Hofseth Biocare ASA: COMPLETES PRIVATE PLACEMENT OF NOK 23.6 MILLION - ANNUAL REPORT 2015 - MARKET AND PRODUCTION UPDATE

NOT FOR DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, TO THE U.S NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN, OR ANY OTHER JURISDICTION IN WHICH THE DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL.
 
Private placement of NOK 23.6 million
 
The board of directors (the "Board") of Hofseth BioCare ASA ("HBC" or the "Company") has today completed a private placement of NOK 23.6 million towards certain existing shareholders and external investors through issuance of 11,800,000 new shares at a subscription price of NOK 2 per share (the "Private Placement"). The Private Placement has been resolved based on the Board's authorization to raise the share capital given on 26 May 2015.
 
The Company is very pleased that it is able to complete the Private Placement at a subscription price which represents a premium of 22.7% to the closing price of the Company's shares as of today. The Company has raised approximately NOK 12.9 million in cash and approximately NOK 10.7 million through conversion of debt. The new shares issued in the Private Placement will be initially issued on a separate ISIN awaiting approval of a prospectus to list the new shares.
 
The Private Placement will strengthen the Company's ability to leverage the ongoing expansion at the Midsund facility. The investment is expected to increase yields and volumes of the protein fractions, improve taste and smell of the protein supplement ProGo® and substantially lower the cost of producing all four product fractions. Production ramp-up is planned to start in June 2016 and HBC will then be able to produce the new version of the ProGo® peptides for humans with a higher protein concentration, and significantly less smell and odor.
 
The Private Placement deviated from the rules on equal treatment and existing shareholders preferential right as set out in the Securities Trading Act section 5-14 and the Public Limited Liability Companies Act sections 10-4 as the subscription offer was not be directed towards all existing shareholders.
 
The Board considers that the capital raised through the Private Placement is raised at favorable terms as the subscription price is higher than the current market price of the Company's shares. The Board has considered other sources of financing, but have not deemed such sources as suitable or more preferable than raising of equity through the Private Placement.
 
The Board has further decided to propose a subsequent offering to limit the dilutive effect of the Private Placement. Such subsequent offering will be subject to approval by the general meeting of the Company.
 
On this background, the Board considers that the deviation from the rules on equal treatment and preferential right is fair and in the best interest of the Company and its shareholders.
 
Turnaround project ongoing
 
HBC is currently expanding the Midsund hydrolysis facility to ramp up production from June. The rationale for this project is to significantly lower production cost on all products and be able to produce and pack PHP and Calcium in full scale.
 
Significant lower CoGS will make HBC able to do high volume sales to feed and pet commodity market for improved revenues and cash flow from the third and fourth quarter. Sales into the feed market have already been executed, which in turn will reduce storage and logistics costs.
 
The project also looks for further changes and add-ons in the sales organization and management team for stronger sales power and focus on revenues. As part of the ramp-up plan, HBC will sell out a large amount of current inventory at low prices to be in position to produce at order-based deliveries in all three market segments; Human, Pet and Feed. This will impact the first and second quarter results of 2016, but result in improved revenues and cash flow by the end of the year.
 
HBC's product development is world leading within its field. The investments in the production process represent a step change in the company's ability to commercialize its product portfolio and meet the strong demand for high-quality biomarine ingredients.
 
Meanwhile, HBC has completed a new study on ProGo® together with the Norwegian School of Sport Sciences. The study shows that ProGo® from HBC is significantly faster to achieve maximum blood concentration of the essential amino acid Leucine, than whey protein. This is exciting findings and important for athletes. The full study will be published later in 2016 and the Norwegian School of Sport Sciences will do further studies to prove ProGo® and OmeGo® clinical effects.
 
Annual report
 
At the same meeting today, the Board approved the annual report. HBC had an operating loss (EBIT) of NOK 93.3 million in 2015, compared to a preliminary loss of NOK 69.7 million stated in the unaudited report for the fourth quarter. The loss before taxes was NOK 100.2 million, compared to a preliminary loss of NOK 76.6 million. The changes are primarily caused by write-down of inventory to future potential sales at low prices as part of the turnaround project and precaution write-down on late trade receivables.
 
Detailed figures are in the attached annual report in English and Norwegian.
 
For more information, please contact:
Jon Olav Ødegård, CEO Hofseth BioCare ASA
Mobile: +47 936 32 966
Email: joo@hofsethbiocare.no
 
About Hofseth BioCare ASA:
HBC is a Norwegian biotech company that offers high-value ingredients and finished products for humans and pets. The company is founded on the core values of sustainability, traceability and optimal utilization of natural resources. Through an innovative hydrolysis technology, HBC is able to preserve the quality of salmon oil, proteins and calcium, prepared of fresh salmon off-cuts. HBC's objective is to contribute to the efficient use of marine resources and deliver quality products for ingredients and finished consumer products in the nutrition market.
 
This information is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.
Hofseth BioCare Annual report 2015 English
Hofseth BioCare Annual report 2015 Norwegian