109 917 -81 929 -89 085

Trade payables -125 842 -107 094 -122 979 -106 086

Total -116 210 -128 074 -104 913 -127 999

PROFIT AND LOSS ITEMS Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Sales revenue

18 881 14 269 18 881 14 269

Total revenue 18 881 14 269 18 881 14 269

Cost of sales 51 381 68 548 51 381 68 548

Other operating expenses 5 353 12 910 5 271 10 675

Financial expenses 7 960 8 383 6 562 6 762

Total costs 64 694 89 840 63 214 85 985

Raw Material agreements

The company has a 5-year agreement with Hofseth Sales AS

on exclusive rights to all by-products from Hofseth Sales`s

suppliers starting 01.01.2022. Hofseth Sales AS is a 100 %

subsidiary of RH Investments AS, which is closely related to

Roger Hofseth.

Transactions and balances between parent companies and

subsidiaries

The company has sold goods and services to subsidiaries

HBC Berkåk AS for TNOK 40 in 2022 (TNOK 815 in 2021).

The subsidiaries HBC Switzerland GmbH has sold services to

the parent company of TNOK 3 447 (TNOK 0 in 2021) and HBC

Berkåk AS for TNOK 996 in 2022 (TNOK 10 211 in 2021).

The company has agreed on a loan to with HBC Berkåk with a

balance of TNOK 0 as of 31 December 2022 (TNOK 4 976 as

of 31 December 2021), with an agreed interest rate of Nibor

+ 3.0 %. Balance to HBC Therapeutics AS was TNOK 25 as of

31 December 2022 (TNOK 0 as of 31 December 2021) and a

Balance to Hofseth Biocare Rørvik AS was TNOK 75 as of 31

December 2022 (TNOK 75 as of 31 December 2021) Balance

to HBC Switzerland GmbH was TNOK 0 as of 31 December

2022 (TNOK 0 as of 31 December 2021).

NOTES TO THE ACCOUNTS

Note 7: Financial income and expenses

FINANCIAL INCOME Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Interest income 651 613 855 617

Foreign exchange gains 3 917 3 034 3 913 3 034

Total 4 568 3 647 4 768 3 651

FINANCIAL EXPENSES Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Interest expenses 9 954 9 394 8 359 8 175

Impairment of financial assets 0 0 0 4 889

Foreign exchange losses 3 182 2 120 3 163 2 118

Total 13 136 11 577 11 522 15 182

NOTES TO THE ACCOUNTS

Note 8: Income taxes

INCOME TAXES Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Income tax expense

Prior year taxes 0 0 0 0

Tax expense 0 0 0 0

Calculation of taxable income

Loss before tax -137 390 -126 464 -119 367 -122 241

Permanent differences -1 937 4 050 -1 937 4 437

Change in temporary differences 22 581 -16 588 10 505 3 544

Taxable result -116 745 -139 002 -110 799 -114 260

Temporary differences

Fixed assets 19 546 33 932 7 533 9 862

Loss carry forward -1 034 784 -918 039 -976 315 -865 516

Other temporary differences -20 524 -12 329 -20 524 -12 348

Total -1 035 763 -897 436 -989 306 -868 002

Calculated deferred tax asset 22 % 227 868 197 436 217 647 190 960

Deferred tax assets are not recognised in the balance sheet.

RECONCILITATION OF TAX EXPENSE Konsern Morselskap

(Amounts in NOK 1000) 2022 2021 2022 2021

Loss before tax -137 390 -126 464 -119 367 -122 241

Tax 22% -30 226 -27 822 -26 261 -26 893

Permanent differences -426 891 -426 976

Defered tax assest, not recognized 30 652 26 931 26 687 25 917

Total tax expense 0 0 0 0

Note 9: Earnings per share

The Group’s earnings per share are calculated by dividing the

profit for the year attributable to share holders by the weighted

average number of shares outstanding during the year.

Diluted earnings per share are calculated by dividing the pro fit

attributable to the share holders by the weighted average num-

ber of shares outstanding during the year.

EARNINGS PER SHARE Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Profit attributable to share holders -137 390 -126 464 -119 367 -122 241

Weighted average number of shares outstanding 374 737 357 831 374 737 357 831

Earnings per share

-ordinary -0.37 -0.35 -0.32 -0.34

-diluted -0.37 -0.35 -0.32 -0.34

NOTES TO THE ACCOUNTS

Note 10: Intangible asset

2021 Group and Parent

(Amounts in NOK 1000) R&D IT-systems Patents Other Sum

Cost at 01.01.2021 53 743 3 438 3 671 2 627 63 480

Additions 0 987* 1 243 0 2 229

Internally developed 12 598 0 0 0 12 598

Cost at 31.12.2021 66 341 4 425 4 914 2 627 78 307

Depreciation at 01.01.2021 14 843 452 3 341 2 409 21 046

Depreciation charge of the year 3 325 307 281 218 4 132

Impairment

0 0 0 0 0

Impairment and depreciation at 31.12.2021 18 169 759 3 622 2 627 25 178

Net book value at 31.12.2021 48 172 3 666 1 292 0 53 055

Economic life 10 years 5-10 years 10 years 5-10 years 5-10 years

Method of depreciaton Straigt line

depreciation

Straigt line

depreciation

Straigt line

depreciation

Straigt line

depreciation

Straigt line

depreciation

2022 Group and Parent

(Amounts in NOK 1000) R&D IT-systems Patents Other Sum

Cost at 01.01.2022 66 341 4 425 4 914 2 627 78 307

Additions 0 2 355* 0 0 2 355

Internally developed 11 237 0 0 0 11 237

Cost at 31.12.2022 77 579 6 780 4 914 2 627 91 899

Depreciation at 01.01.2022 18 169 759 3 622 2 627 25 178

Depreciation charge of the year 5 282 531 132 0 5 945

Impairment

0 188 0 0 188

Impairment and depreciation at 31.12.2022 23 451 1 478 3 754 2 627 31 311

Net book value at 31.12.2022 54 128 5 302 1 159 0 60 588

Economic life 10 years 5-10 years 10 years 5-10 years 5-10 years

Method of depreciaton Straigt line

depreciation

Straigt line

depreciation

Straigt line

depreciation

Straigt line

depreciation

Straigt line

depreciation

* Some development projects and IT system is under development.

Included in the group’s intangible assets is a webshop de-

veloped in the subsidiary HBC Therapeutics AS, the carrying

amount was TNOK 0 as of 31 December 2022 (TNOK 188 as

of 31 December 2021). The asset in the subsidiary was written

down in full in 2022.

Throughout 2022, HBC R&D has focused on developing, im-

proving, and refining their products and processes. Through

extensive research, positive health effects have been uncov-

ered in the ingredients, making development a critical aspect

that sets HBC's products. Core activities such as research,

development, and documentation are integral to HBC's R&D

work. Additionally, significant investments were made in 2022

towards documenting and testing the trademarked products

including ProGo®, CollaGo®, OmeGo®, and CalGo®. This

work is vital to demonstrate the efficacy and unique properties

of the products during marketing and sales.

Research and development

is crucial for the industrial process of producing the compa-

ny's products, as it involves advanced equipment that may ex-

perience downtime during the testing and production of new,

efficient solutions to enhance profits and reduce costs. The

aim to increase the volume of raw materials necessitates the

optimization of all production stages.

In 2022, HBC continued to enhance their knowledge through

studies and analyzing the ingredients' elements that provide

the desired biological effect. The laboratory and factory spent

more time studying and testing these effects, resulting in

some health effects being recognized by international health

authorities.

The company's operations and products must meet environ-

mental and health requirements, regulations, agreements, and

NOTES TO THE ACCOUNTS

conventions. Meeting these standards required extensive de-

velopment activities. The company has ongoing R&D efforts to

develop more efficient production methods and improve the

products' human use.

The R&D process consists of five steps, which are to further

develop the enzymatic hydrolysis of salmon cutting to pro-

duce unique products with proven health effects, optimize the

handling of raw materials and finished products in the value

chain, develop technology to produce higher quality product

fractions of protein, calcium, and oil, identify, research, and

document bioactivity in the products, and document biosafe-

ty, bioavailability, and biological effects through "in-vitro" and

"in-vivo" studies.

Total research and development costs for 2022 were TNOK

28,521 (2021 TNOK 26,859). Of this, TNOK 11,237 has been

capitalized in 2022 (2021: TNOK 12,598).

The following were the most significant development projects

with related capitalized development expenditures:

The R&D process is divided into four steps:

1. The development of ProGo® peptides for Gastro-Intestinal

(GI) health. The collaboration with Stanford has shown that

SPH provides excellent protection against GI tract inflam-

mation in standard models of inflammatory bowel disease

(IBD). The mode of action is an upregulation of the an-

ti-inflammatory gene system, HMOX1. A proof-of-concept

clinical trial in IBD patients at Stanford is expected to com-

mence during 2023. The capitalized development costs for

2022 were TNOK 3,027.

2. OmeGo® as a Novel anti-eosinophilic therapeutic, as it has

shown through clinical studies to decrease inflammation

in the body. Our efforts at developing a pharmaceutical

lead program around eosinophilia inflammation control is

on-going. Our lead analog, MA-022, has shown a clinical-

ly significant and enhanced level of eosinophil control in

in-vitro. Initial development will focus on eosinophilic eso-

phagitis, an orphan condition that causes pain and difficul-

ty in swallowing. Work for the scaling up of MA-022 synthe-

sis is complete and preclinical in vitro and in vivo work will

commence in 2023. There are no licensed oral options for

EoE and exclusion diets and topical steroids have limited

impact on symptoms. The capitalized development costs

for 2022 were TNOK 2,572.

3. HBC's OmeGo whole salmon oil's underlying drivers of im-

mune health, respiratory & overall health. The broad inflam-

mation-resolving profile of OmeGo®, as demonstrated by

our prior research, is expected to help reduce lung irritation

with an improvement in lung function and quality of life.

Particulate matter pollution is a global health problem im-

pacting lung, cardiovascular and overall health. The capital-

ized development costs for 2022 were TNOK 5,638.

4. The Clinical Trial Unit (CTU) in Ålesund has performed sev-

eral clinical trials and they are still ongoing. This includes

studies for Asthma, Osteopenia and Arthritis. The costs re-

lated to the CTU in 2022 have not been capitalized in 2022.

Trademarks

The Group has registered its trademarks under the interna-

tional Madrid Protocol. The trademarks are ProGo®

for hydro-

lyzed protein, CalGo® for Calcium, PetGo™ for non-soluble

protein and OmeGo® and Brilliant™ for salmon oil.

NOTES TO THE ACCOUNTS

Note 11: Fixed assets

2021 Group Parent

(Amounts in NOK 1000) Machinery and

equipment

Fixtures and

fittings

Total Machinery and

equipment

Fixtures and

fittings

Total

Cost at 01.01.2021 165 637 10 955 176 593 156 863 10 846 167 709

Additions 22 487 436 22 924 19 493 436 19 929

Cost at 31.12.2021 188 125 11 392 199 516 176 356 11 283 187 639

Depreciations at 01.01.2021 111 709 8 822 120 531 108 126 8 752 116 878

Depreciations for the year 13 207 288 13 495 11 846 275 12 121

Depreciations at 31.12.2021 124 916 9 111 134 027 119 972 9 028 129 000

Book value 31.12.2021 63 209 2 281 65 489 56 384 2 255 58 639

Economic life 5-10 years 3-10 years 5-10 years 3-10 years

Method of depreciation Straigt line

depreciation

Straigt line

depreciation

Straigt line

depreciation

Straigt line

depreciation

2022 Group Parent

(Amounts in NOK 1000) Machinery and

equipment

Fixtures and

fittings

Total Machinery and

equipment

Fixtures and

fittings

Total

Cost at 01.01.2022 186 084 13 432 199 516 176 356 11 282 187 639

Additions 2 631 2 149 4 780 1 746 2 149 3 895

Cost at 31.12.2022 188 715 15 581 204 296 178 102 13 431 191 534

Depreciations at 01.01.2022 124 916 9 110 134 027 119 972 9 027 129 000

Depreciations for the year 7 692 2 149 9 841 6 109 2 149 8 258

Depreciations at 31.12.2022 132 608 11 259 143 868 126 081 11 176 137 258

Book value 31.12.2022 56 107 4 322 60 428 52 021 2 255 54 276

Economic life 5-10 years 3-10 years 5-10 years 3-10 years

Method of depreciation Straigt line

depreciation

Straigt line

depreciation

Straigt line

depreciation

Straigt line

depreciation

The company has pledged assets as collateral for loans. See more in note 16.

NOTES TO THE ACCOUNTS

Note 12: Leases

The company and the group as lessee

The company and the group’s right of use assets include manufacturing facilities, machinery and equipment and fixtures and fittings:

2021 Group Parent

(Amounts in NOK 1000) Manu-

fac turing

facilities

Machinery

and

equipment

Fixtures and

fittings

Total Land, manu-

fac turing

facilities

Machinery

and

equipment

Fixtures and

fittings

Total

Cost 01.01.2021 66 078 38 321 2 118 106 517 42 538 35 121 1 585 79 244

Additions 34 516 17 628 0 52 144 34 516 15 317 0 49 833

Disposals 0 0 0 0 0 0 0 0

Costs at 31.12.2021

100 594 55 949 2 118 158 661 77 054 50 438 1 585 129 077

Depreciations 01.01.2021 10 037 16 103 457 26 597 6 867 15 491 446 22 803

Depreciations fot the year 6 953 4 696 75 11 723 5 499 3 925 32 9 457

Disposals 0 0 0 0 0 0 0 0

Depreciations per 31.12.2021 16 990 20 798 532 38 320 12 366 19 416 478 32 303

Carrying amounts 31.12.2021 83 604 35 151 1 586 120 342 64 688 31 022 1 107 96 774

Shortest of lease term or economic

life

15 years 5 years 3-5 years 15 years 5 years 3-5 years

Depreciation method Straigt line

depreciation

Straigt line

depreciation

Straigt line

depreciation

Straigt line

depreciation

Straigt line

depreciation

Straigt line

depreciation

2022 Group Parent

(Amounts in NOK 1000) Manu-

fac turing

facilities

Machinery

and

equipment

Fixtures and

fittings

Total Land, manu-

fac turing

facilities

Machinery

and

equipment

Fixtures and

fittings

Total

Cost 01.01.2022 100 594 55 949 2 118 158 661 77 054 50 438 1 585 129 077

Additions 0 2 464 0 2 464 0 2 254 0 2 254

Disposals 0 0 0 0 0 0 0 0

Costs at 31.12.2022

100 594 58 416 2 118 161 125 77 054 52 692 1 585 131 331

Depreciations 01.01.2022 16 990 20 799 532 38 321 12 366 19 416 478 32 303

Depreciations fot the year 8 682 5 711 45 14 438 6 799 4 918 45 11 762

Disposals 0 0 0 0 0 0 0 0

Depreciations per 31.12.2022 25 672 26 510 577 52 759 19 165 24 377 523 44 065

Carrying amounts 31.12.2022 74 922 31 903 1 541 108 366 57 889 28 315 1 062 87 266

Shortest of lease term or

economiclife

15 years 5 years 3-5 years 15 years 5 years 3-5 years

Depreciation method Straigt line

depreciation

Straigt line

depreciation

Straigt line

depreciation

Straigt line

depreciation

Straigt line

depreciation

Straigt line

depreciation

NOTES TO THE ACCOUNTS

Lease liabilities:

Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Undiscounted lease liabilities and due dates for payments

Less than 1 year 19 496 19 496 14 653 15 939

2-5 years 54 272 62 288 45 237 50 369

More than 5 years 49 479 52 968 39 576 41 154

Total undiscounted lease liabilities 31.12 123 247 134 752 99 465 107 462

Changes in lease liabilities

Total lease liabilities 1.1 112 977 72 302 90 144 48 997

New/changed lease liabilities recognized in the period

2 464 52 144 2 254 49 833

Payment of principal amounts

-12 625 -11 469 -9 850 -8 686

Payment of interest amounts

-8 592 -7 595 -7 053 -5 898

Interest related to the lease liabilities

8 592 7 595 7 053 5 898

Total lease liabilities 31.12

102 815 112 977 82 547 90 144

Current lease liabilities 31.12 (note 16)

12 855 12 099 10 055 9 801

Non-current lease liabilities 31.12 (note 16)

89 960 100 878 72 492 80 343

Cash outflows for lease liabilities

19 496 19 064 14 653 14 584

The lease agreements do not restrict the parent company’s

and the group’s dividend policy or financing opportunities. The

parent company and the group do not have significant residual

value guarantees in the lease agreements.

The parent company and the group’s leases of machinery and

equipment include, in addition to lease payments, a requirement

to maintain and secure the assets (right of use assets). The

terms in the lease agreements varies from 3-7 year, and several

of the agreements include an option to extend the lease. At the

expiry date of the main term of the lease, the lease og the ma-

chinery and equipment may be continued for a lease payment

of 1/12 of the lease payments in the main lease period. The

company may also request to purchase the equipment.

The company and the group’s leases of manufacturing facilities

(Midsund og Berkåk) have lease terms of 15 years, no extension

options, and the leases expire 31 March 2032. When entering

into an agreement the group assesses whether it is reasonably

certain to exercise an option to purchase the assets. The leases

of the manufacturing facilities have no options to purchase.

Leases of fixtures and fittings in the table above contain no ex-

tension or purchase options. The group’s potential future lease

payments which have not been included in the lease liabilities re-

lating to purchase options were TNOK 0 as of 31 December 2022.

Applied practical expedients

The company and the group lease warehouses in which both

the lessor and the company / group have the right to terminate

the agreements on a 3-6 months notice period. For such agree-

ments the company and the group do not recognize lease liabil-

ities and related right of use assets. Such lease payments are

expensed when incurred.

Lease payments for the abovementioned leases amounted

to TNOK 1,707 (TNOK 1,159 in 2021) for fixture and fittings

for the Group and TNOK 2,239 (TNOK 1,450 in 2021) for stor-

age, and for the parent company TNOK 1,611 (TNOK 1,046 in

2021) for fixture and fittings TNOK 2,094 (TNOK 1,062 i 2021)

for storage (see note 4). Cash flow from these lease obliga-

tions is approximately equal to the amount expensed and is

included in net cash flow from operating activities.

NOTES TO THE ACCOUNTS

Note 13: Changes in liabilities from financial activities

GROUP

(Amounts in NOK 1000) 1.1.2021 Downpayment Withdrawals New leases Other adjustments 31.12.2021

Short-term interestbearing liabilities

(excl. posts below)

64 078 -3 428 0 0 3 425 3 425

Short-term leasing liabilities 8 224 0 0 0 3 875 12 099

Long-term interest-bearing debt

(excl. posts below)

3 768

-2 416 0 0 0 1 352

Long-term leasing liabilities 64 078 -10 255 0 50 980 -3 925 100 878

Subordinary loan 21 346 0 1 087 0 0 22 433

Total 100 844 -16 099 1 087 50 980 3 375 140 187

PARENT

(Amounts in NOK 1000) 1.1.2021 Downpayment Withdrawals New leases Otherdjustments 31.12.2021

Short-term interest-bearing

liabilities(excl. posts below)

2 884 -2 884 0 0 1 879 1 879

Short term leasing liabilities 6 427 0 0 0 3 374 9 801

Long-term interest-bearing debt

(excl. posts below)

1 875 -1 875 0 0 0 0

Long-term leasing liabilities 42 570 -6 761 0 48 940 -4 406 80 343

Subordinary loan 21 346 0 1 087 0 0 22 433

Total 75 102 -11 520 1 087 48 940 847 114 456

GROUP

(Amounts in NOK 1000) 1.1.2022 Downpayment Withdrawals New leases Other adjustments 31.12.2022

Short-term interestbearing liabilities

(excl. posts below)

3 425 -3 425 0 0 540 540

Short-term leasing liabilities 12 099 0 0 0 756 12 855

Long-term interest-bearing debt

(excl. posts below)

1 352

-540 0 0 0 812

Long-term leasing liabilities 100 878 -12 625 0 2 464 -757 89 960

Subordinary loan 22 433 -1 879 0 0 -20 554 0

Total 140 187 -18 469 0 2 464 26 836 104 167

PARENT

(Amounts in NOK 1000) 1.1.2022 Downpayment Withdrawals New leases Other adjustments 31.12.2022

Short-term interest-bearing

liabilities(excl. posts below)

1 879 -1 879 0 0 0 0

Short-term leasing liabilities 9 801 0 0 0 254 10 055

Long-term interest-bearing debt

(excl. posts below)

0 0 0 0 0 0

Long-term leasing liabilities 80 343 -9 850 0 2 254 -255 72 492

Subordinary loan 22 433 -1 879 0 0 -20 554 0

Total 114 456 -13 608 0 2 464 -20 555 82 547

NOTES TO THE ACCOUNTS

Note 14: Fair value measurement

The following tables provide fair value measurement hierarchy of the group's financial liabilities.

The fair value of financial assets is not disclosed as the fair value is approximately book value.

LIABILITIES MEASURED AT FAIR VALUE, GROUP

(Amounts in NOK 1000) Date of

measurement

Amount Active markets

(Level 1)

Observed market

prices (Level 2)

Non-observed

input (Level 3)

Liabilities in which fair value is stated in note 18:

Interest-bearing loans

Interest-bearing loans floating interest rate 31.12.21 23 784 0 0 23 784

Interest-bearing loans fixed interest rate 31.12.21 1 879 0 0 1 879

LIABILITIES MEASURED AT FAIR VALUE, PARENT COMPANY

(Amounts in NOK 1000) Date of

measurement

Amount Active markets

(Level 1)

Observed market

prices (Level 2)

Non-observed

input (Level 3)

Liabilities in which fair value is stated in note 18:

Interest-bearing loans

Interest-bearing loans floating interest rate 31.12.21 22 433 0 0 22 433

Interest-bearing loans fixed interest rate 31.12.21 1 879 0 0 1 879

Interest-bearing loans floating interest rate from

subsidiaries

31.12.21 4 979 0 0 4 979

LIABILITIES MEASURED AT FAIR VALUE, GROUP

(Amounts in NOK 1000) Date of

measurement

Amount Active markets

(Level 1)

Observed market

prices (Level 2)

Non-observed

input (Level 3)

Liabilities of which the fair value has been provided

in note 18:

Interes-bearing loan

Interest-bearing loan floating interest rates 31.12.22 1 352 0 0 1 352

Interest-bearing loan fixed interest rates 31.12.22 0 0 0 0

LIABILITIES MEASURED AT FAIR VALUE, PARENT COMPANY

(Amounts in NOK 1000) Date of

measurement

Amount Active markets

(Level 1)

Observed market

prices (Level 2)

Non-observed

input (Level 3)

Liabilities of which the fair value has been provided

in note 18:

Interes-bearing loan

Interest-bearing loan floating interest rates 31.12.22 0 0 0 0

Interest-bearing loan fixed interest rates 31.12.22 0 0 0 0

Interest-bearing loan from subsidiary floating interest

rates

31.12.22 0 0 0 0

NOTES TO THE ACCOUNTS

Note 15: Financial assets

FINANCIAL ASSETS Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Amortized cost receivables:

Accounts receivable 14 072 10 089 13 803 9 970

Other current receivable 0 0 9 577 75

Total financial assets 14 072 10 089 23 380 10 045

Total current financial assets 14 072 10 089 23 380 10 045

Total non-current financial assets 0 0 0 0

IFRS 9 requires the Group's to recognize a provision for expect-

ed credit losses for all debt instruments that are not held at

fair value through profit or loss, and for contract assets. The

company and the group have a high degree of collateral for

credit insurance on all accounts receivables and collaterals on

other receivables and loans and, hence, no significant provi-

sions have been made in relation to these, see note 20.

NOTES TO THE ACCOUNTS

Note 16: Interest-bearing debt and borrowings

NON-CURRENT DEBT Group Parent

(Amounts in NOK 1000) Effective

interest rate

Maturity 2022 2021 2022 2021

Rennebu Municipality NIBOR+2,0% 2024- 812 1 352 0 0

Loan from shareholder 4,0% 2024- 0 0 0 0

Subordinary loan NIBOR+4,5% 2024- 0 22 433 0 22 433

Lease liability 6% - 8% 2024- 89 960 100 878 72 492 80 343

Total 90 772 124 662 72 492 102 776

CURRENT DEBT Group Parent

(Amounts in NOK 1000) Effective

interest rate

Maturity 2022 2021 2022 2021

Rennebu Municipality NIBOR+2,0% 2023 540 541 0 0

Loan from shareholder* 4,0% 2023 0 1 879 0 1 879

Subordinary loan 6,6% 2023 0 0 0 0

Lease liability 6% - 8% 2023 12 855 12 099 10 055 9 801

Total 13 395 14 519 10 055 11 680

Sum interest-bearing debt 104 167 139 181 82 548 114 456

*Loan is issued in JPY - unrealized loss calculated to TNOK 0 per 31.12.2021, repaid per 31.12.2022.

The parent company has a credit facility in bank with a credit

limit of TNOK 37,000. The credit limit was unused as of 31

December 2022.

In addition to the above, the parent company had a current

interest- bearing liabilities towards the subsidiary HBC Berkåk AS

amounting to

TNOK 0 as of 31 December 2022 (TNOK 4,976

as of 31 December 2021). The interest rate had been agreed to

NIBOR + 3 %.

Collaterals

Credit facility in parent company is secured in trade receivable andinventory.

(Amounts in NOK 1000) 2022 2021

Trade receivable 13 803 9 970

Inventory 115 983 90 244

Total 129 786 100 215

The Group insures significant receivables against credit risk. The insurance is limited to a maximum of TNOK 13,600 and a

coverage rate of 90 %.

Financial covenants

Credit facility Sparebank1 Nordvest

As of 30 June and 31 December each year, the company will

have a liquidity reserve of at least NOK 5 million in the form of

cash and unused drawing rights in operating credit facility. The

book value of equity in Hofseth BioCare ASA shall at all times

amount to at least 25 % of the book value of the company's

assets. The company had an equity ratio of 41.7 % and was

thus not in breach of covenants given in the loan agreement

with Sparebank1 per 31 December 2022.

NOTES TO THE ACCOUNTS

Note 17: Financial assets and liabilities by category

Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Financial assets at amortized cost:

Long-term financial lending and deposit 0 987 0 987

Accounts receivable 14 072 10 089 13 803 9 970

Other financial loans (see note 15) 0 0 9 577 75

Total financial assets amortized cost 14 072 11 076 23 380 11 033

Total financial assets 14 072 11 076 23 380 11 033

Fair value is equal to carrying amount.

Financial liabilities at amortized cost:

Interest-bearing short-term debt 0 1 879 0 1 879

Accounts payable 145 752 124 165 140 551 121 476

Interest-bearing short-term debt subsidiaries 0 0 0 4 976

Other short-term debt (note 23) 13 081 12 249 11 720 15 367

Non-current interest-bearing debt 812 23 784 0 22 433

Non-current leasing obligations 89 960 100 878 72 492 80 343

Total financial liabilities amortized cost 249 605 262 955 224 764 246 473

LEVEL 3, PARENT 2022 2021

(Amounts in NOK 1000) Booked value Fair value Booked value Fair value

Current interest-bearing liabilities 10 055 10 055 11 680 11 663

Non-current interest-bearing liabilities 72 492 72 492 102 776 103 511

Interest-bearing short-term debt of subsidiaries 0 0 4 976 4 881

LEVEL 3, GROUP

Non-current interest-bearing liabilities 13 395 13 395 14 519 14 502

Interest-bearing short-term debt of subsidiaries 90 772 90 772 124 662 125 398

Presentation of fair value measurements by level in the fair

value hierarchy:

Level 1: Quoted prices in active markets for identical assets

or liabilities

Level 2: Valuation based on other observable factors either di-

rectly (price) or indirectly (derived from price) than the quoted

price (used in level 1) for the asset or liability

Level 3: Valuation based on factors not obtained from observ-

able market data (unobservable conditions)

The fair value of interest-bearing current and long-term fixed

rate debt (level 3) is calculated by comparing the Group and

parent company's conditions with market terms for debt with

similar maturity and credit risk.

The company has no other financial instruments measured at

fair value, except for forward exchange contracts. The carrying

value of cash and cash equivalents, short-term receivables, and

short-term payables approximates fair value as these instru-

ments have short maturities, and «ordinary» conditions.

NOTES TO THE ACCOUNTS

Note 18: Financial risk management

Financial risk

Through its activities, the Group is exposed to various types of

financial risks: market risk, credit risk and liquidity risk. Man-

agement monitors these risks continuously and establishes

guidelines for their management. The Group's overall risk man-

agement program focuses on the unpredictability of the finan-

cial markets and seeks to minimize potential adverse effects

on the Group’s financial results.

The Group may use financial derivatives to hedge against cer-

tain risks. The company has loans from credit institutions and

financial leasing arrangements with the purpose of obtaining

capital for investments in the Groups operations. In addition,

the company has financial instruments such as accounts re-

ceivable and accounts payable, etc., which are directly related

to the daily operational activities.

Interest rate risk

Since the company and the group have no significant inter-

est-bearing assets, the exposure to interest rate risk is through

their financing activities. The company's and the group's inter-

est rate risk is related to non-current interest-bearing loans,

current interest-bearing loans and lease liabilities. Loans with

floating interest rates lead to interest rate risk for the company's

and the Group's cash flow. See note 17 for the book value and

fair value of the financing activities and note 16 for interest rate

terms relating to interest-bearing financing obligations as of 31

december 2022.

For the company's and the Group's loan portfolios that have

floating interest rates, this means that the company is affected

by changes in the interest rate level. The loans are recognized

at amortized cost.

The following table shows the Group's sensitivity to interest rate

fluctuations. The calculation includes all interest-bearing instru-

ments and financial interest rate derivatives to the extent that

they are present.

Interest rate – sensitivity year Effect on interest rate – basis-point Effect on profit – before tax (Amounts in NOK 1000)

2021 +100 -1 130

-100 1 130

2022 +100 -1 042

-100 1 042

Average interest rates on financial instruments were as follows:

Average interest rate in % 2022 2021

Loan from shareholders 4.00 4.00

Secured debt 6.64 5.09

Lease liabilities 5.30 5.97

The following table shows the parent company's sensitivity to interest rate fluctuations. The calculation includes all interest-

bearing instruments and financial interest rate derivatives to the extent that they are present.

Interest rate – sensitivity year Effect on interest rate – basis-point Effect on profit – before tax (Amounts in NOK 1000)

2021 +100 -901

-100 901

2022 +100 -1 036

-100 1 036

Foreign exchange risk

The parent company and the group had a foreign exchange

loan in JPY (repaid in full in 2022) and a large part of their op-

erating income in foreign currency and, to a lesser extent, the

purchase of input factors in foreign currency, and are there-

fore exposed to currency risk. Management has monitored

movements in the foreign exchange market and has assessed

hedging strategies in 2022 based on the parent company's

and the group's contractual and predictable income streams.

The parent company and the group therefore entered into for-

ward exchange contracts both in 2021 and in 2022 in order to

secure the Group's budgeted future sales in foreign currency

(Euro and USD), but have not used hedge accounting. The par-

ent company and the group had no positions per 31 December

2022 or 31 December 2021.

NOTES TO THE ACCOUNTS

The below table demonstrates the sensitivity of possible

changes in EUR, USD and JPY when all other variables are

constant. The effect on the parent company's and the Group's

profit before tax is due to changes in the fair value of monetary

assets and liabilities, including forward exchange contracts. If

the company had used hedge accounting, a currency change

would also have resulted in changes to the OCI. The company

does not use hedge accounting.

Change in currency Change in NOK Effect on profit before tax Effect on balance

(Amounts in NOK 1000) to foreign

currency

EUR USD JPY USD EUR JPY

2021 +10%

2 581 2 425 -8 n/a n/a 188

-10 % -2 581 -2 425 8 n/a n/a -188

2022 +10% 556 306 -5 n/a n/a n/a

-10 % -556 -306 5 n/a n/a n/a

Credit risk

The parent company and the Group are exposed to credit risk

primarily related to accounts receivable, non-current financial

loans, current financial loans, as well as other financial activi-

ties including cash and cash equivalents (bank deposits).

The Group limits its exposure to credit risk through a credit rat-

ing of its customers before credit is given. The Group has cred-

it insurance for all its significant accounts receivable through

Coface Norway (see 20 for further information on credit expo-

sure and maturity analyzes on accounts receivable).

The maximum risk exposure of trade receivables for the group

as of 31 December 2022 is TNOK 14,072 (TNOK 10,089 as of

31 December 2021), and for parent company TNOK 13,803

(TNOK 9,970 as of 31 December 2021). The risk of loss on

accounts receivable is considered low and there has been no

need to provide for losses. See note 20 for further information.

Loan to subsidary of TNOK 9,577 (TNOK 75 in 2021), where

credit risk is considered low. (see note 15, 17 and 20 for further

information on financial loans and other current receivables).

Credit risk for cash and cash equivalents, including bank de-

posits, is managed by the Group's management. The Group's

surplus liquidity is invested by bank deposits with a financial

counterparty with low credit risk. The Group has no investments

in excess liquidity in debt or equity instruments.

The Group has not provided any guarantees for third-party debt.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet

its financial obligations as they fall due. The Group's approach

to liquidity management is to ensure, to the extent possible,

that it will always have sufficient liquidity to meet its liabili-

ties when due, both under normal and stressed conditions,

without incurring unacceptable losses or risking damage to

the Group’s reputation. Cash flows are regularly monitored

by the finance department to ensure that the parent company

has sufficient cash to meet operational commitments, and at

any time to maintain sufficient flexibility in the form of credit

facilities so that it does not violate limits or covenants for any

of the loans. The parent company and the Group aims to have

sufficient cash, cash equivalents or credit opportunities in the

medium term to cover interest and principal payments in the

short term. Please also refer to note 1 section Going concern.

As of 31 December 2022 the group had MNOK 32,4 in cash,

of which MNOK 2,6 were restricted cash as of 31 December

2022. As of 31 December 2021 the group had MNOK 49.9 in

cash, of which MNOK 2,7 were restricted cash.

The group expects to have a stable production level with sta-

ble quality which satisfies the requirements for human quality.

The activities to increase sales to existing customers, as well

as the expectation of increased sales of oil, water-soluble pro-

tein, non-soluble protein and calcium could result in significant

improvement in the company’s cash flows. Expected cash

flows are subject to uncertainties related to achieved sales

prices and volume.

Risk factors should be considered in conjunction with the risk

factors described in note 2 accounting estimates.

The table below shows the maturity profile of the Group's

financial liabilities based on contractual undiscounted pay-

ments, classified according to maturity structure, that is, taken

into account contracts with fixed maturity dates. When the

counterparty can make an election of when an amount is to be

paid, the liability is included in the basis covering the earliest

date on which the entity can be required to pay. Financial liabil-

ities that may be required to be paid on demand are included

in the «within 1-3 months» column.

NOTES TO THE ACCOUNTS

2021 Group

(Amounts in NOK 1000)

1-3 months 4-6 months 7-9 months 10-12

months

2023 2024 2025 2026 > 5 years Total

Interest bearing debt to

financial institutions

0 299 0 295 577 561 274 0 0 2 006

Loan and subordinated

loan from shareholders

864 858 947 252 1 009 22 517 0 0 0 26 448

Lease libilities

4 920 4 890 4 859 4 828 17 863 16 045 15 252 13 128 52 968 134 752

Trade payables

124 165 0 0 0 0 0 0 0 0 124 165

Other current liabilities

7 921 4 328 0 0 0 0 0 0 0 12 249

Total

137 870 10 374 5 806 5 375 19 450 39 122 15 526 13 128 52 968 299 619

2022 Group

(Amounts in NOK 1000)

1-3 months 4-6 months 7-9 months 10-12

months

2024 2025 2026 2027 > 5 years Total

Interest bearing debt to

financial institutions

0 291 0 287 561 274 0 0 0 1 412

Loan and subordinated

loan from shareholders

0 0 0 0 0 0 0 0 0 0

Lease libilities

4 659 4 593 4 464 4 429 16 089 13 867 12 540 11 777 49 479 121 895

Trade payables

145 752 0 0 0 0 0 0 0 0 145 752

Other current liabilities

8 692 4 389 0 0 0 0 0 0 0 13 081

Total

159 103 9 273 4 464 4 715 16 650 14 141 12 540 11 777 49 479 282 140

2021 Parent

(Amounts in NOK 1000)

1-3 months 4-6 months 7-9 months 10-12

months

2022 2023 2024 2025 > 5 years Total

Interest bearing debt to

financial institutions 0 0 0 0 0 0 0 0 0 0

Loan and subordinated

loan from shareholders

864 858 947 252 1 009 22 517 0 0 0 26 448

Lease libilities

4 025 3 998 3 971 3 944 14 460 12 833 12 187 10 889 41 154 107 462

Trade payables

121 476 0 0 0 0 0 0 0 0 121 476

Other current liabilities

11 715 3 652 0 0 0 0 0 0 0 15 367

Total

138 080 8 509 4 918 4 196 15 470 35 350 12 187 10 889 41 154 270 753

2022 Parent

(Amounts in NOK 1000)

1-3 months 4-6 months 7-9 months 10-12

months

2024 2025 2026 2027 > 5 years Total

Interest bearing debt to

financial institutions 0 0 0 0 0 0 0 0 0 0

Loan and subordinated

loan from shareholders

0 0 0 0 0 0 0 0 0 0

Lease libilities

3 740 3 680 3 629 3 605 13 263 11 576 10 541 9 856 39 576 99 465

Trade payables

140 551 0 0 0 0 0 0 0 0 140 551

Other current liabilities

7 817 3 903 0 0 0 0 0 0 0 11 720

Total

152 108 7 538 3 629 3 605 13 263 11 576 10 541 9 856 39 576 251 737

NOTES TO THE ACCOUNTS

The group and the parent company signed in February 2020 a

new credit facility for up until TNOK 37,000 with SpareBank 1

Nordvest for working capital need related to future sales con-

tracts. In addition to the available cash and cash equivalents

as of 31 December 2022, this secures the group and the com-

pany sufficient liquidity for 2023. See note 16 on interest-bear-

ing debt for further information.

In the future, the management and the board will continue to

prioritize the work on an appropriate and long-term financing

of Hofseth BioCare ASA.

Capital structure and equity

The group and the parent company's objectives with respect

to capital management is to ensure the continuation as a

going concern, to provide returns to shareholders and other

stakeholders, and to maintain an optimal capital structure to

reduce capital costs. By ensuring sound ratios between equity

and debt the group and the parent company will support its

operations, thus maximizing the value of its shares.

The parent company manages its capital structure and makes

necessary changes to it on the basis of an ongoing assess-

ment of the financial conditions under which the business is

run, and the prospects seen in the short and medium term,

including any adjustment of dividend shares, buyback of own

shares, reduction of share capital or issuance of new shares.

There has been no change in the policy in this area in 2022.

The Group's equity ratio was 36.0 % as of 31 December 2022

and (33.7 % as of 31 December 2021). The parent company's

equity ratio was 41.7 % as of 31 December 2022 (36.2 % as of

31 December 2021).

Note 19: Inventory

INVENTORY Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Salmon oil 4 803 1 611 4 803 1 611

Soulible protein 32 083 34 492 32 083 34 492

Calcium 48 268 43 517 48 268 43 517

Non-soluble protein and other 3 558 2 647 3 558 2 647

Webshop products 11 694 1 164 11 694 1 164

Total finished goods 100 407 83 431 100 407 83 431

Packaging and auxiliary materials 16 118 7 382 15 577 6 813

Total inventory 116 525 90 813 115 983 90 244

Provision for obsolescence of TNOK 19,145 as of 31 Decem-

ber 2022 compared to TNOK 10,608 as of 31 December 2021.

Profit effect change in obsolescence provisions is included in

cost of goods with TNOK 8 537 in 2022 (TNOK 400 in 2021).

See notes 2, 3 and 4 for more information.

The Group has stored water-soluble protein and calcium. The

contracted sales value amounts to TNOK 64,035 and has

been recognized as revenue in 2017, 2018 and 2019, as and

when the customers are taking over the risk and control of the

goods. Of an incoming stock of 1,785 tonnes, 49 tonnes were

taken out of stock during 2022 (589 tonnes in 2021, and 689

tonnes in 2020) It has not been sales through 2021 and 2022

that have increased the stock.

NOTES TO THE ACCOUNTS

Note 20: Trade receivables and other current receivables

TRADE RECEIVABLES Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Trade receivables related parties 2 243 2 324 2 243 2 324

Trade receivables other 11 827 7 765 11 560 7 646

Sum trade receivables 14 072 10 089 13 803 9 970

Provision for expected credit losses 0 0 0 0

Accounts receivable are not interest-bearing receivables and

general terms and conditions for payment are from 7 to 120

days. All significant accounts receivables are credit secured

by Coface Norway, limited to a maximum of MNOK 11.5 and

with a coverage rate of 90 %. Historical credit losses for cus-

tomers over the past five years are approximately TNOK 210.

AGING OF TRADE RECEIVABLES - Group

(Amounts in NOK 1000) Total Not due <30d 30-60d 60-90d >90d

2022

Accounts receivables 14 072 10 449 2 657 196 35 734

Credit-secured share 11 453 7 850 2 842 170 27 564

Expected credit loss

2021

Accounts receivables 10 089 8 346 1 743 0 0 0

Credit-secured share 7 625 5 896 1 729 0 0 0

Expected credit loss 0 0 0 0 0 0

AGING OF TRADE RECEIVABLES - PARENT

(Amounts in NOK 1000) Total Not due <30d 30-60d 60-90d >90d

2022

Accounts receivables 13 803 10 181 2 657 196 35 734

Credit-secured share 11 453 7 850 2 842 170 27 564

Expected credit loss 0 0 0 0 0 0

2021

Accounts receivables 9 970 8 271 1 699 0 0 0

Credit-secured share 7 625 5 896 1 729 0 0 0

Expected credit loss 0 0 0 0 0 0

The Group has established a model in which the Group calcu-

lates provisions for credit losses by multiplying the expected

credit losses by the proportion of non-credit-secured accounts

receivable. The Group uses an increasing factor for expected

credit losses according to maturity analyzes above. When

analyzing future information about the Group's customers and

markets, no future challenges are listed today which indicate

that there will be a significant credit loss in the future (see and

note 18 on credit risk). The Group and the parent company

have TNOK 0 in provisions for losses on accounts receivable

both in 2022 and 2021.

OTHER CURRENT RECEIVABLES Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Prepayments 1 505 1 610 1 209 1 356

VAT receivable 6 110 5 535 5 580 5 063

Intercompany Group 0 0 9 577 75

Benefit funds 4 383 4 509 4 209 4 122

Other 726 7 833 727 7 833

Total 12 724 19 488 21 301 18 449

NOTES TO THE ACCOUNTS

Note 21: Cash and cash equivalents

Deposits with a credit institution totaled TNOK 32,427 as of

31 December 2022 and TNOK 49,921 as of 31 December 2021

and the Group earns interest income according to agreed

floating interest rate terms.

At 31 December 2022, restricted funds for the Group amount-

ed to TNOK 2,546 which derives from the employees' tax de-

ductions. As of 31 December 2021, this amounted to TNOK

2,710.

Note 22: Equity investments

Subsidiaries Country Head

office

capital

Owner-

ship

Voting

Earnings

2022

Equity

31.12.2022

HBC Berkåk AS Norway Rennebu 100 100% 100% -17 117 -6 074

HBC Therapeutics AS Norway Ålesund 2 000 100% 100% -266 -267

HBC Switzerland GmbH Switzerland Zürich CFH20 100% 100% -185 3

Hofseth BioCare Rørvik AS Norway Rørvik 100 51% 51% -3 -1 411

Hofseth Biocare Americas Holdings Inc. USA Mendham, NJ 0 100% 100% n/a n/a

Current liabilities to subsidiaries amount to TNOK 0 as of 31

December 2022 (current liabilities TNOK 4,976 in 2021). The

shares in the subsidiary HBC Berkåk AS have been written

down to book equity as of 31 December 2021.

Company Country Head office Share capital Ownership Voting share

Atlantic Delights Ltd. Hong Kong Hong Kong HKD 6 163 34% 34%

Atlantic Delights ltd

The parent company and the group acquired 34 % of Atlantic

Delights Ltd., Hong Kong on 27 August 2020, through a share

issue with a nominal value of TNOK 6,517 in the company. Es-

timated surplus value related to customer base amounts to

TNOK 3,395 calculated at the time of acquisition and which is

depreciated on a straight-line basis over 5 years. Profit share

from the company in the ownership period is included after tax

expense and amortization of surplus value.

INVESTMENT IN ASSOCIATED COMPANY

ATLANTIC DELIGHTS LTD

Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Net asset 1.1. 5 764 5 733 6 517 6 517

Access 0 0 0 0

Amitization added value -679 -679 0 0

Profit share after tax 475 709 0 0

Dividend 0 0 0 0

Net asset 31.12. 5 560 5 764 6 517 6 517

FINANCIAL INFORMATION IN ASSOCIATED COMPANY

ATLANTIC DELIGHTS LTD

Group

(Amounts in NOK 1000) 2022 2021

Current assets 9 886 6 456

Fixed assets 3 863 5 083

Current liabilities -2 -636

Non-current liabilities -2 717 -1 268

Operating revenue 2 668 3 220

Total earnings 777 -456

NOTES TO THE ACCOUNTS

Note 23: Accounts payable and other short-term liabilities

ACCOUNTS PAYABLE Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Accounts payable 19 910 17 071 17 572 15 390

Accounts payable related companies 125 842 107 094 122 979 106 086

Total 145 752 124 165 140 551 121 476

Accounts payable are not interest-bearing and normal maturity is from 0 to 60 days. For settlement and terms for accounts

payable with related parties, see information in note 6.

OTHER SHORT-TERM LIABILITIES Group Parent

(Amounts in NOK 1000) 2022 2021 2022 2021

Public duties payable 4 003 4 101 3 476 3 507

Accrued holiday pay 4 546 4 328 3 903 3 652

Other accrued costs 4 532 3 820 4 340 3 232

Short-term debt to group companies 0 0 0 4 976

Total 13 081 12 249 11 720 15 367

NOTES TO THE ACCOUNTS

Note 24: Share capital, shareholders and dividends

As of 31 December 2022, Hofseth BioCare ASA had NOK

3,950,810 in share capital, divided into 395,081,030 shares,

each with a nominal value of NOK 0.01. All shares are fully paid.

There is only one class of shares and all shares have equal vot-

ing rights and equal rights to dividends. The 20 largest share-

holders of Hofseth BioCare ASA as of 31 December 2022 are:

Largest shareholders # of shares % share

SIX SIS AG 77 528 323 19.62

RH INDUSTRI AS 69 300 190 17.54

HOFSETH INTERNATIONAL AS 58 944 778 14.92

YOKOREI CO. LTD 40 951 333 10.37

GOLDMAN SACHS INTERNATIONAL 22 450 000 5.68

BRILLIANT INVEST AS 11 000 000 2.78

GOLDMAN SACHS & CO. LLC 9 251 830 2.34

CREDIT SUISSE(Switzerland) LTD. 9 195 181 2.33

CITIBANK, N.A. 8 015 022 2.03

The Bank of New York Mellon SA/NV 4 959 151 1.26

JPMorgan Chase Bank, N.A., London 4 919 301 1.25

UBS Switzerland AG 3 968 288 1.00

LGT BANK AG 3 447 692 0.87

BOMI FRAMROZE HOLDING AS 3 253 370 0.82

The Bank of New York Mellon 2 802 952 0.71

Saxo Bank A/S 2 693 890 0.68

INITIA AB 2 636 340 0.67

CLEARSTREAM BANKING S.A. 2 486 470 0.63

VERDIPAPIRFONDET DNB SMB 2 482 035 0.63

The Northern Trust Comp, London Br 2 433 865 0.62

In total, the 20 largest shareholders

342 720 011 86.75

Total others

52 361 019 13.25

Total number of shareholders

395 081 030 100.00

Total no. of shareholders: 1,407

Shares owned by CEO and the Board 2022 2021

Jon Olav Ødegård* 2 964 039 2 894 039

Roger Hofseth* 128 444 968 110 723 444

Christoph Baldegger 700 000 700 000

Kristin Fjellby Grung 0 0

Torill Standal Eliassen* 200 000 200 000

Crawford Currie* 750 000 750 000

Amy Novogratz* 22 450 000 12 100 000

Total 154 449 007 127 437 483

*Includes shares owned by related companies and persons.

NOTES TO THE ACCOUNTS

Note 25: New accounting standards with future effective date

The standards and interpretations that have been adopted up

to the time of presentation of the consolidated financial state-

ments, but where the date of entry into force is forthcoming,

are stated below.

The Group's intention is to implement the relevant changes at

the date of entry into force, provided that the EU approves the

changes before the presentation of the consolidated financial

statements.

Note 26: Subsequent events

No major events have occoured between 31.12.2022 and the

date of this Annual report.

THE BOARD OF DIRECTOR’S REPORT 2022

Declaration of the Board of Directors and CEO in Hofseth BioCare ASA

We confirm that the financial statements for the period 1 Jan-

uary to 31 December 2022 to the best of our knowledge, have

been prepared in accordance with IFRS as adopted by the EU

/ applicable accounting standards and that the financial state-

ments give a true and fair view of the Group's assets, liabili-

ties, financial position and results of operations, and that the

annual report gives a fair view of the financial performance

and position of the Group, together with a description of the

main risks and uncertainties faced by the Group.

Hofseth BioCare ASA Board of Directors,

Ålesund, 30March 2023

Kristin Fjellby Grung Torill Standal Eliassen Crawford Currie Christoph Baldegger

Chair of the board Board member Board member Board member

Amy Novogratz Roger Hofseth Jon Olav Ødegård

Board member Board member CEO

CHAPTER 4

Auditors report

AUDITORS REPORTAUDITORS REPORT

Statsautoriserte revisorer

Ernst & Young AS

Thormøhlens gate 53 D, 5006 Bergen

Postboks 6163, 5892 Bergen

Foretaksregisteret: NO 976 389 387 MVA

Tlf: +47 24 00 24 00

www.ey.no

Medlemmer av Den norske Revisorforening

A member firm of Ernst & Young Global Limited

INDEPENDENT AUDITOR'S REPORT

To the Annual Shareholders' Meeting of Hofseth Biocare ASA

Opinion

We have audited the financial statements of Hofseth Biocare ASA (the Company), which comprise the

financial statements of the Company and the consolidated financial statements of the Company and its

subsidiaries (the Group). The financial statements of the Company and the Group comprise the statement

of financial position as at 31 December 2022 and the statement of comprehensive income, statement of

cash flows and statement of changes in equity for the year then ended, and notes to the financial

statements, including a summary of significant accounting policies.

In our opinion, the financial statements comply with applicable legal requirements and give a true and fair

view of the financial position of the Company and the Group as at 31 December 2022 and their financial

performance and cash flows for the year then ended in accordance with International Financial Reporting

Standards as adopted by the EU.

Our opinion is consistent with our additional report to the audit committee.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our

responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of

the financial statements section of our report. We are independent of the Company and the Group in

accordance with the requirements of the relevant laws and regulations in Norway and the International

Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants

(including International Independence Standards) (IESBA Code), and we have fulfilled our other ethical

responsibilities in accordance with these requirements. We believe that the audit evidence we have

obtained is sufficient and appropriate to provide a basis for our opinion.

To the best of our knowledge and belief, no prohibited non-audit services referred to in the Audit

Regulation (537/2014) Article 5.1 have been provided.

We have been the auditor of the Company for 9 years from the election by the general meeting of the

shareholders on 22.07.2014 for the accounting year 2014.

Material uncertainty related to going concern

We draw attention to note 1 in the financial statements and the Board of Director’s report, which

describes that the Company and Group are dependent on increased production and sales with a higher

average price, and or additional capital inflows through loans or equity in 2023 to continue as going

concern. These events or conditions, along with other matters as set forth in note 1 and the Board of

Director’s report, indicate that a material uncertainty exists that may cast significant doubt on the

Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our

audit of the financial statements for 2022. In addition to the matter described in the Material uncertainty

related to going concern section, we have determined the matters described below to be the key audit

matters to be communicated in our report. These matters were addressed in the context of our audit of

the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate

AUDITORS REPORTAUDITORS REPORT

Independent auditor's report - Hofseth Biocare ASA 2022

A member firm of Ernst & Young Global Limited

opinion on these matters. For each matter below, our description of how our audit addressed the matter is

provided in that context.

We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial

statements section of our report, including in relation to these matters. Accordingly, our audit included the

performance of procedures designed to respond to our assessment of the risks of material misstatement

of the financial statements. The results of our audit procedures, including the procedures performed to

address the matters below, provide the basis for our audit opinion on the financial statements.

Allocation of production costs as part of manufacturing cost of finished products

Basis for the key audit matter

The Group had inventory of TNOK 116 525 and

the parent company had inventory of TNOK 115

983 per 31 December 2022. Four types of

finished goods are produced from a common

production process based on the same input

factors. Allocation of production costs is

calculated on the basis of the expected sales

values of the individual finished products

multiplied with the relative share of the production

yield. As the allocation of production costs involve

significant judgement, this was a key audit matter.

Our audit response

We evaluated the management`s sales values in

the model, by comparing the sales values against

representative prices achieved through sales in

2022. We tested the production yield in the model

against reported numbers from factory, and

production costs in the model against actual

costs. We tested the model for allocation of

production costs being mathematically correct.

We refer to note 2, 3, 6 and 19.

Recognition of intangible assets

Basis for the key audit matter

The Group`s recognized intangible assets was

TOK 60 588 for the group and for the parent

company per 31 December 2022, where additions

related to capitalized development costs in 2022

were TNOK 11 237 in group and in parent.

Management exercises judgement in determining

when the recognition criteria for the intangible

assets is met. The group start to capitalize when

there is an identifiable intangible asset or product,

which is in the group`s control, and probable

future economic benefits is expected.

Management also exercises judgement in

determining the cost of the product development

to be capitalized. Based on the size of this year`s

additions and the recognition of developed

intangible assets is based on management`s

judgment and assumptions, this was a key audit

matter.

Our audit response

We assessed management`s principles and

assumptions for recognition of development cost

with criteria in IAS 38, especially the criteria for

recognition and the transition from research to

development. We evaluated this year’s

development projects against available

information about the progress of the

development of the product. We compared the

management's assessments of the projects

against the company's strategy and plans. Further

on we tested a sample of all recognized

development cost against underlying

documentation and evaluated if the criteria for

recognition was met. We refer to note 2 and 10.

AUDITORS REPORTAUDITORS REPORT

Independent auditor's report - Hofseth Biocare ASA 2022

A member firm of Ernst & Young Global Limited

Other information

Other information consists of the information included in the annual report other than the financial

statements and our auditor’s report thereon. Management (the board of directors and the chief executive

officer) is responsible for the other information. Our opinion on the financial statements does not cover the

other information, and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information,

and, in doing so, consider whether the board of directors’ report, the statement on corporate governance

and the statement on corporate social responsibility contain the information required by applicable legal

requirements and whether the other information is materially inconsistent with the financial statements or

our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the

work we have performed, we conclude that the other information is materially inconsistent with the

financial statements, there is a material misstatement in this other information or that the information

required by applicable legal requirements is not included in the board of directors’ report, the statement

on corporate governance or the statement on corporate social responsibility, we are required to report

that fact.

We have nothing to report in this regard, and in our opinion, the board of directors’ report, the statement

on corporate governance and the statement on corporate social responsibility are consistent with the

financial statements and contain the information required by applicable legal requirements.

Responsibilities of management for the financial statements

Management is responsible for the preparation and fair presentation of the financial statements in

accordance with International Financial Reporting Standards as adopted by the EU, and for such internal

control as management determines is necessary to enable the preparation of financial statements that

are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s and the

Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern

and using the going concern basis of accounting unless management either intends to liquidate the

Company or the Group, or to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are

free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that

includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an

audit conducted in accordance with ISAs will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the

aggregate, they could reasonably be expected to influence the economic decisions of users taken on the

basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional

scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to

fraud or error, design and perform audit procedures responsive to those risks, and obtain audit

evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not

detecting a material misstatement resulting from fraud is higher than for one resulting from error,

as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override

of internal control.

AUDITORS REPORTAUDITORS REPORT

Independent auditor's report - Hofseth Biocare ASA 2022

A member firm of Ernst & Young Global Limited

• Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the Company’s and the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting

and, based on the audit evidence obtained, whether a material uncertainty exists related to

events or conditions that may cast significant doubt on the Company’s and the Group’s ability to

continue as a going concern. If we conclude that a material uncertainty exists, we are required to

draw attention in our auditor’s report to the related disclosures in the financial statements or, if

such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit

evidence obtained up to the date of our auditor’s report. However, future events or conditions

may cause the Company and the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the

disclosures, and whether the financial statements represent the underlying transactions and

events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or

business activities within the Group to express an opinion on the consolidated financial

statements. We are responsible for the direction, supervision and performance of the group audit.

We remain solely responsible for our audit opinion.

We communicate with the board of directors regarding, among other matters, the planned scope and

timing of the audit and significant audit findings, including any significant deficiencies in internal control

that we identify during our audit.

We also provide the audit committee with a statement that we have complied with relevant ethical

requirements regarding independence, and to communicate with them all relationships and other matters

that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the board of directors, we determine those matters that were of

most significance in the audit of the financial statements of the current period and are therefore the key

audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public

disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should

not be communicated in our report because the adverse consequences of doing so would reasonably be

expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

Report on compliance with regulation on European Single Electronic Format (ESEF)

Opinion

As part of the audit of the financial statements of Hofseth Biocare ASA we have performed an assurance

engagement to obtain reasonable assurance about whether the financial statements included in the

annual report, with the file name hofsethbiocareasa-2022-12-31-en.zip, have been prepared, in all

material respects, in compliance with the requirements of the Commission Delegated Regulation (EU)

2019/815 on the European Single Electronic Format (ESEF Regulation) and regulation pursuant to

Section 5-5 of the Norwegian Securities Trading Act, which includes requirements related to the

preparation of the annual report in XHTML format and iXBRL tagging of the consolidated financial

statements.

In our opinion, the financial statements, included in the annual report, have been prepared, in all material

respects, in compliance with the ESEF Regulation.

AUDITORS REPORT

Independent auditor's report - Hofseth Biocare ASA 2022

A member firm of Ernst & Young Global Limited

Management’s responsibilities

Management is responsible for the preparation of the annual report in compliance with the ESEF

Regulation. This responsibility comprises an adequate process and such internal control as management

determines is necessary.

Auditor’s responsibilities

Our responsibility, based on audit evidence obtained, is to express an opinion on whether, in all material

respects, the financial statements included in the annual report have been prepared in accordance with

the ESEF Regulation. We conduct our work in accordance with the International Standard for Assurance

Engagements (ISAE) 3000 – “Assurance engagements other than audits or reviews of historical financial

information”. The standard requires us to plan and perform procedures to obtain reasonable assurance

about whether the financial statements included in the annual report have been prepared in accordance

with the ESEF Regulation.

As part of our work, we perform procedures to obtain an understanding of the company’s processes for

preparing the financial statements in accordance with the ESEF Regulation. We test whether the financial

statements are presented in XHTML-format. We evaluate the completeness and accuracy of the iXBRL

tagging of the consolidated financial statements and assess management’s use of judgement. Our

procedures include reconciliation of the iXBRL tagged data with the audited financial statements in

human-readable format. We believe that the evidence we have obtained is sufficient and appropriate to

provide a basis for our opinion.

Bergen, 30 March 2023

ERNST & YOUNG AS

Jørn Knutsen

State Authorised Public Accountant (Norway)

Hofseth BioCare ASA

Kipervikgata 13, 6003 Aalesund, Norway